Supply chain pain yields enterprise gain

Despite the potential benefits supply chain management software can provide, experienced users caution that installing the technology is fraught with challenges, especially when it comes to revamping business processes within companies.

At the Supply-Chain World North America 2004 conference in Chicago, 10 attendees whose companies have invested in supply chain applications said they’re seeing production improvements, inventory reductions and other benefits. But they warned new users to expect some pain — particularly when it comes to defining business processes that can work throughout a company.

“The toughest part (of a supply chain rollout) is the business change management piece,” said Jaime Bohnke, vice-president of supply chain at Raytheon Co.’s missile systems division. The missile unit is rolling out a procurement, supplier management and ERP system primarily built around SAP AG’s applications to replace a variety of home-grown systems, she said.

To help with change management, Waltham, Mass.-based Raytheon is using consultants from SAP and other companies, along with an internal team that’s dedicated to the project. However, Bohnke said the process still requires a “hard-knock school” approach of trial and error.

The division went live with the procurement tool last year. But because data formatting is different between the SAP software and Raytheon’s homegrown production planning, scheduling and control systems, the number of steps needed to ensure that tracking processes are being executed properly has quadrupled, Bohnke said.

The missile division plans to finish rolling out the rest of the system by June 2005, which should eliminate the extra steps, Bohnke said. But she said Raytheon also has had to hire additional personnel to analyze the new data the system generates.

Timothy McVittie, director of logistics at Chicago-based USG Corp., said an ongoing implementation of Oracle Corp.’s supply chain and ERP applications has forced the building materials maker to completely rethink its internal operations.

Previously, the company’s business units operated in a decentralized way. Now they work off a single, centralized system and set of operating procedures, which some executives have perceived as “a lessening of autonomy in how they do things,” McVittie said. “The culture is the biggest challenge.”

He added that to help smooth the path, USG pulled some employees away from their full-time jobs, gave them special incentives and reassigned them to learn the Oracle system and become internal sponsors of the project. The system is designed to optimize USG’s production and distribution operations and is due to be completely in place by 2006.

Because of the variability of business needs, the biggest challenge is to install a set of applications that will provide some wiggle room in the future, said Ted Weinrich, MIS manager at Larson Manufacturing Co., a storm-door and window maker in Brookings, S.D. Larson runs PeopleSoft Inc.’s ERP and manufacturing software.

Weinrich said the ad hoc customizations that Larson has had to make to PeopleSoft’s software include a work-around that allows the company to manufacture specialized subassemblies without having to completely reconfigure the system.

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