Manufacturing Business Technology - 05 JUN 2009

8/14/2019 Manufacturing Business Technology - 05 JUN 2009

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4 MAY/JUNE, 2009 Manufacturing Business Technology

Social networking sites: No place to

fool around

For most businesspeople, the line

between their work and personal lives

has been blurry ever since companies

started issuing laptops and cell phones.

And now that were firmly ensconced

in the era of Web 2.0, that line is being washed

away completely.

Theres still some debate about the business

value of certain Web 2.0 technologiesspe-cifically social networking sites like Facebook,

MySpace, and Twitter. And it recently occurred

to me that the people who insist on continuing

that debate dont know whats actually happen-

ing on these sites.

When a corporate executive inquires aboutthe business value of an activity, what theyre

really asking is, Hows that going to make me

money?

The next time someone asks you how

Tweeting will help the company turn a buck,

this should be your response: What has taking

a customer to dinner or out for a round of golf

ever done for the bottom line?

Theres a social aspect to those activities

people are there having a good time, and every

now and then a business tip gets passed on,

a new contact is made, or contract terms areironed out.

Similar things are happening in the social net-

working arena, and its a lot less expensive.

It was easy to see the business value of

social networking at the recent IBM IMPACT

Smart SOA Conference. It started with

Sandy Carter, IBMs VP of SOA, BPM, and

WebSphere, announcing that a large percent-

age of the 3,500 people who follow her on

Twitter had asked if they could be apprised

of news from the conference through that

channel in lieu of flying to Las Vegas. Im

sure a lot of business executives trying to trim

travel budgets see the value of that.

Later in the conference, IBM unveiled sev-

eral initiatives to help both its customers and

business partners integrate social networking

into their businesses.

These announcements included:

IBM Atlas for Lotus Connections; and IBM SOAsocial.

IBM Atlas for Lotus Connections is a tool

for creating internal vir-

tual communities in which

people seeking knowledge

about specific topics can

easily locate and submit

questions to co-workers

with expertise in those areas.

SOAsocial is an IBM-hosted community in

which IBM partners and customers can connect

to discuss new developments in the realm ofservice-oriented architecture.

I managed to squeeze in a few minutes with

Carter to discuss her opinion on this question

of the business value of social networking.

Among the questions I asked:

Why should manufacturing executives be

interested in social networking?

When did she realize social networking

could be an actual business tool?

On the first question, she said social network-

ing offers a low-risk way of connecting with

customers to generate new ideas for developingproducts and services.

When did she realize the value? Carter said

the business value of social networking became

apparent to her a couple of years ago, when a

customer responded to an item she posted on her

blog. We started a dialogue . . . and ultimately it

resulted in a very large deal, she said.

And no one paid for a single round of golf.

A video of my talk with Sandy Carter is avail-

able on mbtmag.com. You also can follow me

on twitter at: www.twitter/mbtsid

When someone questions how Tweeting will help the company

turn a buck, ask them what treating a customer to a round of

golf has ever done for the bottom line.

ViewpointSidney Hill, Jr., executive editor


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MBT Online

8 Corporate fraud ison the rise

14 Better desktopusefulness?

18 Run cleaner, moreenergy efficiently

MARCH/APRIL 2009 VOL. 27 NO. 3 PERIODICAL

www.MBTmag.com MAY/JUNE, 2009 7

Views from the front 8 Corporate fraud on the rise with market

slowdown

8 Hot Tomato: Food supplier hopes recalldrills will assure customers in a real crisis

9 Spending lag prompts supply chainmanagement makeovers

Cover story10 24-hour product development

With collaboration tools, global designteams never sleep

Emerging Technology14 A new of wave prosperity: AT&T chairman

sees mobile devices driving economicdevelopment

16 Virtual commerce: Serious gaming isbecoming a real business tool

Plant Operations18 A matter of commitment

Model-based advanced process control helpscreate energy-efficient plants

Enterprise/Supply Chain20 Supply chains at risk

Companies tap new technology to enactsmart contingency plansinbound andoutbound

Columnists2 ViewpointSidney Hill, Jr.

Social networking sites: no place tofool around

Calendar

22 Upcoming conferences

Direct subscription inquiries and

changes of address to:

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Webcast: SOA as a Tool for BusinessProcess Management

Hear how manufacturers are using service-

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changing business environment.

Blog: Operation Green

MBT Senior Contributing Editor Roberto Michel

separates fact from fiction in the green IT and

manufacturing movement.

Columnist: Julie Fraser

Julie Fraser on why companies can no longer

survive on strategic sourcing alone.

A sampling of whats happening at mbtmag.com


7/24

In light of recent product recalls, manufacturers must be ready to

respond quickly to supply chain issues to protect consumers as

well as their own brand reputations.

To that end, Moore, Okla.-based Vaughan Foods has enacted

a plan to host two mock recalls a year. The events begin with the

companys quality assurance department, which is notified that a

mock recall is in effect, and the team has three hours to complete

the process.

