Field Report: e-Business Essentials: Job 1

D&P's first-ever conference has come and gone. Not only will the party held along with Sun Microsystems and i2 be long remembered, but the speakers provided some outstanding insights into issues they are grappling with. So if you weren't there, here's some of what you missed.

Building Cars; Getting Connected

Rick Vanzura, chief strategy officer, GM Information Systems and Services, insisted that GM is and will continue to be an automobile manufacturing company. That's what it is. But how it will do what it does is changing significantly as the organization begins to clearly understand that the processes and products are undergoing a profound series of changes driven both by technological innovation, as well as new customer demands. So what this means, Vanzura suggested, is that the organization needs to be able to accommodate the following factors:

  • Build to order
  • Vehicle as information node
  • Valid customer demand information
  • Dealer and manufacturer process integration
  • Sufficient supply chain visibility
  • Reduced product complexity and design cycle times
  • Tighter real-time integrated business processes

In order to handle them, there is what Vanzura called a "New GM," which is, "a network of Internet exchanges." There are six aspects to this:

  1. Customer home/office. This takes into account not only GM's BuyPower Web site, but also financial services through GMAC, entertainment through DirecTV, and aftermarket parts.
  2. Customer Auto. Simply put: OnStar.
  3. Supplier. This exchange is Covisint.
  4. Dealer. Which means working with dealers from the standpoints of both bricks and mortar as well as the 'Net.
  5. Employee. There is the Socrates Web site that provides the user with information at large as well as employee-related tools.
  6. GM Processes. The focus is on order-to-delivery.

While today these aspects are essentially established as an array of satellites with the first five around the sixth, what Vanzura sees in the future is an arrangement wherein the six are morphed into a single element, with the Internet serving as the means through which there is linkage.

Building a Better Pipeline

The "plumbing" that has long served to connect OEMs with key suppliers has been a dedicated EDI arrangement, a costly private network service. Which begins to seem rather cost ineffective in this age of nearly ubiquitous telecom and Internet connections. But whereas it may be one thing to order a book from Amazon.com with one's credit card number, it is an entirely different issue when the issue is advanced shipping notices and the like from the OEM to the supplier. Complicating things a bit is that with the increased responsibility that the Tier One suppliers have with regard to design, engineering and manufacturing, they need to communicate with their suppliers. And as has long been known, some of these lower-tier suppliers are lacking the communications infrastructure that is analogous to the private network between the OEMs and the Tier One supplier.

The public Internet may be a useful tool, but as Doug Buchanan, management consultant withANXeBusiness Corp., which is part of SAIC, the firm that acquired what was then the Automotive Network Exchange from the Automotive Industry Action Group (AIAG) in December, 1999, (it is now, Buchanan pointed out, the "Advanced Network Exchange," because there are non-automotive industries that are interested in this resource), there are some issues when it comes to using the Internet as a business tool. As in iffy performance, unpredictability, decentralized administration and inconsistent support, and inconsistent security. ANX is a business-strength version of the Internet, providing, Buchanan said, guaranteed performance, reliability, centralized admin and support, and standards-based network-level security.

According to Buchanan, companies are building what are described as virtual private network tunnels through ANX, which is allowing secure transfer of things including EDI, e-mail, and CAD files to multiple companies via a single ANX link.

Buchanan believes that a key benefit of the ANX structure is one that will facilitate supply chain development in that it provides a flexible, cost-effective means through which there can be confident, secure communication between trading partners in the supply chain. And whereas ANX was once an expensive proposition, he noted that there is now an offering that provides ANX for a monthly fee of $199, certainly a modest sum by nearly any measure (save that of AOL).

Heavy-duty e-commerce

 

More on WAN 
Kelly Knepley, IS Director, Suspension Components Business at Hayes Lemmerz International (HLI), spoke at length about the physical backbone of the company's electronic efforts—the Wide-Area Network (WAN).

As sturdy as it is, he iterated it can't handle infinite traffic. The company, therefore, is continually looking at ways to keep traffic to a minimum so the really important things that need to move through the WAN can do so.

