Executive Briefings

Supply-Chain Collaboration Much More Than Mere Information Sharing

It may be an old concept, but the internet, new software solutions and growing competitive pressures are giving "collaboration" a new and much deeper definition.

For Celestica Inc., the world's third-largest contract manufacturer of high-tech products, collaboration is more than a consultant's latest buzzword. It's the key to
the company's astounding recent success.

In just four years, Toronto-based Celestica has gone from 2,500 employees to nearly 25,000. Sales have grown by 60 percent a year, reaching $5.6bn in 1999 and an estimated $9bn this year. By 2003, the company expects to hit the $20bn mark.

Celestica has clearly benefited from the rush to contract manufacturing. Such high-tech innovators as Cisco Systems Inc. and Dell Computer have led the way in creating "virtual" supply chains in which they make little or no product of their own.

Actual manufacturing is farmed out to vendors like Celestica, whose name appears nowhere on the computer, component or cell phone. The goods of nominal rivals may even have been made in the same plant with appropriate walls between production lines.

But the biggest risk of contract manufacturing isn't security. It's the possibility of miscommunication and inefficiencies, caused by the newly created gap between those who design, market and sell the product, and those who make it. For all its benefits, outsourcing can wreck a supply chain if it's mishandled.

The answer lies in collaboration, and not just in the traditional sense of the word. A dictionary definition doesn't begin to describe the level of integration among suppliers, manufacturers and sellers that is needed to forge a truly efficient supply chain today.

The mere exchange of information doesn't cut it, says Andrew White, vice president of product strategy with Atlanta-based Logility Inc. What's needed, he says, is a dynamic environment in which information flows in both directions on a real-time basis and can be instantly acted upon by the receiver - sometimes without the need for human intervention. That rules out traditional means of communication such as fax, e-mail or even electronic data interchange (EDI). All are essentially static messaging tools.

By contrast, true collaboration entails interaction at points throughout the supply chain, including the establishment of trading partnerships, design and introduction of new products, sharing of sales and marketing data, order planning and fulfillment, and after-sales service, says Andrew Carlson, senior manager of marketing with J.D. Edwards & Co., Denver.

Taking collaboration to the next level is vital if contract manufacturing is going to work, says Andrew Gort, Celestica's senior vice president of global supply-chain management. Under the old way of doing things, the various partners in a supply chain might run their material requirements planning (MRP) tools once a week, on different days. It could take several weeks for a manufacturer to respond to a request to, say, double the production volumes of a popular item. Real-time communication means the message is received - and the response sent - without delay.

"Our goal is to operate as a unified supply chain with our customers and suppliers by acting as a seamless extension of their operations," Gort says.

Celestica's supply chain divides into four key processes: sourcing, material planning, manufacturing and delivery. All but manufacturing, an internally focused activity, are considered ripe for collaboration with multiple partners outside the company.

Instant Feedback
On the sourcing side, Celestica works closely with customers on new product design and release. With the help of collaborative software tools such as that of Chelmsford, Mass.-based MatrixOne, it receives design proposals and gives instant feedback. For joint material planning, Celestica uses Rhythm, the factory and supply-chain planning suite from i2 Technologies of Irving, Texas. The business-to-business (B2B) electronic commerce platform of Extricity Software, Redwood Shores, Calif., allows Celestica to tell a customer whether it can build a product within 15 minutes of receiving a request.

Chief information officer Lisa Colnett says B2B software tools for collaboration have matured over the last couple of years. The crowded marketplace gives companies looking to capitalize on e-commerce and the internet a broad array of choices, even if the distinctions between software packages tend to be blurry.

Collaborative solutions are being touted by sellers of everything from enterprise resource planning to supply-chain management suites, not to mention a growing number of stand-alone providers. Rather than rely on a single vendor for all its needs, which many experts say is inadvisable at this time, Celestica prefers a "best-of-breed" philosophy.

Colnett says the very notion of outsourcing, which has migrated rapidly from logistics to manufacturing in recent years, demands a high degree of collaboration. In fact, the extent to which partners are able to integrate with Celestica depends largely on how long they have been outsourcing their key processes, she says. Some of Celestica's most successful relationships are with original equipment manufacturers (OEMs), such as Cisco and Sunnyvale, Calif.-based Juniper Networks, both of which rely mostly on contract manufacturing.

