Tackling the International Supply Chain
Written By: Predrag Jakovljevic
Published On: June 6 2005
An Example of TradeBeam's GTM Solution Blueprints
Collaborative Inventory Management (CIM)
Another acquisition took place in early 2004, when TradeBeam, an international global trading solutions provider with over 3,000 customers and users in over 100 countries, acquired SupplySolution. SupplySolution is a Southfield, Michigan-based (US) offers a supply chain execution (SCE) application called i-Supply, which communicates inventory levels and consumption patterns among trading partners. At the time of the acquisition, SupplySolution had in excess of 2,000 paying customers and employed 125 people in offices in the US, Germany, and Australia. TradeBeam acquired SupplySolution to add collaborative inventory management (CIM) capabilities to its GTM product suite.
The acquisition has benefited both companies and their respective customers, given TradeBeam and SupplySolution have similar roadmaps for the management of order, inventory replenishment, compliance, logistics, and payment of the domestic and international movement of goods. Their combined product has helped many common customers avoid deploying multiple point solutions to manage their global supply chains. Effective supply chain management is increasingly vital for global manufacturers' and retailers' success, as enterprises now spend an inordinate amount of time and money managing and directing their suppliers to ensure that critical inventory levels are maintained, and the vital flow of products needed for operation continues. However, the current practice for managing supply chain inventories is still rather reactive and labor intensive, and results in unreliable parts availability, generating typically higher inventory levels or emergency freight. As a result, enterprises are faced with increased inventory carrying costs, higher premium freight charges, decreased customers satisfaction, diminished asset utilization, decreased supplier performance, etc.
To remedy this, TradeBeam offers inventory replenishment products and plans to build and offer other inventory flow management related services over next several months. SupplySolution was a renowned SCE provider, delivering value to manufacturers, distributors, and suppliers through the implementation of the collaborative supply chain application, i-Supply. i-Supply remains one of the most widely used real-time applications for communicating inventory levels and consumption patterns in the automotive industry, in operation at over 2,000 organizations. Under new ownership, i-Supply will be renamed TradeBeam CIM.
The SupplySolution had been highly successful in direct material replenishment applications—a space where many others have failed. Steve Bell, a former general manager of a tier one automotive plant, founded SupplySolution in 1998. The company landed its first pilot customer in July 1999, and in 2001, it contracted some major tier one customers, including Johnson Controls and the largest automotive supplier, Delphi. Since then, it had steadily added other new customers, including the suppliers of its original tier one accounts. All in all, the company landed 35 buyers and 2,000 suppliers in a little more than 3 years since its inception. In 2002, SupplySolution expanded into the life sciences industry, starting with a successful pilot with Stryker Instruments, a manufacturer of specialty surgical and medical products.
This is Part Three of a five-part note.
Part One discussed TradeBeam and GTM.
Part Two presented TradeBeam's background.
Part Four will detail TradeBeam's GTM solution blueprints.
Part Five will cover competition, challenges, and make user recommendations.
TradeBeam's CIM is a collaborative inventory management system, which, in simple terms, provides a means for reducing inventory. It allows an enterprise's suppliers to look inside the inventory database containing information such as stock items, inventory replenishment policies, current stock situation, etc., and replenish its supplies based on predetermined minimum-maximum, or min-max levels. All of this represents outsourcing inventory management in a data processing sense. The product can also enable other processes, such as electronic kanban (to replenish lot size) quantities, since it gives virtually real-time information to suppliers, so that they can deliver as soon as the inventory is consumed instead of shipping against a forecast. In other words, the system provides explicit feedback to the supplier on when and how much inventory to send. One should note that supplier management inefficiencies directly affect tier one manufacturers' bottom lines because purchased parts are possibly the biggest cost driver. On their hand, the biggest complaints of many tier two suppliers are inaccurate forecasts and misleading shipping schedules from their larger trading partners (customers).
Consequently, when user enterprises first implement the TradeBeam CIM system, they would typically start with higher safety stock levels, and then gradually adjust those inventories down, as they build trust with each vendor. Given that production and logistics lead times may vary between parts and suppliers, TradeBeam's CIM is a system that could be configured to provide just-in-time (JIT) replenishment for any part. Further, product life cycles always change. What might make sense this month can be either way too little or way too much the next month; therefore, the system could also help customers maintain appropriate replenishment quantities over time, through its forecasting mechanisms. Over time, some companies have consequently adopted a variety of formulas to best determine lot sizes that are consistent with current rates of demand.
