E-commerce streamlines supply chain communication
March 10, 2011
E-commerce now involves the full gamut of business communications, from quoting and paying invoices to job tracking. Technology, sources said, has made the supply chain more transparent, accountable, and efficient.
Doug Gardner, president of Hi-Tech Industries of New York, a contract precision sheet metal fabricator in Johnson City, N.Y., has a customer who happens to have no machine tools—in fact, no significant manufacturing capability at all. Instead, the customer relies on Hi-Tech to manage the entire manufacturing process: cutting, bending, welding, grinding, painting, assembly, and shipping.
Nowadays contract metal fabricators do more than just make parts for customers. They manage risk. In some instances the term original equipment manufacturer is giving way to original equipment supplier. The OES supplies customers with products, but it doesn't manufacture them. It's too risky. Demand ebbs and flows. Economic cycles can be catastrophically dramatic, as the last downturn proved all too clearly. Product life cycles are shorter than ever.
So why should these product suppliers invest in manufacturing equipment? For some sectors, of course, outsourcing all manufacturing is too risky or just plain impractical. But in certain industries many are realizing that just because you design and market a product doesn't mean you have to make it. As flexible manufacturing becomes ever more common and product-specific tooling becomes rarer, outsourcing everything to competent contract manufacturers begins to make more sense. Besides, after the past 10 years and two recessions, contract fabricators that continue to thrive really know what they're doing.
This all is admittedly counterintuitive. After all, doesn't outsourcing mean a company gives up some control? Yes, but mitigating this is what's being called the "transparent supply chain," which gives businesses a better view into the status of work at customers and suppliers. According to sources, it's here that e-commerce will play a greater role.
Online procurement has flourished for years, with sites like www.mfg.com, www.sourceauthority.com, and others streamlining the supplier hunt. These days, though, some of the most effective e-commerce opportunities are after the hunt, when existing relationships between buyers and sellers are solidified, turning that one-time order into a long-term relationship.
"E-commerce now is a term that involves the full online interaction between a company and its customers and suppliers," said Daniel Noonan, managing director at ECi Software Solutions, Fort Worth, Texas. "So it's not just the ordering. It's paying invoices, account details, even tracking job information—the full gamut of [customer and supplier] interactions."
Amazon.com and similar Web retailers helped shape common perception of e-commerce. In the 1990s someone could slap a page on the Web, put a clickable shopping cart icon on it, and voila! he was a pioneer of e-commerce. Fifteen years later Web-based transactions are proliferating in retail and in sectors like music, even dominating. In December headlines proclaimed that the value of Web transactions over the holiday reached a new record, apparently helped by shoppers trapped at home due to record snowfalls.
But some of the most innovative e-commerce ideas have been mouse-clicking a few links up the supply chain, in the business-to-business realm—and Web-based ordering is only a small part of the action.
"One of the biggest misconceptions about e-commerce is that it's just a shopping cart," said Chris Laffey, OEM sales executive for Exact Inc., Middleton, Mass.
Today e-commerce really is a communication tool. It gives not only order confirmation but also tracking. Is the shop working with the correct part revision? Will the part be delivered on time? Where does the job stand in production? Through electronic data interchange and Web-based interfaces, an e-commerce system will answer these questions.
Product line manufacturers, even those with highly customized products, now boast sophisticated Web ordering functionality. Quoting a price is immediate. As just one example, Greenheck Fan, Schofield, Wis., uses product configurator software that allows customers to customize components. Sometimes within hours of ordering, sheet metal is being punched and laser-cut on the shop floor.
Web ordering also is emerging in contract metal fabrication, especially in operations that focus on one or two primary manufacturing processes. Consider Robinson Laser, an East Chicago, Ind., fabricator specializing in laser cutting of flat parts—and that's it. Forty CO2 laser cutting centers give the organization tremendous cutting capacity. Thanks to a large in-house database of past jobs, a dynamic job scheduling system, as well as real-time metal pricing information, the request-for-quote (RFQ) process is immediate. Customers can upload their designs; type in the material, quantity, and requested delivery date; and the Web site gives an immediate price estimate. For small orders, the fabricator even accepts credit cards.
Robinson developed a Web-based e-commerce system that immediately cleans up drawing files and shows them to the customer before any price quote. When moving ahead with a purchase order, the system bases everything on current schedules as well as material and machine availability. The software must access myriad data sets to make that immediate RFQ and click-to-order process possible.
But Robinson specializes in only one process—laser cutting. Processes like bending and welding complicate matters in operations that continually take on new products. "Often it's the forming portion that can be difficult to write algorithms that will tell you what it's going to cost to make the part," said Adria Iles, managing director at Lantek Systems, Mason, Ohio.
According to sources, it's not the number of processes that makes things difficult, it's their variability, and processes like bending have plenty of variables. How many bend lines does a part have? Too small or too large, and the part may be difficult for the operator to handle. An experienced press brake operator may bend certain parts faster. Older brakes have idiosyncrasies that new machines don't. A component may have several optimal bend sequences. Welding and grinding times may have similar variability.
All of it hinges not only on the part characteristics, but also the person doing the job, his specific method (one bend sequence versus another, for example), and machinery. "The real barrier isn't the software as much as it is having control over costs in your shop," said Iles. "If you measure everything and know exactly what it costs to make certain components, and you know the lead-time for those components, you could easily adopt an e-commerce strategy that involves automating your RFQ."