HLI is not alone in its information flow struggles. Most companies wrestle with the issue of WAN traffic. To the uninitiated, this issue doesn't sound like much…why not just build a better backbone? That's incredibly expensive and would remain so, since the backbone would have to be rebuilt every couple of years or so. Knepley, though, like other IS directors around the globe, knows the amount of and fullness of the data flowing through the WAN will continue to grow, so they are continually finding new ways to both fortify it and limit traffic on it without breaking the budget.

To keep business moving over the WAN at HLI, Knepley says, they've done a combination of things. First and foremost, a proxy server limits what employees can do on the Internet, and a firewall prevents unwanted traffic from sneaking in. There's also a lot of teleconferencing going on, as well as voice-over IP and the use of compressed data packets. The company has also recently upgraded all circuits to 256k, speeding things up considerably.

Obviously, the efficiency of the WAN is important to the company-and for good reason. HLI is a big user of EDI. Imagine what would happen if a release couldn't come in from an OEM or go out to a supplier because someone was downloading Metallica tunes from Napster. Talk about "Stone Dead Forever."—CDJ

One could call Hayes Lemmerz International (HLI) a heavy-duty manufacturing company in that this company produces wheels, brakes, suspension components, and powertrain components from aluminum, iron, steel, and plastics in high volumes in 36 plants around the world. One might imagine that such a company is primarily interested in better machinery and equipment to produce these products. There is undoubtedly something to the interest in better casting and faster chip removal. But Kelly Knepley, IS director, Suspension Components Business, HLI, explained that the CEO of HLI stabled an executive steering committee that was committed to e-commerce, which gave rise to a working committee on the topic that was charged with developing a comprehensive e-commerce strategy that took into account the following components:

  • Infrastructure—including the people in the organization, as well as the hardware and software, such as the corporate wide-area network and ERP systems.
  • Product data management—an important tool for shortening product development time; they're currently evaluating a Web-centric approach and anticipate implementation by the end of 2001.
  • Intranet strategy—facilitating document management and workflow.
  • Asset management—using the Web as a means by which to auction off obsolete equipment and excess inventory
  • Customer relationship management—mainly a concern for the Aftermarket business unit
  • EDI—working from the standpoints of OEM customers (implementing brain North America software for robust FTP and e-five capabilities); suppliers (using it for releases and ASNs), and even banks.
  • Procurement—determined to be a source of immediate payback; to undergo a pilot program.
  • Supply chain management—looking for process improvements (e.g., no phone calls and faxes) by automating and streamlining the supply chain. Knepley called it "an easy win in e-commerce."

The Why? of this undertaking is interesting. One aspect is that HLI, like all suppliers, is under pressure to reduce cost, and it was determined that e-commerce can help in that undertaking. Secondly, it was deemed important to show shareholders that HLI understands that e-commerce is an important capability. (Never underestimate the power of Wall Street when it comes to decisions that might seem to be pure technology-based.)

Teamwork Works

What's interesting about the approach that is being taken by Delphi Automotive Systems is that it is actually taking a cross-functional approach to its e-initiatives in its E-Business Program Office. Richard L. Radecki, corporate director, E-Business, noted that he's not a technical guy, having had several positions in his decades' long career in the industry, including director of marketing and customer development. What they are doing in the program office, what he described as "a central point for setting priorities and coordinating all of Delphi's e-business efforts around the world," is pairing a business person with a technical person. Teams at the supplier are focusing on:

  • Customer relationship management
  • Electronic procurement and buy-sell exchanges
  • Supply chain management (logistics)
  • Supplier management
  • Technical collaboration
  • Employee self-service

Radecki explained that Delphi is running a series of pilot programs in order to comparatively quickly determine viability. Speed is essential. As Radecki said that many auto industry veterans have "had the luxury of a mature industry." He went on to explain, "For the most part, we've been able to look at the successes and failures of those before us and apply what we know to make the best decisions for our companies. Our choices haven't always been right, but they were logical...and had some basis in precedence. Right now, automotive suppliers and manufacturers are on a journey that has no map. There is no industry history on which we can base decisions. There isn't a lot of that reliable data or proven results on which we've always relied. So those of us working at automotive suppliers and manufacturers today are faced with navigating our industry into a new era."

Simple & Effective

"Everybody wants to do e-business, but nobody knows what the heck to do," remarked Paul DeHart, plant manager, L&L Products, which is a supplier of automotive sealing products, both directly and via Tier Ones.

