Sharing Their Way To Savings

Dec. 21, 2004
Automakers and suppliers strive for interoperable inventory visibility software. The project driver: the Automotive Industry Action Group (AIAG).

Will competing inventory visibility software products ever interoperate? By November, the Southfield, Mich.-based AIAG will have its answer. That's when the proof-of-concept will emerge from its Inventory Visibility and Interoperability project (IV&I). Other sponsors include the Original Equipment Supplier Association (OESA) and Odette, an industry association of European automotive manufacturers and suppliers Being able to seamlessly communicate demand throughout the supply chain could result in an estimated net savings to the auto industry of $255 million, says the IV&I project team. In addition, interoperability will greatly increase business velocity via time savings. The IV&I project will impact trading partner interactions such as inventory replenishment signals and help reduce lead time in the supply chain, says Linda Plawecki, executive director, AIAG. In the absence of interoperability, communicating with a supplier or OEM is reminiscent of the early days of the fax machine -- before communication standards prevailed. A fax could be sent only if the intended recipient of the data had compatible equipment! A similar situation prevailed when banks first offered ATMs. Lack of interoperability meant customers were restricted to the ATMs of their own bank. Today ATMs conform to standards permitting customer access through almost any ATM. A recent University of Michigan study reveals suppliers are eager for the benefits of interoperability. Tier 1 survey respondents named inventory visibility as a top priority. Furthermore, the one-time savings in inventory and working capital were perceived as justifying the cost of innovating an interoperable platform. The project will lead to new versions of inventory visibility software, says Terry Onica, QAD Inc.'s Detroit-based representative and an active volunteer on the AIAG project. "For example, our [QAD's] current software is not designed to communicate with competing products. In the future it will. We will have to be able to send information from our software to someone else's software." She says competing products confront the same challenge. Today many Tier 1 and Tier 2 automotive suppliers are in the process of implementing Web-based inventory visibility tools. In addition, some OEMs have developed their own fulfillment tools. Suppliers are often required to subscribe to and support multiple tools, increasing their operations cost and complexity and delaying further implementation of these tools down the supply chain. Upon completion of the IV&I project, customers and suppliers will be able to view and share identical business information regardless of the software packages used by a business partner. Data will be shared in a secured environment using a standard automotive electronic format that can be accessed using a PC and a browser and can be integrated into a company's applications. "For the automotive industry in particular, inventory visibility will drive efficiency as supply is better balanced with demand," says Pamela Lopker, QAD president and chairman. "The AIAG study will speed the creation of standards for interoperability that ensure applications work together and preserve manufacturers' and suppliers' choice of software." Adds Darrell Schwartz of AIAG member company Metaldyne Inc.: "By tracking the complex issue of inventory visibility and interoperability, AIAG is addressing a key process issue that will yield cost savings throughout the supply chain." QAD, SAP AG and other software vendors are assisting with the fundamental definition and testing of the interoperability standards. All participating companies will help in fine-tuning and finalizing the standard for interoperability. The National Institute of Standards and Technology is facilitating the proof-of-concept phase.

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