At a time when internet auctions threaten to reduce many transactions to a question of price, Celestica stresses solid relationships with its chosen partners at both ends of the supply chain. OEMs like Sun Microsystems, and component suppliers like Texas Instruments, are part of a tight alliance involving the constant flow of information about product design and availability. Recently these three companies rolled out an internet-based private trading exchange for that purpose, eschewing the price-driven public exchanges.

"You really have to do business with each other with a long-term commitment in mind," says Gort.

Even at this early stage of collaboration, the benefits can be substantial. Colnett says Celestica, which was spun off by IBM just four years ago, has experienced a 30 percent to 40 percent reduction in supply-chain cycle time with the help of the internet and newer software solutions. "The introduction of products used to take weeks to months," she says. "Now it's a couple of weeks."

The internet may not be essential to supply-chain collaboration, but it has given the practice a huge lift. "The net fulfills the promise of EDI," says Ian Michel, director of business development with Mountain View, Calif.-based Ariba Inc. A decade ago, EDI was thought to be the answer to companies' dreams of collaboration. It turned out to be too expensive and arcane for most users, and wasn't flexible enough to handle rapid growth.

Now, "the ability to bring all of this together is much more within our reach," says Bob Ferrari, senior research analyst with AMR Research Inc. in Boston. He speaks of web-enabled "collaborative communities" that involve relationships among design partners, suppliers, manufacturers, buyers and logistics providers. Together they can create an "electronic workflow" in real time, allowing for the back-and-forth nature of initial planning, and quick adjustments to the unforeseen changes that are a part of nearly every supply chain.

Only in the last five years have software providers begun offering systems that go beyond the static transmission of data, says Michael G. Ker, president and chief executive officer of webPLAN, based in Ottawa. The earliest versions of collaborative software tended to concentrate on data such as change orders to the manufacturer. More recently, systems have allowed the supplier to act on the information. WebPLAN's own browser-based product gives multiple partners access to key information, and permits them to run simulations on actual orders to determine the feasibility of new production schemes. As a result, manufacturers can provide their customers with accurate, fixed delivery dates. Ker says the internet has created a dynamic environment that recognizes the ever-changing nature of a company's supplier base.

Companies embracing collaboration for the first time often do it in the areas most visible to the end customer, says John Webb, vice president and product manager of PeopleSoft Inc. in Pleasanton, Calif. "We're starting to see a tremendous amount of momentum," he says. That might be followed by supply-chain planning, procurement and trading exchanges.

Typically, sellers will open up a web portal that allows their customers to order product online, as well as check availability, order status and delivery dates. At least one company has employed PeopleSoft's sales-force link to allow for the confirmation of order status and shipment by cell phone. The system was implemented in a day, Webb says.

The ultimate goal of companies today is mass collaboration. Executives are beginning to realize that a supply "chain" is actually a complex web of partners, many of whom must view the same piece of information simultaneously. Cambridge, Mass.-based eRoom Technology claims to provide a "digital workplace" that can be accessed by all partners in the chain. The tool is web browser-based and doesn't require loading additional software, says John Fiorelli, market strategy manager.

Some of the most aggressive moves toward collaboration have been occurring in the retail sector. Leading the charge is Collaborative Planning, Forecasting and Replenishment (CPFR), a process for linking up suppliers to retailers' point-of-sale data. Not only can the partners minimize inventory by making and selling the goods that consumers want, they can work together on turning out items for problematic short-term promotions. Still in its formative stages, CPFR has run up some big successes among early participants such as Wal-Mart Stores, Warner-Lambert and Procter & Gamble.

Among the software vendors supporting CPFR is Syncra Systems of Cambridge. It allows for the comparison of detailed demand forecasts between suppliers and retailers, covering such areas as the timing of promotions, new product introductions and item switches. Prior to CPFR, those processes were loosely coordinated, leading to frequent errors and miscommunication, says Matt Johnson, chief technology officer of Syncra. The company addresses those relationships that involve multiple planning systems, which previously couldn't "talk" to each other.

Vendor-managed inventory (VMI) programs also fall under the heading of collaboration, although they are not always used to their fullest potential. In its most basic form, VMI involves pushing inventory upstream to a supplier or manufacturer, who then feeds materials to the plant or retailer on an as-needed basis.

