Collaborating for Order Fulfillment

Web storefronts, public marketplaces and private extranets have heightened customer expectations for rapid order fulfillment.

Provided by Gartner  

Web storefronts, public marketplaces and private extranets have heightened customer expectations for rapid order fulfillment. As a result, manufacturers have undertaken initiatives to integrate their front-end, sell-side, and customer relationship management (CRM) applications with their back-end enterprise resource planning (ERP), advanced planning and scheduling (APS) and supply-chain management (SCM) applications.

Manufacturers--particularly those in the high-tech and automotive sectors--have aggressively Web-enabled these enterprise applications. Such Web presence provides greater operational visibility where internal and external supply chain participants are concerned.

However, because these enterprise applications are not typically synchronized with the actual status of plant operations and capacity, this integration still falls short of optimizing order fulfillment and collaboration capabilities. Plant-level production applications, such as manufacturing execution systems (MES), generate and store real-time data (for example, raw material requirements, resource allocation and status, operational scheduling and dispatching, and product tracking) but are not integrated with enterprise applications. For this reason, knowledge workers at the enterprise level lack the most accurate production data. This impedes their ability to make decisions, respond to customer-order inquiries, and collaborate with external trading and business partners. As a result, manufacturers are not reaping the efficiency and revenue-generating benefits of Internet-enabled collaborative commerce. Moreover, they can make erroneous delivery promises, which cause decreased goodwill among their customers and threaten future revenue and profits.

Plant Floor- and Enterprise-Level Integration
When manufacturers integrate plant systems with enterprise applications, decision makers within the organization have a more accurate view of the plant's operations. The benefits of such integration include the following:

  • Supply chain staff can forecast raw material demand more accurately
  • Corporate scheduling staff can avert production backlogs and respond more accurately to customer inquiries
  • Field service staff can link performance of manufactured products with production history and quality testing, letting them resolve production issues

Conversely, plant managers gain insight on the business impact of their operational decisions and can make better planning, scheduling, and routing decisions based on business drivers. Likewise, external supply chain participants at the plant and the corporate level can supplement their decisions with real-time data generated from links to the manufacturing partner's production-level data. Or, they can use links to the partner's enterprise applications that are, in turn, linked to production data.

Dataquest Perspective
As manufacturers more commonly sell their products through Web storefronts, extranets, and marketplaces, they will increasingly require the integration of plant floor systems and enterprise applications. In addition to the proliferation of Web-based transactions, the trend toward outsourced manufacturing capacity will drive the adoption of integration solutions. Although many of the companies that outsource manufacturing do not consider the process to be a core competence, they still desire a sense of control over those operations. Integrating enterprise applications with contract manufacturers' plant floor systems will give these companies the business insight to support decisions regarding processes that are not physically performed in their organization.

Despite these strong drivers, many issues challenge the receptivity of manufacturing companies to solutions that integrate plant floor systems with enterprise applications. First, the components of plant systems are a mix of proprietary point solutions, legacy solutions and overlays on legacy systems, which are not amenable to easy integration to business systems. The difficulty of integrating the systems is further compounded by the disparate data used and generated by the systems. Plant floor systems generate real-time production data in large volume that must be translated into data. For example, flow rates must be converted into yields and order status information.

The investment to carry out the integration will particularly deter those companies that have suffered from painful ERP implementations. Manufacturers will be especially sensitive to the possibility of disrupting their MES systems because in most plants, a disruption in the operation of the MES system causes the disruption of their production lines, thereby resulting in late deliveries, customer dissatisfaction and lost revenue. Consequently, manufacturing companies will be attracted to integrated suites of solutions or pre-integrated best-of-breed solutions that will cut the risk of lost production time. Indeed, IT vendors that develop plug-and-play solutions--which have yet to become a reality--will be in enviable competitive positions as the market for integrated plant and enterprise solutions grows.

IT vendors must recognize that manufacturers will be wary of potential security violations associated with integrating plant floor systems to the applications of their external trading and business partners. Plant floor systems generate and store operational secrets, including bills of materials, quality test results and recipes for the manufacture of products. Companies that produce custom products or companies whose value proposition is tied to their production methods will be extremely cautious in providing visibility of their production systems to external companies.

Indeed, some plant managers may resist sharing production data with other internal groups within their own organizations because the plant managers want to retain control over the creation, analysis, and dissemination of the data. Thus, IT vendors that compete in this market need to develop marketing messages that demonstrate to plant managers that these integration solutions will help them to better align operational decisions with enterprisewide business goals. Moreover, when plant managers recommend particular courses of action to corporate management, they can present their proposals in the business language understood by the enterprise-level decision makers.

In addition to addressing the particular needs of plant managers, IT vendors must develop separate marketing messages targeted to decision makers at the corporate strategy level, including vice presidents of operations and C-level executives, who will become more involved in the selection of integration solutions as they increasingly recognize the strategic value of these systems to their revenue and profit generating objectives.