We must isolate the contaminated product, have knowledge

about where the product is in the supply chain, and file accurate

and timely reports to the authorities, says Victor Gramillo, quality

assurance manager for Vaughan Foods, a supplier of fresh

vegetables, refrigerated deli salads, soups, and fruit.

Vaughn Foods decided to hold these drills after losing revenue

when the tomato industry was hit by a recall in summer 2008.

No Vaughn products were tainted, but customers remained wary.

We realized we have to minimize risk . . . and prevent serious

problems from happening, Gramillo says.

Track & trace in the process industr ies, such as food and

beverage, is very challenging, says Karin

Bursa, a VP with Logility, supplier of the

software system Vaughn Foods uses for

product tracking.

Production operators and co-packers

may use the same semi-finished goods to

make several other finished products, Bursa

says. Jam or jelly can be sold as a finished

product but also can be used for pie filling,

which adds another step as well as several

layers and levels to the process.

The Logility Voyager system manages aler t notification for a

recall by automatically contacting partners via the Internet or

alerting customer relationship managers about the issue. Since

speed is of the essence during a recall, having quick access to

product data, vendor information, and locations where product last

resided is very important, says Bursa.


Corporate fraud on the rise with market slowdown

The tough economic climate has

negatively impacted just aboutevery business sector, from real

estate to retail, and services to

manufacturing. Unfortunately,

the lackluster market simultaneously also

is stimulating growth of another disheart-

ening trend: corporate fraud.

Over the past year, fraud has grown in

depth and breadth, becoming more wide-

spread, and increasing in volume and value.

According to the latest Kroll Global Fraud

Report, the fastest growing types of fraud are informationtheft27 percent, up from 22 percentand regulatory and

compliance breaches25 percent, up from 19 percent. Both

areas are up by more than five percentage points from last

years survey.

More than four out of five companies surveyed (85 percent)

have suffered from corporate fraud in the past three yearsup

from 80 percent in last years survey. For larger companies the

proportion suffering from fraud rose to 90 percent.

The most common types of fraud in the manufacturing

industry are theft of physical assets or

stock (53 percent), regulatory or compli-ance breach (27 percent), vendor, supplier

or procurement fraud (25 percent), corrup-

tion and bribery (24 percent) and informa-

tion theft, loss or attack (22 percent).

The poor economy has increased com-

petition for many businesses as typical

revenue resources have dried up, says Blake

Coppotelli, senior managing director of

business intelligence and investigations

for Kroll, a risk consulting company.

To move ahead in todays climate, many companies havefelt the need to pursue higher-risk opportunities to gener-

ate new revenue. Some have moved into geographic areas

where they are inexperienced, or are dealing with unfamiliar

suppliers or partners, Coppotelli says. Companies that have

been forced to cut overhead and other costs often do not

dedicate enough resources to mitigating risks.

Coppotelli stresses the importance of training creative and

innovative individuals to combat fraud since the perpetrators

are incredibly adept and market savvy.

Viewsfrom the front

To prepare for potential recalls, Moore,

Okla.-based Vaughan Foods enacted

a plan to host two mock recalls a year.

Once an event is in process, the quality

assurance department team has three

hours to complete the process.

Hot Tomato:Food supplier hopes recall drills will assure customers in a real crisis


8/24

Spending lag prompts supply chain management makeovers

T

he precipitous drop in consumer

spending that has been cited as a

major cause of the ongoing economic

recession now has manufacturers scrambling

to adjust supply chain management

strategies.

In fact, lower consumer spending took the

top position on the list of supply chain risks in

a recent survey conducted by Boston-based

AMR Research.

As retailers cut inventories in the face of

softening demand, this risk is cascading up

consumer and industrial supply chains, Noha

Tohamy, an AMR Research VP said in a report

summarizing the surveys findings. Companies

like Cisco and Procter & Gamble are grappling with tactical questions, like

where to cut and position inventory, and strategic initiatives, like where to

source and how to rationalize their supplier bases to remain healthy during

the downturn and be well-positioned for the next recovery cycle.

Tohamy said AMR conducts this risk assessment survey on a quarterly

basis, and its clear from the results of the most recent canvasscovering

the first quarter of 2009that the economic downturn is dominating

the thinking of supply chain executives.

Lower consumer demand is dominating the

list of risks this quarter, with 37 percent of

respondents identifying it as No. 1, Tohamy

said. Additionally, only 15 percent expect this

risk to decrease by next year.

Product quality failures placed second

on risk list, with 35 percent of respondents

identifying it as their second top concern.

Volatile energy and commodity prices

which consistently took first and second place

honors last yearplaced third and sixth,

respectively, on the most recent list.

The potential of having intellectual property

stolen was fourth-highest risk factor cited

in the latest survey. This fearcoupled with concern over product

qualityappears to be causing manufacturers to rethink outsourcing

and offshoring strategies.

For instance, Tohamy said, Chinawhich continues to be plagued by

both recall and IP protection problemsis now getting more competition

from India as a manufacturing center, and more U.S.-based manufacturers

are looking at nearshoring.


