Jack Lowry has a dream: a manufacturing company where integrated, enterprisewide information systems reduce costs, cut cycle times and allow different companies to collaborate on product design and production. Lowry imagines a level of collaboration that goes well beyond the simple sharing of blueprints and computer-aided design (CAD) files; he dreams of linking ERP, product data management and whatever other systems contain critical manufacturing data, thereby granting collaborators real-time access to everything from inventory to financials to last-minute product changes.
For several years, Lowry dabbled in integration projects at General Machinery, a division of Wheaton Industries in Millville, N.J., and Vineland, N.J.-based Wallace and Tiernan. And while integrating CAD, ERP and product data management (PDM) systems certainly presented challenges, no one project fulfilled Lowry’s vision of using IT to facilitate collaboration with other companies on the grand scale. But in January 1999, Mark Swift, group president of the privately held Goldman Industrial Group of Vermont, a consortium of four machine tool manufacturers that make grinders, gear shapers and cutters for the automobile industry, invited Lowry to come aboard as vice president of IT. Swift promised Lowry that he could make the Springfield, Vt.-based company a testing ground for his collaborative vision.
Lowry spent the next two years laying the very real technical groundwork for his dream of a fully collaborative computing environment. And, indeed, Goldman is now ready to collaborate on a grand scale.
But its partners and suppliers in the automotive supply chain are not.
When Lowry joined Goldman, the company hadn’t made a significant IT investment in 25 years, placing him in the enviable position of heading up IT at a company without legacy systems while working for a chief executive who wanted the best?and was willing to pay for it. Lowry viewed the lack of modern IT (Goldman had only a homegrown order placement and inventory system connected to dumb terminals) as an opportunity. He set out not just to integrate the Goldman companies but to link Goldman’s internal systems with current and potential customers and suppliers in the automotive supply chain.
Lowry’s new IT infrastructure, which became operational in April, has three major components: a T1 line connecting a network of new PCs on every desk and new workstations on the plant floor; engineering applications, including IBM’s Catia CAD and SmarTeam’s PDM systems; and a Baan ERP system linked to an e-commerce-enabled website on an NT server. Everything is integrated and runs on the AS/400 platform, allowing anyone on the network to track a product through order placement, design, manufacturing and shipping. The technology upgrade, excluding training and education expenses, cost $4 million, a significant outlay for a company with just $100 million in revenues in a good year.
The new technology was selected and installed with collaboration in mind, a win-win proposition in Lowry’s view. For example, instead of Goldman waiting for an out-of-stock part to complete a custom gear cutter, a supplier with a view into Goldman’s inventory and order processing systems can recommend a substitute part. The supplier can expedite delivery of the part to Goldman, which is a win for the supplier. Goldman in turn can expedite production and delivery, another win. In this scenario, Lowry thinks Goldman’s average cycle time for manufacturing could be reduced from three months to three weeks.
At least that’s the promise that dangles in front of Lowry like fruit on a 12-foot-high branch. The reward is in sight, but he can’t reach it without a willing partner. For the past several months, Goldman’s salespeople have been pounding the pavement looking to sign up a partner. Lowry himself has been involved in many of these discussions, and he’s surprised they haven’t lead to anything concrete. Ironically, it was the demands of these same customers and partners that convinced him that the time was finally right for collaborative technology.
“I heard so much noise from the big companies?our customers?saying we need to be able to collaborate,” Lowry says. Specifically, customers clamored for collaboration to trim cycle times and squeeze costs.
Fears and Excuses
Jack Maynard, research director for collaborative business solutions at Boston-based Aberdeen Group, thinks that widespread adoption of collaboration technology involving linked systems and shared data is at least two years away. Furthermore, Maynard believes it will happen gradually, with companies first linking de-sign systems. If those links prove successful, then integrating CRM, ERP and PDM applications will follow.
The disappointing results of Lowry’s discussions with potential collaboration partners back up Maynard’s theory that companies aren’t yet sold on integrating systems. “We are talking about a depth of integration that they are not ready for yet,” he says. From a purely technical standpoint, a collaboration partner would need to have a completely functional ERP system and modern CAD and PDM systems. That alone has scared off a few potential partners in an industry where many CIOs admit that most business is still done with faxes and phones.
Swift has taken on the job of chief salesman. Companies are enthusiastic as long as talks remain theoretical, but once Swift broaches the details of the integration, the excuses start. In addition to technical issues involving such things as integrating disparate ERP systems, Swift often hears about customers’ fears that collaboration will result in layoffs.
And Swift doesn’t dispute this. Linking with Goldman’s collaboration efforts could, he acknowledges, cost midlevel managers their jobs, particularly those who work in purchasing. So unless a major player like Ford or GM forces Goldman’s customers to collaborate electronically, Swift believes he’ll continue to have a hard sell.
Furthermore, there are no rules in place to dictate how companies will collaborate once they clear the technological and cultural hurdles. One supplier Lowry talked to about collaborating in the design process didn’t have the proper Catia software and didn’t think it could justify the expense of buying it. Initially Lowry thought that the supplier could simply borrow a Goldman license and access the application through the Web. But lending the supplier a license means there’s one less for Goldman to use and raises a host of other potential problems. “How do I know that they aren’t using my license to do someone else’s work?” Lowry asks. And if that’s the case, should the supplier pay Goldman for the license? Vendors could do their part to ease this situation by supporting shared license agreements, but no vendor has offered Lowry this option.
Furthermore, if and when companies integrate their systems, what happens when one partner wants to upgrade? It’s complicated enough to do it across several departments within a single organization; imagine the difficulties of upgrading across a network of companies. Lowry believes that companies working collaboratively will only be as fast as the slowest member. “If one member of a team is back in the ’50s, then you’re all back in the ’50s.” In other words, if one company in an integrated network of collaborators hasn’t spent the money on the necessary systems, it will mute the benefits experienced by companies that have opened their wallets.
Lowry is still optimistic about the long-term potential of collaboration, and even without it he’s already seen a return on Goldman’s IT investment. He estimates saving $700,000 because of reduced cycle times and increased sales through the e-commerce site in the first 18 months alone. For example, under the old order-and-inventory system, customers placed orders with engineers, who would review them before releasing them to the order-processing group. Engineers would spend weeks studiously examining each order, searching for nonstandard specifications, even though 95 percent of the orders were for standard cutters. Now, information is automatically entered into the Baan system when customers place orders on the e-commerce site, and only those orders for nonstandard cutters are routed to engineering for analysis.
Goldman’s position near the bottom of the supply chain puts the company in a poor spot to steer changes within the industry. Lowry says its suppliers have listened to his pitch but generally balk at the very thought of integrating systems with another company.
Lowry will continue talking to other companies throughout the supply chain. At this point, he’s not even trying to convince them to join Goldman’s collaboration efforts. “I am going to educate these people about what we can do,” he says. “Then the best-case follow-up is a meeting with more people. I’m beyond the point of thinking, I’m going to go in, talk to some key people, and it will happen.”
So far, Lowry’s at least getting his message across. Some companies Lowry has approached are indicating that they might be more receptive to collaborating sometime down the road when the practice becomes more widespread. Other companies are asking him for detailed technical requirements of Goldman’s systems. It’s an indication that small companies such as Goldman may be able to propel companies throughout the automotive supply chain to adopt collaborative technologies after all.
Lowry doesn’t regret the decision to actively invest in collaborative technologies ahead of the curve. “It’s not that you’re a big player or a little player,” he says. “It’s that you’re a player or you’re not.”