VMI data not used
While the benefits to the end customer are obvious, VMI can serve as little more than a strategy for shifting inventory to a captive supplier, instead of eliminating it from the supply chain. A recent report by AMR consultant Greg Girard says most manufacturers have failed to use the data gained from VMI programs to improve supply planning. Few, if any, have extended these programs to all products and trading partners, he says.

Far-seeing companies like Celestica notwithstanding, Girard says manufacturers must do a better job of collaborating in areas beyond the scope of CPFR, including product introductions, promotions marketing, trade-funds management, order consolidations and product ordering. Tools that could make a difference include independent trading exchanges and the new wave of application service providers (ASPs), as long as a company isn't tied to one software provider, no matter how comprehensive it claims to be.

When it comes to B2B applications over the internet, trading exchanges are the flavor of the moment. Currently they number in the hundreds, if not thousands, and have taken a variety of forms: independent, vendor-based, consortium-based and private. The earliest incarnations were mostly procurement sites built around auctions - sort of an eBay for the business world. But experts say that type of exchange is of limited value in a world where long-term collaboration is crucial. Following an inevitable shakeout over the next several years, many of the surviving exchanges are likely to be those that address key business processes involved in bringing a product to market.

For that reason, Celestica has declined to play a founding role in some of the super-exchanges now under development. Gort likens the trend to inventing the automobile, then scrambling to build a nationwide network of highways overnight.

One big trading exchange that deals literally with the auto industry, Covisint, is said to be struggling to iron out differences among the Big Three auto makers - General Motors, Ford and DaimlerChrysler - who are its founders. Details of how the still-developing site will work with suppliers, many of whom have expressed reservations about it, remain sketchy. Celestica, Gort says, prefers a more focused approach to trading exchanges, hence the deal with Texas Instruments and Sun.

WorldChain Inc., headquartered in Santa Clara, Calif., offers software that can act as a platform for trading exchanges. Its initial target has been equipment manufacturers, who turn out configured products within narrow production and delivery windows. Ray Homan, vice president of business development, says trading exchanges have tended to focus on one-way transactions, as in the case of auctions. More important are those that promote business process automation among multiple partners. "The value of the process goes up with the scale of the relationship," Homan says.

Ultimately, says AMR's Girard, many trading exchanges will give way to planning exchanges, for companies seeking more than a mechanism for driving down suppliers' prices. This new breed of exchange will expand vertically and horizontally to emphasize collaborative planning, of the sort that Celestica and a handful of others already are doing.
Making a start in the retail arena is the WorldWide Retail Exchange (WWRE), a collaborative effort among some of the world's largest consumer retailers. They include Best Buy, Gap Inc., Kmart, Safeway, Target and Tesco. The group plans to use guidelines developed under CPFR, as well as the emerging Extensible Markup Language (XML) standards for ease of communication between computers. The WWRE's technology partner is an e-business alliance among IBM, i2 Technologies and Ariba.

Ariba recently bolstered its efforts with the purchase of SupplierMarket.com, a Burlington, Mass.-based provider of online collaborative software for industrial goods. Michel says the acquisition will be morphed into Ariba's Private Sourcing Exchange, which already includes product design, procurement, payment and logistics in the service and retail arenas.

Retek Inc., headquartered in Minneapolis, recently was chosen to provide collaborative design capability to WWRE. The company previously had launched a site known as retail.com, for retailers and suppliers. According to senior marketing manager Andrew McGlasson, Retek creates the equivalent of a "collaborative whiteboard," by which partners can design product together. He estimates that the tool can cut in half the time required for development of private-label goods.

For all its obvious appeal, the modern-day version of collaboration within the supply chain has yet to catch on with many users. "We're in the relatively early days," says Michel. "I'd say we're a quarter to halfway there."

Customer Is Boss
Mark McDonnell, marketing director of U.K.-based Eqos Systems Ltd., pegs progress at no more than 15 percent. Few supply chains offer total visibility and communicability up and down the line, although many companies have solved pieces of the puzzle.

