Implementation and use of B2B-enabling technologies: five ...

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JMTM 16,5

Implementation and use of B2B-enabling technologies: five manufacturing cases

554 Received May 2003 Revised January 2004 Accepted March 2004

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Damien Power Department of Management, Faculty of Economics and Commerce, The University of Melbourne, Parkville, Australia Abstract Purpose – To determine the extent to which long-established technologies (such as barcoding and electronic data interchange (EDI)) have been applied across their supply chains, identify factors influencing implementation, discuss future trends for new technologies, and document the business benefits accrued. Design/methodology/approach – Five case studies were conducted in manufacturing companies who are members of EAN Australia. As members of EAN Australia, the case study companies were using (to some extent at least) some aspects of the EAN system, and thus involved in using e-commerce-enabling technologies. Findings – Indicates that the use of technology is largely restricted to the demand (in this study retail trading partners) side of the supply chain, despite a general understanding of the potential benefits of implementation backward through the supply side. There is general agreement that emerging technologies (such as the internet) will provide further opportunities, and at the same time increase pressure for extended use. Research limitations/implications – Being limited to organizations operating in the Australian fast moving consumer goods (FMCG) sector, the results therefore need to be read in this context. It would be useful if these findings could be compared with those from other countries and different industry sectors. Practical implications – It is apparent that for manufacturers a critical loop is often not closed due to the limited availability of point of sale (POS) data from major trading partners, and that this has served to limit value capture (by the manufacturers) through extended application. Originality/value – Highlights both the potential for business-to-business (B2B)-enabling technologies to facilitate improvements in manufacturing operations, and the reality of their current limitations. An important emergent theme was that business benefits could be as much attributed to complementary methodologies (cooperative arrangements, cross-functional involvement, etc.), as to the use of the technologies themselves. As such, the cases point to the critical nature of information in this area, and to the need for appropriate relationships between trading partners to underpin and enable data flows between trading partners. Keywords Business-to-business marketing, Manufacturing industries, Supply chain management, Electronic commerce, Communication technologies Paper type Research paper

Journal of Manufacturing Technology Management Vol. 16 No. 5, 2005 pp. 554-572 q Emerald Group Publishing Limited 1741-038X DOI 10.1108/17410380510600527

Introduction The efficient and effective management of the supply chain has increasingly become a primary focus for organisations worldwide. For many years, organisations have been faced with the problem of trying to maximise the efficiency and effectiveness of their operations, when often their fate was not entirely within their scope of control.

Reliability and quality of supply of inputs has long been a source of potential problems for organisations attempting to compete on the basis of quality, cost and/or delivery. On the demand side, the accuracy and timeliness of information that could improve knowledge of real demand patterns has also historically been a problem for all types of organisations. The standard response to this issue has been to attempt to use both qualitative and quantitative methods to improve forecasting accuracy. At best these methods are usually approximations based on historical data, and as such are based in the assumption the future will be like the past. Unfortunately this is less and less the case for many companies as they find the business environment changing around them. Rapid changes in technology, changing demographics, globalisation of both markets and industries and requirements for customised products have all combined to refocus awareness on the need to optimise performance of supply chains rather than individual organisations. Companies have become increasingly aware of the fact that the needs of all stakeholders can be better served through this broader, more strategic approach. Technologies such as electronic data interchange (EDI), barcoding and product numbering have been in use for many years, particularly in retail supply chains, as a means of linking information flows to the physical movement of goods. As such, they represent technologies that have been developed to help mitigate some of the problems described above, and in fact provide a vital link between technology and supply-chain management methodologies. What has come to be known as e-commerce has largely been the result of application of multiple technologies to link flows of goods and information about those goods. It is therefore somewhat surprising that while some organisations have seen the application of such techniques as an opportunity to streamline logistics flows, reduce inventory and improve customer service, their acceptance has been far from widespread (Fernie, 1995). Many organisations have only implemented in response to requests (or directives) from trading partners. The importance of new technology in facilitating this process has been further highlighted over the past decade, and in particular over the past five years, by the development of accessible, affordable and practical means by which organisations can transact business electronically. Many benefits are therefore proposed for companies that develop and implement internet-based strategies in the management of their supply chains. A report released by the New South Wales Department of State and Regional Development suggests some of these include reduction in impact of geographical boundaries, reduction in operating costs, the ability to “lock-in” customers and the lowering of entry and overhead costs (New South Wales Department of State and Regional Development and Microsoft Australia, 2000). In discussing the reduction of geographic barriers, the report does make the point that this is very much an information issue, and that in effect it amplifies the need for coherent and coordinated physical logistics strategies. Information flows (and easily digitised items such as trading documentation) between trading partners will be greatly facilitated through the use of the internet, but the management and integration of physical logistics will still provide significant challenges. This view is supported throughout the literature on the management of the supply chain (Bowersox and Calantone, 1998; Bender, 2000; The Australian Financial Review, 2001; Bytheway and Braganza, 1992; Handfield and Nichols, 1999; Herridge, 1997; Natarajan, 1999; Schwarz, 1998; Magretta and Dell, 1998).