9/24


W

hile scenarios for sharing

design data may invoke

grandiose thoughts of

enhanced collaboration

or disparate design cen-

ter interactions, sometimes all a company

really needs to do is make it easier for

two engineers sitting in the same office

to work together on a project.

Just ask Black Diamond Equipment,

a Salt Lake City-based manufacturer of

climbing and skiing equipment. Many

of its products require input from both

industrial designers and mechanical

engineers, and up until a few years

ago, the company used several dif-

ferent CAD systems to develop its

products.

24-hour product developmentWith collaboration tools, global design teams never sleep

By Hope Neal,

contributing editor

Cover Story

Joshua Dees, Black Diamond VP of MIS Dave Mellon, Black Diamond VP of products


10/24

Some would serve this purpose well

and some would serve that purpose well,

says Joshua Dees, VP of MIS for Black

Diamond, referring to the CAD systems.

None of them served all of our purpos-

es well. As you can imagine, it created

nightmares [when] translating this file

to that file.

As Dave Mellon, Black Diamonds VP

of products, explains, when you move

files to different CAD systems, youre

going to lose a lot of the history about

a part and how it was built. Being able

to contain all that and see the entirehistoryhow someone built the part

over the last eight to 10 hoursasyou open it up is helpful.

From many to one

To retain its product design history,

Black Diamond decided to make the

switch to a more powerful CAD system

that would support all of its engineering

needs. It chose NX from Siemens PLM

Software.

Describing NX as a unified solution,

Paul Brown, senior director of NX product

marketing, Siemens PLM Software, says

its tools for styling, mechanical design,

manufacturing, and analysis are available

through a single system, making it easier

for [Black Diamond] to share data and get

the data through the whole process.Having successfully addressed its engi-

neering collaboration problem, BlackDiamond had other data-sharing capa-

bilities it wanted to look at next. Along

with engineers working on products at

Black Diamonds home office, the com-

pany has product and marketing managers

working in other parts of Salt Lake City,

as well as in Reinach, Switzerland, and

Zhuhai, China.

Being able to effectively share data

about products in all locations is critical

to Black Diamonds success.

None of [the CAD systems] served all of our purposeswell. As you can imagine, it created nightmares [when]

translating this file to that file.Joshua Dees, VP of MIS for Black Diamond

With enhanced design data sharing facilitatedby Siemens Teamcenter and NX solutions, Black

Diamond engineers in China and the U.S. are

able to quickly develop ski boot product lines

because they are in essence working 24 hours a

day across time zones.



11/24


In the past, the company used to

store much of its product datae.g.,

product concept records, product briefs,

forecasts, and pricing informationin

folders in Microsoft Windows file direc-

tories. But concerns about security and

file versioning controlas well as the

potential for misplaced or unintention-ally deleted filesled Black Diamond

to another Siemens product, called

Teamcenter.

Teamcenter lets Black Diamond cen-

tralize its product data so users from all

locations can access it. The benefit is a

much greater level of versioning control

and security than seen with the folder-

based system.

Moreover, says Dees, the value of

Teamcenter is its Web-based. Its achallenge to share Windows file sys-

tems around the globe, he says. Its

a lot easier to share applications if

you can go into the Web application

and download files from the database

server.

This is particularly important for a

company that relies heavily on being

able to design around the clock to

bring products to market faster. With

better design-data sharing, Black

Diamond engineers in China and the

U.S. can collaborate on, for example, a

new line of ski boots, so that the com-

pany is in essence working 20 hours

a day developing and delivering its

products.

Without the NX platform and with-

out the ability to work around the clock,theres no way we would have been able

to pull off a launch of a product line like

boots in the time period that we did,

says Mellon.

Interactive view

While Black Diamond can speak to

the value of Siemens products such as

Teamcenter and NX, Siemens isnt the

only vendor offering data-sharing capa-

bilities. Dassault Systmes, for example,offers several solutions. One of these is

called 3DLive.

Unlike CAD viewers, which allow non-

engineers to open CAD files without

installing expensive CAD software on

their computers, 3DLive offers much

more than a view-only look at the CAD

model in of itselfit establishes a rich

environment of information, says Brian

Chambers, a business strategy director

for Dassault.

You can set up collaborative review

sessions based on the 3DLive view of the

product model and do interactive ses-

sions remotely via the Web with other

engineersand with other functional

organizationsto view and mark up the

data, and move portions of the CAD model

from one user environment to another,

Chambers explains. It can be quite

interactive.

Interactivity is important because

sharing design data and using it to

collaborate often involves more than a

one-way journey from the CAD system

to members of the product development

team or outside the organization to sup-

ply chain partners.

As Hardeep Gulati, VP of product

strategy for Oracle PLM, points out, the

movement of product data should be

bidirectional.

