Table Of ContentUsing Real-Time Information
to Support the Supply Chain
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Using Real-Time Information
to Support the Supply Chain
Michael McClellan
ST. LUCIE PRESS
A CRC Press Company
Boca Raton London New York Washington, D.C.
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Library of Congress Cataloging-in-Publication Data
McClellan, Michael, 1940-
Collaborative manufacturing : using real-time information to support the supply chain /
Michael McClellan
p. cm.
Includes bibliographical references and index.
ISBN 1-57444-341-0
1. Production management. 2. Business logistics. 3. Real-time data processing. I. Title.
II. Series.
TS155 .M3455 2002
658.7'2—dc21 2002068208
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Dedication
To my wife Pamela
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Preface
Collaborative manufacturing can be a totally different way of doing business.
There are many facets to this idea, but the most significant is the change of
business buy and sell roles, from adversarial relationships to cooperative
and then collaborative arrangements, based on identified elements of mutual
interest and trust. The concept of collaboration means that participants con-
tribute something for the betterment of the whole. In doing so, the relation-
ship changes from traditional business rules to those based on mutual trust;
these are enhanced by performance and contribution. One example is the
sharing of new product development information with a vendor. The first
commitment a vendor must provide is one of absolute confidentiality: infor-
mation will not be shared beyond those required to contribute. The supplier
agrees to product development confidentiality while the host agrees to not
share product innovation or production ideas provided by the supplier. The
results are better ideas, lower cost (perhaps shared), and committed produc-
tion benefiting both supplier and host. It’s a win/win arrangement that is
likely to provide a better product and improved business success for both
parties. For many years, this relationship has been evident in certain indus-
tries and some companies, including automotive and electronics manufac-
turers, and contrasts sharply with the tough adversarial beat-down-the-price
and beat-up-the-vendor relationship that exists in many supply chains.
One of the best starting points of collaboration is to provide each supplier
partner with accurate information regarding product demand. Are your
major suppliers in the dark as to your expected purchases or can they plan
operations based on a shared forecast? With better information, a stronger
commitment of delivery and performance to the agreed schedule are possi-
ble. How many times has your company used an estimated forecast to
generate a master production schedule only to find that the forecast was
substantially inaccurate, with quantities either under- or over-estimated?
Either instance causes considerable upheaval, now or later, in eventually
responding to the real demand requirement, either by driving up inventory
costs or by missing sales opportunities because the product was not avail-
able. One of the primary objectives of collaborative manufacturing is to
synchronize the production processes of the value chain network to reduce
or eliminate this dysfunctional process, thereby lowering costs and more
consistently meeting market demand requirements. Although conceptually
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simple, the idea of synchronized inventory/production requires true collab-
oration. One goal is to eliminate or improve management of events that
result in just-in-case inventory, the historic method of responding to events
that might affect delivery performance. With even a minimal degree of
success, the savings are enormous.
To apply collaboration in manufacturing companies, begin by removing
obstacles that stand in the way of cooperation for a small group (two to four)
of supply chain partners within the supply chain network. The process
begins with steps that identify and set out the objectives of the arrangement.
The second phase establishes the requirements, responsibilities, and methods
of each partner in meeting the determined objectives. The third phase is the
ensuring of compliance or the confirmation of facts based on absolute truth.
This is the most vulnerable point of the process, where trust alone can bridge
the gap between partners.
Trust is gained through confirmed compliance using on-line, real-time
information. In the case of product design, on-line information is basic to
the process of tracking and recording each event and contribution through-
out a product’s entire life cycle. In the production environment, trust is
ensured through generation and presentation of real-time information from
the plant-floor production process that confirms agreed-on planned events
and product compliance processes. Assumptions, paper transmittals, or
promises will not suffice, as any misinformation will detract from the fun-
damental element of trust, the foundation of the collaboration agreement.
Actual information gained through process visibility is the only data source
that confirms truth. There is no substitute.
Another important area of collaboration is accomplished through the
use of information technology systems and the Internet to simultaneously
include partner collaboration in product design and to collect and manage
product definition information from design to product disposal. Generally
referred to as collaborative product commerce or product life-cycle manage-
ment, this form is characterized by the idea of broad, perhaps global, inclu-
sion of participants in product design.
Companies have been exchanging manufacturing and product data with
customers and suppliers for many years. This has taken the form of direct
contact with the plant floor or production updates provided on some
planned basis. Collaborative manufacturing, at its minimum, takes this sim-
ple passing of information one or two dimensions higher, to an actual con-
firmation of successfully meeting the committed performance requirements.
This book examines the application of collaborative manufacturing pro-
cesses through at least four categories, ranging from collaboration in product
life-cycle management to collaborative tools used in manufacturing manage-
ment. It addresses collaboration as it might be applied to business processes
within companies on a department-to-department basis and externally to
designated supply chain partners on both the demand and the supply side
of the supply chain network. It includes some reasons you should change
your practices, and provides details on how to achieve change.
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The business assumptions are that you are looking to improve your
ability to convert incoming inventory to a greater value-added product, and
you want to include partners within the supply chain network to get the
maximum impact and result.
Two messages will be presented:
• Collaboration is a good thing. Linking partners within the supply
chain network can accumulate numerous advantages through collab-
oration as a formal business alliance or simply through the sharing
of business process information. Collaboration can be as simple as
linking internal interdepartmental business processes or as complex
as synchronizing an eight-tier supply chain.
• Real-time, on-line information from production processes is crucial
to improving success across the supply chain network. Without real-
time information, the most solid information is based only on as-
sumptions. Mutual trust is hard to build on assumptions. Only true,
current, and accurate information will suffice. There is no substitute
for real-time production data.
Collaboration may or may not be a paradigm shift, but the momentum
exists and is likely to continue to grow because leading companies, such as
Daimler-Chrysler, Dell Computer, and Cisco Systems, have seen its success
and the opportunities are nearly endless.
The book’s chapters and appendices are summarized below, followed
by a table that lists the relative value of each chapter for readers by area of
responsibility, department, and industry.
• Chapter 1 is an introduction to the general idea of collaboration as
used in manufacturing companies. It describes how working together
with shared objectives in a nonadversarial environment can have
positive impact. A general explanation of enterprise resource plan-
ning systems, supply chain management, and real-time information
from production and logistics processes shows their role in the ex-
tended enterprise and their fit in a collaborative environment.
• Chapter 2 defines four collaboration strategies: product life-cycle
management; collaborative planning, forecasting, and replenishment
(CPFR®); synchronized inventory management; and manufacturing
enterprise collaboration. The chapter contains a list of considerations
applicable to collaboration and a discussion regarding the value of
truth as a crucial element in nonadversarial business relationships.
• Chapter 3 provides details on CPFR, the version of collaboration that
has been developed to serve the manufacturer to retailer environment.
Through the efforts of the Voluntary Interindustry Commerce Stan-
dards Association, an organization of major retailers and consumer
goods producers, standards have been developed to guide companies
in their efforts to more effectively serve the retailing industry.