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Putzger (1998) states that the key criterion in implementation is correct choice of information technology, and that the use of third party providers for both transportation and information management is the option chosen by successful performers. Bowman (1997) states that many companies fail in the initial stages of implementation because they simply are unable to come to agreement on terms. In describing a supply-chain management implementation in a European company, Hammant (1997) lists seven critical success factors they identified through this process: (1) a committed organisation, from the board down; (2) effective programme management; (3) consistent, pre-emptive communications; (4) positive action to identify and manage key risks before they become issues; (5) a well defined and managed programme baseline, changed as necessary; (6) a succession of manageable delivery milestones to maintain momentum and confidence; and (7) an actionable, owned, manageable and measurable set of business benefits. Gourley (1998), (in citing the implementation of supply-chain-management techniques across 15 distribution centres (DCs) of the Mopar Division of Chrysler Corporation in the USA), makes the point that involvement of the DC staff, as well as suppliers, in implementation has been of critical importance. As part of the ongoing management of the program the company actively encourages the involvement of staff in decision making, as well as soliciting input from suppliers on potential productivity improvements. This supports the earlier discussion on the importance of partnerships and cooperative arrangements for successful supply-chain management. Larkins and Luce (2000) recommend the following “stepping stones” for an orderly implementation of supply-chain-management practices in the pulp and paper industry: . start small, with a single link with which you can have a good relationship; . start internally with a single business process; . focus on long-term, sustainable and cost effective business improvements that will benefit both you and your link; and . educate staff and promote buy-in from stakeholders. Moller (2000) provides some support for these criteria in documenting the implementation of an advanced planning and scheduling (APS) system at LEGO in Denmark. The three major lessons learnt in this case were: (1) do not be too ambitious with the timing and expectations for rapid results; (2) ensure accurate alignment between requirements and system functionality; and (3) critical importance of data accuracy. In planning for implementation of supply-chain-management systems, Parnell (1998) recommends the following factors that need to be taken into account: . Ensure that both process and system improvements are covered. Expensive new tools can become worthless if business processes do not support them.

.

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Fix your own internal supply chain first before you attempt to do anything with trading partners. Education in two areas: demand management and system optimisation. Understand the effect on current business systems, how behaviours will need to change, and how performance measures will need to change to reinforce desired behaviours. Do not let “best” get in the way of “better”.

Tyndall et al. (2000) indicate that there are three critical elements that need to be evaluated and balanced to ensure a successful implementation. These are value (relationship between cost and benefits), risk (probability of success – dependant on time span for tangible results), and method (the approach adopted by the company to balance value and risk). Some common issues they identify relating to these three elements are: . To ensure value companies need to be realistic about benefits. Many companies either grossly over estimate the benefits, or under estimate the time needed to implement and realise these benefits. . Companies need to be very critical about costs. Included should be internal and opportunity costs, real inventory costs, subcontractor costs, systems costs, support costs and asset costs. . Mitigate risk by focusing on short-term projects. The justification for this comes from the fact that it will be easier to set action plans, targets and specific time horizons for short-term projects. Long term projects run the risk of having costs and timing under estimated. . Implement in stages and avoid the temptation of trying for a “silver bullet” solution. They advise attempting to tackle small parts of larger problems, rather than attempting to solve one large problem in one hit. . Understand the supply chain first, take care of basics such as data accuracy at an early stage, and be prepared to learn from the implementation process. In summarizing their approach, they state: The value of working in stages and by segments is best captured in a wholly counterintuitive maxim: do less with more. In other words, put more resources onto fewer, more implementable initiatives, and make them accountable for results (Tyndal et al., 2000, p. 59).

In the context of emerging technologies and the implementation of e-commerce applications, Froehlich et al have identified that most companies will have to address some basic structural issues prior to implementation: E-commerce places new demands not only on delivery technology, but on the way that business processes are designed. At present, technology is forcing organisations to embark on e-commerce before they have built a coherent model of the business processes they need (Froehlich et al., 1999, p. 473).

This issue of getting the basic business processes right either as a precursor to, or an essential part of, implementation has also been identified as a barrier to implementation. An Andersen Consulting (1994) report has identified inaccurate

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data, existing systems infrastructure and entrenched business practices as the major barriers to implementation of advanced technologies and innovative management approaches. The importance of getting existing processes in line with new technologies and methodologies serves to highlight the importance of planning, as well as supporting the use of standardised frameworks for implementation. This paper seeks to examine some of these implementation related issues in the context of manufacturing organisations. As such, it addresses the following research questions: . What objectives and expectations do manufacturers have when implementing the EAN system? . What levels of planning are involved and what priorities drive investment decisions? . What benefits and limitations are encountered as a result of implementation? . How do organizational and cultural issues affect the implementation process in manufacturing companies? . What are the perceived future trends in development of business-to-business (B2B)-enabling technologies relevant to the manufacturing sector? Five companies are examined in turn to assess how each has approached implementation of B2B-enabling technologies, and to compare usage and application for the management of their supply chains. Methodology In order to provide a framework for this project, the model on which the research was based was that of the “EAN System”. EAN Australia is the organisation that administers, validates and issues EAN (European article numbering) standard barcodes to Australian companies. As well as promoting the use of these barcodes, EAN promote a system for the adoption and implementation of electronic commerce and supply-chain management. This uses a combination of EAN numbering, barcoding and EDI type technologies to link the flow of physical goods with the flow of information through a supply chain. This system, therefore, provides a set of integrated technological solutions of the type described in the introduction, where e-commerce-enabling technologies can be applied to the management of supply chains. The membership of EAN Australia, therefore, provides an accessible and relevant context within which to conduct the research. Five case studies were conducted in manufacturing companies who are members of EAN Australia. As members of EAN Australia, the case study companies were using (to some extent at least) some aspects of the EAN system, and thus involved in using e-commerce-enabling technologies. The five companies that consented to being part of the study came from a group of thirty companies randomly selected from the EAN Australia membership list. The case studies were conducted for the purpose of identifying some of the major issues relating to the implementation of the EAN system, and electronic commerce generally. In order to provide this focus, and to document “. . . the procedures and general rules that should be followed” (Yin, 1994, p. 63), a case study protocol was developed. Following are the major areas of interest for the conduct of interviews (as captured in the protocol):

