Trading up: Community supply chain solutions support virtual manufacturers
Karen Dilger, senior contributing editor -- Manufacturing Business Technology, 11/12/2008 1:05:00 PM
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The challenges facing virtual manufacturers stack up differently than that of brick-and-mortar companies. With no stored inventory, virtual manufacturers aren’t concerned with making a facility more efficient or utilizing assets properly. They end up asking for extended visibility and flexibility in their systems, focusing on product velocity and supplier capacity.
As midmarket companies must fight for supplier capacity, issues surrounding compliance and quality gain importance for virtual manufacturers, says Amar Singh, president and CEO for Amitive, a provider of community supply chain management (CSCM) systems.
“Brand owners want to know where product is, where it is going, and whether they allocated enough to suppliers,” says Singh.
CSCM solutions such as those from Amitive typically consist of an open platform design with capabilities for planning, execution, and collaboration. They cater specifically to manufacturers that outsource product, allowing users to build communities and support multi-enterprise trade.
“Financial risks are higher when you hold finished goods in a longer supply chain,” says Singh. “Enhanced visibility is necessary because companies may have three months of inventory already in route, and consequently, the [time frame for reacting] to customer demand changes is longer.”
The Amitive system works by receiving forecasts from a customer, which are analyzed and reshuffled. The application uses demand/supply synchronization and unique algorithms to determine lead times based on on-hand inventory, open orders, and inventory in-transit.
“The system recommends how much to buy from which supplier, and when,” says Singh.
Amitive allows for event-based synchronization, which reacts to certain events without rescheduling the entire supply chain plan.
“Some companies can hold excess inventory for months while others carry highly perishable items—for example, roses,” says Singh. “A flower supplier might see a large amount of white roses in inventory and then decide to put them on sale on its Web site.”
Integration and configuration are key issues when building multi-enterprise solutions, says Nari Viswanathan, a VP with Boston-based analyst firm Aberdeen Group. “Each network has its own configuration, depending on the number of suppliers and their requirements and capabilities. Plus, the system should be flexible because virtual environments do change frequently.”
Traditional manufacturers face many of the same problems as virtual manufacturers, but virtual suppliers have more direct control over other parties in the community, says Viswanathan. “It is important to begin collaboration early in the design phase to foster greater visibility as the supply chain grows and expands. Each community focuses on a common goal of satisfying customers, where players want to know what is going on at every point in the process.”
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| Community supply chain management solutions such as those from Amitive have an open platform design with capabilities for planning, execution, and collaboration—allowing users to build communities and support multi-enterprise trade. |
Mitsui is a New York City-based Japanese trading firm that deals with a variety of products ranging from raw materials to finished goods. The company has used Amitive for nearly eight years to manage its network of suppliers, manufacturers, intermediaries, and retailers.
Mitsui works with consignment inventory, which is similar to vendor-managed inventory. Product is housed at a manufacturing facility and is pulled as needed from customers.
“We see the inventory and we share the location,” says Marc Bialt, manager of corporate supply chains for Mitsui. “Customers plan against inventory and pay as they use it. They need to see what is coming in, what is on the floor, and what is being shipped out.”
Mitsui uses Amitive in a Software-as-a-Service model for forecasting, order management, sales & billing, and EDI. Buyers have a user ID and password to access their assigned community.
“Marketing personnel use the system to look at customer forecasts and supply profiles to see where we may be short or where we need to order—and when,” explains Bialt.
Suppliers can see orders and negotiate prices, and also view delivery dates and track history. The solution integrates with numerous systems within the network, including suppliers’ manufacturing resources planning and warehouse management systems, as well as applications used by freight forwarders and other transportation providers.
“The system reduced our inventory and we are better controlling our numbers,” says Bialt. “We also improved communication, which is very important when dealing with long supply chains and products with a short shelf life. Customers may be responsible for accurate demand, but you have to decide who is responsible for overage.”
Other CSCM solution players include One Network, TradeBeam, and e2Open, which have developed an extensive trade network with partner Exostar, a key player in the aerospace & defense market.
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