Company Overview World Wide Technology, Inc. (WWT) is a leading Systems Integrator providing technology products, services, and supply chain solutions to customers around the globe. Founded in 1990, WWT has grown from a small startup to a world-class organization approaching $3 billion in revenue and over 1,000 highly trained employees. WWT continues to achieve consistent financial growth and provide our partners with uncommon strength and stability. Currently has 1,300 employees Greater St. Louis area
Company Overview ClearOrbit's real-time supply chain execution and returns management solutions improve the speed, visibility, and control of extended manufacturing and distribution supply chains. Founded 1994 Currently, 150 employees Austin, Texas Now called TAKE Supply Chain TAKE Supply Chain’s single data model approach extends the functionality of procurement, manufacturing and warehousing systems from Oracle® and SAP® to eliminate supply chain, warehousing, data collection and reverse logistics inefficiencies.
Problems-WWT as a transaction hub Execution was more challenging than expected Vendors could not meet collaborative requirements WWT used phones, vendors used EDI Spot buy transactions could not be eliminated
Problems-Software Solution Needed Tight time budget WWT must work faster Heterogeneous supply base made program challenging Cost effective way to deal with small suppliers must be sought out
Problems-Make the Software? Could take too long Could require too many resources Too much maintenance from WWT Expertise needed may be costly
Problems-Buy the Software (iSupplier) Suppliers would need time to adapt Rigid nature as a standard solution Limited/costly customization Did not upload throughout the entire cycle Early collaboration and prevention is key
Problems-POC Installation Difficulties Understand company on a functional level Constantly changing requirements After installation Must get large suppliers on board
Problems-Future Challenges WWT: continue searching for OEM short term efficiency ClearOrbit: continue satisfying customer needs currently and in the future
Key Facts-General December 2004: ClearOrbit was chosen to be WWT’s software provider that would fulfill the requirements of high-volume automotive OEM program. It was hoped that ClearOrbit will also support purchasing engagements at WWT in the future February 2006: 1,200 indirect material suppliers handled thousands of POs from WWT on behalf of the OEM electronically (via ClearOrbit). They were also given visibility in WWT’s accounts payable by tracking the status of involves directly from WWT’s ERP (a regular web browser was required) New PO and invoice management process between automaker’s supply base and WWT was collaborative (real time, back and forth communication to ensure error-free and shipment accuracy WWT had visibility into promised delivery dates as soon as the Pos had been issued, accepted and acknowledged Many suppliers did not need to solve discrepancies with hard copies and spend time consuming phone calls The program’s stability going forward depended on the community’s continued focus on using ClearOrbit as an accurate, consolidated record system, rather than relying on multiple date sources thought the company Mark wants to expand the use of ClearOrbit to other areas in order to reduce administrative costs within the supply chain
Key Facts-WWT Founded in 1990 as a value added reserve (VAR) for IT products including hardware and services. Originally, WWT served the telecommunication industry 1992 – WWT expanded its service to government, which promoted growth 1997 – Invest on an ERP system (despite the then small size of the company). Oracle was the ERP vendor. Purpose: cost effective internal operations Successful Oracle implementation and boom of Internet WWT was able to drive efficiencies to partners, customers and suppliers Web based tools Integration point XML technologies Web portals 1997 – 2001: revenues grew by 61.7% and reached $1B WWT’s sustained work as a VAR was due to its robust IT platform and fully connected warehouse facilities 2000 – WWT started to provide high end supply chain outsourcing solutions Mid 2000 – Revenues continued to grow: 17.5% Breath of WWT also expanded due to strategic partnerships Fortune 500 companies and federal government outsourced complete operations thru WWT
