The Supple Supply Chain
Agile companies can adjust their operations to cope with unexpected events, whether it's a surge in new business or a backlog in the warehouse. Four CIO 100 honorees tell how IT makes them and their trading partners flexible.
Wed, June 13, 2007
CIO — FAXES. PHONE CALLS. Desk-bound quality specialists storing thousands of pieces of paper in hundreds of binders.
These were the ways that DaimlerChrysler used to track development and resolve quality issues with the thousands of companies that design parts for the cars, trucks and commercial vehicles manufactured by its Chrysler Group unit. Problem was, when a drive train was one-eighth of an inch too long or a widget a half-centimeter too wide, it could take up to three weeks to notify the supplier, fix the problem and insert the remedied part back into the design process.
Now those suppliers instead use Powerway, a Web-enabled quality management system and supply chain collaboration network. Faster and more accurate than the paper-based processes it replaced, Powerway helps Chrysler identify potential design and engineering conflicts in theory before they even occur in reality.That in turn helps the company design new cars much faster-in months rather than years-which is a key consideration in an industry where consumers are fickle, competitors are tough, and time to market can make or break a company.
The automotive industry is one of many in which a nimble supply chain-one that can respond quickly to changes in customer demand-plays a crucial role. An agile supply chain is fast from end-to-end, but more important, it's flexible. Lean operating practices and manufacturing principles enable agile supply chains to accommodate or bypass disruptions smoothly. "Some of our plants can require over 450 truckloads a day. A supply chain breakdown can bring an entire assembly line to a halt," says Susan Unger, DaimlerChrysler senior VP and CIO. "For us, a robust, agile, IT-enabled supply chain is critical." DaimlerChrysler comprises the Mercedes and Smart Passenger Car Group, the Chrysler Group and the Commercial Vehicles unit; it commands a global supply chain of staggering proportions-104 plants in 37 countries, 14,000 suppliers and 13,000 sales outlets in 200 countries. Even so, in the United States, the company's Chrysler Group, which includes the Chrysler, Dodge and Jeep brands, "has always been one of the smaller domestic players," says Unger."We have to leverage our supply base much more heavily than a GM or a Ford."
DaimlerChrysler is among several CIO 100 honorees, including ABF Freight System and GKN Aerospace North America (East), that stand out for using IT to create a supply chain that's not just efficient, but one that's nimble and predictive-that is, able to anticipate change and help companies adjust to that change and accommodate it on the fly. These companies have tapped technology to gain insight into and extract knowledge from business and manufacturing processes that allow both the corporation and its suppliers to respond in record time to changes in the marketplace.
An agile supply chain isn't just fast and flexible; it's transparent: Managers can "see into" systems and, when necessary, make ad hoc adjustments that keep manufacturing and delivery processes aligned with customers' needs and their own bottom line. "A few years ago, IT was all about shaking the pennies out of the supply chain. There are still pennies to be shaken, but now there's a big drive to create more agility," says Gene Alvarez, a senior program director at Meta Group who tracks supply chain trends. The role of the CIO, he says, is to bring the business closer to its suppliers and improve the "sensing" abilities of the organization-that is, its ability to detect and respond to changes in its supply chain.
Here are four ways that DaimlerChrysler and other agile supply chain leaders are using IT to become flexible.
1. Look Beyond the Shop Floor.
Supply chain managers must pay heed to manufacturing and shipping processes, but companies that are truly committed to flexibility look beyond the factory floor to make their supply chains more agile. The Chrysler Group, for example, considers every step in the vehicle production and sales process as part of its supply chain, starting with the very first stage of vehicle design and ending with its service and repair. "Too many people think of the supply chain as only manufacturing, but it covers pre- and post-build as well," says Unger.
That's why Chrysler has deployed a constellation of systems that automate and streamline every part of its supply chain: One of these systems, the Global Supplier Portal, presents a unified interface and infrastructure for transactions between suppliers and all of DaimlerChrysler. Another, the Integrated Volume Planning Application, gathers sales data and relays it back to production planning applications and, from there, to suppliers so that, for example, dealers will have enough Dodge RAM trucks with 15-inch rather than 16-inch wheels if that's what's selling. And at the earliest stages of design, Chrysler and 3,400 of its suppliers use Powerway to track new parts through nine quality control "gates" before they're certified for use on production lines. (Powerway was first adapted by Chrysler for the automotive industry in 2001; it's now considered an industry standard, Unger says.)