Intelligent Manufacturing € November € 1996 € Vol. 2 € No. 11

Supply Chain Dominates APICS '96 Conference

By David Greenfield
Managing Editor

The theme of streamlining processes from supplier to manufacturer to vendor to customer dominated the 1996 APICS International Conference and Exhibition held in New Orleans last month. From discussions of how best to implement it to a record 185 booth exhibits showing off the latest software advancements, there was no shortage of information for the crowd of some 6,500 attendees regarding the increasing emphasis being placed on the supply chain and its importance to the manufacturing process.


The Heart of the Matter
APICS gathered a focus group of industry professionals deeply involved with the implementation of supply chain management (SCM) in an effort to drill down into the meat of the SCM issue to decide not only what the process means to today's manufacturer, but its viability for the future of manufacturing. Martin Mirsky of the Supply Chain Process Technology Center at Dow Chemical; Louis DiFrancesco with Bowman Distribution; David Roth, vice president of Manugistics; Elaine Whittington of G&E Enterprises; and Dick Bourke of Bourke Arnold Enterprises served on the panel of the focus group with Steve Melnyk of Michigan State University moderating.

Among the first conclusions reached by this group is that SCM differs from purchasing in that it (SCM) correctly utilizes supplies and makes suppliers and customers part of the same team. This incorporation of more players directly into the heart of the supply chain also brings about the biggest challenge for manufacturers -- optimization of the increased communication which inevitably occurs with such cooperation. This amplified communication is moving manufacturing toward a more collaborative type of enterprise, and manufacturers must be prepared to deal with this.

Fortunately, the widespread use of the Internet will help facilitate this abundance of communication, particularly on a global level. In becoming more of a global enterprise practitioner, as well as integrating other players more closely into its supply chain processes, a manufacturer must establish a high degree of trust with his partners and customers. This "open kimono" approach of total trust comes prominently to the fore in most global and heavily integrated implementations of SCM.

Another aspect of increasing the global orientation of the supply chain involves the difference of opinions on matters which may have long been considered standardized within a company. But in becoming a global concern, an international customer's definition of quality or success must also become your own definition.

Likely the most important concern to arise within the focus group is that current SCM, operating at tactical and strategic levels and handling everything in the manufacturing process from source to customer, allows for more decision making at different levels, making the operation of a supply chain more of a balancing act than an optimization. Thus, while SCM provides manufacturers with many of the processes they've been clamoring for to streamline their operations, it also leaves them open to a number of other concerns not previously faced. However, the bottom line that has driven SCM to this point and will continue to drive it in the future is that it has proven time and again to help firms keep up with competition in markets where an entire product life cycle may be as short as one year.


Going Beyond the Hype
Nearly 100 lectures offered at the APICS conference provided a chance for attendees to go beyond the hype of the latest software offerings and get to their core concerns -- improving processes and thereby improving profits. Gary Gossard's (USC School of Engineering and Stanford Executive Manegement Program) lecture on Improving Inventory Performance and Bottom-Line Profits focused on how many comprehensive manufacturing planning and distribution management systems have yielded disappointing results. He believes the reason for this lies in the fact that most of these systems are all quantity driven (e.g., MRP).

To truly affect the bottom line, Gossard contends that one must shift his focus from looking at quantities and begin looking at dollars. For Gossard, a true dollar-based performance measure involves:

1) establishing inventory classes based on future dollar requirements;
2) setting target inventory levels for the various classes of inventory;
3) measuring the dollars invested in good, bad and marginal inventories;
4) setting specific objectives for inventory reduction;
5) analyzing data in poor quality categories to identify the best opportunities; and
6) using the performance measure to monitor continuous improvement over time.

Another manufacturing issue that looks to affect not only a company's bottom line, but future viability, is the environment. Steve Melnyk (Michigan State University, East Lansing) examined ERM (environmentally responsible manufacturing) in a lecture that started from the basis that ERM is increasingly forcing a fundamental rethinking of the manufacturing system, the goals and objectives driving it, and the way in which we measure and evaluate the effectiveness and efficiency of both this system and the firm as a whole.

The types of action available to achieve ERM, according to Melnyk, are: redesign of the product or process; substitution of a source that creates environmental waste with another material not as likely to create the same type of problem; reduction of waste by reducing the level of use of materials that create waste streams; rebuilding an engine or process in order to restore it to its original, optimal condition; remanufacturing a product or process back to its original condition with no parts being reduced to raw materials; reuse; prolonged use; separating waste streams in order to allow more efficient processing of them; spreading risks -- passing on the responsibility of proper disposal to another firm that is better equipped to handle the task; and accepting risks and problems.

The benefits of a proactive stance on environmental matters help protect a company against increasing legislation and liability implications. In addition, by keeping abreast of environmental matters, a company can reduce the amount of regulatory requirements and reporting it must perform.

Forecasting represented one specific aspect of improved supply chain processes that received a great deal of attention at the conference. Joseph Shedlawski's (Wyerth-Lerderle Vaccines and Pediatrics, Pearl River, N.Y.) lecture examined the importance of accurate forecasting in remaining competitive. The biggest forecasting pitfalls Shedlawski identified were: forecasting the wrong things by forecasting everything; individual decision making; second guessing; overreaction; conflicting purposes; sudden, unpredictable change; failure to recognize all sources of demand; and lack of timely monitoring. The optimal method of forecasting, according to Shedlawski, involves the determination of what to forecast, the modularization of options bills; assignation of responsibility; measuring the forecast; monitoring the forecast method; honoring, but not worshipping, the time fence; not just predicting but affecting; sales and operational planning; and two numbers -- a target and an error -- but using only one set of such numbers.

On the topic of integrating vendor-managed inventory (VMI) into supply chain decision-making, Mary Lou Fox (Manugistics, Rockville, Md.) spoke of how VMI leverages advanced technology and trading-partner relationships to enable the flow of information and inventory throughout the entire supply chain. VMI provides visibility into demand at the trading-partner level to improve the flow of products, eliminate inefficiencies, and lower costs. By incorporating demand and distribution planning, VMI provides integrated, enterprise-wide answers to problems in the supply chain. Benefits from VMI include: improved customer service, reduced demand uncertainty, reduced inventory and reduced costs. Some of the larger companies currently implementing VMI include Johnson & Johnson, Black & Decker, and Schering-Plough.

The effect of the Theory of Constraints (TOC) on the supply chain also received a fair amount of attention at the conference. Dierdre Bradbury Jacobs' (Avraham Y. Goldratt Institute, New Haven, Conn.) lecture on using the TOC to bring a project in on time focused on how the TOC addresses the handling of resource dependencies and the placement of time buffers to cover statistical fluctuations. Also, Thomas B. McMullen Jr. examined TOC and how its philosophies, practices, decision processes, measurements, logistics, and systems architectures all work together to provide an infrastructure for agile manufacturing.

Numerous other lectures, including Scheduling to Keep Your Customers Happy, Making Supply Chains Agile for Niche Products, Direction of Supply Chain Optimization Technologies, and Improved Supply Chain Management Through Mathematical Modeling, all served to underscore this conference's focus on improving processes and educating manufacturers.

The APICS '96 Conference neatly dovetailed with the lecture motifs closely mirroring the exhibit themes on the convention hall floor. These two outlets of information served to illustrate how the links to the future of manufacturing are being joined by taking established, functional procedures like supply chain management and integrating them with burgeoning technologies such as the Internet and newer manufacturing thought processes (i.e., vendor managed inventory and the Theory of Constraints) to enable a more timely and satisfying execution of manufacturing processes.