Even today, says GartnerGroup analyst Karen Peterson, much of the collaboration taking place within the supply chain is really coercion by the controlling party. Whether it's an OEM or major retailer, the customer tends to call the shots. It doesn't pause to negotiate over the creation of VMI programs by hungry suppliers - it demands them.

That approach may have been necessary among the early adopters of a supply-chain mentality, Peterson says. Now it's up to channel masters to cede some of their control in favor of a truly cooperative relationship. Suppliers must see more in trading exchanges than the privilege of engaging in cutthroat competition for the favors of a powerful automaker. Consumer goods producers must share in the opportunity to reduce inventory in the pipeline, not just take it off the retailer's hands.

"How do you measure when it's a win-win?" asks Peterson. "It's when you're getting as much as giving."

For the most part, the failure to collaborate today isn't for lack of technological tools. The real barrier, says Ferrari, is a human one. Companies remain reluctant to share sensitive business information, even with long-term partners. Even the vaunted CPFR effort is being slowed by the failure of charter members to part with critical data. While high-tech leaders such as Dell and Cisco have come to trust their suppliers, automotive and other industries remain mired in historically adversarial relationships.

Collaboration might have happened earlier but for the Y2K scare, suggests Chris Houck, director of sales and marketing with i2. Over the past two years, he says, companies were preoccupied with making sure their legacy systems didn't crash on New Year's Day 2000. When those fears were allayed, they began looking seriously at the internet as a means of working together.

i2's own broad solution set for collaborative e-commerce, dubbed TradeMatrix.com, is only a year old, although the company had made some stabs in that direction previously. It also has jumped on the trading-exchange bandwagon, moving away from an initial attempt to sponsor its own exchange, in favor of powering those of others.

AMR's Girard identifies a number of other hurdles on the road to collaboration. They include the belief by manufacturers that they first need to address gaps within their internal processes, the tendency to get bogged down in implementation details for programs such as CPFR, and a general failure of nerve by top management, which often seems satisfied with the status quo. Many executives appear complacent due to their current success, or prefer to invest more time in brand development than on true collaboration.

"A cultural change needs to come first, for collaboration to be truly successful," says Peterson.

On the positive side, companies within key industries are working to develop standards of communication, business processes and documentation that will facilitate the flow of information between channel partners. The high-tech sector's RosettaNet is one such effort; XML language for multiple industries is another. UCCnet, a project of the Uniform Code Council, is pursuing similar XML-based protocols for the retail industry. Carlson of J.D. Edwards says UCCnet can prove valuable in synchronizing the data of CPFR partners, whose product information can quickly get out of date.

There's work to be done in smoothing the way for collaboration, says Carlson. There are still too many different versions of software that can't easily interact with one another. Despite the proliferation of integration application providers, companies continue to struggle with the gaps between major systems - ERP, APS, CRM, SCM and the like.

At least one part of the supply chain won't suffer from that problem for long, Carlson believes. "We are within 12 months of making it easy to overcome system disparity on the fulfillment and planning side," he says.

Supply-chain executives are growing increasingly impatient with the time it takes to realize a payback from collaboration, or any other new management concept. Many are still nursing their wounds from multi-year - and multimillion-dollar - ERP installations. As a result, the most popular tools today are likely to be those that involve the least complications, most reasonable costs, and fastest results. Applications built around Eqos's collaborative platform, for example, can be up and running at a major hub within four to eight weeks, McDonnell claims.

Speed becomes even more important where contract manufacturers are involved, and must react rapidly to OEMs' change orders. The software suite of Los Angeles-based Adexa is intended to shorten response time through collaborative planning and design. Nima Bakhtiary, vice president of strategic marketing, says automakers are under intense pressure to reduce the time it takes to introduce new models. The transmission of orders to suppliers can take up to 90 days; Adexa is looking to reduce that span to three or four. In the personal-computer industry, one contract manufacturer already can respond to OEM orders within half an hour, versus the previous time of 72 hours, he says.

Logility's White conjures up the dream of collaboration: supply-chain partners who mutually decide on the value of a piece of information, develop it jointly, measure their performance against it and get paid accordingly. A single sales forecast, for example, would serve as the basis for manufacturing, distribution, promotion and replenishment, with the data crossing all functions and enterprises.