Take the case of an engineer pickingparts when designing a product. While its

natural for the engineer to evaluate the

technical attributes of a potential part,

procurement concernssuch as pricing

or availabilitymay not be considered

if that information isnt available to

the engineer. And once the product is

designed and sent to procurement, it can

cause delays to learn at that point that

a component is no longer available, or

is too expensive.When designers are picking the CAD

part, you want some of that supply chain

data to be visible to them while theyre

making selections, says Gulati.

With the Oracle Agile PLM solution set,

Gulati adds, [designers] have all this

supply chain information available during

the parts-selection process in the CAD

tool. They can annotate some of those

attributes and supply chain information

right into the CAD tool.

Cover Story

Without the NX platformand without the ability

to work around the

clock, theres no way

we would have been

able to pull off a launch

of a product line like

boots in the time

period that we did,says Mellon.


12/24

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13/24


A new of wave prosperity:AT&T chairman seesmobile devices driving economic development

The rise of mobile broadband technology will drive a new

wave of productivity and economic development similar

to that produced by the advent of the Internet.

Randall Stephenson, chairman and CEO of AT&T, made

that declaration during his keynote address at the annualconference for customers of Sterling Commerce, a supplier

of B2B integration solutions, and an AT&T company.

New devices will come with 4G networks, and soon it will

be difficult to find any electronic device that is not connected

wirelessly, Stephenson said. We are just on the edge of

this with the iPhone, which has an entire ecosystem created

around it. There are now 35,000 applications available for the

iPhone, and Apple recently reported that more than 1 billion

people have downloaded those applications.

AT&T is the primary service provider for Apples wildly suc-

cessful iPhone.Holding up one of the devices, Stephenson said AT&Ts

vision is for usersincluding businesspeopleto be able

to have the same experience on an iPhone or a BlackBerry

that they have when accessing applications from desktop or

laptop computers.

When asked about the synergy between a telecommunica-

tions giant like AT&T and an e-commerce software provider

like Sterling Commerce, Stephenson once again held up

his iPhone and said, All of the applications that Sterling

Commerce provides should be available on this device.

Sterling Commerce offers two categories of solutions: B2B integration solutions; and

Selling and fulfillment applications.

At the user conference, held April 27 29 in San Antonio,

Texas, Sterling introduced a new set of B2B integration solu-

tions under the name, Sterling Business Integration Suite.

Fast data and video from any location is what we expect

to provide, Stephenson continued. We spent $9 billion last

year buying spectrum to accommodate that.

Noting that his weekly staff meetings are now held via

video conference rather than face-to-face, Stephenson said,

imagine having that capability on a mobile phone.

Once that happens, he predicted, there will be a new wave

of productivity, commerce, and prosperity rivaling the one

sparked by the emergence of the Internet.

Sidney Hill, Jr., executive editor

Emerging Technology

AT&T wants mobile devices to provide

desktop-type usefulness.


14/24

The Siemens Answer:PLM Software for a 50 percent reduction in time-to-market.

An idea comes from one part of the world; needs to be manufactured in another; and needs to sell everywhere.

Medium to large businesses need a Product Lifecycle Management (PLM) solution that moves more ideas efficiently

through the innovation process, so that the complexities of a global enterprise are managed with the simplicity of a

local environment. www.siemens.com/plm/answers/mle.

Answers for Industry.

2009 Siemens Product Lifecycle Management Software Inc. All rights reserved. Siemens and the Siemens logo are registeredtrademarks of Siemens AG. All other logos, trademarks or service marks used herein are the property of their respective owners.

How do we turn more ideasinto successful products?


15/24


16/24


17/24


If cost werent a factor, numerous tech-

nologies could be tapped to create

the most energy-efficient plant. The

latest furnaces, boilers, or co-gener-

ation equipment could be installed.

The facility could have solar panels or

geo-thermal heating. A new distributed

process control system (DCS) could be

deployed.

But thats not todays reality.

The economic reality dictates that

manufacturers must be as energy-effi-

cient as they can, largely with the assets

that exist. As John Nesi, VP of market

development for Rockwell Automation,

a vendor of plant automation systems,

acknowledges, We are in a phase of

Draconian cutbacks in terms of capitalexpense.

Still there are technologies that make

existing assets more energy efficient,

says Nesi. These include advanced pro-

cess control (APC), a class of softwarethat optimizes real-time plant-floor

processes; variable speed control,

which allows gears and motors to adjust

speed efficiently; and energy monitor-

ing software.

According to Allen Avery, an analyst

with Dedham, Mass.-based analyst firm

ARC Advisory Group, Technology is an

enabler, but improved energy management

is mainly a matter of people, processes,

and organizational commitment.

The value of APC

Advanced process control uses software

to model how multiple variables inter-

act during a process, and integrates with

automation hardware such as program-

mable logic controllers (PLC) or DCSs

to control the process optimally. APC

projects historically have been aimed at

throughput, but APC can also optimize

energy use.

To deploy APC, plant testing is typi-

cally used, whereby incremental inputs

from the control layer are fed into the

software to build a model.

