Supply Chain 20/20

Companies that don't have real-time visibility into their supply chains (and their demand chains) are losing focus on the promise of e-business. There's no use making a blind investment in automation technology if you can't see the big picture.


The traditional way that information has moved in the automaker's supply chain was not conducive to efficiency, according to Greg Wise, a senior supply specialist working on the e-Extended Enterprise team. Suppliers receive information from the tier above, process it through a material requirement planning (MRP) or enterprise resource planning (ERP) system, and then release it to the next tier down. As a result, by the time the information gets to the critical-components suppliers -- the key links in the supply chain for particular commodities -- they have little or no time to react and have to resort to firefighting methods of management, as Wise puts it. The Supply Network Collaboration initiative is aimed at giving suppliers a real-time view of the OEM's requirements, allowing them more time to react to any changes that occur.


To test the visibility concept, last summer the automaker ran eight-week pilot projects for two commodities: a body stamping and an interior door trim panel. The pilots' objectives included testing a supply chain software package to determine whether it could really provide the type of visibility DaimlerChrysler was looking to achieve and gauging the reaction of the company's suppliers to this type of initiative.


The automaker's first task was to identify the critical-components' supplier for each of the two pilot commodities. Each supply chain is different, Wise says. You may get down to a tier-two supplier and realize that's where your critical components are coming from. You may go down to tier four or five before you realize that you have mapped the whole critical part of that supply network. For the body stamping, tier two was far enough, while for the interior trim it was tier four.


Not surprisingly, DaimlerChrysler found that various tiers in the supply chain operated at differing levels of technical sophistication. Says Wise: We are connected virtually 100 percent with all our tier-ones via EDI. That level of sophistication obviously doesn┬╣t exist as you go down through the lower chain. The need to accommodate these different levels of technology dictated DaimlerChrysler┬╣s requirements for its visibility solution: low-cost, relatively simple, user-friendly and Web-enabled systems, so that lower-tier suppliers could access information flowing down from the OEM using only a desktop computer and a Web browser.


The process of gaining supplier buy-in for the pilots began at the top. DaimlerChrysler alerted its first-tier suppliers for the chosen commodities that the OEM would be talking with the tier-twos, tier-threes and so on. Then the automaker contacted the different tiers, described the pilot, explained the objectives and invited all the suppliers to come to DaimlerChrysler's offices for a presentation on the pilot's implications for the suppliers. The car company followed up with field visits to the suppliers' locations to present the project more broadly within each organization. Supplier response was favorable, Wise says, as soon as we showed them what our intent was and the fact that this tool was going to make the whole supply chain run smoothly.


Although the pilots were limited in scope -- just 10 suppliers participated in all -- they produced radical changes in information flows in the selected supply networks. By logging onto a central Web site, suppliers were able to see requirements for the parts they provided, with the information presented using the part numbers and unit of measure applicable to a particular supplier. Equally important, the information flowed directly from DaimlerChrysler to all players in the affected supply chains. In the case of the body stamping, DaimlerChrysler's parts requirements moved to the tier-one supplier and to the tier-twos. But information could also flow back and forth among the various suppliers at the various tiers. Data movement was equally dynamic among suppliers in the interior trim supply chain.


The advantages to this type of communication became clear when orders coming in from DaimlerChrysler's retail sales group showed an unexpected change in demand for interior trim colors on a particular model: more of one color, less of two others. That mix change hit us all in a week's time, so we had to get information out to the suppliers right away, Wise says. In the past, right away' meant a two-week process as the changes filtered down the supply chain to the tier-four critical-components supplier, the mill that produced the cloth for the interiors. But in the pilot, the tier-four saw the information on the same day as the tier-one, cutting 13 days out of the information cycle. The supply chain was able to react more effectively to the change and to coordinate with the tiers to accommodate the new requirement. By having that information out there, we were able to support that change in our customer requirements without any significant delay, Wise concludes.

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