Feeding the Beast

E-customers want answers, and they want them now. Is your customer response infrastructure up to the task?

By Frank Wilhelm

Continued from Page 2

Redeploying Supply Chain Resources

Some companies have adopted a demand- flow manufacturing mode by rethinking and redeploying supply chain resources to tap into each member's core competencies. For example, they have suppliers who take over packaging responsibilities, while others look after the entire logistics area, from warehousing to transportation, shipping, and invoicing. The secret is to leverage the capabilities of the team to maximize value.

Take, for example, a computer hardware company that produces circuit boards and ships three different packages of its product, one for each of three countries. The manufacturer, without knowing exact requirements from each country, would try to forecast demand. The company would build to that forecast, insert the circuit boards and documentation into each different package, and seal them for distribution. At this point, the inventory was held at most value and least versatility, costing the company money. Furthermore, demand forecasting of the packaged items was rarely on target, so the company was constantly in "expedite" mode.

When the company Web-enabled its supply chain so that everyone could see customer demands, management realized that the demand signal should be going directly to the distribution center so it could take the raw materials and package them according to the actual orders. In essence, the Internet let the circuit board vendor perform just-in-time manufacturing because of its direct access to the demand signal. Shifting the information upstream and using these demand flow techniques in a nonscheduled way simplified operations, made them more cost-effective, and let the organization respond much more quickly to customers.

Infrastructure, Integration, and Discipline

Attempting to implement demand signal management across the enterprise and among suppliers and business partners requires a robust infrastructure, integration of back- and front-office information, and a disciplined environment in which processes are standardized and trading partners are synchronized.

In short, to succeed as an e-business, your organization must consider these key factors:

• A robust and reliable infrastructure. Your IT infrastructure should integrate all back- and front-office processes and solutions. But before planning and building this e-business infrastructure, you need answers to at least these questions: Are servers adequate to handle surges in Web traffic? When orders, inquiries, or help requests come in from a variety of sources, including the Web, where will they go? If a customer changes an order, how will that be routed to the appropriate people, both internally and externally?
• Alignment of business processes. If your existing business environment is "undisciplined" - lacking rules-based standardization and optimized processes and procedures - it will become increasingly difficult to handle demand signal management effectively. To promote a successful e-business initiative, you may find it necessary to reengineer processes according to industry best practices.
• Supply chain collaboration. To create a true value chain and make demand signal management work, you need to create a true spirit of customer-centric collaboration up and down the supply chain, as well as provide the technology tools to enable fast, open communications. If you don't, the value chain will only be as strong as its weakest link.

Sense of Urgency

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The data that should mean the most to a supply chain is the demand signal. It should be the tune to which the whole organization dances: In response to this signal, companies buy inventory, hire people, and build and close plants. If the demand signal fails to reflect reality, as it often did with outdated forecasting methods, reactions will be equally misdirected.

But with instant access to the true demand signal and a better understanding of how to respond to that signal, businesses can eliminate unnecessary investments in inventory and infrastructure. By addressing this process, responsible companies communicate a sense of urgency and responsiveness to their customers.

By making dynamic fulfillment and e-business integration a reality in their businesses, dot-com companies can avoid being blindsided by more traditional companies with value chain infrastructures already in place. Likewise, by adopting this new paradigm, newly agile brick-and-mortar companies will have no trouble competing with their "click-and-order" competitors.