We start by building models of how

a process works, says Mike Tay, man-

ager of sales engineering with Pavilion,

a Rockwell Automation division that

offers APC. Its a virtual plant that you

can then optimize to achieve variousgoals, such as minimum cost, energy, or

emissions.

Fonterra Cooperative Group, an

Auckland, New Zealand-based dairy prod-

ucts manufacturer, has used APC for morethan a decade.

We have a track record for APC projects

where people in the business understand

what it can do and what it can deliver

to the business, says Tristan Hunter,

manager of Fonterras advanced process

control group.

An early project was aimed at improved

boiler operation at Fonterras Waitoa

plant in New Zealand. The site has sev-

eral spray driers that make a range of

powdered products. The coal-fired boilers

that supply high-pressure steam to the

driers were exhibiting unwanted variabil-

ity, so in 1997, the company deployed

Pavilions Model Predictive Control APC

solution to, as Hunter explains it, run

the boilers smarter.

More specifically, APC reduces variabil-

ity and minimizes excess oxygen in the

flue gas of the boilers, as well as reducing

variability in the high pressure steam sup-

ply. The project cut oxygen variability in

the boilers flue gas by up to 50 percent,

while high-pressure steam variability was

reduced by at least 60 percent. Whats

more, the steadier operation brought

close to a 4-percent reduction in coal

consumption.

To work well, APC needs a solid control

foundation, Hunter warns.Your existing control systems need to

be running well, he says. You need to

review the instrumentation, the calibra-

tion, and the tuning of the low-level

loops. When APC is running, the plant

needs to respond reliably to what the

control moves are.

Over the years, Fonterra has estab-

lished an APC group of 10 people who

deploy projects with help from Pavilion.

With this expertise, says Hunter, proj-ects can be better aligned with corporate

goals, rather than focused on immediate

pain points. We are now aligning more

with the strategy of our business, looking

where we are headed in the next two to

three years, says Hunter.

Beyond basic control

AtYara Belle Plaine, a manufacturer of

ammonia, granular urea, and urea ammo-

nium nitrate (UAN) products used in agri-

A matter of commitmentModel-based advanced process control helps create energy efficient plants

Roberto Michel, senior contributing editor

Plant Operations

Its a virtual plant that you can then optimize to achievevarious goalsminimum cost, energy, or emissions.

Mike Tay, Rockwell Automation


18/24

cultural products, APC is saving energy by

achieving consistent, cleaner operations.

Located near Belle Plaine, Saskatchewan,

Canada, the company deployed Honeywell

Internationals Profit Controller APC solu-

tion for the nitric acid processing unit

within the plant.

The unit or plant feeds UAN produc-

tion within the site. The APC solution

optimally controls the amount of NOx

emissions leaving the plants combustor

while minimizing the consumption of the

combustors fuel gases.

Since deploying APC in November of

2007, combustor fuel consumption hasdropped by up to 5 percent, NOx emis-

sions have been held at 200 parts per

million, and methane emissions dropped

25 percent.

The benefits have held up, says Rob

Harkness, controls supervisor for Yara

Belle Plaine. Weve consistently kept the

3-percent to 5-percent improvements in

fuel reduction.

Yara Belle Plaine is upgrading its DCS to

Honeywells latest Experion PKS system,but APC goes a step beyond DCS in that

its able to model and control multiple

variables without operator intervention.

The APC integrates with DCS, but runs on

its own server.

APC technology can take a whole plant

into consideration, says Harkness. It

looks at all the critical elements, where

typically with conventional control, youd

have one input, one controller, and one

outputor possibly a cascade control

arrangement. But with APC, it takes in

numerous measurements throughout the

plant and works with all of them to opti-

mize the entire processnot just one

part of the process.

Why energy reduction is

everyones business

Attention surrounding the metric for

energy intensityi.e., energy consumed

per unit of product producedis espe-

cially high among process manufacturers,

with Fortune 500 firms like DuPont and

Dow Chemical elevating their energy pro-

grams to board-level importance.

Avery, the ARC analyst, says, The sheer

amount of energy that process manufac-

turers use is startling . . . For some its

higher than that of many small coun-

tries, but the payoff when [an energymanagement] program is adopted top to

bottom in an organization can be equally

surprising.

Allen says a recent ARC study found

that companies in the forefront of the

energy management movement treat

it like a continuous improvement

program.

It requires involvement at all levels of

the plant, with everyone aligned around

it, Allen says. You have to give them

visibility, the tools, and the authority to

make a difference. Technology can clearly

play a role in this.

Advanced process control, decision sup-

port, and real-time performance manage-

ment software were the top three areas of

technology investment among companies

identified as energy-management leaders

in the ARC survey.

In tough economic times like now,

vendors should focus on helping custom-

ers understand how these technologies

can assist them in energy reduction,

Allen says.

A comprehensive energy assessment

of plant operations to determine where

and how much energy is consumed is the

starting point for any energy-management

effort. ARC found that the vast majority

of the companies it identified as leadershave performed an energy assessment.

