It wasn\u2019t exactly the most shining moment in the history of electronics manufacturing. Contractors such as Flextronics, SCI Systems and Solectron, which quietly churn out the innards of PCs, routers and cell phones for the likes of Cisco, Dell, Nokia and Nortel, were once considered recession-proof. But in March, financial analysts downgraded the contract manufacturers\u2019 stocks, citing excess inventory and low demand from their original equipment manufacturer (OEM) customers.Then came the bomb from the industry\u2019s biggest OEM, Cisco: Not only would sales for the quarter ending April 30 be down 30 percent, but the company claimed that $2.2 billion of its inventories were worthless because of a decrease in demand. "This may be the fastest deceleration any company of our size has ever experienced," said Cisco CEO John Chambers in a statement.Across the country in Huntsville, Ala., Vincent Melvin watched Chambers on TV. The next morning, he got out of bed and went to his job at SCI Systems, just as he does every morning. More pressure? Sure?but it makes things interesting. "The truth of the matter is, if you didn\u2019t want that pressure, you wouldn\u2019t be in the job you\u2019re in," says Melvin, CIO of the Fortune 230 company that did $8.3 billion worth of sales in 2000.Yet Chambers\u2019 comments were clearly weighing on Melvin\u2019s mind. Soon after, SCI laid off 1,300 employees, capping off a total of 5,100 layoffs between January and April.SCI sits smack in the middle of the world\u2019s most complex, volatile supply chain?a spot so risky that some of the most respected technology companies, such as Cisco, Dell, Hewlett-Packard, IBM, Motorola and Nokia, just to name a few, decided they\u2019d be better off not making their products themselves. Instead, they farm them out to electronics manufacturing services (EMS) companies such as SCI. EMS companies purchase their customers\u2019 old factories, where they will assemble as many different products for different customers as possible, to keep the lines rolling all the time and squeeze out the maximum efficiency.Considering that the factories were pretty good before the OEMs threw up their hands, SCI\u2019s is not a high-margin business. To make matters worse, SCI\u2019s OEM customers are feeling constant downward price pressure on the perishable electronics they sell?pressure they don\u2019t hesitate to pass on to SCI. And despite the fact that OEMs have cast off direct responsibility for manufacturing, they still want to be involved in the process, from forecasts to decisions to inventory. "I\u2019d be hard-pressed to identify a business model that requires more collaboration than that between an OEM and EMS," says Todd Ackerman, a director for the management consultancy Pittiglio, Rabin, Todd & McGrath. In response, SCI is in the midst of an ambitious effort to streamline its supply chain?to give customers visibility into the manufacturing process, to monitor suppliers, to reduce inventory and to respond better to changes in demand. It\u2019s not a plan so much as a process, and Melvin, along with SCI\u2019s senior vice president of supply chain, is piecing it together.SCI is pushing its top 200 suppliers (of the thousands it works with) to communicate via EDI, XML or the Web. In April, about 40 percent of those suppliers were still sending data either on paper or in nonstandardized electronic formats, such as e-mail attachments.\nWhen asked what the incentive is for SCI\u2019s suppliers to cooperate, Melvin laughs. "Business," he says. But if that\u2019s true for SCI\u2019s suppliers, then it\u2019s equally true for SCI itself, as the company deals with the unpredictable needs of its own customers in tough times. CIO talked to Melvin about the driving forces behind his company\u2019s supply chain initiative.\n\n \n\n\n\n\nCIO: How are you using software to improve your supply chain processes?\n \n\nVincent Melvin: We\u2019re using it to respond faster to changes in customer demand. For example, a key customer will say, "A week ago I asked you for 1,000 units in four weeks; now I need 2,000." The customer wants to know within 24 or 48 hours what we can do. Now, everybody [at SCI] says, OK, we have this new recognized requirement, but nobody knows whether we can build the 2,000 in the period that they have requested.\nFiguring that out requires us to analyze a huge amount of data about our capabilities to meet the order. Before, we did this by brute force?collecting data manually. You\u2019d have to get in touch with each of your vendors?call them and say, "We need to deliver 1,000 more," and see if you could get a firm commitment from all of them.Until recently, the software for helping with this was hard to use and didn\u2019t have the right interface capabilities. Our software from Webplan allows us to do the scenario analysis of customers\u2019 demand and our ability to supply that demand. It does a fast simulation?24 to 48 hours versus a week in the past?of an entire material planning cycle.