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Organisation profile. This section captured the organisation specific structural issues, product/service offerings, competitive and market issues and industry critical success factors. As such, a general demographic background for each organisation was developed. Ban system background. Objectives and expectations from implementation, planning for implementation, techniques in use, investment priorities, and other B2B e-commerce related issues. Business outcomes from implementation. Benefits derived and limitations encountered as a result of implementation. Implementation issues. Levels of employee involvement, attitudes toward implementation within the organisation, company specific issues relevant to the implementation process, and some assessment of the culture within the organisation. Future trends. Each interviewee was asked to provide some insight as to what they saw to be future directions in electronic commerce.

Interviews were conducted with at least one person from each company, being the nominated BAN system co-ordinator for that organisation. Interviews were conducted with a combination of site visits and phone calls. Analysis and comparison of case studies Organisation profiles Organisation A. This organisation was a manufacturer and distributor of paper-based consumer products used mainly in domestic markets. The company is 50 percent Australian-owned and 50 percent US-owned and has an annual turnover of around $A750 million. The company saw itself as being a medium technology, highly software dependent and highly innovative organisation with a strong customer focus, and had been a member of BAN Australia for 15 years. The primary interviewee was the corporate e-commerce/supply-chain systems manager. The industry in which the company operates is highly competitive and characterised by low margins and a small number of major players. As such cost minimisation is critical with the supply-chain-management and e-commerce initiatives seen to be major strategies to achieve this. Organisation B. This organisation is a manufacturer of smallgoods employing approximately 650 people and is wholly Australian-owned. The company employs medium to high technology processes, is highly software dependent with a strong customer focus. It was also described as sometimes innovative in both product and process development, this being seen to be an area for further improvement. The company operates in a highly competitive market where products often have limited shelf lives and thus require efficient physical logistics and distribution systems. The major factors critical for success in this industry were identified as brand awareness and integrity, quality and price. The primary interviewee was the product manager. Organisation C. The company is a wholly Australian-owned manufacturer of cereal-based snack foods employing approximately 1,200 people nationally. Based in rural Victoria the organisation was described as employing a medium level of product development and process technology, being highly software dependant, highly innovative and having a strong customer focus. The group had been a member of BAN

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Australia for over ten years and the primary interviewee held the position of supply manager. Organisation D. This organisation is a small manufacturer of household cleaning products employing 24 people with an annual turnover of around $A24 million. The interviewee described the business as using a medium level of technology, being medium to highly software dependent, highly innovative and with a strong customer focus. The company had been a BAN member for nine years and the primary interviewee held the position of general manager. The competitive environment for this company had been complicated in recent times due to the rationalisation of supplier bases by all the major retail chains. As a result smaller competitors had suffered and only those who had been proactive in implementing supply-chain-management processes (such as the BAN system) were surviving. In the case of this organisation a decision was made six years ago to redefine the business as a “service provider” when EDI was introduced. Effectively this meant that the focus would be on customer service rather than innovation of manufacturing processes (partly due to the generic nature of the products and simplicity of current processes). This re-focusing of business objectives provided a means of differentiation through flexibility and the ability to respond quickly to the demands of the customer. Organisation E. This organisation is a manufacturer of paper and paper related products employing around 3,000 people Australia wide. The company is New Zealand-owned and has been a member of BAN Australia for 15 years. The company was described as being a high technology organisation with a medium level of software dependence. It was also described as being highly innovative with a strong customer focus. Critical success factors for the company were given as service and delivery reflecting the customer focused culture. The primary interviewee held the position of packaging materials coordinator.

EAN system background Objectives and expectations of implementation of the EAN system Organisation A. Simply stated, the objective of the supply-chain-management program was to extend implementation as far as possible throughout the entire organisational supply chain. Incorporated within this program is the use of the EAN system to progressively cover as many different applications as possible. An example of this included the pre-printing of BAN numbers on packaging, the use of BAN numbers in electronic messages and the intended use of SSCC’s for both incoming and outgoing goods. One restriction noted on the implementation process had been the readiness of suppliers to deal with these changes. It was generally felt that major suppliers would be able to cope with this more readily than the multitude of small to medium ones. In terms of expectations from implementation this organisation was looking to better manage both internal processes and the extended supply chain, as well as meeting the requirement of major customers to comply. Tangible business benefits (e.g. real cost savings) were expected as a result, and it was also anticipated that implementation would act as an enabler for further change in the business. Organisation B. The primary objective for implementation was stated simply as being to better manage the entire supply chain. This included processes forward, backward and internal. The expectation was that substantial benefits would flow from