These companies also perform audits more

regularly and at shorter intervals than

their peers.

Energy management is worthy of

being a core tenet in managing the

business, as the potential payoff is

huge, Allen states. Underscoring the

point, one process manufacturer ARC

spoke with claimed energy savings of

$7 billion over 12 years.

Advanced process control (APC) technology is helping Yara Belle Plaines nitric acid plant in Western Canada run cleaner and more energy efficiently.


Its important that you treat energy reduction as a

continuous-improvement program.

Allen Avery, analyst, ARC Advisory Group


19/24

Last June, Cary, Ill.-based Sage

Products asked for a voluntary

recall of certain lots of a preop-

erative skin preparation product.

For Sage, a manufacturer of personal care

products sold to hospitals and medical

practitioners, the measure was precau-

tionary: A batch of chlorhexidine gluco-

nate, bought from an outside supplier,

had been found to contain the burkhold-

eria cepacia bacterium.

While the bacterium posed little

medical risk to healthy people, the

incident underscored the wisdom of

an investment Sage had made in a

rapid testing system from Celsis that

enabled Sage to detect microbiologi-

cal contamination far faster than was

possible using conventional testing

methods. Using the Celsis system, atest that once might have taken three

to seven days to conductwhile pos-

sible biological contaminants grew to

detectable levelscan take place in

under 24 hours.

In the wake of high-profile product

recall scares ranging from vegetables

and peanut butter to childrens bath

products and cribs, supply chain risk

is center-stage. Businesses are under

renewed pressure from customers to

strip the risk from their outbound sup-

ply chains even as they acknowledge

the vulnerability of their inbound sup-

ply chains. The result is a profound

emphasis on technology as manufac-

turers rush to play catch-up in a world

that is suddenly far riskier than many

had realized.

Many observers

A recent IBM survey on smarter supply

chains, based on interviews with 400senior supply chain executives, found

that dealing with supply chain risk was

the second-highest priority on their agen-

das, and significantly or very signifi-

cantly affected 60 percent of businesses

involved.

The finding was a huge surprise, says

Karen Butner, supply chain management

lead at the IBM Institute of Business

Value. Not that it was on the agenda

but that it was supply chain executives

second-biggest concern.

According to Butner, IBM is seeing

heightened interest from companies in

anything that has to do with risk iden-

tification and mitigation. Manufacturers

are looking at their supply chains and

putting contingency plans in place. If

theres going to be a problem, they want

to know in advance what they are going

to do about it, she says.

The recession only exacerbates the risk

of those problems arising.With the economic recession in full

Supply chains at risk:Companies tap new technology to enact smart contingency plansinbound and outbound

Malcolm Wheatley, senior contributing editor

Enterprise/Supply Chain


Industry Spotlight:Emerging marketsWhile doing business in emerging markets offers many rewards, it also poses risks.

Manufacturing Business Technology recently spoke with Mike Novels, CEO ofPreactor, a supplier of supply chain planning and scheduling solutions, about this trend.

MBT: Preactor has experienced success in the so-called BRIC

countries (Brazil, Russia, India, China) in recent yearswith

nearly 200 customers in Brazil alonewhat advice to you have

for manufacturers wishing to increase their presence in emerging

markets?

Novels: The key working in these countries is working with local

partners who understand the local language and local culture.

MBT: In which emerging markets do you see the most demand

for advanced planning and scheduling solutions like those Preactor

offers?

Novels: There has been a considerable level of adoption in

Brazil, where we have more than 170 accounts. However weve had

a very active partner there for 10 yearswhereas weve only just

penetrated the Russian and Chinese markets in the last two years.

Were also developing a healthy market in India.

China has been the more difficult market to penetrate. Of our 30

accounts there, most are U.S. or European companies who have

plants there.

MBT: Planning and scheduling applications are generally

considered more specialized solutions used by companies that

already have established business processes supported by ERP

systems. Have companies in emerging markets reached a level of

maturity that allows them to fully take advantage of APS technology?

Novels: That varies enormously from one market to the next.

Companies in the Indian sub-continentespecially in Sri Lanka for

exampleare up to date with enterprise software such as ERP and

they recognize like so many companies around the world that ERP

does not offer detailed scheduling functionality. The same can be

said of Brazil.


20/24


swing, supply chain managers face a grow-

ing array of risks, warns David Simchi-

Levi, professor of engineering systems at

Cambridge, Mass.-based MIT, and chief

scientist for supply chain optimizationvendor ILOG, an IBM company.

Fluctuating transportation costs,

high volatility in demand volume and

mix, commodity price volatility, increased

labor costs in developing countries, and

the pressure to reduce inventoriesthese

are just a few of the challenges compa-

nies are struggling to overcome today

and will likely face throughout 2009,

Simchi-Levi adds.

Greg Quinn, president of Quinn &Associates, a reseller for planning &

scheduling solutions vendor Preactorin

North America, says rising supply chain

risks are forcing manufacturers to focus

more the use of supply chain execution

systems, which provide a greater ability

to respond to immediate circumstances,

as opposed to supply chain planning

systems, which focus more on long-term

time horizons.