\nBased on the simulation we run in the software, we can come back to the customer in a day or two and say, "Look, we\u2019re very confident that we can get you 1,500 in four weeks, and the other 500 two weeks on."\n\n \n\n\n\n\nYou are also just starting to use software to measure your suppliers\u2019 performance. How does that work?\n \n\nSeeCommerce is a relational database engine that takes the framework of the Supply Chain Operations Reference (SCOR) model [a cross-industry standard for supply chain management] and attempts to put parameters and guidelines around it. For example, let\u2019s say I\u2019ve contracted with a supplier to have 25 days\u2019 worth of materials available to me all the time. That manifests itself in my system as an inventory location with X amount of goods in it. I can put in a rule that says when the inventory drops below 25 days\u2019 worth, an e-mail automatically goes to the supplier, or the number shows in red to them.\nThen the question becomes, What do I do with that information? Do I call the supplier [and complain whenever inventory drops below that level], or do I go back to the supplier during the SCOR card review and say, "During the last 60 days, there were 15 days where the service level in the hub dropped below 95 percent"? The main challenge is deciding what to measure and then how to monitor and communicate with the supplier [so you get what you want from them].\n\n \n\n\n\n\nMany experts say that the only way to have a truly efficient outsourced supply chain is if everyone in the supply chain has real-time visibility into the entire supply chain. Do you agree?\n \n\nI\u2019m not quite yet on the page that says that you need to have real-time, seamless visibility to everyone. Providing that level of visibility still has some level of overhead to it?the cost of moving data, and then storage and systems that can manage that data. If every event within my system triggers notifications across the supply base, that can create an awful lot of traffic and complexity.\n\n \n\n\n\n\nMany companies are having serious problems with their supply chain software implementations. What have you learned from your experiences?\n \n\nOne of the lessons I\u2019ve had is that you tend to overestimate the amount of time you can get from the key supply chain people who understand the business process change that needs to occur.\nYou can look at the vendor pitch and get excited and think that all the functionality is there. But the reality is that until you actually bring the software into your environment, you\u2019re not really going to know whether you have a 90 percent fit to what you expect or a 60 percent fit or a 100 percent fit. [Looking back,] I could have planned better for this happening.\nPart of the difficulty in predicting the fit is understanding [the level of development of] the technology versus [the supply chain processes you have in place]. And you know, if you don\u2019t have a good understanding of your process design or if your process just isn\u2019t very good, you can bump into some problems.\n\n \n\n\n\n\nDo you have an answer for getting out of that predicament?\n \n\nYou should go into the project with the expectation that you\u2019re only going to get 80 percent of what you want. And maybe what you do is set the realistic expectation that you are going to have release one, release two and release three to get to where you want to be. You want to get your releases tightly dovetailed together so you can keep showing improvement. Plan for the fact that you\u2019re not going to finish and be done. You\u2019re going to finish with something good, hopefully, and then you\u2019re going to work to make it better. \n\n \n\n\n\n\nIn your mind, what does collaborative supply chain mean?\n \n\n[Laughing] As you know, it means we\u2019re all partners, right? I think it means everybody is trying to do the right thing?make decisions quickly and effectively so that everyone across the supply chain understands the ramifications. [But every company has its] own incentive systems in place, right? And the truth is, those incentive systems and those priorities and goals need to be in alignment across the supply chain. If they are not, it doesn\u2019t matter?you can call it collaborative supply chain until you\u2019re blue in the face, [but it isn\u2019t].\n\n \n\n\n\n\nYet you seem pretty optimistic.\n \n\nI am. I love the idea of working with companies like Dell and Cisco and Compaq. Working with them to redesign the supply chain is exciting as hell.