Supply Chain Management For Everyone!!

1. Supply Chain Management For Everyone!! Joseph Cahill, PartnerWaterstone Consulting1700 Higgins Road, Suite 420Des Plaines, IL 60018(847) 699-9797(847) 699-9889jcahill@waterstone.com ERP World East Conference April 26-27, 1999

2. 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….

3. What’s Happened in the Market... Fortune 500 (and some specific mid-market segments): • 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 The Early Adopters have made significant investment in Core Business Systems

4. What’s Happened in the Market... ERP Vendors • 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)

5. 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

6. What about the small and mid-market companies... Thechallenge... • How to enjoy the benefits of the new technology without repeating the pain of the early adopters The good news… • Technology is cheaper and more mature • Hardware and client / server systems • Internet / Extranet / browser technology • EDI / EC Standards • THE ‘OTHER 30%’ ! • Implementation of ERP is ‘relatively’ easier

7. What Is The 70 / 30 Rule? Your business ERP System In most businesses, true competitive advantage comes from unique business practices supported by non-core (non-transactional) systems

8. What is ‘The Other 30%’? • 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

9. 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

10. 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

11. Case Study - Consolidated Commerce • 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?

12. 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

13. Buying / Industry Group CC-Enabled Network Current Member / Supplier Supply Chain CC-Enabled Consolidated Supply Chain

14. CC Services

15. 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

16. 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

17. CC - Technical Architecture Members’ existing business application EDI Translation Software Remote Inventory Manager Manufacturer Specific Application Web Web or VAN Members automated re-ordering based on sales/usage Suppliers with EDI translation software EDI Translation Software Admin. and Mgmt. Rptng SQL Server Database Acctng Software Internet Commerce Server Order Consolidation Application PC with Internet Browser and Web access PC with Internet Browser and Web access Members direct product ordering through Internet Application Web Web Suppliers with Web access but no EDI capability

18. 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

19. 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

20. 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

21. Discussion / Q & A