Were seeing a lot more interest in

execution systems, Quinn says. Its like

someone has flipped a switch.

The good news is, despite the com-

mon perceptions, eliminating risk neednt

always add cost. When St. Louis-basedcoatings manufacturer U.S. Paint

deployed Preactor to minimize the risk

of outbound supply chain disruption

impacting the North American operations

of Toyota, Subaru, and Kawasaki, costs

went down and efficiencies went up.

As on-time delivery performance

improved, they found that they could

eliminate work-in-process and finished

goods inventory without jeopardizing

delivery reliability, notes Quinn. Itbecame a virtuous circle.

New kind of crisis

Supplier viability is another height-

ened risk factor in the present econ-

omy. New York-based advisory firm

PricewaterhouseCoopers, for example,

estimates 670,000 small companies

have shuttered across China due to the

global crisiswith many of them linked

to Western supply chains.

But nearer home, transport provider

viability is a growing concern, adds

Mike Maris, senior director of the global

transportation and logistics group at

Schaumburg, Ill.-based Motorola. Theressomething of a crisis in the transport sec-

tor, he notes. In North America alone,

up to a thousand transportation compa-

nies have gone out of business.

And when those transport companies

are tied into enterprise networks through

outsourced contract operations, disrup-

tion follows. Third-party logistics pro-

vider Ryder System, for instance, has been

called upon to provide back-up service to

a major office equipment manufacturer,supplying system-savvy logistics person-

nel familiar with its ERP system in the

event of a depots local transport provider

going out of business.

Covering up to 50 service depots

nationwide, the service has been invoked

twice during the last few months, says

Jim Moore, VP of supply chain solutions

at Ryder. We peel people off, put them

on a plane, and fly them to wherever the

problem is, he says.

Closercollaboration

with

trading

partners

Passing

cost

increases

tothecustomer

Dual/m

ulti-sourcing

strategies

andredundants

uppliers

Performance-based

contracts

with

suppliers

orservicep

roviders

Alertingcus

tomersto

potentialp

roblems

Utilizingmod

elingtools

Commodity

hedges

Using

nearshorer

egions

for

sourcing

and

manu

facturing

Outsourcing

manufacturing

function

Outsourcing

sourcin

gfunction

Outsourcing

logistic

sfunction

Vertical

inte

grationof

your

supp

lychain

Increase

ITinvestment

forbetter

visibilityacross

thesupp

lychain

0

10

20

30

40

50

Methods used to mitigate risk

Most sucessful method used to mitigate risk48%

41%40%

38% 37%35% 34%

32%

29%27%

24%

21%

10%

2%3%

6%

9%

4%5%

7%4%

6%

10%

14%

10%

18%


21/24


Events/Calendar

PublisherJim Langhenry 630-288-8789

[email protected]

Production CoordinatorMark Skipworth 630-288-8432

[email protected]

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Manufacturing Business Technology (ISSN 1554-3404), (GST#123397457, C.P.C. Intl Pub Mail# 0242128)is published monthly except August & December by ReedBusiness Information, 8878 South Barrons Blvd., HighlandsRanch, CO 80129-2345. Reed Business Information, aDivision of Reed Elsevier, is located at 360 Park Avenue South,New York, NY 10010. Tad Smith, CEO. Circulation records aremain tained at Reed Business Information, 8878 South BarronsBlvd., Highlands Ranch, CO 80129-2345. Phone (303) 470-4445. Periodicals Postage paid at Littleton, CO 80126 andat additional mailing offices. POSTMASTER: Send addresschanges to Manufacturing Business Technology, P.O. Box7500, Highlands Ranch, CO 80163-7500. For subscriptioninquiries and address changes, please contact: CustomerService, Reed Business Information, 8878 South Barrons Blvd.,Highlands Ranch, CO 80129-2345. Phone (800) 446-6551. Fax(303) 470-4280. www.getfreemag.com/mbt. E-mail [email protected]. Manufacturing Business Technology isa registered trademark of Reed Properties Inc., used underlicense. Printed in U.S.A. Subscription prices: U.S. One Year$93.00, U.S. Two Year $168.00, Canada and Mexico One Year$112, Canada and Mexico Two Year $202.00, One Year Intl$336.00, Two Year Intl $604.00. For information please callU.S. 800-446-6551 or Foreign 303-470-4466.Copyright 2000 by Reed Business Information. All rightsreserved. Printed in USA. No part of this publication may bereproduced or transmitted by any means without permissionfrom the publisher. Permission to photocopy for internal use orthe internal use of specific clients is granted by Reed BusinessInformation for libraries and other users registered with theCopyright Clearance Center (CCC), provided that the base feeof $1.00 per copy of the article is paid directly to the CCC, 222Rosewood Dr., Danvers, MA 01923. Special requests shouldbe addressed to the editor. Publications Mail Agreement No.40685520. Return undeliverable Canadian addresses to:

