www.quadrem.com
An eMarketplace for the Mining, Processed Foods and Oil and Gas Industries
Quadrem is the global eMarketplace for the global mining/mineral/metals industry, the consumer packaged goods and the oil and gas industries with 14,500 suppliers and 436 buyers. It handles more than US$5.9 billion throughput a year. Quadrem commenced trading in 2001 and has been developed around six core principles:
1. Openness – Quadrem is open to all sellers and buyers who want to participate.
2. Global – Quadrem reaches a global market of sellers and buyers and has established regional offi ces to provide technical and sales support.
3. Superior technology that is secure and confi dential – Quadrem provides a highly secure environment for commercial information and transactions with best practice training and support processes.
4. Neutral – Quadrem is an electronic transaction platform whose value-added services deliver benefi ts to both sellers and buyers with a comprehensive digital document set.
5. Independent – Quadrem is an autonomous entity. Its shareholder base is comprised of organizations which may also be customers; however, Quadrem’s management is completely independent.
6. Connected and integrated – Quadrem has a very large trading community of buyers and suppliers many of which have integrated their ERP systems with the eMarketplace to accelerate effi ciencies.
Purchase order value has risen from US$0 in 2001 to over US$6 billion in 2005 with a major increase in the number of suppliers joining the eMarketplace between 2003 and 2005 (doubling from 5,000 to more than 13,000 members).
• Quadrem’s unique selling point to buyers is that through ‘E’ technologies it streamlines all aspects of purchasing, reducing supply-chain costs, improving operations and increasing revenue opportunities.
• Quadrem’s unique selling point to suppliers is that through ‘E’ technologies it delivers transaction speed, order accuracy and new business opportunity.
Information sourced from CIO Magazine (www.cio.com) and the Quadrem website
Electronic Enablement and the Lean Chain
Lean supply chain management reduces costs and boosts sales and market share for companies by focusing on breakthrough performance improvements wherever and whenever it is possible. Electronic enablement is an important part of adopting a lean approach to supply chain management in that it facilitates:
• The identifi cation and elimination of waste wherever it occurs which leads to reduced lead times, frees up cash, increases customer responsiveness and delivers new products to market quicker. In particular where legacy systems are still being used, many businesses have had to design their processes to fi t in with these – and each successive set of changes has added to a patchwork of different fi xes which tends to increase waste. Up-to-date technology eliminates this situation and streamlines processes.
• Monitoring the continuous motion that surrounds lean inventory management thereby making a Just-In-Time approach to managing inventory a feasible goal.
• Information fl ow. Information that is inaccurate or slow will certainly make the fl ow of materials from suppliers through manufacturing and onto customers a visible problem so speeding it up and making the fl ow transparent to all concerned, vastly improves this situation.
• Making the right item at the right time and improving the accuracy of product costing by having better and faster access to customer demand information and forecasting data.
Fig. 4.7. A possible internet enabled supply chain network scenario
A good example is the use of radio frequency identifi cation (RFID) technology (AIM, 1999) as a tracking device, both of the obvious issues such as environmental conditions and the history and movement of the item, but also of less obvious issues. Issues such as eliminating human error in monitoring and recording information, controlling shrinkage by improving visibility through the system which also helps in mitigating risk – for example in areas where there are intense regulatory requirements. It should be noted however that RFID technology is an enabler of lean supply chains – not the creator (Brooke, 2005).
Optimizing ESCM through Collaboration
Successful collaboration, in the business sense, means that two or more groups or companies are working jointly to:
• Derive shared information
• Plan, based on that shared information
• Execute with greater success than when acting independently
• Measure performance
• Reward success.
In such a collaborative environment where the internet is a communication medium, the potential for SCM (originally envisaged as ‘the elimination of barriers between trading partners’) is that multiple levels of trading partners can all benefi t from information on consumer behaviour as it occurs. This is because it can be communicated through the collaborative network, thus immediately allowing all partners access to the same information and joint decision-making capabilities. The key communication requirements for this type of business model are:
• Real-time. If information is old, it is worthless, and you might as well wait for the re-order point replenishment and build-up the inventory.
• Global. It is for the fi rst to stamp their leadership role in any given value chain.
• Secure. It must be secure if suffi cient trust is to be established across multiple trading partners.
• Simultaneous. The information needs to be shared between numerous interested parties at the same time and there must be trust that this is so.