this that would significantly impact on the potential of the organisation to meet the critical success factors of brand integrity, quality and price. Organisation C. The original objectives for implementation were to comply with the requirements of the major grocery chains for barcoding. After a short period the company then moved to using trade unit numbers (and did so for seven years before the retailers started to use them). SSCMs were then applied to pallets as part of the desired move to a more “strategic” implementation. The objective had thus grown to be driven by a desire to better manage and integrate total supply-chain-management process, with the expectation of substantial and quantifiable cost savings. At this point the company attempted to implement EAN128 numbers to capture dynamic order dependent data on cartons. Significant problems had been encountered as a result due to the inability to get a high-resolution inkjet-printed barcode on to cartons during the production process that could be read reliably. This meant that labels needed to be printed and manually applied to each carton at a cost of approximately 3-5 cents each. Organisation D. The primary objective of implementation was to provide better customer service by better managing the total supply chain. Although it was recognised that the initial impetus for implementation was provided by the need to comply with the requirements of the major retail chains, this had served as a catalyst for a more strategic approach. Organisation E. The primary focus for implementation had been to meet the requirements of major customers (i.e. the major retail chains). It was understood that the best way to achieve this was by better managing the company’s complete supply chain, rather than to focus on internal processes solely. It was also stated that tangible business benefits were expected from implementation, but that these had not as yet been easy to quantify. Summary of objectives and expectations. Table I captures the objectives and expectations of the five companies in summary. All five organisations shared the objective of eventual extension of the system across their supply chains. Three of them had evolved toward this view after initially having solely wanted to comply with the requirement of trading partners to implement (although various problems had been encountered during this transition – with suppliers for organisation A and with the Organisation

Implementation focus

Expectations

A

Supply chain wide implementation

B C

Supply chain wide implementation Initially compliance with trading partner requirements followed by extension across supply chain Initially compliance with trading partner requirements followed by extension across supply chain Initially compliance with trading partner requirements followed by extension across supply chain

Large suppliers would cope better than small-to-medium suppliers Tangible business benefits Enabler of further change Tangible business benefits Tangible business benefits

D E

Better customer relations through compliance Tangible business benefits

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Table I. Objectives and expectations of implementation of the EAN system

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technology for organisation C). The common expectation for four of the five was to realise tangible business benefits, and by extension this appears to be the driving force behind extended implementation. Planning for implementation. Table II summarises the planning approach adopted by each of the five companies. Two of the organisations recorded the incorporation of the BAN system into a long-term strategic plan for the organisation, while the other three indicated that implementation evolved over time. It was also interesting to note that organisation E identified the rate of technological change to be a significant impediment to the development of detailed plans, and that the need for flexibility needed to be traded against the need to commit to a technology (or combinations of technologies). Techniques in use Organisation A. BAN product numbers and barcodes are being applied to all delivered products, and were being phased in for use on incoming goods from suppliers. At the time, work in progress was tracked using internal numbers generated by a legacy system, and therefore did not follow the BAN standard. This was identified as an issue that was being worked on in order to extend use of the BAN standard across internal processes. BAN 13, (TUN – trade unit number) 14 and 128 numbers were used and applied to both retail and non-retail items. Some stock locations were also identified using BAN numbers, with application being progressively extended. A small number of internal items (e.g. company assets) had also been allocated numbers, but this practice was not at the time widespread. Serial shipper container codes, application identifiers and EAN logistics labels were used extensively. BAN location and electronic commerce numbers were not used at all. This organisation also used EDI widely for incoming sales orders, ASN’s and EFT. Some point of sale (POS) data was being received and used and this was expected to grow over time. EDI reverse purchase orders and other VMI practices were not used. The company also had cooperative purchasing agreements in place with major suppliers, and to lesser extent with major customers. Organisation B. BAN product numbers and barcodes were applied to both delivered products and WIP using BAN 13, 128 and (TUN) 14 codes. Few incoming goods were currently received already coded, and this was seen to be a major challenge for future applications due to the nature of the supplier base,(e.g. many were primary producers who may not see an immediate benefit) and the nature of raw materials (often delivered in bulk, etc.). No BAN numbers or barcodes were applied to store locations or internal Organisation Planning approach A

Table II. Planning approach for implementation of the EAN system

B C D E

Actions taken

Part of long-term strategic plan Detailed project plan and business case had been developed following a critical evaluation of the supply chain and related processes Minimal None recorded Minimal None recorded Evolutionary Driven by a compliance focus Part of long-term strategic plan Driven by changing customer requirements – rapid technological change identified as an inhibitor of extensive planning

items (i.e. other than WIP). Application identifiers and serial shipper container codes were used extensively, while BAN logistics labels and BAN location and electronic commerce numbers were not used at all. Use of EDI was currently restricted to incoming sales orders and was not used for ASN’s, VMI, EFT or receipt of POS data from major customers. The practice of delivering loose cartons to distribution centres was used to some extent and was planned for expansion. The company reported having no formal cooperative partnership arrangements with either suppliers or customers. Organisation C. BAN product numbers and barcodes were being applied to all delivered products, but not at the time to WIP. A program aimed at having incoming goods arrive with BAN standard barcodes applied was in the process of implementation, focusing initially on major suppliers and the use of SSCM’s. BAN numbers were used to identify both retail and non-retail items, but not for stock locations or other internal items. Application identifiers and SSCM’s are used mainly when supplying the major retail chains. The company did not use BAN location and electronic commerce numbers or BAN logistic labels. EDI was used extensively for receipt and processing of incoming sales orders, ASN’s and POS data from major customers (usually a weekly download but in some cases monthly). It was also used to a lesser extent for EFT but not for reverse purchase orders or other VMI-related practices. The company had formal cooperative supply agreements in place with major suppliers, and to a lesser extent with major customers. Organisation D. BAN product numbers and barcodes were being applied to all products delivered to major retailers able to scan them. They were not used for WIP or incoming goods from suppliers. Only retail items were barcoded with currently no application to non-retail items, store locations or other internal items. Application identifiers were used extensively, while SSCC’s were not at that time in use (there were plans for implementation in the near future). BAN logistics labels were used but not location and electronic trading numbers. EDI was used for incoming sales orders, ASN’s and EFT. No POS data was received, while reverse purchase orders or other similar VMI practices were not in use. The company had formal cooperative agreements in place with all major suppliers and customers, and saw these as being vital to the integration of supply-chain-management processes. The issue of availability of POS data was seen to be of particular significance for this organisation. The availability of this data was seen to be a key factor for companies wishing to extend implementation backward along their supply chain. It was stated that the supply of dynamic demand information from points of sale had been a major carrot dangled in front of suppliers when they were asked to implement the EAN system by the major retailers. This data had never been available, and in some cases retailers had not implemented systems capable of delivering it. Organisation E. The company applied BAN 13 and 128 product numbers and barcodes to all delivered products. There was no use of these for WIP or incoming goods from suppliers. These numbers were used to identify both retail and non-retail items, but not store locations or other internal items. Application identifiers were not used and SSCC’s were used to a limited extent. The company did not use BAN location and electronic commerce numbers or BAN logistics labels at all. EDI was being used for incoming sales orders and for EFT transactions. It was not used for ASN’s, and it was not known whether reverse purchase orders (or other VMI practices), or POS data

