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Part - IV

What is supply chain collaboration?

Let's look at consumer packaged goods as an example of collaboration. If there are two companies that have made supply chain a household word, they are Wal-Mart and Procter & Gamble. Before these two companies started collaborating back in the '80s, retailers shared very little information with manufacturers. But then the two giants built a software system that hooked P&G up to Wal-Mart's distribution centers. When P&G's products run low at the distribution centers, the system sends an automatic alert to P&G to ship more products. In some cases, the system goes all the way to the individual Wal-Mart store. It lets P&G monitor the shelves through real-time satellite link-ups that send messages to the factory whenever a P&G item swoops past a scanner at the register.

With this kind of minute-to-minute information, P&G knows when to make, ship and display more products at the Wal-Mart stores. No need to keep products piled up in warehouses awaiting Wal-Mart's call. Invoicing and payments happen automatically too. The system saves P&G so much in time, reduced inventory and lower order-processing costs that it can afford to give Wal-Mart "low, everyday prices" without putting itself out of business.

Cisco Systems, which makes equipment to hook up to the Internet, is also famous for its supply chain collaboration. Cisco has a network of component suppliers, distributors and contract manufacturers that are linked through Cisco's extranet to form a virtual, just-in-time supply chain. When a customer orders a typical Cisco product-for example, a router that directs Internet traffic over a company network-through Cisco's website, the order triggers a flurry of messages to contract manufacturers of printed circuit board assemblies. Distributors, meanwhile, are alerted to supply the generic components of the router, such as a power supply. Cisco's contract manufacturers, some of whom make subassemblies like the router chassis and others who assemble the finished product, already know what's coming down the order pipe because they've logged on to Cisco's extranet and linked in to Cisco's own manufacturing execution systems.

Soon after the contract manufacturers reach into Cisco's extranet, the extranet starts poking around the contractor's assembly line to make sure everything is kosher. Factory assemblers slap a bar code on the router, scan it and plug in cables that simulate those of a typical corporate network. One of those cables is a fire hose for Cisco's automated testing software. It looks up the bar code, matches it to a customer's order and then probes the nascent router to see if it has all the ports and memory that the customer wanted. If everything checks out-and only then-Cisco's software releases the customer name and shipping information so that the subcontractor can get it off the shop floor.

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Source: The Net