Posted by Gavin Davidson, Vertical Market Expert for Manufacturing, NetSuite
International Data Corporation (IDC) recently published their top 10 predictions for manufacturing in 2014 and the #1 prediction in particular caught my attention:
“Manufacturers begin to build 3D value chains”
Ok, so at some point during the last 30 years, coordinating the purchase of items from suppliers became a “supply chain.” I get that. I also get that sub-contracting manufacturing processes (that add value to a product) became a “value chain” – but what’s this 3D thing? And do I need to wear funky glasses in order to see it? Thankfully not – but it may help.
In this case, IDC is referring to three separate but related elements of supply chain execution:
- Demand Oriented
- Data Driven
- Digitally Executed
Is this really a new concept though? It does remind me of a “standard” that has been around for 40+ years: EDI (Electronic Data Interchange) – the mere mention of that most dastardly of three-letter words still sends shivers down my spine.
When I first started implementing ERP solutions in Southern Ontario in the late 90’s, the impending Y2K “disaster” was a nice impetus for change and a lot of my customers were automotive parts suppliers. As I walked into one of these companies for the first time there were a few things I knew I would be greeted with:
- A Kanban board
- An aging PC sitting in the corner with a dial-up modem and dot matrix printer attached
- Total chaos
Two of the three are related. I’m not brave enough to say anything negative about Kanban, so that leaves the PC and chaos. How can a PC, modem and dot matrix printer cause chaos I hear you ask?
Because that PC was “the EDI machine”
The concept of EDI was great – the automotive companies would send out forecasts and orders to all levels of the supply chain and the suppliers would respond with confirmations, ASN’s etc. However, the harsh reality – and the reason it failed in a lot of cases – was because of that same PC sitting in the corner with a dot matrix printer attached. You see, the smaller companies couldn’t afford to have the EDI signals integrated with their ERP systems (if they had one) so they did what we called “rip and read” – they would receive the EDI communication, print it out and re-enter it to their internal systems. Instantly breaking the chain and really rendering EDI useless in a lot of cases.
In this scenario, you’d need the following to receive / transmit EDI:
- Local EDI software
- Customer specific map definitions (which may change at any time)
- VAN (Value Added Network) subscription
- Someone to re-key the information
So what’s changed that would make IDC choose 2014 to call this out as their #1 trend?
Ok, maybe more specifically the ability to outsource all of the above to a company who does “EDI as a Service” – which completely simplifies the process. They define and update the maps between your system and the EDI source and delivers the content directly into your ERP solution through an API or web services.
But EDI doesn’t go deep enough into the value chain. Typically, EDI communicates at the order level, but virtually every company I have spoken to in the last year wants visibility into the value chain – it’s not good enough anymore to place an order on a supplier and wait until they deliver it, today’s manufacturer wants visibility into their suppliers manufacturing process as if it was their own. They also want visibility into efficiency by process step, scrap and yield by workcenter, in-process failure reasons and more.
Whether you are dealing with suppliers, manufacturing partners or your own foreign manufacturing facility, how exactly do you put the infrastructure in place to support this? From an IT perspective, true cloud solutions are inherently agile and not just because of their configurability but because your company information is centrally managed with reduced infrastructure.
You’ll also need to be prepared to offer portal access for vendors with lower volumes to update manually as desired.
Cloud was in its infancy when Bill Gates published the following in his book: Business @ the Speed of Thought : Using a Digital Nervous System.
“To function in the digital age, we have developed a new digital infrastructure. It's like the human nervous system. Companies need to have that same kind of nervous system--the ability to run smoothly and efficiently, to respond quickly to emergencies and opportunities, to quickly get valuable information to the people in the company who need it, the ability to quickly make decisions and interact with customers.”
Doesn’t that sound familiar?