Towards a Framework for the e-Enabling of an Automotive Supply Chain Hilton Cameron
Reinhardt Botha
Faculty of Computer Studies, Port Elizabeth Technikon, Port Elizabeth
[email protected] [email protected] Abstract E-business is changing industry as we know it. The constraints of time and geographic location are disappearing. Even small businesses can function across different time zones and remote destinations, which previously they would not have been able to penetrate. E-business, facilitated by the proliferation of the Internet, allows people to purchase goods and exchange business transactions online. Although the use of the Internet for business has been a fairly recent development, it nevertheless is making a large impact on the business community. The Internet is making more of an impact, than any other business channel has made in the past decade. It is inevitable, therefore, that utilizing the Internet to facilitate business collaboration, will before long become an important requirement for any business. Keywords: Supply Chain, Collaboration, B2B Computing Review Categories: ?
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Introduction
Supplying value to the customer, in the form of goods and services, is the core of business. A supply chain is a network of organisations and all of their associated activities, that operate jointly, most often in a sequential manner, to produce value for the consumer [8]. Supply chains encompass all of the diverse activities that are associated with the flow and transformation of goods, right from the beginning stage of the raw materials, all the way through to the consumer [11]. Supply chains are broken into three distinct parts, upstream activities involving all of the material and service inputs from suppliers, internal activities involving the manufacture and packaging of the goods, and downstream activities which involves the distribution and sale of the goods. Since the inception of the automotive industry, buyers and suppliers have been linked in ridged, inflexible relationships. With the advent of the Internet, however, supply chains are becoming less rigid and more efficient. Supply chains have always been large and complex. This complexity stems from companies purchasing the majority of their parts, opposed to manufacturing the parts themselves. As can be seen in figure 1, a supply chain has three distinct parts, a supply side, a demand side and the internal activities. The supply side extends from the manufacturer, be it an automotive manufacturer or an automotive component manufacturer, to all of its suppliers. These suppliers, possibly being manufacturers in their own right, may in turn, have their own suppliers. As depicted in figure 1, this can extend to the Nth supplier. The demand side of the supply chain, extends from the manufacture where the internal activities occour, to distributers, retailers and eventually the customer. Supply chains may also have links to other companies, such as links to partners or to outsourced companies.
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Supply Chain Aspects
Early supply chains centered around demand uncertainty through inventory demand forecasting, as well as the reduction of inventory and transport costs. Today, however, supply chains cover many different aspects or activities. Being able to collaborate electronically, can vastly improve the efficiency of many of these activities. Figure 2 portrays the different aspects that may be involved in an automotive supply chain.
2.1
Design Collaboration
With design collaboration, companies select a supplier before commencing with the product design, and then collaborate with the supplier throughout the development process. Target prices for each component can be SAICSIT 2002 Post-graduate Research Symposium
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Cameron and Botha Nth -TIER SUPPLIER FIRST-TIER SUPPLIER
SUPPLY SIDE
FIRST-TIER SUPPLIER
FIRST-TIER SUPPLIER
MANUFACTURER Automotive or Component
DEMAND SIDE OUTSOURCED MANUFACTURE
DISTRIBUTOR
RETAILER
CUSTOMER
CUSTOMER
Figure 1: Automotive or component manufacture’s supply chain set with suppliers, prior to the start of the design process, products can then be developed jointly. The ability to communicate electronically supports the collaboration between the different parties. Being able to transmit drawings, such as CAD drawings improves the communication process.
2.2
Sourcing solutions
Sourcing solutions often involve, the creation of a buyer-oriented market place on the Internet. With this type of market, the buyer will open an electronic market on his own server, and then invite potential suppliers to bid on RFQ’s (request for quotes) that are advertised on the site [11]. This sourcing model can improve the productivity of the buyer’s sourcing process, by providing the suppliers all the information that they need to know online, including specifications, drawings, pictures and the likes.
2.3
Demand Planning
Research by [9] of the IDC, one of the worlds leading IT media, research and exposition companies, indicates that demand planning and inventory management are the two most desired activities of a supply chain. By allowing trading partners to communicate their vital materials requirements and inventory information in real time, both buyers and suppliers are able to avoid excessive unmanageable inventories.
