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Supply chain management for really smart people

The newest supply chain management technology is taking place outside the firewall, where edge-of-enterprise applications give companies a whole new outlook.

When Malvern, Pa.-based MG Industries tried to forecast its demand schedule several years ago, the company could look barely five days ahead.

It has broadened our scope and allowed us to expand our view of customer needs through an interface in our legacy systems.
Matt Brown
vice president of supply chain managementMG Industries

Using dated delivery schedules, scribbled on notebook paper and attached to clip boards, managers were having a difficult time calculating demand and often wrote insufficient reports, said Matt Brown, vice president of supply chain management at MG Industries.

"It's all changed now that we use SCM (supply chain management) software. Our forecast, based on previous history, gives us an 18-month projection instead of five days and that's a big difference," Brown said. "It enables us to plan our production based on demand and also allows us to conduct a long- term sales and operations planning process to monitor production capacity."

Brown's firm chose mySAP SCM software to monitor its adaptive supply chain, in addition to organizing its network of partners to connect the data to its new software. SAP was chosen because it links to MG's legacy systems, giving managers a better view of the supply chain, Brown said.

"It has broadened our scope and allowed us to expand our view of customer needs through an interface in our legacy systems," Brown said.

As companies seek to make better business decisions, many are seeking to extend their supply chains well beyond the company walls, said Michael Dominy, a senior analyst on business applications and commerce with Boston-based Yankee Group. Companies are currently transitioning from a static supply chain to what is known as adaptive supply chains. These integrate data and processes across networks of customers, suppliers and employees, Dominy said.

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"Adaptive supply chain networks are made by mixing innovative business strategies with application technologies that connect and synchronize the business network," Dominy said.

MG Industries reached out to its delivery partners, distribution centers and customers, and eventually connected over 40 of them to its SCM software, Brown said. Supply chain planners upload information daily on plant and customer inventories and transportation and delivery requirements to prepare forecasting reports.

Working with partners to get timely information is not always easy, Brown said. Some logistics data from partners and customers must still be fed into MG's legacy systems by hand before it is collected and analyzed by the mySAP SCM software.

Dominy estimates that companies will spend more than $4 billion during the next four years as they incorporate data synchronization, radio frequency identification (RFID) technology and other technologies into the supply chain.

The first step in extending supply chains is simplifying data transaction and execution layers, Dominy said. Companies should begin the transition by using one ERP vendor for transactions with one centralized set of master data and one supply-chain execution vendor.

Companies should choose a single supply-chain execution vendor that provides capabilities in all areas of the supply chain, including RFID technology, Dominy said.

Dominy predicted that SAP and Oracle will continue to dominate the large enterprise SCM transaction market. Microsoft, he said, will also still dominate among small and medium-sized businesses, he said.

SAP's challenge is to combine integration technologies with vertical specific applications, while Oracle must expand its customer base in the applications market by acquiring supply chain and ERP vendors, Dominy said. By purchasing smaller SCM vendors, Oracle will grow its base and appeal to specific industries.

"Companies have increased their core ERP technology, and now they're finding the best way to reduce costs is to drive down the overall network costs," Dominy said. "Enterprises are seeing the value in SCM vendors, such as SAP and Oracle, and their costs are being reduced by extending the view of the supply chain."

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