First, companies must adjust to the very notion of collaboration in a world of multiple trading partners. And that means taking a fresh approach to the sharing of information. Says Gort of Celestica: "Maturity is going to take a long time."

For Celestica Inc., the world's third-largest contract manufacturer of high-tech products, collaboration is more than a consultant's latest buzzword. It's the key to
the company's astounding recent success.

In just four years, Toronto-based Celestica has gone from 2,500 employees to nearly 25,000. Sales have grown by 60 percent a year, reaching $5.6bn in 1999 and an estimated $9bn this year. By 2003, the company expects to hit the $20bn mark.

Celestica has clearly benefited from the rush to contract manufacturing. Such high-tech innovators as Cisco Systems Inc. and Dell Computer have led the way in creating "virtual" supply chains in which they make little or no product of their own.

Actual manufacturing is farmed out to vendors like Celestica, whose name appears nowhere on the computer, component or cell phone. The goods of nominal rivals may even have been made in the same plant with appropriate walls between production lines.

But the biggest risk of contract manufacturing isn't security. It's the possibility of miscommunication and inefficiencies, caused by the newly created gap between those who design, market and sell the product, and those who make it. For all its benefits, outsourcing can wreck a supply chain if it's mishandled.

The answer lies in collaboration, and not just in the traditional sense of the word. A dictionary definition doesn't begin to describe the level of integration among suppliers, manufacturers and sellers that is needed to forge a truly efficient supply chain today.

The mere exchange of information doesn't cut it, says Andrew White, vice president of product strategy with Atlanta-based Logility Inc. What's needed, he says, is a dynamic environment in which information flows in both directions on a real-time basis and can be instantly acted upon by the receiver - sometimes without the need for human intervention. That rules out traditional means of communication such as fax, e-mail or even electronic data interchange (EDI). All are essentially static messaging tools.

By contrast, true collaboration entails interaction at points throughout the supply chain, including the establishment of trading partnerships, design and introduction of new products, sharing of sales and marketing data, order planning and fulfillment, and after-sales service, says Andrew Carlson, senior manager of marketing with J.D. Edwards & Co., Denver.

Taking collaboration to the next level is vital if contract manufacturing is going to work, says Andrew Gort, Celestica's senior vice president of global supply-chain management. Under the old way of doing things, the various partners in a supply chain might run their material requirements planning (MRP) tools once a week, on different days. It could take several weeks for a manufacturer to respond to a request to, say, double the production volumes of a popular item. Real-time communication means the message is received - and the response sent - without delay.

"Our goal is to operate as a unified supply chain with our customers and suppliers by acting as a seamless extension of their operations," Gort says.

Celestica's supply chain divides into four key processes: sourcing, material planning, manufacturing and delivery. All but manufacturing, an internally focused activity, are considered ripe for collaboration with multiple partners outside the company.

Instant Feedback
On the sourcing side, Celestica works closely with customers on new product design and release. With the help of collaborative software tools such as that of Chelmsford, Mass.-based MatrixOne, it receives design proposals and gives instant feedback. For joint material planning, Celestica uses Rhythm, the factory and supply-chain planning suite from i2 Technologies of Irving, Texas. The business-to-business (B2B) electronic commerce platform of Extricity Software, Redwood Shores, Calif., allows Celestica to tell a customer whether it can build a product within 15 minutes of receiving a request.

Chief information officer Lisa Colnett says B2B software tools for collaboration have matured over the last couple of years. The crowded marketplace gives companies looking to capitalize on e-commerce and the internet a broad array of choices, even if the distinctions between software packages tend to be blurry.

Collaborative solutions are being touted by sellers of everything from enterprise resource planning to supply-chain management suites, not to mention a growing number of stand-alone providers. Rather than rely on a single vendor for all its needs, which many experts say is inadvisable at this time, Celestica prefers a "best-of-breed" philosophy.

Colnett says the very notion of outsourcing, which has migrated rapidly from logistics to manufacturing in recent years, demands a high degree of collaboration. In fact, the extent to which partners are able to integrate with Celestica depends largely on how long they have been outsourcing their key processes, she says. Some of Celestica's most successful relationships are with original equipment manufacturers (OEMs), such as Cisco and Sunnyvale, Calif.-based Juniper Networks, both of which rely mostly on contract manufacturing.

