Joseph Cahill, PartnerWaterstone Consulting

1700 Higgins Road, Suite 420Des Plaines, IL 60018

(847) 699-9797(847) 699-9889

jcahill@waterstone.com

Supply Chain Management For Everyone!!ERP World East Conference

April 26-27, 1999

Why Are We Here Today...• Supply Chain Management opportunities exist for small to

mid-size companies

• There is much to be learned from the early adopters

• Technology has evolved to the point where the little guys can now act like big guys

• The marketplace will reward those who can best address the customer, not who is the biggest or who has invested the most in technology

• The playing field is moving from the ERP to SCM

• The 70/30 rule says that true competitive advantage lies in the 30!

Let’s start with a look at the marketplace….

What’s Happened in the Market...

• Y2K issues, technology evolution, general market pressures, etc. forced changes in business systems

• ERP Projects underway since mid-1990’s• Projects have big budgets and 18-36 month

implementation timeframes• Transactional systems typically supporting 60-

80% of core business, including Sales Processing, Finance, and Human Resources

Fortune 500 (and some specific mid-market segments):

The Early Adopters have made significant investment in Core Business Systems

What’s Happened in the Market...

• Explosion of growth coinciding with the large market needs

• Emergence of handful of market leaders (SAP, Oracle, Baan, PeopleSoft)

• Expansion into the Mid-market, shortening the implementation timeframe (e.g. ASAP methodology)

• General slowdown of Sales in 1998 (large market saturation, most companies either in the midst of ERP projects or addressing Y2K issues with other strategies)

ERP Vendors

What’s Happening in the Market...

• Saturation of the Mid-Market (early adopters) with ERP

• Development of Specialized Vertical Market Solutions (Automotive, Healthcare, Public Sector, High-Tech, etc.)

• Changes in the SCM Package Software Market • Manugistics Re-organization• I2 CRM (e-BPO)• ERP Movement into the ‘Other 30%’• Customer Relationship Management (CRM)• Supply Chain Management (SCM)

Many companies are looking for the payback from the ERP investment

•Technology is cheaper and more mature–Hardware and client / server systems–Internet / Extranet / browser technology–EDI / EC Standards

•THE ‘OTHER 30%’ !

The good news…

• How to enjoy the benefits of the new technology without repeating the pain of the early adopters

The challenge...

What about the small and mid-market companies...

•Implementation of ERP is ‘relatively’ easier

What Is The 70 / 30 Rule?

ERP System

In most businesses, true competitive advantage comes from unique business practices supported by

non-core (non-transactional) systems

Your business

• The competitive advantage lies in systems and processes which allow companies to work outside their four walls and interact more effectively with the upstream vendors and downstream customers.

• These initiatives must either increase sales or decrease cost• These opportunities typically lie outside the scope of

traditional ERP systems• These opportunities can be grouped into two broad

categories– Customer Relationship Management– Supply Chain Management

What is ‘The Other 30%’?

Some Examples of ‘The Other 30%’

Customer Relationship Management -

• Web-based sales channels• Remote product configuration• Custom order configuration• Complex pricing / contract maintenance• Customer categorization• Data warehousing

Some Examples of ‘The Other 30%’

Supply Chain Management -

• Inventory channel management (‘dealership’ model)• Vendor managed inventory / automatic replenishment• Warehouse network rationalization• Customer service management • Transportation / logistics management• Order fulfillment management• Data warehousing

• In fragmented and immature industries, consolidation is forcing many companies to reinvent themselves or risk being swallowed up

• Traditionally these industries used buying groups to band together (loosely) and leverage their collective size

• Consolidated Commerce recognized the need in this market from both the buying groups and their trading partners

• How can the members look and act like ‘big guys’ to both their upstream and downstream partners?

• How can the buying groups / industry organizations remain vital to their members?

Case Study - Consolidated Commerce

Consolidated Commerce - Market Offering

• ‘Consolidated Commerce provides fragmented industries with the benefits of advanced supply chain management’

• CC operates as a ‘service bureau’ company that consolidates all of the ordering, payment, and physical distribution (logistics) of product

• CC combines an electronic commerce platform with supply chain management concepts to provide a cost savings to all members of the supply chain -- suppliers, buying groups (or industry organizations), and the members of those groups

CC-Enabled Network

Buying /

Industry

Group

Current Member / SupplierSupply Chain

CC-Enabled ConsolidatedSupply Chain

CC Services

Order

Pay

Fill

Invoice

Member

Supplier

InternetCommerceServer

SupplierManagedInventory

Consol./Scheduler

MgmtReporting

EDITranslation

CC Technical Architecture• Internet Commerce Server allows the exchange of order,

payment, and fulfillment information between group members and suppliers

• Consolidation Application includes routing, margin management, and customer / supplier management.

• EDI Translator Server Software is used to receive and send EDI transactions to suppliers and group customers

• Management Reporting Application allows members with single or multiple locations to review order and fulfillment activity at a summary level covering all operating locations

CC Technical Architecture• Central Data Repository captures all current and

historical customer order and fulfillment information

• Integration Application links accounting information between customer sales and supplier purchases

CC - Technical Architecture

EDI Translation Software

Admin. andMgmt. Rptng

Internet Commerce Server

SQL ServerDatabase

Order ConsolidationApplication

AcctngSoftware

EDI Translation Software

ManufacturerSpecificApplication

PC with InternetBrowser and Web access

PC with InternetBrowser and Web access

Members’ existingbusinessapplication

RemoteInventoryManager

Members automated re-orderingbased on sales/usage

Members direct product orderingthrough Internet Application

Suppliers with Web accessbut no EDI capability

Suppliers with EDI translationsoftware

Web

WebWeb

Webor VAN

Benefits of the CC Solution

• Reduction in Operational Costs associated with Transaction Processing

• Reduction in Product Cost to the Member through Volume Buying and Improved Operating Efficiencies

• Increase Sales to the Buying Group Members by supporting sales to their customers

• Reduce Inventory by increasing product replenishment frequency

Benefits of the CC Solution

• Reduce Transportation Costs associated with physical movement of product from suppliers to buying group members

• Introduce a new sales channel for suppliers/distributors

The SCM Message• Opportunities for Supply Chain Management

benefits exist for small to mid-sized companies• These benefits typically lie outside the traditional

transaction processing systems• Supply Chain Management initiatives focus on

customer-facing and vendor-facing processes• The 70/30 Rule applies to companies of all sizes• These systems let the little guy act like the big

guys and enjoy the big-guy benefits

Discussion / Q & A