2.4
Procurement solution
A innovative approach to procurement, is to give suppliers direct access to the inventory of the parts that they supply [2]. By doing this, it allows the suppliers to monitor the usage rates on virtually a real-time basis. They can then anticipate needs, and supply parts as the need arises, ensuring the lean synchronous arrival of materials. 2
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Towards a Framework for the e-Enabling of an Automotive Supply Chain
Demand Planning Procurement Solution
Sorcing Solution Inventory Management
Aumotive Supply Chain
Design Collaboration
Resource Scheduling
Return Flows
Sell-Side Solution Logistics Management
Figure 2: Aspects of an automotive supply chain
2.5
Inventory Management
The level of inventory in a company plays an important role in the success of the company. The inventory levels of a manufacturing company generally consist of two parts, the component or raw material store and the finished goods store. Not having sufficient raw materials in the warehouse can mean holding up production, which is disastrous, not only is the customer kept waiting but the production staff will also be non-productive. At the same time not having sufficient stock of finished goods may cause a sale to be lost, and a sale that is lost is never regained. Hence, it is important to maintain the correct stock levels.
2.6
Resource Scheduling
With limited or no visibility of supply chain activities, it is difficult to organize a companies resources. It is, however, extremely important to correctly determine a companies labour and production machine requirements. By collaborating with inbound consolidators and having order visibility, companies can more accurately forecast their resource requirements. This demand and order visibility gives a clear picture of the resources that will be required to do the forthcoming work. This enables appropriate staffing, which eliminates costly overtime and nonproductive time.
2.7
Logistics Management
The Council of Logistic Management, a non-profit professional association for people interested in logistics management, defines logistics as “that part of the supply chain process that plans, implements and controls the efficient, effective flow and storage of goods, services and related information from the point of origin to the point of consumption in order to meet customers’ requirements” [4]. The processes that are discussed in this definition are all linked together and contribute to the outcome of the overall process of logistics. Many of these processes transcend the boundaries of a company, which makes the processes more complex to manage. Some of the processes that run individually might be running efficiently, but collectively they may not be efficient. More favorable results can be achieved by optimizing the entire process, opposed to optimizing only parts of the process [6]. SAICSIT 2002 Post-graduate Research Symposium
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2.8
Sell-Side Solution
The Internet can be a very useful tool for advertising and selling products to consumers [5]. Due to the nature of the Internet domain, a vast base of users may be reached. Because these users are the general public, the nature of content, usability and friendliness, must be careful considerations of such Web sites [10].
2.9
Return Flows
Return flows, also known as recycling, is an important aspect of the supply chain considering the environmentally sensitive world in which we live. We are constantly in danger of being flooded in our discarded products and simultaneously we are running out of supply side resources. There is a very real need to collect, reuse and recycle products that are no longer useful. Supply chains need to be extended to include reverse logistics.
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Automotive Supply Chain Challenges
In the current economic climate, companies not only have to rely on themselves, but on their entire supply chain in order to remain competitive. By having an effective supply chain, companies may become more efficient and more competitive. Efficient supply chains, can offer streamlined collaboration and coordination between suppliers, business partners and customers. According to [7] “Supply Chain Management will be a focal point of business strategy during the next decade”. Categories
Challenges
1. Supply Chain Related Challenges Sharing the Supply Chain Costs Adjusting to the Speed of Manufacturing Process Avoiding the Bullwhip Effect Maintaining Communication Synchronicity Distribution Using in Sequence JIT Supply 2. Selecting the Right Architecture True Interchangeability Requires Standards Choice of Software Tools Taking Advantage of Scalability Ensuring Fault Tolerance 3. The Internet Brings New Challenges Keeping it Simple and Cost Effective The Effects of Globalization Operating 24 Hours a Day Increased Global Competition 4. Challenges Regarding the Infrastructure Addressing the Costs and Rigidity of EDI The Integration of Legacy Systems The Use of Multiple Devices Insufficient Telecommunication Bandwidth The Requirement of Additional Infrastructure 5. Challenges for Software Developers A New Generation of Applications Interface Design Considerations Ensuring Application Performance Easing Application Deployment 6. The Challenge of Security Sharing of Sensitive Information Escaping the Chinese Wall Security Problem Security on the Internet Payment Over the Internet
Table 1: Summary of common challenges in supply chains There are however, many challenges that may be encountered when one makes use of an electronic supply 4
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Towards a Framework for the e-Enabling of an Automotive Supply Chain chain. Table 1 summarizes some of the many challenges that may be encountered. These challenges have been grouped into six main categories, namely, Supply Chain Related Challenges, which cover the challenges that relate to actual supply chains. Such as, who should be responsible for paying for the intercompany collaboration system? Selecting the Right Architecture, which covers important challenges like, which communication standards should be adopted. Challenges that relate to the Internet is another group, where there are problems like the need for 24 hour availability. Challenges Regarding the Infrastructure, such as the integration of legacy computer systems into the Internet environment. The different Challenge for Software Developers, are also covered, for instance the need for application performance, taking into account the current Internet bandwidth restrictions. The last group of challenges that are exposed are those of Security. Which covers topics like the sharing of sensitive information.
