VOLUME 1, NUMBER 1 | SPRING 1998

INDUSTRY outlook

Organization Seeks to Revolutionize Supply Chain Management


Chrysler Motors Corporation, Deere & Company, Harley-Davidson Motor Company, Honda of America, Proctor & Gamble Co., The Trane Company and Supply America, Inc., are charter members of an organization that will address a critical, competitive business issue -- supply chain management.

The National Initiative for Supply Chain Integration (NISCI) will facilitate member businesses in researching and developing the most effective solutions to optimize the performance of supply chains of three links or more.

NISCI is non-profit organization, headquartered in Chicago, that will function through a board of directors consisting of end-product producers, raw material firms and small- to medium-sized intermediate processors. Members will establish teams of industry executives that will guide the development and testing of solutions to supply chain integration issues. These teams will be responsible for assuring the viability of each solution and to provide them to all NISCI members complete with any tools, systems, processes or training they may require for proper implementation.

NISCI members have identified three areas as important initial challenges for the organization to tackle: establishing a system for real-time consensus decision making in supply chains; developing standards to measure and improve chain economic performance; and building trust in supply chain relationships.

Manufacturers Recognize the Benefits of Extranets


Midsize manufacturers that currently have or plan to develop commercial sites on the World Wide Web tend to view this medium as a marketing and promotional vehicle rather than a means for electronic commerce, according to Grant Thornton LLP, an accounting and consulting firm.

In its latest study, the Eighth Grant Thornton Survey of American Manufacturers Annual Report: Managing Growth, the firm reports that 44 percent of American industrial companies with annual sales from $10 million to $500 million currently have commercial sites on the World Wide Web, and another 21 percent plan to establish them by 1998.

Among these companies, 65 percent say they primarily use their Web sites for marketing and advertising, while 62 percent say their sites help to define their industry leadership. Only 30 percent say their sites are important to remain competitive.
Eighteen percent are looking to sell products directly via the Internet, and 17 percent want to begin or enhance mail-order capabilities.

In addition to the Internet, the study explores other issues that can enhance or inhibit midsize manufacturers' ability to grow:

  • More than two-thirds have been designated as preferred suppliers by one or more major customers, and 62 percent have selected preferred suppliers of their own.
  • A quarter of midsize manufacturers are enduring pressure from their larger customers to establish operations in other countries. Currently, 18 percent of midsize companies have operations abroad, while another 9 percent plan to establish sites in the next two years.
  • Nearly two-thirds of midsize manufacturers have no outside directors on their boards; overall, outside membership comprises only 14 percent of corporate boards.

    U.S. Manufacturers Take Global Lead


    U.S. manufacturers have taken the lead in defining world-class productivity and quality improvements, reveals the IndustryWeek Census of Manufacturers, a comprehensive survey of plant managers and manufacturing executives.

    The survey indicates that world-class manufacturers are significantly improving supply chain management by aggressively pursuing increased flexibility and agility in five performance areas:


    • Enterprise integration of knowledge: U.S. manufacturers are developing more "connected" organizations by eliminating functional boundaries, creating more widespread empowerment and cross-training of employees, and implementing knowledge sharing technologies -- both within their companies and with suppliers and customers.
    • Strategic cost performance: Manufacturers in the United States are no longer relying on reengineering or restructuring to lower costs but are seeking ways to reduce costs in cooperation with suppliers and customers.
    • Maximized utilization of assets: World-class manufacturers are continuously seeking new ways to leverage existing assets to increase productivity. For example, manufacturers are improving ways to reduce conversion and overhaul time on the production line to create more output and lower costs per output.
    • Supply-chain optimization: U.S. manufacturers are finding more opportunities to link and streamline the supply chain internally and externally from supplier to customer.
    • Technologically enhanced manufacturing: World-class manufacturers are increasingly using information technology as a tool to maximize the gains achieved from reinventing the organization. For example, they are using computer maintenance management, EDI with customers, the Internet and supply-chain logistic systems.


    Terror in Transportation: Shipments From Hell


    For the past two years, Roberts Express, a transportation company that specializes in critical-needs shipments, has sponsored a unique contest that asks people about their worst shipping disasters. It's the Shipment From Hell contest, designed to uncover the kind of shipments people would otherwise be glad to forget.

    Some of the more incredible stories that have earned Shipment From Hell "honors" this year include:


    • Half a Brain Is Better Than None? A research facility shipped a human brain in two boxes. One box arrived, as planned, but the other never showed up. It does make you wonder where that half- a-brain went to -- and who got the surprise of his or her life.
    • A Case of Arachnophobia. It wasn't bad enough that 15 or so eight-legged stowaways crawled into skids that had been packed and stored outside for the night. They had to be black widow spiders. By the time the exterminator finished at the receiving end, it was a $5,000 job -- enough to make anyone's skin crawl!
    • Just One Little Stop Along the Way. Three days to drive 900 miles and make a much-needed delivery? No problem -- unless the driver decides to stop off at a former girlfriend's house. And not call in. For days. He arrives happy, but his rendezvous costs the customer $9,500 in downtime and idle crew and equipment costs.
    • The One(s) That Got Away. Campers hit the jackpot when thousands of pounds of fresh salmon spilled out from a truck that was involved in an accident nearby. "Somehow" 2,500 pounds of salmon -- more than a ton -- vanished. Rumor has it that S'mores and toasted marshmallows weren't the only treats around the campfire that night. This may be the ultimate fish story: the ton that got away.
    • A Little Detail We Forgot to Mention... A Danish company arranged to send a shipment by rail from New York to Washington state, but neglected to "mention" the fact that it needed to be refrigerated. A week later, instead of a railcar full of imported margarine, everyone involved had a gooey, yellow mess on their hands -- literally.
    • The Shipment That Was Afraid of Heights. A shipment headed for the Seattle Zoo made fellow air travelers very nervous. The problem: an unhappy gorilla on board, making such a racket that the flight had to high-tail it back to the airport. It appears that the gorilla was just afraid of heights; once he was on the ground again, he was fine.

    According to Roberts Express, the Shipment From Hell contest has attracted more than 1,000 entries over the past two years. Entrants are specifically told not to name names, as the purpose is not to assign blame.


    Poor Communication Costs Companies Customers


    Companies worldwide lose millions of dollars every year because they fail to communicate efficiently with customers and suppliers, according to KPMG Consulting. Companies' supply chain inefficiencies are pointed out in the results of two surveys issued by the company. The survey found that many companies worldwide do not know the exact amount of goods they need to manufacture, transport and store, yet are sluggish to adopt the techniques and technologies that would solve the problem.

    Supplier and customer involvement is essential to efficient supply chain management, yet 29 percent of companies report their suppliers have no involvement in their inventory management. Another 22 percent of companies report no involvement from their customers when planning manufacturing requirements.

    In consumer markets in particular, there is a quantifiable gap between perception and reality. While 96 percent of retailers are sharing information with customers/suppliers, 79 percent are using outdated modes of communication, such as paper or fax. Those using electronic data interchange (EDI), are not using it to its fullest potential.

    Efficient manufacturing practices such as just-in-time (JIT) manufacturing and total quality management (TQM) are critical techniques for lowering inventory levels and enhancing product quality, but according to the study, are largely absent from consumer markets companies.



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