Collaborative commerce techniques directly applied to supply chain and electronically enabled business models, along with the entire range of trading partners and employees that are impacted by them, are collectively known as the Commerce Chain. The ability of organizations to employ collaborative commerce techniques and technologies to optimize their supply and value chains, bolster eCommerce activities and foster inter-enterprise communication and information exchange, will largely determine tomorrow’s market leaders.
Success will go to the companies and markets that provide real value-added services to the end-to-end supply chain (Gaudin, 2002).
Similarly, those companies that deliver more productive and effi cient ways to connect with customers, suppliers and partners will dominate the new B2B eCommerce environment.
Collaboration must also extend into all areas within the enterprise such as planning, procurement, engineering, manufacturing, product testing etc. (Ferreira et al 2002).
The eLandscape enables information to be shared simultaneously at multiple levels of the supply chain, with organizations and enterprises moving to non-linear information fl ows, so
that all supply chain participants are ‘working off the same page’ with the most up-to-date and accurate information available. Passing point-of-sale (POS) data from the retailer to the distributor, who then passes this on to the manufacturer is an example of a linear information fl ow. In a nonlinear information fl ow, a retailer might simultaneously share the POS data with the distributor and the manufacturer (Woods and Jimenez, 2002).
ECollaborationthen, is about optimizing business processes and business value in every corner of the extended enterprise - from the supplier’s supplier to the customer’s customer.
eCollaboration uses the eLandscape and electronically enabled business technologies to manage beyond the organization, both upstream and downstream. It is the strategic approach that unites all steps in the business cycle, from initial product design and product data management, through production, shipping, distribution, and warehousing until a fi nished product is delivered to a customer.
A collaborative supply chain relationship must be based on trust between organizations that previously may not have considered themselves partners. This means that strong leadership and change management are essential ingredients of a successful collaboration effort. There are three main issues associated with supply chain performance that are relevant here. They are visibility, velocity and variability.
1. Information visibility is knowing what’s happening in the supply chain. Essentially, the broader the visibility of information within the chain, the better the service that can be offered to customers.
2. Supply chain velocity is the speed of the supply chain. It is governed by the speed of access to good data, planning cycles and execution cycles.
3. Supply chain management variability is the ability to manage change. Average companies are still focused on managing/coping with variability through simply better forecasting.
The top companies understand that change is inevitable, and while continuing to forecast, they change their business and supply chain management to be more adaptive and agile in the face of change.
Companies with a network of suppliers, partners, and customers need a fast, effi cient way to review designs, disseminate information and enable two-way communications. This is done over the internet using:
• Extranet web sites (e.g. 3Com)
• Web servers (e.g. IBM’s webserver platform)
• Groupware (email-integrated collaborative software – eg Lotus Notes)
Web-enabling a company’s systems provides visibility to selected partners, suppliers, and customers and allows it to integrate them into the company’s other processes. In this way, companies can:
• Tie together all players in the extended enterprise, from design concept to production
• Provide real-time information thus allowing the participants to anticipate and adjust their operations in response to market conditions
• Improve productivity through better data integrity, fewer data entry errors, less rework, and faster communications
• Improve customer satisfaction by providing a more responsive and higher quality service
• Lower the costs, improve the speed, and increase the accuracy of data sharing within the extended enterprise.
Although the internet has been an important catalyst toward advancing data availability, tools such as email leave much to be desired for successful mass collaboration. To be truly effective, collaboration tools must take advantage of all levels of the organization and workfl ow process, affording ready data access to employees, whether they are next door or half way around the world.
The rapid growth seen in video and data conferencing markets and constant improvements in streaming technologies are enabling companies to leverage existing internet/intranet investments to enhance communication with remote sites bringing information to people, rather than bringing people to information. There are two main points to note however:
1. There is a difference between communicating and collaborating. Properly deployed, interactive collaboration tools can provide effective, competitive, and cost-saving advantages to an organization by streamlining the interactive processes of project management. As discussed in Chapter 3, internet and intranet solutions are providing good electronic collaboration options that can be extended to incorporate outside suppliers and vendors as well – for example through the development of enterprise information portals (EIPs).
2. No matter how good the technological improvements are in collaborative groupware there will remain the socio-technical hurdle of user adoption. Getting people to modify their behaviour is typically the greatest stumbling block, requiring a transformation of user habits (see Chapter 8).
Collaborative Supply and Demand Forecasting
Forecasting is a crucial method for managing inventory control and in a demand-driven environment where the focus is on meeting customer expectations, accurate demand forecasting is only achieved when a collaborative process integrates various forecasting systems. In addition, if you want your organization to succeed, you need to do more than create forecasts. You’ve got to use the results of the forecasts to improve your future. Having demand information from everyone in your supply chain lets you synchronize what you are doing with your customers and suppliers. It also helps you avoid some fatal mistakes, such as building too much manufacturing capacity – or too little.