Key Facts-WWT MRO purchasing effort became difficult OEM used to conduct all purchases on its own MRO supply base had 1,800 vendors 20 full-time employees managed the MRO vendor relationship. Responsible for blanket POs, introducing new items to blanket POs, receiving invoices, conducting payments. Paper nightmare! 50 Tool managers use to spend hours in telephone conversations about order status, shipment arrangements, and etc. Vendors were assigned to each of the 26 assembly plants to ease communication Vendors saw the need to provide HR OEM employees followed-up with plant vendors (unofficially) Too much people and unofficial processes involved! 2004 – WWT partnered a consulting firm with a strong procurement arm. The consulting company approached a large OEM company with the purpose of reducing expenses across all assembly plants. Consulting firm invited OEM to outsource the entire MRO sourcing and purchasing operations The proposal intended to reduce expenses by: Strategic sourcing: reduce number of suppliers from 1,800 to 300 Intensify the purchasing process via IT (WWT comes into play). Increase control Enable automation Reduce human intervention WWT must integrate with other 300 suppliers
Key Facts-WWT WTT’s tasks included: Receiving POs from the OEM via EDI Placing POs upon suppliers Sending e-mail alerts automatically to the supply base Enabling supplier acceptance and rejection POs Receiving PO acknowledgements from suppliers Sending and receiving notes on POs to and from suppliers Receiving promised dates from suppliers Conducting reconciliation of POs to invoices Summer 2004 – WWT and the consulting company launched the automotive OEM program However, it was noticed that delivering on the collaboration requirements was more challenging than expected The exchange of business documents took place via EDI, WWT still resolved issues with last minute changes on the POs over the phone October 2004 – Make or Buy decision: Develop an in-house software solution Partner with a third party software company 2005 – 40-50% of WWT’s sales came from The executions of supply chain processes Value added reselling and distribution of IT products in communication
Key Facts-ClearOrbit Founded in 1994 – Austin, TX. Then named BPA systems Originally founded as a software developer and service provider for high-volume manufacturing plants Late 1995 – Launched Enterprise Hardware Integration (EHI) platform: first product released. The EHI aimed to bridge the gap on ERP systems. Long term partnership with Oracle in order to facilitate market entry and accelerate revenue growth 1997 – Release a supply chain software solution with several modules 1997 – 2000 BPA Systems revenues grew from $4.2M to $16.4M (~290%) Employee increased from 47 to 124 (~164%) Acquired 250 costumers BPA Systems is now ClearOrbit Transitioning between being a service provider to a product-focus provider New products were organized into two major suites: Genesis Series (May 2001): supply chain execution within the four walls of the enterprise Endeavour Series (November 2001): enable tight collaboration between business partners beyond the four walls of the enterprise. Targeted one of ERP’s major limitations: inability to communicate with external systems administered by another companies
Key Facts-ClearOrbit 2003 – Converted all products to J2EE. This allowed ClearOrbit to reach not only Oracle users but also clients using SAP, JD Edwards, SSA Global, and etc. 2006 – Expansion of product line Modules increased form 2 to 36 Gemini and Endeavor suites were re-organized into a single ERP centric data and solution model
Key Facts-WWT engages ClearOrbit ClearOrbit’s most recent product: Purchase Order Collaborator (POC), also main reason for the negotiations with WWT ClearOrbit’s POC offered WWT a “single version of the truth” model. The Oracle versions of POC could not work on a SAP system. It is more beneficial to have an ERP-specific version of the product, rather than having a standard product compatible with other ERP systems Advantages of POC: Highly customizable POC platform as opposed to iSupplier’s lack of self serve customization feature Minimal training required for users Ability to change the look and feel of the screens, as opposed to working with a hard-coded user interface. Each supplier could customize their screens as need be Control: POC prevented controls to make sure that the supplier would not ship products the manufacturer did not want or was ready to receive or cancelled at the last minute 3 Phases of POC: one month for POC implementation Phase 1 (early January 2005): Define, from a business perspective, the specific needs and exceptions to be covered, from the moment an order was created until the corresponding invoice was paid. Phase 2 (mid-January): Install POC at WWT headquarters Phase 3 (end-January): Adapt POC to WWT’s IT environment
Alternatives WWT uses Oracle’s iSupplier WWT uses ClearOrbit’s POC WWT creates its own program in-house WWT collaborates with ClearOrbit to create their own program
Alternative #1 WWT uses Oracle’s supplier collaboration tool, iSupplier Pros: WWT is very familiar with Oracle’s technology because Oracle is their ERP vendor (deploying iSupplier would not add additional layers) iSupplier would not place IT or financial burdens on suppliers (all the suppliers would need an Internet account and Web browser) Cons: Although, suppliers would not need to incur any IT expenses to use iSupplier at the sites, time would be needed to train suppliers iSupplier does not offer any way to upload documents throughout the fulfillment cycle iSupplier is very rigid and standard (no ability to customize)