Also, since many current ERP systems do not properly address the establishment of optimal min-max inventory levels, the CIM solution can provide both the buyer and the supplier with a single source of data for actual consumption, average consumption, and forecasted demand. Buyers could download this information into a Microsoft Excel spreadsheet, manipulate it, and come up with formulas to calculate appropriate min-max levels for their companies. Additionally, customers wanting to anticipate transitory changes in demand, can use the product to support temporary kanban lot sizes. Users can change the lot size for one cycle only, so that the supplier only has to deliver a larger or smaller quantity once, and then receive replenishment messages for the original kanban quantity. Conversely, the system can also allow the buyer to put selected kanbans on temporary hold,. In this instance, as kanbans are consumed they are put on hold, so that the supplier does not replenish them.
Other major features of TradeBeam's CIM include real time change visibility; fulfillment with pull-based processing; collaborative inventory management; direct material replenishment; suggested delivery quantity and timing; and in-transit visibility. It also allows forecasting analysis with min-max goals for capacity evaluation and production scheduling; analysis of patterns of consumption; actual material usage visibility; EDI functionality; advanced repetitive replenishment; in-transit goods management, and quality management support. The solution is available in several languages beside English, including Chinese, German, Italian, and Spanish.
The solution is not required to enable suppliers to respond to the buyers' requirements electronically. Advance shipment notices (ASN), purchase order confirmations, or shipment data, do not need to be sent since it is not a permission system, where the supplier needs the go-ahead prompt to send material. By virtue of being invited to participate in the system by the customer, the supplier is presumably given the upfront go-ahead to replenish inventory to predetermined min-max levels, and unless it informs the customer that it is unable or unwilling to meet the needed material requirements, it is authorized to fulfill to min-max levels on a continuous basis. The system also allows for measuring performance against those min-max levels, so that involved user parties can address any failure to maintain inventory at the predetermined levels.
The system recommends that the buyer maintain an open, blanket order so that they can receive the material and pay the supplier. Further, in a traditional EDI system, the buying company usually sends a weekly forecast to the supplier (the EDI 830 message), and follows that up with daily shipment requirements (EDI 852 messages). The supplier responds with the ASN (EDI 856 message). However, since TradeBeam's CIM gives suppliers virtually real-time inventory visibility, meaning that when they replenish inventory, they can create an ASN that is automatically visible to the customer, the need for traditional EDI might hereby be obviated.
Still, many large, high-volume suppliers already have an EDI infrastructure in place and want to download the buyer's forecasts into their planning systems. To accommodate this, TradeBeam's CIM can generate EDI transactions from the forecast data it extracts from the buyer's system, feed them to the suppliers, pick up ASNs from the suppliers' automated shipping systems, and deliver the EDI 856 messages to the buyer. One of the most powerful elements of the solution might thus be its integration framework, which maps data from users' internal databases to the system. This might come in handy given companies typically use hundreds of thousands of dollars worth of professional service hours to accomplish the same thing. On the contrary, users do not have to do all the cumbersome mapping typically done for traditional EDI systems where every trading partner uses a different format. TradeBeam's CIM could normalize different customer maps into a single format. For more pertinent information, see Pain And Gain Of Integrated EDI.
Also, because the system supplies actual product consumption and transportation information, daily and in real time to the supplier, the "mailbox" feature of the traditional value-added network-based (VAN) EDI infrastructure is not required. With the old system, suppliers had to queue up and access incoming messages and data files. With TradeBeam, a supplier only needs a Web browser to view data. The Web-based interface gives the supplier the ability to "export" whatever data they need and can see, including forecast information and real time consumption numbers. They can export that data in a comma separated value (CSV) format to their desktops or laptops with a simple few-click process for import into an Excel spreadsheet or upload into their internal planning system.