At a time when internet auctions threaten to reduce many transactions to a question of price, Celestica stresses solid relationships with its chosen partners at both ends of the supply chain. OEMs like Sun Microsystems, and component suppliers like Texas Instruments, are part of a tight alliance involving the constant flow of information about product design and availability. Recently these three companies rolled out an internet-based private trading exchange for that purpose, eschewing the price-driven public exchanges.

"You really have to do business with each other with a long-term commitment in mind," says Gort.

Even at this early stage of collaboration, the benefits can be substantial. Colnett says Celestica, which was spun off by IBM just four years ago, has experienced a 30 percent to 40 percent reduction in supply-chain cycle time with the help of the internet and newer software solutions. "The introduction of products used to take weeks to months," she says. "Now it's a couple of weeks."

The internet may not be essential to supply-chain collaboration, but it has given the practice a huge lift. "The net fulfills the promise of EDI," says Ian Michel, director of business development with Mountain View, Calif.-based Ariba Inc. A decade ago, EDI was thought to be the answer to companies' dreams of collaboration. It turned out to be too expensive and arcane for most users, and wasn't flexible enough to handle rapid growth.

Now, "the ability to bring all of this together is much more within our reach," says Bob Ferrari, senior research analyst with AMR Research Inc. in Boston. He speaks of web-enabled "collaborative communities" that involve relationships among design partners, suppliers, manufacturers, buyers and logistics providers. Together they can create an "electronic workflow" in real time, allowing for the back-and-forth nature of initial planning, and quick adjustments to the unforeseen changes that are a part of nearly every supply chain.

Only in the last five years have software providers begun offering systems that go beyond the static transmission of data, says Michael G. Ker, president and chief executive officer of webPLAN, based in Ottawa. The earliest versions of collaborative software tended to concentrate on data such as change orders to the manufacturer. More recently, systems have allowed the supplier to act on the information. WebPLAN's own browser-based product gives multiple partners access to key information, and permits them to run simulations on actual orders to determine the feasibility of new production schemes. As a result, manufacturers can provide their customers with accurate, fixed delivery dates. Ker says the internet has created a dynamic environment that recognizes the ever-changing nature of a company's supplier base.

Companies embracing collaboration for the first time often do it in the areas most visible to the end customer, says John Webb, vice president and product manager of PeopleSoft Inc. in Pleasanton, Calif. "We're starting to see a tremendous amount of momentum," he says. That might be followed by supply-chain planning, procurement and trading exchanges.

Typically, sellers will open up a web portal that allows their customers to order product online, as well as check availability, order status and delivery dates. At least one company has employed PeopleSoft's sales-force link to allow for the confirmation of order status and shipment by cell phone. The system was implemented in a day, Webb says.

The ultimate goal of companies today is mass collaboration. Executives are beginning to realize that a supply "chain" is actually a complex web of partners, many of whom must view the same piece of information simultaneously. Cambridge, Mass.-based eRoom Technology claims to provide a "digital workplace" that can be accessed by all partners in the chain. The tool is web browser-based and doesn't require loading additional software, says John Fiorelli, market strategy manager.

Some of the most aggressive moves toward collaboration have been occurring in the retail sector. Leading the charge is Collaborative Planning, Forecasting and Replenishment (CPFR), a process for linking up suppliers to retailers' point-of-sale data. Not only can the partners minimize inventory by making and selling the goods that consumers want, they can work together on turning out items for problematic short-term promotions. Still in its formative stages, CPFR has run up some big successes among early participants such as Wal-Mart Stores, Warner-Lambert and Procter & Gamble.

Among the software vendors supporting CPFR is Syncra Systems of Cambridge. It allows for the comparison of detailed demand forecasts between suppliers and retailers, covering such areas as the timing of promotions, new product introductions and item switches. Prior to CPFR, those processes were loosely coordinated, leading to frequent errors and miscommunication, says Matt Johnson, chief technology officer of Syncra. The company addresses those relationships that involve multiple planning systems, which previously couldn't "talk" to each other.

Vendor-managed inventory (VMI) programs also fall under the heading of collaboration, although they are not always used to their fullest potential. In its most basic form, VMI involves pushing inventory upstream to a supplier or manufacturer, who then feeds materials to the plant or retailer on an as-needed basis.

