Seeing the light

It is easy to think of the supply chain and its management as something of a catch-all phrase. That's why explaining how it works...

It is easy to think of the supply chain and its management as something of a catch-all phrase. That's why explaining how it works is so difficult.

For example, it is difficult to apply the same lessons to all suppliers and distributors - how products ordered by customers are pulled through the supply loop - and end up with the customer, while accounting for the price value of those products and the numbers of their stock available in back-end systems.

Kingston-based GE Lighting, a part of US company General Electric, is one of the most advanced exponents of B2B e-commerce. It has become a pioneer in what could be described as the 'top' part of the supply chain - how distributor and wholesaler orders are made via the web, and how those orders are integrated into back-end systems in a seamless process.

Charlie Coode, e-commerce operations leader at GEL, says the company's customer web centres (CWC) have been so successful that it has created a patent around their use. In this case, GEL is a business-to-business global bulb and fixture manufacturer whose customers are split between the consumer, commercial and industrial channels, while their end users range from building contractors to individual consumers looking to buy lamps for their home.

"We have developed a three-pronged Web strategy to target our customers and end users in different ways. We offer the Internet to our end users, the customer Web centre to our direct customers, and partnership services to enhance our trading partners' Web offerings." a centre of success.

According to Coode, GE's CWC is digitising, or Web-enabling, its current trading with direct customers. "This is where the overlap with the supply chain comes in. On the commercial side, customers are happy to work through the Web. They hear about new products, which they can research on the customer Web centre and they can place orders directly into the supply chain thanks to the real-time link between the CWC and GE's SAP enterprise resource planning system.

They can order via the Web, and the order is fulfilled automatically through our SAP system. "Similarly, from an operational point of view, CWC is a Web version of a customer service rep. It answers customers' queries about products, availability and allows them to place an order automatically on to our SAP system. All those tasks were done previously by customer service reps," he says.

Coode believes Web-enabling gives GEL business value. "The difficulty is in providing value to customers to enable them to want to use it, not just because they are being pressured to do so. Currently, they might pick a fax up off their back-end system, put it through the fax machine and probably forget about it. GEL would see the fax, its customer service rep would place it into SAP, and overnight the customer would receive a faxed order confirmation. So, the system is partly automated."

"Undoubtedly the customer web centre is Web-enabling the front-end of the supply chain. There are several layers to the supply chain in a vertically integrated business like ours. There's customer service, warehousing, distribution and manufacturing. What we're doing in the e-sales side is looking at the customer-facing side of the supply chain."

GE's three-pronged strategy - GE Lighting, distributor and contractor - is designed to meet end-user demands and the needs of contractors who use its lamps. GEL can produce 'end-user pull' and can help them decide what products will suit their needs.

Similarly, working with its distributors, it aims to offer a 'golf bag' of solutions, so that no matter how the customer wants to do business they can do it electronically. "We're trying to provide a Web alternative to every mode of 'touch'. And turning all our manual touches into electronic touches helps us in terms of efficiency. It also helps the customer in terms of information and value," explains Coode.

"The middle ground is the key area because that's the area that has been reluctant to use CWC for ordering. Although they [the middle ground] don't use EDI, and they're not ready for XML, they're sophisticated enough to have their own back-end systems.

"What they don't want is to go through the extra effort of placing an order through their back-end system and then do what some call a 'swivel chair' or 'double-order entry', where they go on to our CWC and type their order again for the order placement. That means extra work for them, which has been the fundamental barrier to the survival of the CWC," explain Coode.

"Now they have a piece of functionality which allows them to retrieve the order from their back-end system and pull it up into the CWC. It also solves the duplicate order-entry process in one swipe."

The real magic of this is that it involves relatively little change to the customer system. The business logic is held on the CWC application so the incremental cost and time for each implementation is minimal. The third part of the strategy is providing the tools and services to the customer to allow them to enhance their Web offering to the end users.

This 'golf bag' of products and tools-branded 'Partnership Services' - is flexible to what the customer needs, ranging from simple links to the GEL 'wizards' all the way to complex content syndication.

The proof is in the delivery GEL still has some challenges to solve in fully digitising its supply chain. Proof of delivery remains an issue, particularly in a pan-European context.

The carrier that delivers the product is not the same carrier that left GEL's warehouse, so you don't have 'closed-loop distribution', where the truck that leaves the warehouse is the one that returns, and you can get a delivery note signed which you can reconcile with the back-end system.

"When you have same-day proof of delivery," explains Coode, "and you have that data in your back-end system, you can replicate it on the web. So you can say to a customer, 'We got your order, it has been allocated from the warehouse, we've invoiced you for it, and we have proof of delivery'." he says.

"The difficulty where you don't have closed-loop distribution is that you might have a contracted party to deliver your products to a certain area, and there's no electronic way of getting that proof of delivery back to your warehouse and into your back-end systems.

"We've got three stages on our website. Have we allocated stock in the warehouse? The next stage is, has it been dispatched? And the final stage is, has the customer been invoiced?"

One of the other key issues, Coode admits, is successful commercialisation to the customers, and often that comes down to the sales staff. "Our existing distribution chain to our wholesalers is what we do. We ship lamps to our wholesalers in bulk, so our distribution and logistics haven't changed. But encouraging the change in our distributors to enable that to happen more efficiently is a tough game. And then, the people who have the interface with the distributors - the salesforce - must be your disciples.

"You wouldn't normally think about sales staff in conjunction with the supply chain, but sales staff must be catalyst to the process of changing the way customers are behaving. If we don't convince the salesforce to believe in the strategy, they'll never be able to convince the customer to believe in it, and then you'll end up with a brake in the process."

Read more on Business applications