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Integration of Several Disciplines
During the implementation of an electronic supply chain, one encounters many various disciplines. Each of these disciplines contribute towards the successful implementation of the supply chain. The various disciplines that are involved are, namely, strategic planning, systems analysis and design, IT management and economics, and finally, project management. Strategic planning is important in that it identifies the future direction for the company, it also assists in linking the business direction and the IT direction [3]. Strategic planning also helps in the management of a critical and expensive asset of a company. Systems analysis and design, is where the business and information requirements of users, are transformed into computer based technical solutions [12]. IT management and economics is an important discipline, in that it is here that the important decisions are made. Decisions regarding the architectural and technological requirements, it also covers important economic subjects like return on investment. The discipline of project management plays an important role throughout the project. Due to the diversity of the disciplines that are involved in implementing an e-enabled supply chain, a proposed framework has been developed. The framework aims to provide a process of detailed steps, that may be followed, in order to achieve an e-enabled automotive supply chain. The framework comprises of many activities that span all the discussed disciplines.
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Proposed Framework
Before an actual framework is proposed, it seems appropriate to define the term. A framework is a brief set of ideas which assists in organizing a thought process about a particular item or situation. It identifies different topics that need to be considered and shows how the topics relate [1]. The framework, which is a set of ideas, helps in thinking about a particular type of situation. All supply chains are different, and encompass their own complexities. Each company is faced with a confusing array of choices, and needs to develop a vision, in order to form an optimal supply chain. There are a number of methodologies and techniques that may be employed to provide a supply chain solution. In this article we propose a framework or model, that may be used to attain such a solution. A conceptual view of the proposed framework, which is to be used for the e-enabling of an automotive supply chain, is depicted in figure 3. The framework is depicted as a continuous process, this is due to the fact that the first phase, developing a strategic business plan, should not be a once off process, but rather an ongoing process that is continually monitored and updated to suit the changing needs of business. The proposed framework comprises of five different phases, with each phase having a different objective. In terms of this framework, we start with the strategic business plan. The framework, further includes four successive phases, namely, the design of the information technology architecture, the identification of system and resource requirements, creating the project plan and, finally, implementation of the project. The different phases each contribute in their own way, to the end goal of having an e-enabled supply chain. It is important to start a new project with a solid planning phase. The first phase, looks at the supply chain from a strategic business point of view and aims at developing sound business direction for the supply chain. The second phase is important, in that it identifies what needs to be done and technologies that are available for doing it. Once the supply chain has business direction and the business processes and technologies have been defined, the third phase goes on to identify the hardware and software requirements. The second last stage contributes to the project in that the actual project plan is developed. The last and final phase is significant, because it is here that the supply chain is implemented. Following is a more detailed explanation of the different phases: During the first phase (viz. “develop strategic business plan”), an overview, as well the purpose of having an e-enabled supply chain is presented to management. This is done, in order to obtain management approval SAICSIT 2002 Post-graduate Research Symposium
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DEVELOP STRATEGIC BUSINESS PLAN
PHASE 1
IMPLEMENT THE PROJECT PHASE 2 PHASE 5
DESIGN IT ARCHITECTURE
PHASE 4 PHASE 3 CREATE THE PROJECT PLAN IDENTIFY SYSTEM AND RESOURCE REQUIREMENTS