Sources added that what matters most is not necessarily the level of automation a shop floor has, but the level of process standardization. It just so happens that automated processes follow a standardized procedure for every job, documented in the program. But a spelled-out operating procedure, even on a manual press brake, can increase standardization and, hence, make it easier to build a database that eventually could make immediate, accurate quoting feasible.
For a sheet metal shop, as Iles explained, the first step often involves optimized nesting on the cutting machine. In sheet metal fabrication, nesting is where the rubber hits the road. Make a change to a nest, and processes up- and downstream feel the effects. Small orders can be combined and mixed among various sheets, maximizing sheet utilization while minimizing and tracking sheet remnants—all the while minimizing work-in-process.
"The next step, now that you combine these orders, is to put all the customers into a database and start tracking all orders that flow through the shop," Iles said. If orders are being tracked, why not open up at least a portion of that tracking information, so that customers can view it online? A company's e-commerce system often grows from there.
In the coming years software may handle esoteric algorithms that would be able to account for and predict how certain processes would vary for certain jobs. Even in one-off, custom operations, "such esoteric algorithms would be able to look at a deeper level of complex logic to define what's being done from job to job," said Exact's Laffey.
Manual estimating has its benefits. Totally automated RFQs may not do the best job selling a shop's metal fabrication expertise. What if a part has a flange on it that's 1.5 inches high, welded on top? Could that flange be cut and bent as part of the base metal itself? Even better, could the flange be slightly shorter and formed with tooling on the punch press? These questions require conversations between a design guru and a sheet metal manufacturing expert. Such give-and-take is difficult to automate. Besides, these conversations may sow the seeds of coveted, long-term business relationships.
Even in these cases, a Web-based interface has its benefits. Often shops offer an online interface for customers to upload drawings. "In these made-to-order cases, such orders can be placed on an automatic hold status for review," Laffey said. "[The order] triggers an e-mail to the person who reviews it, and they can respond with information on the e-commerce site or directly to the customer."
The Web ordering interface adds continuity, even if immediate responses to RFQs aren't possible. It helps record any job changes discussed. The conversations and rapport-building still take place between customer and supplier, in person and over the phone. But the content of those discussions is recorded into the online e-commerce system, so that everyone is on the same page before the job is released to the floor.
E-commerce systems at companies like Dell and Amazon have become world-renowned, which is why some might think that the technology doesn't scale down easily to the mom-and-pop level. But this is a misconception, Laffey said, who explained that e-commerce systems can be especially beneficial to the mom-and-pop. "Let's say you have five people, with one executive, one administrator, and three people on the floor who are running machines all the time," he said. "You don't have time for one of these people to be on the phone handling [job status] calls." The Web interface can streamline communication and, in many cases, make a small company act big.
He added that the ability to implement e-commerce depends less on company size and more on process standardization. "It's not about scale or even about product complexity. It's about the logic [of the procedures]." Even if the shop produces myriad made-to-order components, as long as procedures are consistent and standardized, an e-commerce system becomes easier to implement.
E-commerce tools help manage ever-changing business relationships in manufacturing. High-volume orders are less common. Suppliers order only when they need it immediately and demand fast turnaround. And as product designs change ever more frequently (at least in some sectors), so do orders and the drawings that go with them. So having tools that allow customers to track orders can help. If a last-minute design change occurs, a customer may flag the order in queue and attach the new drawing. This way, all such issues can be settled when they cause the least disruption, before the job hits the shop floor.
E-commerce also can help communicate any savings gained through design-for-manufacturability (DFM) initiatives. "It's easy to do in software," Iles said, explaining that e-commerce tools aid communication between all parties involved. Software that details costs behind products also can spell out savings that suggested design changes produce.
Traceability also plays a role, and these days even specific metallic components can be traced to their source. Software reveals the power of the bar code, which can be affixed to raw stock. A worker scans it, and it's tied to specific jobs and tracked throughout the shop. "For instance, if a customer calls with a quality problem and wants to find out every part you made from a certain steel or even a certain plate of material, you could look at [the ERP] system to find every part that was cut out of it," Iles said. She added that this kind of detail is usually kept internally, but it is technically feasible to make such information available to customers. They could log on a secure Web server and gather the data with a few clicks.
Of course, "you don't want to lose flexibility," ECi's Noonan said.
Schedulers may shuffle priorities to meet due dates for dozens of customers requiring widely varying components. If a customer logs in and sees his order being held for a week, then fabricated in a few business days, he may ask why a part can't be delivered sooner than the promised due date. For the next order, that customer may hold off the purchase order until the last possible moment (an all-too-familiar situation during the recession).
Noonan said that, ultimately, the level of transparency is a balance between how much the customer wants to see, and how much the job shop wants to share.
A just-in-time supply chain requires continual communication between buyer and seller, and software helps streamline that communication. Calling someone to check on a job can take significant time. "If I call a company, they have to put me through to the right person, who then may have to go to the shop floor to find out where the job is," Noonan explained. "Moving that function to an e-commerce environment, I can view that job information and when it's scheduled to be completed and shipped."
The recession exposed the risks of taking on too much inventory. Minimal inventory means companies order smaller batches more frequently. This also means many job shops must manage communication with dozens or even hundreds of customers, since one or two no longer provide enough volume to sustain a business.
Sources said that it comes down to weighing the value of customer service and sales personnel. Should they be devoted to answering calls and tracking down existing orders, or should they be talking about future orders, and about how the fabricator could meet additional needs?
In other words, they could be talking not about what's happening now—but what's next.