VMI data not used
While the benefits to the end customer are obvious, VMI can serve as little more than a strategy for shifting inventory to a captive supplier, instead of eliminating it from the supply chain. A recent report by AMR consultant Greg Girard says most manufacturers have failed to use the data gained from VMI programs to improve supply planning. Few, if any, have extended these programs to all products and trading partners, he says.

Far-seeing companies like Celestica notwithstanding, Girard says manufacturers must do a better job of collaborating in areas beyond the scope of CPFR, including product introductions, promotions marketing, trade-funds management, order consolidations and product ordering. Tools that could make a difference include independent trading exchanges and the new wave of application service providers (ASPs), as long as a company isn't tied to one software provider, no matter how comprehensive it claims to be.

When it comes to B2B applications over the internet, trading exchanges are the flavor of the moment. Currently they number in the hundreds, if not thousands, and have taken a variety of forms: independent, vendor-based, consortium-based and private. The earliest incarnations were mostly procurement sites built around auctions - sort of an eBay for the business world. But experts say that type of exchange is of limited value in a world where long-term collaboration is crucial. Following an inevitable shakeout over the next several years, many of the surviving exchanges are likely to be those that address key business processes involved in bringing a product to market.

For that reason, Celestica has declined to play a founding role in some of the super-exchanges now under development. Gort likens the trend to inventing the automobile, then scrambling to build a nationwide network of highways overnight.

One big trading exchange that deals literally with the auto industry, Covisint, is said to be struggling to iron out differences among the Big Three auto makers - General Motors, Ford and DaimlerChrysler - who are its founders. Details of how the still-developing site will work with suppliers, many of whom have expressed reservations about it, remain sketchy. Celestica, Gort says, prefers a more focused approach to trading exchanges, hence the deal with Texas Instruments and Sun.

WorldChain Inc., headquartered in Santa Clara, Calif., offers software that can act as a platform for trading exchanges. Its initial target has been equipment manufacturers, who turn out configured products within narrow production and delivery windows. Ray Homan, vice president of business development, says trading exchanges have tended to focus on one-way transactions, as in the case of auctions. More important are those that promote business process automation among multiple partners. "The value of the process goes up with the scale of the relationship," Homan says.

Ultimately, says AMR's Girard, many trading exchanges will give way to planning exchanges, for companies seeking more than a mechanism for driving down suppliers' prices. This new breed of exchange will expand vertically and horizontally to emphasize collaborative planning, of the sort that Celestica and a handful of others already are doing.
Making a start in the retail arena is the WorldWide Retail Exchange (WWRE), a collaborative effort among some of the world's largest consumer retailers. They include Best Buy, Gap Inc., Kmart, Safeway, Target and Tesco. The group plans to use guidelines developed under CPFR, as well as the emerging Extensible Markup Language (XML) standards for ease of communication between computers. The WWRE's technology partner is an e-business alliance among IBM, i2 Technologies and Ariba.

Ariba recently bolstered its efforts with the purchase of SupplierMarket.com, a Burlington, Mass.-based provider of online collaborative software for industrial goods. Michel says the acquisition will be morphed into Ariba's Private Sourcing Exchange, which already includes product design, procurement, payment and logistics in the service and retail arenas.

Retek Inc., headquartered in Minneapolis, recently was chosen to provide collaborative design capability to WWRE. The company previously had launched a site known as retail.com, for retailers and suppliers. According to senior marketing manager Andrew McGlasson, Retek creates the equivalent of a "collaborative whiteboard," by which partners can design product together. He estimates that the tool can cut in half the time required for development of private-label goods.

For all its obvious appeal, the modern-day version of collaboration within the supply chain has yet to catch on with many users. "We're in the relatively early days," says Michel. "I'd say we're a quarter to halfway there."

Customer Is Boss
Mark McDonnell, marketing director of U.K.-based Eqos Systems Ltd., pegs progress at no more than 15 percent. Few supply chains offer total visibility and communicability up and down the line, although many companies have solved pieces of the puzzle.

Even today, says GartnerGroup analyst Karen Peterson, much of the collaboration taking place within the supply chain is really coercion by the controlling party. Whether it's an OEM or major retailer, the customer tends to call the shots. It doesn't pause to negotiate over the creation of VMI programs by hungry suppliers - it demands them.

