The Exceptional Supply Chain

Customers don't want excuses for problems in the supply chain - they want solutions. One company knows first-hand the dangers of unchecked exceptions and the importance of real-time visibility with supply chain event management.

[From iSource Business, February/March 2002] Only a few years after Commodore Matthew Perry sailed into Tokyo Bay in 1854, acting on behalf of the United States government, and opened wide the gate between East and West for trade to flourish in a new, more connected era, NYK Line, a Japanese steamship company, began its operations.


Since that historical exchange more than a century ago, NYK Line has shipped countless numbers of goods across hundreds of miles of ocean to ports all across the world. For such an old grandfather living in a world that caters to the youngest, newest companies, survival is a matter of learning how to evolve as businesses, as well as the shipping industry, bring change. For instance, NYK no longer calls itself a ship operator; it is now known as a global logistics and mega-carrier. Also, its ships are no longer powered by steam, instead, computers power them.


Likewise, NYK's Scandinavian operations, which coordinate some 800 vessels for the import and export of 62,000 containers each year that hold everything from IKEA home furnishings to Volvo, General Motors and Saab parts, no longer track their customers and their customers' cargo by means of rosters and lists. Instead, enabled technology tracks them.


This latest development began some three years ago in response to a gap NYK's Scandinavian operations experienced between the information they had about customers' container units and the exceptions that were occurring in their system. AMR Research notes that this hole between supply chain planning (SCP) and supply chain execution (SCE) applications can be filled with supply chain event management (SCEM) software, which AMR deems to be the missing component in closed-loop supply chain management.


This missing component was perhaps most apparent in NYK's data quality. Because of the sheer size of the shipping operations that NYK conducts, which includes keeping track of those 62,000 containers as they make their way around the globe at any given time, there is a massive amount of data that needs to be managed. However, the information management system that they originally used could not process the data in real time, which left days before problems could be spotted  in the system.


The [system] we had was very sophisticated, but it focused a lot on past history and past performance, and it obviously didn't provide any kind of exception reports, explains Lars Green, managing director of NYK's Scandinavian operations.


And for someone who is, as Thorgeir Einarsson, CEO of Virginia-based SCEM provider Categoric Software says, obsessed with customer service, no exception reports meant slow reaction times to system problems and, at times, unhappy customers, which was an unacceptable way of doing business for Green. Our customers demand outstanding levels of service and support, be that regular updates on account balances or reassurances on shipments, he says. We needed a real-time system that could notify us of their service levels and changing requirements.


That's why, when Green was approached by Einarsson with Categoric's SCEM solution, called Xalerts, he took a chance on a concept that, as Green puts it, had a new flavor.


Where SCM Meets CRM


NYK selected the Categoric Xalerts solution as its backbone messaging system, which is designed to deliver critical business information to key management staff and external customers and suppliers in real time. With the Xalerts technology, NYK defined certain aspects of its customer data that it felt was important for its sales and marketing teams, as well as other individuals within the enterprise, like overdue invoices, changes in customer requirements, or new business partners.


With those rules defined, Xalerts now monitors the company's data sources for any exceptions and, if any are spotted, it sends a message of notification to the appropriate party for correction. The notifications can be sent in pretty much any way NYK chooses, such as e-mail, PDA, pager, mobile phone or over the Web. Basically, Einarsson says, the Xalerts software tracks data as broadly or as narrowly as the customer likes, whether they want to track the movements of 62,000 containers or five component suppliers. Its personalization engine allows the customer to drive the searches according to their own responsibilities and accountabilities.


Einarsson explains that, for NYK, the Xalerts technology is where supply chain management meets CRM [customer relationship management] & Every event is a customer event because it will affect [NYK's] customer service. The information needs to be communicated fast so [they] can tell [their] customer, Look, we're aware of this [exception].'


Looking Back, Looking Ahead


Green says NYK has been extremely pleased with the way in which the Xalerts software is meeting its operation's needs. And, without quoting any specific numbers, he states that notification times on exceptions have been reduced from days to a matter of minutes. However, Green is ready for the software to be able to move to the next level. In addition to sales and marketing applications, Green hopes the Xalerts software will eventually monitor credit lines, so the company can follow up on customers who aren't paying their freight in due time; and track containers, cutting back on the possibility that they would sit lost or idle for long periods of time. What we are dealing with now is a lot of information about things that have happened and things that have happened in a correct way, and we are still paying too little attention to what went wrong, he says.


When asked what NYK could have done better to prepare for the implementation of the Xalerts software, Green says, I think it's a matter of broadcasting the merits of the whole system within your entire organization before implementing it, because the people sitting at the front line are also [the people] that see the benefit of the system. Because NYK installed the software only on a local mainframe and not the company's main host in Europe, the process of making all the operations SCEM-ready has been slowed. AMR Research agrees with this assessment, stating that when companies widen the scope of their SCEM coverage to incorporate all activities within the enterprise, and even beyond, the return on investment increases, as well, because of greater visibility, speed and effectiveness of event management.


Einarsson says that while Green was willing to go through some of the trials that early adopters face, today companies need to change their concept of time when it comes to business events to truly see SCEM's scope and potential. The bigger an organization gets, the more you need to think about how to transform it from being a reactive organization, working in a weekly timeframe, to one that works in a second-by-second, minute-by-minute timeframe. To do this, he suggests that enterprises assess where the glitches are in their systems and then decide how to take the wasted time and effort out of the system by communicating those problems.


Time might change technology and processes, but it hasn't touched the importance of bottom-line savings. Because the market for SCEM is expected to quadruple by 2005 - up to $518 million from $125 million in 2000, according to ARC Advisory Group - this might just be one area in which companies should try tossing out their anchor. For Green, it was with the Xalerts software. Delivering important information at exactly the right time is a brilliant, yet simple, idea, comments Green. Xalerts allows us to pick out problems as they occur, giving our team members the flexibility to deliver higher levels of service to our valued customers.