When you have been given a green light for a particular e-business project development, but a red light on capital expenditure, what can you do?
This was the problem Lear Corporation's Ford Division Europe faced last year, when it wanted to improve communications with its pan-European supply chain.
Lear is the world's fifth largest automotive supplier. It sells car seating and interiors to the likes of Jaguar and Ford.
The days when manufacturers would store warehouses full of components until needed are gone. Today's car makers demand delivery exactly when required. To achieve this, Lear needs to produce seats on a just-in-time basis. And this is no mean feat, given the numerous links in its own supply chain.
Seats need to reach vehicle manufacturers at the time and sequence in which they are to be fitted.
The schedules at Lear's Belgian plant in Genk are so tight that it sometimes finds out what seats Ford requires only three-and-a-half hours before they are due to be fitted at the Ford factory, linked to Lear's Genk operation by a 1.3km conveyor belt.
Too many manufacturers have found, to their cost, that just-in-time can descend into into a "seat-of- your-pants" approach. It fell to the e-business manager, Iain Wells, to ensure that this would not be the case for Lear. "If the seat isn't there, the line would stop and we would stop Ford," says Wells.
There was just one problem. While the US head office was happy to grant individual sites free rein to explore e-business opportunities, it stated that no implementation was to take more than 10 weeks; that sites had to be able to pull out of any project within 90 days; and that no project should involve any substantial capital expenditure.
Wells' team ruled out electronic data interchange (EDI) early on. While EDI could have passed on the schedules Lear's material requirement planning system created, it would not have delivered the dynamism that supply chain management software promised. "EDI offers at best once a day [communication with suppliers], but more commonly once a week. We felt that was not suitable," says Wells.
Aware of budget limits, the IT and logistics teams chose the Wesupply Chain solution, an Internet-based information platform, for three of Lear's European plants. "We didn't have to spend any money up-front. Being an ASP, it was on subscription," says Wells.
After initial pilot testing at Lear's HQ in Coventry, Wesupply's software was rolled out at Genk, and at Halewood in the UK. The negotiations for the deal were tricky. "The initial contract WeSupply wanted was two years," he explains. In the end, Lear inserted a clause stating that if a cheaper or better solution came up, it could end the contract on 45 days' notice, without penalty.
He stresses that trust must exist in any ASP arrangement. "We knew Wesupply as people; they were known in the car manufacturing industry and we thought we could trust them," says Wells. "As long as you know a company's pedigree, I can't see any problems with doing things through the ASP model. Still, you have to go through the learning, trust-building phase."
ASPs, he warns, "need to understand how critical their solution is to you" and they need to back up words with tangible services such as telephone support, regular catch-up meetings and watertight service level agreements.
They must also pay attention to training. Wesupply provided initial training for Lear's schedule handlers in working the solution and interpreting what they saw on screen. There was also training for key users, who went out to bring the suppliers up to speed on the software.
Were Lear's suppliers willing to buy into this new method of communication with Lear? "Generally yes," says Wells, though not all welcomed the change. It has shed no suppliers in the move to Wesupply, but a few still insist they deal on paper.
"Each supplier pays a monthly subscription. They appreciate the detail of information and the solution lowers the workload on the customer and the supplier as well, but not all have been keen on the cost," he says. The suppliers that were most reluctant were, "those that haven't bought into the just-in-time philosophy. They are used to weekly, not hourly schedules."
Some suppliers found the technology an inhibitor. "The solution works happily over a normal 56kbyte modem but even that was hard for some suppliers, which we found a surprise," Wells admits.
Wesupply replaced a paper system of forecasting and scheduling which, says Wells, lacked responsiveness and accuracy. "We needed material as required; a dynamic solution that would give flexibility, giving [suppliers] new requirements on a daily, if not a shift basis."
"The concept behind the solution," reports Archie Henderson, Lear's logistics manager, "was to provide a common view of supply chain information, that all our suppliers could access through an Internet browser. This provided a marked contrast to existing supply chain solutions which still involve the electronic transfer of data to and fro, without providing one place to view understandable and meaningful information.
"Suppliers based further away from our plants were delighted to have a transparent, real-time view of all changes to our forecast," adds Henderson.
Lear runs BPCS on AS400s to create manufacturing schedules. WeSupply uploads the information onto its servers, then interprets it into schedules that are easier for suppliers to understand, but only delivers on production of a secure password. This gives suppliers visibility of requirements, so they know exactly what products are required and when.
The system also warns Lear of any potential problems, allowing it to alter its production schedule and monitor under-performing suppliers. "When the supplier ships goods, they use the platform to confirm what is in transit," says Wells. "This is critical - we can see at once if a supplier cannot supply what we expect from them."
"In year one we reckon we saved $220,000," estimates Wells, as compared to EDI. At this rate, he expects a return on investment of 579% over five years, from "the measurable cost of extra labour, subscription and hardware costs of EDI". If you build into the equation intangible benefits such as extra dynamism and heightened customer satisfaction, the picture grows rosier still.