That approach may have been necessary among the early adopters of a supply-chain mentality, Peterson says. Now it's up to channel masters to cede some of their control in favor of a truly cooperative relationship. Suppliers must see more in trading exchanges than the privilege of engaging in cutthroat competition for the favors of a powerful automaker. Consumer goods producers must share in the opportunity to reduce inventory in the pipeline, not just take it off the retailer's hands.

"How do you measure when it's a win-win?" asks Peterson. "It's when you're getting as much as giving."

For the most part, the failure to collaborate today isn't for lack of technological tools. The real barrier, says Ferrari, is a human one. Companies remain reluctant to share sensitive business information, even with long-term partners. Even the vaunted CPFR effort is being slowed by the failure of charter members to part with critical data. While high-tech leaders such as Dell and Cisco have come to trust their suppliers, automotive and other industries remain mired in historically adversarial relationships.

Collaboration might have happened earlier but for the Y2K scare, suggests Chris Houck, director of sales and marketing with i2. Over the past two years, he says, companies were preoccupied with making sure their legacy systems didn't crash on New Year's Day 2000. When those fears were allayed, they began looking seriously at the internet as a means of working together.

i2's own broad solution set for collaborative e-commerce, dubbed TradeMatrix.com, is only a year old, although the company had made some stabs in that direction previously. It also has jumped on the trading-exchange bandwagon, moving away from an initial attempt to sponsor its own exchange, in favor of powering those of others.

AMR's Girard identifies a number of other hurdles on the road to collaboration. They include the belief by manufacturers that they first need to address gaps within their internal processes, the tendency to get bogged down in implementation details for programs such as CPFR, and a general failure of nerve by top management, which often seems satisfied with the status quo. Many executives appear complacent due to their current success, or prefer to invest more time in brand development than on true collaboration.

"A cultural change needs to come first, for collaboration to be truly successful," says Peterson.

On the positive side, companies within key industries are working to develop standards of communication, business processes and documentation that will facilitate the flow of information between channel partners. The high-tech sector's RosettaNet is one such effort; XML language for multiple industries is another. UCCnet, a project of the Uniform Code Council, is pursuing similar XML-based protocols for the retail industry. Carlson of J.D. Edwards says UCCnet can prove valuable in synchronizing the data of CPFR partners, whose product information can quickly get out of date.

There's work to be done in smoothing the way for collaboration, says Carlson. There are still too many different versions of software that can't easily interact with one another. Despite the proliferation of integration application providers, companies continue to struggle with the gaps between major systems - ERP, APS, CRM, SCM and the like.

At least one part of the supply chain won't suffer from that problem for long, Carlson believes. "We are within 12 months of making it easy to overcome system disparity on the fulfillment and planning side," he says.

Supply-chain executives are growing increasingly impatient with the time it takes to realize a payback from collaboration, or any other new management concept. Many are still nursing their wounds from multi-year - and multimillion-dollar - ERP installations. As a result, the most popular tools today are likely to be those that involve the least complications, most reasonable costs, and fastest results. Applications built around Eqos's collaborative platform, for example, can be up and running at a major hub within four to eight weeks, McDonnell claims.

Speed becomes even more important where contract manufacturers are involved, and must react rapidly to OEMs' change orders. The software suite of Los Angeles-based Adexa is intended to shorten response time through collaborative planning and design. Nima Bakhtiary, vice president of strategic marketing, says automakers are under intense pressure to reduce the time it takes to introduce new models. The transmission of orders to suppliers can take up to 90 days; Adexa is looking to reduce that span to three or four. In the personal-computer industry, one contract manufacturer already can respond to OEM orders within half an hour, versus the previous time of 72 hours, he says.

Logility's White conjures up the dream of collaboration: supply-chain partners who mutually decide on the value of a piece of information, develop it jointly, measure their performance against it and get paid accordingly. A single sales forecast, for example, would serve as the basis for manufacturing, distribution, promotion and replenishment, with the data crossing all functions and enterprises.

First, companies must adjust to the very notion of collaboration in a world of multiple trading partners. And that means taking a fresh approach to the sharing of information. Says Gort of Celestica: "Maturity is going to take a long time."