Alternative #2 WWT uses ClearOrbit’s POC program Pros: ClearOrbit’s strategy is to exclusively target users of the Oracle ERP system(seamless integration with Oracle products) POC is highly customizable and collaborative (it allows real-time communication between suppliers) POC is a “single version of the truth” model (no duplication of data) Cons: Hard convincing the large suppliers of the value of the ClearOrbit program (they were use to dealing with the OEM directly)
Alternative #3 WWT develops their own program in-house Pros: The company knows best what it needs The program would be fully customized Less expensive Cons: Requires WWT to have a team of software engineers capable of developing such a program Program would only be effective for small to medium projects (large projects are complex and would be too expensive and time consuming for a homegrown program) Resources needed in other areas of the WWT organization would be focused on the homegrown program because of constant maintenance and training needed
Alternative #4 WWT collaborates with ClearOrbit to create their own program Pros Project Specific Adaptable Capabilities Continuing collaborative efforts = continued relationship between the companies Cons Costly Time consuming
Solution Short-term solution: 1. WWT keeps using ClearOrbit’s POC system Great success with the program Great success with ClearOrbit Good success with vendors No interest in becoming a software creator Long-term solution: 4. WWT merges with ClearOrbit to collaborate on creating a program specific program If necessary, WWT and ClearOrbit retain the option of collaborating on a “project specific” software program
Case Question 1 What were the main challenges facing OEM’s MRO purchasing operations?
Case Answer 1 OEM’s MRO purchasing operations were extremely inefficient and costly for the company. OEM’s supply base was close to 1,800 vendors and the company conducted all the purchases within making labor costs high. The vendors were connected to OEM in different formats ranging from hard copy documents to electronic data interchanges systems. The inconsistency in formatting provided for even more ineffectiveness in the company. There were also a multitude of employees involved in the MRO vendor process. Twenty full time employees managed the MRO vendor relationship while fifty tool store managers spent time gathering supplier information about orders. There were also OEM employees at the plants that performed follow up work with vendors making the process even more costly and less controllable. Along with all these OEM employees, the vendors had representatives at all twenty-six of the plants to help ease the flow of information between OEM and suppliers. This proved to be costly for suppliers, but they looked at the cost as part of doing business with OEM.
Case Question 2 What types of collaboration were sought to address the OEM’s challenges?
Case Answer 2 Collaboration: the process by which two or more parties adopt a high level of purposeful cooperation to maintain a trading relationship over time. OEM needed a simplistic approach to POs: OEM collaborated with WWT-Instead of receiving POs and invoices from over 1,800 companies, OEM received POs and Invoices from only WWT WWT collaborated with ClearOrbit-instead of wasting time and money creating their own software, WWT utilized ClearOrbit’s POC program WWT collaborated with vendors-the vendor pool shrank, from the original 1,800 suppliers only 300 joined the POC program and 900 spot-buy vendors joined
Case Question 3 Why did outsourcing MRO purchasing operations make sense for the OEM? Can they do the same for direct materials?
Case Answer 3 Part 1 Outsourcing made sense for the following reasons: Scalability- reduced quality of suppliers (1,800 down to 1,200) Cost reduction: more than 30% labor reduction; 30%-40% reduction of customer support tasks due to automation and fewer supplier inquiries; 50%-60% labor reduction in Accounts payable department due to online/ e-processing; avoiding high integration cost by a one-to-many virtual hub, which also limited required human resources. More efficiency in: order acknowledgement; promised delivery/shipment date capabilities; information sharing in real time; cash transfers; and reconciliations. Visibility on timing and contracts of deliveries and shipments, which enabled better performance evaluation.
Case Answer 3 Part 2 Why not? Yes, it would entail a more in depth, knowledgeable approach to the operations management and flow of the manufacturer and its items. However, it could be done, in theory. In fact, having done this with the indirect materials already, and that process operating successfully, provides insight and a sort of roadmap to accomplishing the same with direct materials.