Figure 3: Conceptual view of the framework for e-enabling an automotive supply chain to proceed with the project. Providing approval is obtained, the vision, objectives and goals for the supply chain are set. Any organizational change that may occur, is considered, as well as the impact of these changes. Communication with other supply chain members also takes place in this phase. Once all these activities have been completed, the companies strategic supply chain plan is developed. The second phase (viz. “design IT architecture”), is devoted to analyzing the current business situation. Any current supply chain applications are analyzed and documented. The existing IT infrastructure is explored, with the view to identify its’ suitability. The information that will flow through the supply chain is identified. Any new technologies are explored in this phase, to ascertain their suitability for the project. Industry standards are given much consideration to ensure interoperability. The actual architectural blueprint is then devised. Finally the reliability of the system is considered. During the third phase (viz. “identify system and resource requirements”), decisions are made regarding the technological requirements, one of the important decisions that needs to be made is wether the required applications should be bought or developed. All of the relevant hardware and network requirements are also defined. If there are any current supply chain applications that contain data, the issue of migrating the data to the new system is investigated. The IT personnel are accessed in order to determine their skills level for the project. Finally the cost implications of the project are considered.
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Towards a Framework for the e-Enabling of an Automotive Supply Chain The fourth phase (viz. “create project plan”), covers the planning of the project. It involves identifying all of the tasks that need to be performed, as well as breaking the tasks into modules and prioritizing them. Milestones are set and completion times established. The fourth phase also identifies the training needs as well as determining the costs of running the project. Finally the detailed implementation plan is created. The fifth and final phase (viz. “implement the project”), is dedicated to the implementation of the project. Which includes the development or acquisition of the application. The accompanying testing and training. It also looks at the migration of data and finally the deployment of the supply chain application. As we have just seen, the framework consists of various activities that need to be performed. Table 2 lists the five major components of the framework as well as the individual activities for each of these phases.
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Phases
Activities
1. Develop Strategic Business Plan Provide an overview of supply chains State the purpose of a supply chain Obtain project approval Clarify corporate strategy Define supply chain vision Clarify strategic objectives Identify supply chain goals Define spectrum of organizational change Communicate ideas with other supply chain members Develop the strategic supply chain blueprint 2. Design Information Technology Architecture Identify current business functions Compare business functions to strategy Ascertain information flow Define current IT capabilities Anticipate future scenarios Investigate new technologies Review industry standards Consider data migration Construct architectural blueprint Devise fault tolerance Create backup and recovery procedure Cater for disaster recovery 3. Identify System and Resource Requirements Ascertain software requirements Make or buy decision Define hardware requirements Detail database requirements Consider network and telecommunication requirements Assess IT personnel’s skills Calculate capital requirements Identify return on investment Clarify cost for suppliers 4. Create the Project Plan Modularize and prioritize Identify tasks Set project milestones Estimate completion times Consider training initiatives Estimate project costs Devise detailed implementation plan 5. Implement the Project Develop/acquire the application Train users Test the application Migrate any data Deploy the application
Table 2: The conceptual framework divided into the different phases and activities
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Conclusion
Due to shrinking margins, the ever-growing demand for product innovation and a critical need to decrease time to market, automotive manufacturers and their supply chain partners are increasingly turning to collaborative business models and technologies. These powerful new tools enable multiple trading partners to create new products and markets, synchronize their processes, share information, lower their costs, improve product quality and optimize their supply chain performance, thereby giving them a competitive advantage. Electronic supply chains, however, need to be properly planned if they are to be successful and achieve their objectives. There is a very definitive need for a solid planning phase, prior to implementing a supply chain. What makes this planning difficult, however, is the diversity of disciplines that are involved. Disciplines such as strategic planning, systems analysis, project management and so on. Due to this need for planning and the discipline diversity that is encountered, the proposed framework is being developed. The framework aims at providing a process of detailed steps, that may be followed, in order to acquire an e-enabled automotive supply chain.
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