Report: Portals Ease Dialogue with Suppliers

 
 
By Jacqueline Emigh  |  Posted 2004-07-26
 
 
 
For improved performance, stop communicating with your suppliers by fax and phone. Turn to portals and other Web-based methods instead, according to a new supply chain study from the Aberdeen Group.

"Aside from communicating regularly with their suppliers, companies should share information with their suppliers and monitor suppliers at an above-average rate," Beth Enslow, an Aberdeen analyst, said during an interview.

Companies that follow all three tips can triple their chances of getting a 40 percent performance boost from their initiatives, according to the "Supplier Management Benchmark Report."

Many of the companies included in the study still resort to faxes and phone calls for keeping in touch with suppliers.

Yet 20 percent of them pointed to Internet-based supplier portals as their real preference. Another 15 percent said they prefer WebEDI, while 11 percent lean toward XML.

"Fax and phone are still used in a lot of established relationships. It can be a big jump to Internet-based messaging," Enslow said. But these traditional methods tend to be much less efficient, she said.

"You always have to make sure that the information [from trading partners] doesnt get typed wrong into your own system."

E-mail is another established favorite, according to Enslow. Yet none of the subjects in the survey volunteered a preference for using IM (instant messaging) to do business with partners.

"They might like IM, though, for chatting about the scores of baseball games," Enslow quipped.

Security didnt rear its head as a communications concern, either. "We [at Aberdeen] heard a lot about security issues four or five years ago. By now, though, these companies know that there are secure mechanisms for Internet messaging," Enslow said.

Click here to read about how one retailer is upgrading its supply chain technology.

"Theres a new breed of Web services provider thats focusing on hooking up companies over the Internet," Enslow added, citing ADX and SPS Commerce as a couple of examples.

More than 50 percent of the surveys respondents either already use this sort of Web services provider or intend to do so within the next two years.

The study also showed that, although sharing scheduling and planning information with suppliers is important, performance doesnt rise unless you switch to Internet-based messaging and monitor your suppliers activities, too.

"Companies that monitor six or more domestic supplier events or more than 10 international events are much more likely to achieve extreme performance improvements in lead-time reductions and increased perfect orders," the report found.

"You have to be very nosy about your suppliers," Enslow said. Depending on what industries theyre in, companies monitor distributor events ranging from the receipt of raw materials to component manufacturing, shipment of finished goods and transportation status. For international shipments, companies track whether shipped goods have cleared customs, for instance.

To read about software for supply chain automation, click here.

Products effective at monitoring suppliers include WMSes (warehouse management systems) from vendors such as Timogen, as well as many ERP systems, Enslow said.

Aberdeens study also urges businesses to "evaluate [their] internal processes and organizational structures and move to centralized accountability for supplier management."

Some companies have enough in-house expertise to do this on their own. Others call in outside BPR (business process re-engineering) consultancies such as IBMs, the analyst said.

Another recommendation from Aberdeen is to "treat suppliers as a point of flexibility" by pushing inventory and other tasks backward in the supply chain.

Companies can streamline the supply chain by requiring distributors to perform quality checking, or by asking them to send their products prepackaged, Enslow said.

"Others are having distributors ship products direct to customers," she added. "Cisco, for instance, is famous for this."

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