For manufacturers, collaborative forecasting could be one of the greatest benefi ts of internet-aware process integration. By sharing demand forecast data in real time amongst the members of the supply chain, manufacturers can vastly improve the accuracy and usefulness of data used to drive business operations and decisions (Lewis, 1998). The problem: when there are multiple entities in the supply chain, forecasting becomes a very complex proposition.
To implement collaborative forecasting, manufacturers must form collaborative partnerships with their partners, develop compatible processes which will require agreement on how to negotiate and approve changes in the supply chain, and implement technology changes so the technology works with the processes and ERP systems in place in the supply chain. Change processes rather than deploy customized solutions, which generally prove costly to maintain.
The technology exists to enable seamless transfer of data between dissimilar ERP systems, so that instantaneous demand data can ripple down the chain. By leveraging the open environment of Web-enabled internet applications, electronically enabled businesses are well positioned to accomplish this transfer of data. For manufacturers in particular, better data transfer means better collaborative forecasting and ultimately, a more competitive business.
Collaborative Planning, Forecasting and Replenishment (CPFR).
CPFR is an integrated process of marketing, production and sales processes in consumer goods fi rms (retailers and suppliers) (Peterson, 2003; VICS, 2004). The aim of CPFR is to seamlessly link the manufacturer to the consumer, allowing trading partners to see information along the entire supply chain from one end to the other (iSource, 2003). CPFR is essentially a set of business processes that eliminate supply and demand uncertainty through improved communications between supply chain trading partners.
CPFR is part and parcel of collaborative commerce (cCommerce) in that it calls for complete collaboration and information sharing between trading partners, including the merchandising process, item/category selection and seasonal and promotional planning.
Combined with real-time updates based on hourly activity, trading partners will be able to engage in total supply chain visibility and forecasting. CPFR differs from its predecessors such as electronic data interchange (EDI), and vendor-managed inventory (VMI), in that it is designed to link the supply and demand processes allowing for a more consumer driven supply chain.
Collaborative Data Modelling is a critical phase in the development of CPFR since this activity focuses on the relationship between two or more companies. Compatible data from all organizations involved in the relationship is necessary, as are defi ned business rules on how the data may be used and how that data is to be aligned and organized. Advocates of CFPR suggest that this approach can provide three main benefi ts (Peterson, 2003):
• Inventory reductions. Currently about 8% of customers are not able to purchase what they intend to when they enter a shop because it will be not in stock. If inventory were in the pipeline, including the stores, then consumers would never have to deal with products being out of stock. Unfortunately, inventory bears a high cost in terms of capital consumption and expense, something participants in the value chain are aggressively trying to manage.
CPFR has a signifi cant impact on the management of value chain uncertainty and process ineffi ciencies, which are the drivers for holding inventory.
• Improved technology ROI. Through the CPFR process, technology investments for internal integration can be leveraged by extending these enabling technologies to trading partners.
• Improved overall ROI. The return on investment from CPFR for most companies will be substantial because investments in the technology necessary for CPFR are relatively small compared to the technology that it leverages (e.g. decision support systems) and compared to the expense reductions from improved supply-process effi ciency and marketing-expense productivity improvement as well as stimulating inventory reductions that free up working capital. The only area of potentially signifi cant investment is the change management required to move to a corporate culture that supports collaboration.
Where CPFR has most impact is in supply chains where good inventory management can substantially reduce working capital outlay (generally by millions of dollars). For example in the food retail sector, the CEO of Woolworths Australia, recently stated that he wanted Woolworth’s current inventory holding of 40 days’ worth of supplies to drop to ‘best practice’
levels (which he identifi ed as being that of Tesco Supermarkets in the UK) of 17 days. This type of inventory management and control in what is a highly competitive and consumer driven market, can only be achieved by having: good quality (i.e. very few errors) real-time information on the current demands from customers around the country, logistics (supply
levels in warehouses and the whereabouts of trucks), and suppliers’ capability to provide product as well good forecasting models.
Practically, collaborative supply chain management can only occur when issues of data quality, technological capability and integration between organizations, and the technical competencies of the people contributing to the supply chain, are aligned. The company i2 – see Byte Idea this chapter, is currently a leading player in providing software to electronically manage supply and demand forecasting and potentially, collaborative supply chain management.