OR/MS Today - June 1998

June 1998

Cyberspace:
Internet-Enabled Collaborative Planning

By ManMohan Sodhi

In the previous article (April 1998), I wrote about some of the ways the Internet was transforming supply chain management through company-to-company e-commerce, marketing and consumer intelligence, e-procurement, in-transit inventory visibility and drop-shipping. This article will focus on collaboration with suppliers and clients for supply chain planning, the operative word being planning.

A case study

Here is a situation that I came across a few weeks ago: Company B buys raw material from Company A, and sells finished goods to Company C. Lead times are a few months in both cases, but production planning is done for a two-month horizon. Company B is afraid it is going to experience capacity problems in a few months, but hopes that improved planning for a year out (instead of two months) should help in the search for alternatives. Executives from A and C say they can provide detailed estimates for how much they can supply and buy, respectively, for up to a year.

In this situation, the Internet (what else!) could be used to enable collaborative planning as follows: suppose B has an application linked to a database and a Web server to which both A and C have access through a Web browser. Given demand data, the application can create a feasible production plan a year out as well as determine appropriate replenishment needs. When A (or C) accesses the Web server through a browser, it can get replenishment requirements (demand forecasts). A (or C) can then either confirm or revise, and if a revision is made, the application, which continually checks the database for any changes, revises the supply chain plan quickly with approval/modification by a human planner. This in turn may change the replenishment needs and forecasts, leading to another cycle hopefully closer to a consensus plan. Could this have been done without the Internet? Yes, but can you imagine the training as well as specialized software needed?

Discussion issues for collaborative solutions

One issue could be the type of access provided to collaborators: read-only, interactive, real-time solution, etc. For instance, a weaker version of the above hypothetical application would be to provide read-only access to clients and suppliers via the Web, and use the telephone/fax for revisions. Another issue is security for protecting data, deciding who gets to see what, and even protecting the firm's systems from hackers. A third issue could be to look for solutions that are not based on the Internet despite the temptation of web browser software being free and requiring little training.

Some firms are already offering, or will be offering, Internet-based secure interactive collaborative capability to supplement their planning applications. Here is a sampling:

• Manugistics (www.manugistics.com) Manugistics, a leading supply chain planning software provider, offers NetWORKS, an Internet-based solution that "gives companies the ability to collaborate on supply chain decision-making through applications that connect enterprise boundaries, alert partners to changes in the supply chain, and provide user-defined supply chain metrics." Areas targeted for collaborative planning include demand planning, order promising, load tendering for carriers, and replenishment of materials for material planning.

• Logility (www.logility.com) Logility has a pair of products Demand Chain Voyager (DCV) and Supply Chain Voyager (SCV) for collaborative planning. It claims to be the pioneer in Internet-based collaborative planning and stresses the security built into these applications. This is how the software is to be used in conjunction with their other products: a firm's customer (or the firm's own sales force) can obtain suggested forecast for the customer from the firm's Web server and either confirm it or modify it. The firm's planning department, using Logility's Demand Planning application, may revise these forecasts and make them available for its customers for confirmation. Similarly, on the supply side, Logility's Replenishment Planning module is used to support the Web server using SCV. Suppliers can access the Web server and confirm or change the firm's replenishment requirements.

• SAP (www.sap.com) One of the biggest news in the supply chain planning world recently has been the announcement of SAP's entry with a suite of Advanced Planning and Optimization products (APO) in the area of production scheduling, distribution planning, transportation management (but not planning) and forecasting. The products are designed to be link up to any data source (not just R/3), and it is just a matter of time (1999?) before they are Internet-enabled for getting data from or to Web servers.

Conclusion

There is tremendous excitement about Internet-enabled collaborative planning, and for good reason, and we will see many new products in the not-too distant future. Still, you do need to understand the security risks as well as what a vendor is actually offering beyond the PowerPoint slides. Then there is question of the underlying business processes; for instance, if you do not have a collaborative planning within your firm, Internet-enabled collaboration with suppliers and customers may be a pipe dream. And, if you are curious about company B, my view was that they need to work on internal collaboration first.

Dr. ManMohan S. Sodhi is President of the Logistics Section of INFORMS and a consultant in supply chain planning with Andersen Consulting in Chicago. He is the founder of the OR news group, sci.op.research, and helped design and create INFORMS Online. He welcomes your comments at MohanSodhi@AOL.com.

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