However, previously, prior to its baptism the system did not supported any ancillary transactions, such as electronic invoicing, settlement, logistics tracking or collaborative engineering (some of which has since been and will be complemented by TradeBeam), given SupplySolution did not want to compete with the likes of SAP or Oracle. Rather, it wanted to focus on building buyer/seller communities. The vendor also had not been a "sell-prospective-users-software-and-let-them-play-with it" solutions provider. Rather is was a complete service company that would even sign up the suppliers on behalf of the customer, because in many cases, companies would decide to implement the solution with their own suppliers. These supplier management practices have been leveraged at TradeBeam to build a global competency center for supplier enablement throughout all TradeBeam's applications.
Consequently, SupplySolution created a community in its first target market, the automotive industry, where suppliers will now use TradeBeam's CIM to support multiple customers. Having garnered this astute solution and install base, TradeBeam has given a pause to the automotive-focused archrivals like Infor Automotive, SupplyWorks, QAD, (with its eQ and MFGx.net supply visualization collaborative offerings), SAP (which largely partners with SupplyOn), or Glovia. While there are certainly many others that sell similar products, many of these systems are never implemented because there is no one in the buying company that sells and trains their suppliers. One should always keep in mind that the suppliers do not always make it easy, often pleading computer illiteracy and resistance when asked to use the software. SupplySolution, however, has helped with its community-building forays.
TradeBeam's CIM Solution Blueprint
One should also be aware of segmentation in the marketplace, in terms of supplier replenishment systems. Namely, in a manufacturing organization, especially in the automotive segment, demand is usually fairly steady and predictable, and suppliers ship most products to a single plant. Conversely, a retail replenishment system must be designed to handle demand that is unpredictable as a result of promotions or seasonal events like the holidays' rush. In this case, point-of-sale (POS) data are a supplement to the forecast, and shipment sizes are typically much smaller and are made to multiple, regional distribution centers or stores.
Whether enterprises buy commodity parts, (parts that are used by more than one company and made by more than one supplier) is also a key differentiating factor when choosing an appropriate replenishment system. For example, in the high-tech and electronics industry, a semiconductor manufacturer might suddenly have extra parts as a result of a large, cancelled order, and it could sell to another customer at a deeply discounted price, whereby the counterpart buyer might acquire a month or more of supply because of the opportunity. Similarly, food manufacturers typically place regular, high-volume orders for the ingredients they need, but because these items are commodities such as flour, cheese and vegetables, they are much less likely to buy these under long-term contracts. However, these practices hardly ever happen in the automotive sector, where most parts are engineered for and bought by a single, specific customer. Thus, TradeBeam's CIM is well suited to continuous fulfillment processes with fluctuation in volume rather than in part type or specification.
Based on these traits, the current TradeBeam Inventory Management Solution delivers bottom line benefits to enterprises of many sizes by facilitating the real time execution of component replenishment across multiple tiers of the entire extended enterprise. The solution is complementary to existing ERP, inventory, and warehouse management systems (WMS), as it leverages and enhances the key information locked within them and makes this information visible to suppliers via the Web. The solution features
- Multiple Inventory Replenishment Models—Automated replenishment signals include both push (advanced repetitive, jit, and distribution warehouse) and pull (kanban) based models.
- Discrete Order—Optimally used for spare or after-market parts ordering, this solution manages the entire discrete order cycle across different order types including emergency (vehicle out repaired, airplane on ground, etc.), export and new parts, whereby all players in the supply chain from parts managers to suppliers contribute online to the order process. Even companies that have a handle on regulatory compliance for imports and exports often fail to apply controls to after-sale repairs and parts orders. Therefore, this solution can bring after-sales service and repair organizations, which typically have no regulatory expertise, into the procedural loop.
- Proactive Notification Capabilities—A comprehensive alerting system providing notifications regarding exceptions in inventory levels, consumption, shipments, receipts, and time-based events, and other critical milestones needed to monitor and track inventory flow.
- On-line Access—Members across all tiers of the supply chain can access the solution via a simple, easy to use Web interface providing views into inventory, consumption, and shipping related data across multiple facilities and storage locations.
- Configuration and Integration Flexibility—The solution can be implemented as a component of an entire solution or used standalone for supply chain monitoring and measurement only. When integrated with the rest of the TradeBeam Product Suite, the user has the ability to not only plan and monitor supply chain activity, but also execute against the planned activity and measure actual versus planned. Additionally, the system can interface with all trading partners through an array of communication capabilities including EDI, XML, middleware technologies, or simple e-mail and fax alerts.