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was transmitted in this fashion. The company had formal cooperative supply agreements in place with major suppliers and customers, and saw these as an integral part of their supply-chain-management strategy. Summary of techniques in use. Table III summarises the techniques in use at each of the five companies. The five manufacturers in this study indicated very high levels of use of BAN product numbers and barcodes applied to delivered products, as well as for BAN ID numbers identifying both retail and non-retail items. This is consistent with all companies reporting some use of the BAN system. On the other hand, all five indicated that their objective for implementation was to extend use across their supply chain, while the evidence suggests that the use of these basic elements of the system was still concentrated on the customer side (i.e. in order to comply with requirements of major trading partners). Some use of other applications such as identifiers of use by dates, batch numbers, etc. was also evident, although use of electronic commerce numbers was non-existent, and in fact their existence was unknown in most cases. Other BAN system elements. All five recorded high to very high levels of use of EDI for receipt of sales orders, while three of the five were using ASNs extensively. POS data was, on the other hand, only being accessed and used by two of the companies, and in both cases to a limited extent. None of the five were using EDI as a means of enabling VMI type programs (i.e. through use of reverse purchase orders, etc.). Only one of the five reported no cooperative arrangements in place with either suppliers or customers, but it was also interesting to note that the company reporting the strongest

Techniques in use EAN product numbers and barcodes Delivered products Work in progress Incoming goods EAN ID numbers identifying Retail items Non-retail items Locations

Organisation C

D

E

Very high High

Very high

Very high

Very high

Very high Very high To some extent

Very high Very high

Very high Very high

Very high

Very high High

Very high

Very high

Very high Very high

Very high

A

B

Very high To some extent

Internal items EAN location and electronic commerce numbers identifying Legal entities Functional entities Physical entities Other applications Application identifiers Table III. EAN system techniques in use

Serial shipper container codes EAN logistics labels

To some extent To some extent

Very high To some extent Very high

To some extent

links of this type with customers (i.e. major retailers), also reported no use (or access to) POS data from these same customers. This serves to highlight that the picture emerging around use of the techniques and technologies is one of application at the demand end (i.e. to outgoing goods, shipments to distribution centres, etc.), without the loop being closed via access to demand information critical to improved manufacturing operations (e.g. POS data).

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565 Investment priorities Only two of the companies in the study provided details of where they had focused their investment in use of the BAN system. Organisation A. This organisation had spent over $A1 million on implementation of these systems to date. This included BAN system related software and hardware as well as other related investments (e.g. implementation of an ERP system). Although this total investment had been spread over a number of years, and at the time some elements were perhaps not seen as part of a supply-chain-management implementation, it was felt that all of these items needed to be counted in the overall cost. This was justified on the basis of supply-chain management being seen as an evolutionary process where systems implemented in the past would be built on and modified. Organisation D. Total investment to date for this organisation in the BAN system and supply-chain-management techniques generally amounted to well over $A100,000, with the major expense categories being computer related hardware and software. Lesser amounts were spent on process re-engineering, training and employee development and outsourcing of activities to third party providers. External consultants were not used at all. Other B2B e-commerce-related issues Organisation A. EDI transactions were being conducted using both the value added networks and the internet, with future expansion seen to be in the extended use of the internet at the expense of the VAN’s. This change was linked to the expansion of web-based trading activities with both customers and suppliers. In fact the use of the web for direct B2B trading was said to be the function served most by the company’s web site. This web site was also being used to provide product information and catalogues, a customer service interface and as a public relations tool. Direct marketing was not seen to be a viable option at the time due to the low unit value/low margin/low differentiation nature of the product. This “commodity” style of product did, however, provide some particular opportunities for the use of the web in purchasing commodity style inputs. Among these was the development of “reverse auction” style purchasing where supply quantities would be allocated to vendors on the basis of a tendering process conducted entirely on line. Organisation B. The value added networks were used for transmission of EDI messaging and the company had recently implemented a fully functional web site. This site was used primarily for listing of product information and catalogues, public relations and general company information. It was also being used in a limited sense for the dissemination of product related educational content. There were currently no plans to use this site for direct marketing.