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Honeywell Process Solutions User Group Conference

June 14 -18, Phoenixhttp://hpsweb.honeywell.com/Cultures/en-US/NewsEvents/

UsersGroupSymposia/Americas/default.htm

East Pack/Automation Technology Expo (ATX Expo)

June 9-11, New York City

www.devicelink.com/expo/atxe09

Growth, Innovation and Leadership (GIL) 2009: NA

A Frost & Sullivan Global Congress on Corporate Growth

September 13-16, Phoenixwww.frost.com/prod/servlet/summits-details.

pag?eventid=144109086

Council of Supply Chain Management Professionals

(CSCMP) Annual Global Conference

September 20-23, Chicago

http://cscmp.org/events/annual-global/index.asp

National Manufacturing Week

September 22-24, Rosemont, Ill. (Chicago)www.devicelink.com/expo/nmw08

Growth, Innovation and Leadership (GIL) 2009: Asia Pacific

A Frost & Sullivan Global Congress on Corporate Growth

October 12-15, Kuala Lumpur, Malaysia

www.frost-gil.com

Rockwell Automation Fair

November 11-12, Anaheim, Calif.

www.rockwellautomation.com/events/automationfair

WonderWorld 2009 North America Conference

November 3-5, 2009, Anaheim, Calif.

http://pacwest.wonderware.com/web/News/NewsDetails.

aspx?NewsThreadID=2&NewsID=202600

Editors note: If theres a seminar, conference, or

exhibition youd like posted on MBTs Web site, email

the description to [email protected].


22/24

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24/24

Managing Supplier Relationships:

Beyond Strategic Sourcing

Strategic sourcing is not sufficient . . . Once a supplier is

selected, the ongoing work of monitoring and improving

their performance begins.

Julie Fraser

Julie Fraser is Principal

Industry Analyst for Cambashi

Inc., and has been an

industry analyst, consultant,

and marketer for more than

20 years, specializing in

manufacturing value network

processes and systems.

Julie can be reached through

Manufacturing Business

Technology or email at Julie

High profile news stories about taint-

ed or unsafe toys, food, comput-

ers, and pharmaceuticals point to a

problem every manufacturer faces:

managing suppliers. Companies can

suffer immeasurable brand damage when a

suppliers quality slips, not to mention the

more concrete costs of recalls, customer

alerts, and lawsuits.

As industry networks stretch beyond tradi-

tional regional boundaries and companies seek

to limit travel, differences in communication

styles and culture will only increase these risks.

Strategic sourcing is a critical start to a sup-

plier relationship, but it is not nearly sufficient.Once a supplier is selected, the ongoing work

of monitoring and helping improve their per-

formance and practices begins.

This involves rationalizing and consolidating

sourcing, managing parts and suppliers, control-

ling contracts through their life-cycle, evaluating

and delivering supplier scorecards, and collabo-

rating with suppliers to better ensure mutual

success. So why is it that we hear so little about

supplier relationship management (SRM)?

One reason may be that its now often a

component part of larger software suites.For example, i2, Oracle, SAP, IBM and JDA,

all have acquired and subsequently built out

SRM capabilities as part of their supply chain

capabilities.

PLM companies have also extended into

certain areas of SRM. Siemens PLM has

Teamcenter for SRM with its services partner

CapGemini. Dassault works with i2. Most

of the PLM focus is on sourcing and supplier

selection, but it can be extended across the

life-cycle successfully

The supplier selection process can also be

supported by buying sites such as GlobalSpec,

PartMiner, and Mfg.com. Look for the ability

to build up relationship data and scorecards

over time, not just during selection.

A private or public network can be a dynam-

ic and low-infrastructure means to collabo-

rate and manage suppliers effectively. While

exchanges such as AxWay, ChemConnect,

DemandTech, e2open, Exostar,and GXS started as EDI focused,

these now provide deeper buyer-

supplier services.

There is one other angle of sup-

plier relationship management

that is not well known, and may

be a cornerstone to success in this volatile envi-

ronment: supplier risk management.

This software can help predict whether and

when a supplier will have a glitchfinancial,

quality, or delivery. Dun & Bradstreet has added

this capability to its portfolio through acquisi-tion, and has some major customers reaping

extraordinary benefits.

Companies must learn to work with suppli-

ers as effectively as if they were part of their

own company. This requires a new level of

communication and collaboration to build

the trust and visibility that allows everyone

to truly create win-win situations. SRM can

contribute to:

lower risks of supply delays, quality prob-

lems, and negative publicity;

improved ability for supplier managementteams to focus on exceptions, relationships,

and strategy;

reduced cost of goods sold; and

greater supply chain effectiveness and

flexibility.

Perhaps this is the yearwhile volumes for

many products are relatively lowcompanies

will re-focus on the supply base. SRM is not

the answer to the questions, but it can reduce

the effort to help ensure that sound processes

are in place and working reliably

In perspective

Manufacturing Business Technology - 05 JUN 2009

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