In addition to these financial and operational impact, the TradeBeam Inventory Management solution can deliver many other benefits including inventory reductions throughout the supply chain network, premium freight reductions, improved transportation utilization (i.e., reduced overall transportation costs), increased service levels from suppliers, reduced administrative effort (owing to less reactive expediting), improved quality levels (and, thus, fewer "panic" situations), anticipated and proactively managed potential shortages and schedule changes, and performance ratings and measurements linked to bottlenecks and inefficiency.
TradeBeam Key Partnerships
As to tackle a deeper market entry and channel strategy within the automotive industry, in September 2004, TradeBeam announced it had partnered with Global eXchange Services (GXS). As part of the agreement, GXS will offer automotive customers and suppliers the TradeBeam's Inventory Management solution via GXS's business process network. This should be a significant alliance between a leading provider of business process networking services and a leading provider of collaborative inventory management capabilities. The alliance represents an important opportunity to expand the reach of TradeBeam's CIM service that already is operational at thousands of automotive suppliers worldwide, as the product will this way be available to all major original equipment manufacturers' (OEM) and over 14,000 suppliers, via GXS' established network of global automotive customers.
As indicated, the ability to react to immediate requirement changes can increase inventory ROI up to 30 percent, improve asset and capacity utilization, and reduce the cost of premium freight and administration. TradeBeam's inventory management solution will to that end provide OEM's and suppliers with real time visibility into consumption and replenishment patterns across the supply chain, lessening reliance on forecasts. Suppliers can thereby monitor current inventory levels and decide when, and how much, to ship, and OEM can then monitor supplier performance to service level requirements.
TradeBeam has demonstrated significant growth by partnering with other major companies as well, including Telstra, CGI-AMS, and Unisys. Each of these companies has built major programs and sales activities around TradeBeam's GTM Platform. Additionally, in October 2004, TradeBeam announced a partnership with Telstra eBusiness Services in which it the company is making TradeBeam's CIM solution available to the local automotive industry through Telstra eBusiness Services and the Australian Automotive Network Exchange (AANX). The partnership has reportedly provided the Australian automotive industry the ability to drive significant costs out of their operations by reducing inventory levels throughout the networked supply chain. TradeBeam's CIM solution has already been in use for about a year at Holden's Service Parts National Distribution Centre in Melbourne (Australia). After the success of a pilot program with 15 of Holden's high volume tier one suppliers, Holden and General Motors (GM) approved the transition into a full production implementation and deployment to Holden's top 300 suppliers (local and overseas).
TradeBeam continues to make advances in leading the integration of the financial and physical supply chain solutions to the banking industry and consequently partnered in 2004 with CGI-AMS, the leading provider of back-office trade finance systems (ERP for trading banks) and one of the largest independent information technology and business process services firms in North America. CGI-AMS provides trade finance solutions for over twenty financial institutions including Bank of America, Wells Fargo, Bank of Montreal, and ANZ. TradeBeam has been selected to be the primary trade finance supply chain solutions for CGI-AMS's banking customers. The solution is designed to ensure that banks' customers are able to pursue their international business strategies in the most efficient manner possible. Focused on supporting the latest methods of trade finance, including the integration of the physical and financial supply chain, the initial product suite includes solutions for letter of credit management, open account management and trade financing. These applications are linked to TradeBeam's broader GTM platform, enabling companies to manage global order, shipment and financial settlement activities seamlessly.
In 2003, TradeBeam and Unisys started collaborating on the GTM market. The two companies worked together in the DHS' OSC trade lane trials because of TradeBeam's unique ability to monitor, evaluate, and manage the physical and financial supply chains for inbound international shipments. Together with Unisys's professional services teams, TradeBeam was able to provide enterprises the ability to detect and respond to potential security issues across their global operations. Further, Unisys has recently launched an initiative known as Visible Global Commerce (VGC) to provide the tracking, tracing and securing of goods and assets in partnership with TradeBeam.
This concludes Part Three of a five-part note.
Part One discussed TradeBeam and GTM.
Part Two presented TradeBeam's background.
Part Four will detail TradeBeam's GTM solution blueprints.
Part Five will cover competition, challenges, and make user recommendations.