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Organisation C. This organisation had a fully operational web site that provided product information and catalogues, a customer service interface and general public relations. It was not expected that the site would be used for direct marketing in the near future. Organisation D. EDI transmission was carried out using the value added networks and the company at the time did not have an operational web site. It was planned to have a web site implemented within 12 months (using the facilities of EANnet – a web hosting service offered by EAN Australia). This site would be used for product information and catalogues, as a customer service interface and for public relations generally. Organisation E. The company had an operational web site providing access to product information and catalogues, some limited direct marketing activities and an interface for dealing with customer service issues. It was not known how EDI transactions were being transmitted. Business outcomes from implementation Summary Table IV summarises the business benefits recorded from implementation of the EAN system. The perception within the case companies of business benefits resulting from implementation of the EAN system was generally very positive. The common perception that use of the system had led to reduced levels of all types of inventory needs perhaps to be interpreted in light of the fact that EAN barcodes and product numbers were not being applied extensively to WIP and incoming goods (see Table III). It is difficult to imagine that raw material and WIP inventories would be reduced substantially as a result of applying barcodes to finished goods only. It is, however, consistent with reported higher productivity, reduced cycle times and improved cash flows. It is also consistent with the general assessment of the system in terms of cost vs

Business outcomes

Table IV. Business benefits from implementation of the EAN system

A

B

Organisation C

D

E

Improved customer satisfaction High High Moderate High High Reduced inventory Finished goods Moderate High High High High WIP Moderate High High High Raw materials/components Moderate High High High Improved product traceability Improved stock accuracy Reduced time required for annual stocktakes Increased productivity High High High High Improved service quality High High High High Improved product quality Moderate Moderate Increased flexibility High High High Moderate Increased sales High High Increased net profit High Moderate Reduced cycle times High High High Moderate Improved cash flow Moderate Moderate High High Moderate Reduction in claims High High High Moderate Reduced costs Moderate High

benefit (as shown in Table V). Part of the explanation for this apparent anomaly perhaps lies in the evidence documented in the section following covering Implementation Issues. Here factors common to most of the group are cross-functional and multi-level involvement of staff, improved relations with customers, and the use of benchmarking for establishing “best practice”. It is not inconsistent with the literature to propose that many of the benefits attributed to the BAN system could, in part at least, be attributed to the adoption and implementation of a range of methods and techniques likely to promote more effective management of supply chains.

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Limitations of the system Company A. The major limitation recorded (if it can be recorded as a limitation or just an outcome of significant change) involved the expense in coping with changes required when dealing with legacy systems. The pace of technological change meant that systems implemented in the near past needed to be replaced (or in some cases substantially modified) in order to be able to operate effectively in this environment. This created some short-term expense and inconvenience, and also highlighted the importance of using open systems (i.e. the BAN system) for future implementations. Company C. The major limitation recorded related to some of the technical issues mentioned earlier. The current system was believed to be generally sound and in most instances worked well, but some technical limitations had been experienced that placed limitations on the ability of this organisation to further extend implementation. Company D. The major limitation noted for this organisation again related to the availability of POS data from major retailers. For this company to implement scan packing without adding an extra cost to their processes it needed to be done at the production stage. This could not at the time be done due to the fact that goods are made to stock (although this is kept to a minimum), and orders picked and filled from warehouse stocks. With the availability of accurate POS data the company would be able to move toward matching production schedules more closely to actual demand and thus implement scan packing in production. This would mean that not only would scan packing be implemented (and thus enable cross-docking at customer warehouses) without adding cost, but that the order picking process could be progressively eliminated altogether. Implementation issues Organisation A. Middle and front line management were the groups most involved in implementation. Senior management and general staff had played only a small part,

Organisation A B C D E

Cost

Benefit

Medium Medium Medium Low Low

High High High High High

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but it was expected that the role of general staff would increase over time (particularly those staff directly involved in the operational aspects of the system). Attitudes within the organisation toward implementation were positive at most levels. Although it was felt that implementation (at least of the BAN system initially) had been largely the result of customers driving change, there had been an evolution toward this process becoming an enabler for further continuous improvement activities. An example of this related to improved information on customer requirements resulting in an increased capacity for innovation and speedier product development cycles. It was also reported that the drive for change within the organisation was coming more from the level of functional heads than from senior management or even board level. The importance of incorporating customer requirements in the development of plans, policies and procedures was rated very highly for this organisation, and was seen to be significantly more important than incorporating supplier capabilities. It was stated that the culture of the organisation encouraged participation at all levels. This participatory culture was evidenced by the active encouragement of change and involvement by senior management, the encouragement of the use of ideas from production operators in assisting management, and the perception that communication processes were effective both vertically and horizontally. Benchmarking was an activity used extensively by senior and middle management with almost no involvement at all for front line managers and general staff. The frequency of site visits varied across different functional areas and levels, but it was estimated that the relevant personnel from financial and purchasing functions would have visited up to eight sites in the past 12 months. This included a combination of both external and internal (i.e. part of the larger group this organisation was part of) sites. Other senior staff directly responsible for the implementation of the system were estimated to have visited more than 100 internal and external sites over the past couple of years as part of the planning and implementation process. Organisation B. Involvement of senior management in both the planning and implementation phases was said to be very high, with middle and front line management also highly involved (if to a lesser extent). Involvement of general staff was low. It was indicated that only a limited use of benchmarking by senior levels of management and none at front line and general staff level. Organisation C. The most highly involved employee groups during planning and implementation had been front-line management and general staff. Middle management were also involved, but to a lesser extent than the above two groups. Senior management had been involved least of all, but their involvement had nonetheless been important. The rationale for this approach had been that those using the system most should have the greatest degree of involvement to maximise buy in. Senior management had been involved more at a strategic level. Organisation D. Senior management was the group most highly involved in planning and implementation. This was in part attributed to the size of the organisation (i.e. the MD wears a number of hats covering logistics, finance etc). Middle managers, front line managers and general staff were also involved but to a lesser extent. Extensive training of all staff during implementation was also seen to be of critical importance to ensure that buy-in was maximised.

