Ask any procurement officer these days if supply chains are getting more complex and you're likely to get an earful in the affirmative. The number of suppliers, location of suppliers and regulations dealing with customs and security are all combining to make supply chains more difficult to manage. Faced with this complexity, information on suppliers and orders is vital to helping purchasing and operations officials manage cost-effectively and reduce supply chain risk.
In companies with hundreds or even thousands of suppliers, information needs can range from a company's name and billing address to financial information such as payment terms and credit information. "There is so much data, some of which is very dynamic, and the problem is, how do you keep up with it," says Warren Sumner, chief operating officer and general manager, Enterprise Software Group, Take Supply Chain, headquartered in Austin, Texas.
Software companies such as Take Supply Chain help firms achieve better insight into their supply chains by extending the capabilities of their ERP systems and allowing them to better manage the movement of goods from their suppliers through their distribution channel and ultimately customer base.
Sumner says the key to managing the supplier-buyer relationship is an electronic commerce system in which the supplier itself can provide much of the required information to the buyer. While that seems to put more work on the supplier's shoulders, Sumner says companies that rely on paper-based systems are constantly dealing with discrepancies involving shipping dates, prices and other issues.
"While a supplier is fighting with its buyer about all these discrepancies, guess what, they're not getting paid," he says. "We implement systems that have visibility into the receipt of an item, into the invoice that the supplier has transmitted and into the payment by that buying organization against that invoice. When you serve that all up to the supplier, they don't have to call their customer. They know what the status is and they get paid faster."
Warren Sumner, chief operating officer and general manager, Enterprise Software Group, Take Supply Chain
Information systems also can help companies deal with concerns about risk in the supply chain. Sumner says some companies are outsourcing physical processes to logistics carriers and other supply chain partners, but maintaining control of the information systems needed to manage that process. "What happens, for example, if a supplier runs short of a critical item?" Sumner notes. "If I as the brand manager have the information, I can very quickly change suppliers. If my supplier has all the data, I am basically at their mercy."
One of the primary benefits of understanding the supply chain better, says Sumner, is the opportunity to remove links from the supply chain and get products to customers more quickly. He explains that the typical supply chain starts with raw materials shipped to a supplier who creates a part, sends it to a distributor who then sends it to a brand owner for final assembly and then that finished product often goes back to a distributor before it reaches the end customer. That requires warehouses, shipping, personnel and other resources. "It's much better when you can just have a supplier create and finish the component and drop-ship it directly to the customer," says Sumner. "The only way you can do that and still be the brand owner who controls the brand image, quality and delivery performance is with sophisticated IT systems."