But what was particularly vexing to DeHart is not the issue of people wanting to be de rigueur, but with what tended to happen at the end of the week: There would be a suddenly identified production shortage, which led to overtime over the weekend. The old way of dealing with an issue of this type might have been to just stock up on large inventories, which, DeHart explained, was unacceptable, in that they are working to be a lean supplier.

One of the limitations was that of communications with the various suppliers, which range from small Tier 2 and 3 suppliers to large chemical companies: phone, fax, and EDI. It was a tough administrative approach to deal with.

What DeHart was looking for, he said, was a pull-based system (they are working lean, after all) that would provide real-time information flow, not require a whole lot of data entry, would work with suppliers large and small, not require a "huge up-front investment," be easy to implement, and not have a "Big Bang" effect on operations. And evidently they found it in the i-Supply direct material fulfillment package fromSupplySolution, which is a subscription-based, Internet-delivered package that is allowing L&L and its suppliers to communicate such that the suppliers can see what their inventory levels are (there are red and green zones) so that there are no surprises.

The implementation occurred in four weeks. Eighty-nine percent of the suppliers L&L works with are on the program. The IT impact, DeHart noted, "is minimal: You only need a web browser." So far as results go, there has been a more than 50% reduction in inventory, admin costs for supplier material scheduling is down by 70%, and the whole issue of emergencies and expediting is greatly reduced.

In L&L's case, they certainly know what the heck to do when it comes to e-commerce.

Moving Materials With Better Info
Consider these figures:

  • 4,000 suppliers
  • 31 powertrain plants
  • 13 stamping plants
  • 54 assembly plants
  • <20,000 dealers
  • <200 countries

That's Ford's supply chain. Stephen Harley, manager, Global Logistics Planning at Ford, explained that the vehicle manufacturer has 500,000 tons of freight in transit at all times. Furthermore, one of the big issues that they're facing in the logistics arena is that the shipments are complicated by issues relating to going to the right places at the right time, which is why they are driving to have an optimized supply chain, which means that there is both synchronous material and information flow. As for the material flow, they are looking to have the right material, quantity, container, location and time—every time. As for information: stable and accurate info flow; data formatted to enable transformation to knowledge and then to predictability—and, of course, it has to be the right info at the right time, every time.

What they are doing is to create an e-supply chain that will allow them to achieve these goals such that there is a coordination between what a customer wants all the way through the suppliers, vehicle assembly, and to the dealer/distribution network. The goals that they are aiming to achieve are minimal inventory, minimal expediting, optimized logistics cost, minimal leadtime, and the total lowest cost.

As Harley put it, "At Ford, we believe that e-business must be the business." Accomplishing what is required vis-à-vis the logistical supply chain will not only require adept transportation methods, but also an infrastructure that provides the timely transport of information.

Looking in the Mirror

Greg Avesian, vice president, Information Systems, Textron Automotive, admitted that one of the trying things about all of the developments that are occurring in the e-business space—both technological and market-driven—is that there is so much, so fast, that it becomes seemingly overwhelming. But Avesian counseled, "Things are never going to stabilize. We're going to have to learn to deal with it."

One of the important messages that Avesian stressed is that the shift to an e-business organization is not so much about servers and networks as it is mainly about people. (He pointed out that during a meeting about e-business, attendees were asked who they thought was responsible for the Textron Automotive e-business initiative. Avesian said that given his position in the corporation he got a few votes. But everyone was told to open the envelopes and to pull out what was inside. Mirrors. And they were told that the person in the mirror was the one who has the responsibility.) They are seeking active involvement from people. According to Avesian, the Textron Automotive people (as well as all people who are engaged in any organization) should do four things:

  • Learn
  • Explore
  • Innovate
  • Lead

That is the way success is found.

From an initiative point of view, they are working on several projects at Textron Automotive. Among them are:

  • E-procurement
  • Financial consolidation and reporting
  • Collaborative product development (internally and with external parties)
  • Web-enabled internal processes (such as allowing employees to access to pertinent information)
  • Virtual integration (with outside companies [e.g., Valeo] to provide full solutions for customers)

According to Avesian, there are plenty of good, useful tools available for e-business implementation. Getting people to deploy those tools in an effective manner is what really makes the difference to success.