Such a dynamic, capable-to-promise function presupposes working together with customers and suppliers to design an end product and being able to identify the suppliers best suited - in terms of performance and capacity - to participate in a given project. Let's tackle each of these points in turn.
Design for Supply Chain, Not Assembly
This magazine has covered the drive to introduce collaborative engineering tools that allow manufacturers to work with their customers and suppliers in an online environment to design new products (see Stop. Collaborate and Listen, iSource Business, September 2001). But according to Dave Seybold, managing principal in the supply chain planning practice at IBM Global Services, the potential of design collaboration goes well beyond the engineering function. There is a tremendous need, Seybold says, to consolidate procurement and other business processes with supply chain processes focused on product creation. You have to start earlier in the [design] cycle planning for procurement and planning for the supply chain. In other words, companies must move beyond design for assembly to achieve design for supply chain. Engineers, Seybold asserts, tend to focus on the best engineering solution, which might not be the optimal solution from a procurement and supply chain point of view. By involving the latter two functions at an early stage of the product life cycle, a company can take advantage of its relationships with suppliers, as well as information on the performance of the company's supply chain. With that data in hand, for instance, the company can then weigh options for each component of a bill of materials and decide the merits of sacrificing some aspect of form, fit or function in favor of a supplier that performs better in on-time delivery or that offers better terms for a particular component. The end result: satisfied customers get products that meet their specifications, the company optimizes its use of resources and its supply chain, and suppliers participate in a project that plays to their strengths.
The ability to identify which suppliers are best suited for a particular project will be key to the success of this type of dynamic supply chain, according to Jeff Baron, director of marketing at Open Ratings, a service that offers what it describes as predictive supplier performance ratings. You don't necessarily want to do business with the suppliers that are best in every category, Baron says. If on-time delivery isn't as important to you for a particular category, you don't need to do business with the supplier in that category that has the best on-time delivery. The costs would likely be higher than for a supplier with a lower on-time delivery rating but lower costs.
Distributed Order Fulfillment
Another precondition for the success of the dynamic supply chain is the much-ballyhooed visibility, another topic covered by this magazine (see Supply Chain 20/20, June 2001). AMR's Newton says that technologies available today can provide information on the current inventory status of a given supplier, allowing a company to book inventory held by a third party for a particular order. Similarly, the technology is available today to view and book production capacity at a supplier. One result of all this visibility is the up-and-coming concept of distributed order fulfillment. With the technology coming available, Newton says, it's a real possibility that you, as a company, can dynamically source products from your supply network, track the status of the order with each supplier, coordinate a merge-in-transit shipment to bring that order back together, and then get it to the final customer, all under a single invoice. Newton cites companies such as i2 Technologies, Vizional Technologies and Yantra as solution providers that have been working in this area.