Implementation had originally been driven by major customers but had quickly evolved in recognition of it’s importance in enabling the company to react to a rapidly changing business environment. The mindset within the organisation toward the BAN system was characterised now as “. . . implement or die”. This process was also seen to have been an important catalyst for improved discipline and innovation within the company. In summary, what had started off as a demand from customers had quickly been turned into a business opportunity. Both customer requirements and supplier capabilities were seen to be important factors to be taken into account when developing plans and objectives in this organisation. In particular, it was felt that once customer requirements were understood, then understanding the capabilities of suppliers was critical to developing realistic plans for fulfilment of those requirements. The culture of the company also strongly encouraged production operators to provide input into planning processes, and was characterised as actively promoting change driven by senior management. Communication was felt to be effective both vertically and laterally and the proactive pursuit of continuous improvement a factor critical for organisational success. Gathering and dissemination of information relating to customer requirements was also regarded as highly important, and in particular for these requirements to be understood at production operator level. In summary, the management style in the company was described as participatory and open, and it was felt that this style ultimately yielded both tangible and intangible benefits for the organisation. Benchmarking was also used extensively for implementation with both senior and middle management estimated to have visited more than nine sites in the previous 12 months for this purpose. Front line management and general staff were also involved with both groups estimated to have visited up to five sites for the same purpose over the same period. All staff had also spent time visiting major logistics and material handling exhibitions. Organisation E. The organisation had involved both suppliers and customers in relevant aspects of implementation, but as yet the extension of aspects of the system backward through the supplier base had been limited. This was in part due to the nature of some incoming raw materials (i.e. commodity items), and also to complications particular to their supply chain (combinations of new and recycled inputs, etc). It was, however, planned to progressively move implementation backwards into the supplier base. This was in recognition of the perception that implementation was seen to be a strategic opportunity and critical to the success of the organisation. Involvement of employees was said to be high at both senior and middle management levels. Frontline managers had some involvement, but there was less participation recorded for general staff. Future trends Organisation A. The following future trends in supply-chain management (and B2B e-commerce generally) were identified: . EDI via the internet. It was expected that there would be a rapid move toward extending the use of the internet as an alternative method of delivering EDI. This would happen rapidly and could allow more widely distributed participation. . Rapid growth in B2B e-commerce applications. As more organisations became connected and standards for communications became more open there would be a rapid increase in new applications for doing business electronically. An

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example quoted was the use of on-line “reverse auctions” for the purchasing of commodity style raw materials. Development of new marketing channels. The current moves to home shopping could be just the tip of the iceberg in terms of changes in direct marketing practices. Collaboration. With the growth in availability of information it was also expected that there would be an increased need for collaborative partnerships (or even just information sharing arrangements). An example would be making POS data more widely available by retailers for use by partner suppliers. Speed. Reduction in cycle times (i.e. all business cycles) could become the primary source of competitive advantage in many industries. Supply-chain management to grow in importance. The main enabler for this trend will be the EAN system and it is expected to grow in importance in all industries and sectors requiring integration of physical logistics and information flow.

Organisation B. Future trends in supply-chain management identified included: . Further demands from customers for extension of supply-chain-management practices. It was felt that customers (both large and small) would continue to demand further integration of the supply chain. By way of example the increasing level of involvement of industry bodies (e.g. GISCC – Grocery Industry Supply Chain Council – in the grocery industry) in promoting the use of these practices was cited. This process could also allow further benefits to flow back to suppliers as customers improved their technologies (e.g. allowing inkjet printing of barcodes on cartons). . Increased use of POS data. This was seen to be a pivotal issue for this company. It was observed that the availability of this data was critical for further integration of the supply chain and in particular for reducing overall cycle times. At the time, most companies supplying into the grocery sector were still reliant on purchasing Nielsen scan data (i.e. data collected periodically by a third party to predict real demand). Organisation C. It was stated that in future the organisation would become more and more reliant on electronic information and as such the need for further implementation was paramount. The increase in the number of, and dependence on, electronic transactions would also mean that companies (particularly in manufacturing) would need to simplify processes or be “left behind”. Organisation D. The major trends foreseen for this company included: . Further conversion to computer driven programs. As part of the natural progression to further integration of the supply chain it was believed that further use of computing technology would occur over time. . Move to use of MRP. The company was currently investigating the implementation of an MRP package to coordinate the planning of materials management and purchasing. . An increase in internet trading. The company saw itself moving toward greater use of, and reliance on, the internet for (in particular) B2B trading. It was expected that this would enable some home shopping and direct marketing, but

