[From iSource Business, April/May 2002] Sourcing widgets is one thing, but sourcing chemicals is quite another. For DuPont, the $28 billion science company, supplier relationships and supply regulations are not only critical in terms of customer satisfaction and shipping deadlines, they are critical for the safety of the employees and products. In other words, having high standards for new suppliers and new technology is imperative.
With 200 years of experience, DuPont has built its reputation in part on high safety standards and reliable suppliers. Therefore, the risk of straining supplier relationships in an effort to move interactions online or even the suggestion of moving toward vendor-managed inventory is unnerving at best. Walking that tightrope between technologically enabling the company to perform in the new century and maintaining delicate, century-old supplier relationships is Henri Irrthum, vice president of DuPont Global Sourcing and Logistics Services and the company's chief procurement officer.
iSource talked with Irrthum to find out how to maintain balance in such unstable times, how to get consensus on critical decisions, and why lockboxing priorities is the only way to go.
iSource: As someone who has spearheaded the e-business and supply chain innovation efforts of a $28 billion company, where do you think technology offers the greatest opportunity for companies?
Irrthum: For large companies like ours, technology offers the great opportunity to provide a single, global ERP [enterprise resource planning] system for all strategic business units with readily available global data. In other words, an ERP backbone has great advantages over legacy systems that do not connect with one another.
Another great opportunity lies in the e-procurement platforms that many companies are in the process of implementing. Those platforms make it easier for purchases to be more visible, and they reduce the leakage, as we say, by sustaining the gains that have been made by the commodity teams that make the decisions for each commodity. In addition, it helps to have a common user interface for all purchases on the Web.
Another major advantage is that the technology offers information and systems to reduce inventory or manage inventories, thereby reducing costs and improving service. We are almost reaching the point of vendor-managed inventory (VMI). It is almost possible to have in-transit inventory as a virtual warehouse with the help of this type technology, which is very exciting. DuPont, for example, has a corporate-wide implementation of Six Sigma. The Six Sigma method ensures our decisions are data driven and not opinion driven. That is a big step forward. You need proper data for good decision making.
iSource: DuPont has done extensive research to determine what technology is going to work best for its needs. How much of a learning curve is involved for other companies as they try to implement today's technology?
Irrthum: You need a learning curve. You can study a lot and you can listen to a lot of companies, but the key is to do something so that you can learn. At DuPont, we worked with companies like Chemdex to learn the ropes. Not everything was 100 percent successful, but we learned a great deal through working with them. Those experiences provided us with the learning and insights needed to proceed faster and on a broader scale. When we had to make a decision about what e-procurement platform to use, we had a team that wasn't just made up of sourcing people - it included people from IT, operations, maintenance and some on the business side. We also had a pretty elaborate process of deciding on the platform. Had we not decided to create a team like that, we would have probably made the decision about which technology to use in a much quicker way, and not everyone would have bought into it.
Another important point is that you decide what is best for your situation based upon where you are and what you want to achieve going forward. You need to have a clear vision in front of you, and you need to start with the end in mind. You also need to have a good process in place with all of your stakeholders who will use the system and an understanding with them about what the company really wants to achieve over the next couple of years and what the benefits are.
iSource: We've talked about the opportunities available with e-business and supply chain technology. What are some of the obstacles you have faced?
Irrthum: There have been several obstacles. DuPont, like other large corporations, has about 20 different strategic business units that have different needs and different numbers of legacy systems. One of the difficulties has been to streamline that, as well as to get all of the business units to agree on one ERP system. It was difficult, but we were able to overcome it.
Another difficulty has been connecting with suppliers through e-catalogs. We have learned that these connections happen at a slower pace than we thought initially. However, you need to work harder and spend more time with your key suppliers to make that happen.
Another challenge is the rapid pace of change. There are a lot of initiatives that compete with one another to a certain degree. You need to make sure you set clear priorities. That is something we learned that has helped us a lot.
iSource: Could you elaborate on that a bit more? How do you line up priorities in terms of e-business goals?
Irrthum: Well, you have to look at everything and say, 'Where do we have the biggest prospect for bottom-line improvement with the change we are going to embark on?' Examine your business processes to find the areas in which your company might not be playing on a level field. Then you can determine how you will ultimately get that level playing field with the change that you are going to implement. We tend to prioritize those elements that have the most positive business impact and the best returns, and that is a key guiding factor. Another guiding factor might be the ease-of-use to make that change. If it is something that is not too costly and is very user friendly and with good returns, then that might get a higher priority. But, mainly, the goal is to see how much positive change and improvement can be made in different areas of your company, and the highest return areas get the highest priority.
iSource: How has the economic downturn affected your technology spend?
Irrthum: It has impacted us somewhat, but we have not cut back in the realm of IT investment. We have no short-term change in priorities on our e-procurement systems or on the platforms with which we work. On the contrary, we have made a few adjustments in some e-procurement areas, but we also want to be poised with the necessary resources, human and financial, so that we position ourselves favorably when the economy bounces back. We are in a cyclical situation, and the cycle is down now. However, we also know that it will come up in due time - hopefully sometime this year.
iSource: What sort of advice would you give to CIOs of companies that are facing dramatic cutbacks in the IT department? What sort of things should they spend money on that would be most cost-effective?
Irrthum: I would tell them not to start investing in something that isn't a high priority under any condition. You need to have weatherproof priorities. That, to me, is the key. If you have weatherproof priorities, then you don't get into a downward spiral and you have good arguments ready to substantiate why your programs are very important for the future financial health of the company. That would be my advice and that's what we have done at DuPont, basically. We have been very prudent and very selective with what we invested in. What you decide to drive must be supported when cycles go up or down. You may tweak a little bit during a down time, but you do not take away the backbone of the drive.
iSource: Where do you see this technology heading in the future? What do you think is the biggest thing to come out of the type of technology that we are seeing now?
Irrthum: I am not an expert on technology, but I like to use technology wherever it helps make life easier and processes more productive. From what I know, I would say that information is going to continue to become more available and accessible to everybody. I am convinced of that. I also think that, for the first time in history, the world has a common user interface. The Web browser enables buyers and sellers to share information and conduct commerce. That will drive increased global commerce. Technology will also enable more sensors of inventory levels, which can trigger replenishment and give the potential for trucks and container shipments to report their location using global positioning systems. Visibility and tracability will be much better, thereby allowing companies to better manage the flow of the supply chain in the most productive and cost-effective way.