that most of this type of trading would be coordinated by the major retailers. The unknown factor was described as the importance of the “market atmosphere” and other social and behavioural aspects of shopping. Organisation E. The major future trend for this company was expected to be general extension of the BAN system within their own business, and subsequently backward along their supply chain. No time frame for this was provided. Conclusion These five case studies highlight both the potential for B2B-enabling technologies to facilitate improvements in manufacturing operations, and the reality of their current limitations. On the one hand, all five had invested substantial resources in the implementation and use of existing technologies (e.g. barcoding, EDI), and also saw the future being further dominated by use and application of emerging technologies (e.g. the internet) for the improved management of supply-chain operations. On the other hand, evidence of extended application of these technologies backward along their supply chains (i.e. with suppliers) was limited, despite a general recognition that this would yield further benefits. Although the reasons for this varied from company-to-company, one strong theme to also emerge was that business benefits could be as much attributed to complementary methodologies (cooperative arrangements, cross-functional involvement, etc.), as to the use of the technologies themselves. Access to POS data (as close as possible to real time) was also seen to be a critical aspect of the system that was not as readily available as it should be, and as illustrating a bias toward value being captured at the demand end of the chain (i.e. by retail trading partners). As manufacturers, these companies understand the importance of this type of information reflecting real demand patterns. As such, the cases point to the critical nature of information in this area, and to the need for appropriate relationships between trading partners to underpin and enable data flows between trading partners. The view of the future also pointed to the more effective management of the supply chain being further enabled by the application of internet technologies. This view was balanced, however, by the recognition that in order for these technologies to provide significant value, collaboration between trading partners would also need to be a key point of focus. The evidence that POS data was not easily available to these companies highlights the importance of collaboration and trust in this context. The technology for sharing this information has been available for many years, and yet the propensity for it to be shared appears more a function of relations between trading partners, than of the technology itself. References Andersen Consulting (1994), The Mass Merchant Distribution Channel: Challenges and Opportunities, July, report prepared by Andersen Consulting for the Warehouse Education and Research Council, Oak Brook, IL. (The) Australian Financial Review (2001), “Li & Fung backs HK’s services”, The Australian Financial Review, special report on supply chain management, 2 May, p. 9. Bender, P.S. (2000), “How information technology is transforming global logistics”, in Katayama, H. (Ed.), Global logistics for the New Millennium – Proceedings of the 5th International Symposium on Logistics, Iwate, Waseda UP Ltd, Tokyo, pp. 309-16.

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Bowersox, D.J. and Calantone, R.J. (1998), “Executive insights: global logistics”, Journal of International Marketing, Vol. 6 No. 4, pp. 83-93. Bowman, R.J. (1997), “The state of the supply chain”, Distribution, Vol. 96 No. 1, p. 28. Bytheway, A. and Braganza, A. (1992), “Corporate information, EDI and logistics”, Logistics Information Management, Vol. 5 No. 4, pp. 10-18. Fernie, J. (1995), “International comparisons of supply chain management in grocery retailing”, Service Industries Journal, Vol. 15 No. 4, pp. 134-47. Froehlich, G., Hoover, H.J., Liew, W. and Sorenson, P.G. (1999), “Application framework issues when evolving business applications for electronic commerce”, Information Systems, Vol. 24 No. 6, pp. 457-73. Gourley, C. (1998), “What’s driving the automotive supply chain?”, Warehousing Management, Vol. 5 No. 10, pp. 44-8. Hammant, J. (1997), “Implementing a European supply chain strategy: turning vision into reality”, AIMM/LMA/APICS/AIPMM, Sydney, pp. 95-100. Handfield, R.B. and Nichols, E.L. (1999), Introduction to Supply Chain Management, Prentice-Hall, Englewood Cliffs, NJ. Herridge, G. (1997), “Developing integrated logistics systems with your trading partners”, Proceedings of the International Conference on Logistics and the Management of the Supply Chain, AIMM/LMA/APICS/AIPMM, Sydney, pp. 107-11. Larkins, M. and Luce, K. (2000), “Business & IT work together to plan and support supply chain management initiatives – implementing a supply chain management process does not need to be difficult or complicated”, Pulp & Paper – Canada, Vol. 101 No. 4, pp. 12-14. Magretta, J. and Dell, M. (1998), “The power of virtual integration: an interview with Dell Computers’ Michael Dell”, Harvard Business Review, Vol. 76, March/April, pp. 72-84. Moller, C. (2000), “SCM in the extended enterprise: implementation of APS systems”, The Journal of Enterprise Resource Management, Vol. 4 4th quarter, pp. 29-35. Natarajan, R.N. (1999), “Logistics, strategy and supply chain: making the right connections in the information age”, in Muffatto, M. and Pawar, K.S. (Eds), Logistics in the Information Age, Proceedings of the 4th International Symposium on Logistics, Florence, Servizi Grafici Editoriali, Padova, pp. 203-10. New South Wales Department of State and Regional Development and Microsoft Australia (2000), Brief on Electronic Commerce – Why Invest in E-commerce?, New South Wales Department of State and Regional Development and Microsoft Australia, available at: www.smallbiz.nsw.gov.au/issues/ecommerce/Brief/Why.html (accessed 4 January 2001). Parnell, C. (1998), “Supply chain management in the soft goods industry”, Apparel Industry Magazine, Vol. 59 No. 6, p. 60. Putzger, L. (1998), “All the ducks in a row”, World Trade, Vol. 11 No. 9, pp. 54-6. Schwarz, B.M. (1998), “Electronics supply chains: still standing tall”, Transportation and Distribution, October, pp. 29-32. Tyndal, G., Gopal, C., Partsch, W. and Kamauff, J. (2000), “Making it happen: the value producing supply chain”, Ernst & Young, online report, available at: www.ey.com/global/gcr.nsf/US/ Supercharging_Supply_Chains_-_Think_Tank_-_Ernst_%26_Young_LLP (accessed 10 January 2001). Yin, R.K. (1994), Case Study Research – Design and Methods, Sage Publications, Thousand Oaks, CA.