Strengthening Competitiveness through Production Networks

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Strengthening Competitiveness

through Production Networks

A perspective from European ICT research projects inthe field of Enterprise Networking

2005 Edition


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Foreword

Research is still too fragmented in Europe, including in the ICT forenterprise networking domain. Therefore, the European Commissionis promoting a structural approach aimed at integrating collaborative

relevant RTD at a pan-European level, thus contributing to thecreation of a genuine and powerful European Research Area (ERA).One way to achieve this has been the clustering of research projects,intended to promote exchange between projects working in relatedtopics, allowing their individual partners to come together and to sharetheir knowledge and experiences for mutual benefit. Project clustersalso provide a common basis for dissemination among and interactionwith people interested in the domain.

This report is an initiative of the Ambient Intelligence Technologies for the Product Lifecycle(AITPL) cluster. It is an instrument to widely disseminate recent results obtained by projects from thiscluster and by other projects in the ICT for Enterprise Networking domain. All these projects share in

common the aim and the passion to tackle the challenge of pinpointing strategies for furtherresearch in new forms of dynamic networked co-operative processes, and of keeping Europesmanufacturing industry not only alive, but fully competitive and in a strategically leading position.

The papers presented here outline some of the major challenges which face the community ofEuropean researchers in the e-business area. Although these papers are almost devoted to a singledebate is there such a thing as a new way to develop production networks in the knowledge-basedeconomy? they exemplify a number of innovations deemed to support integrated enterprisemodelling for supply business processes, Build-to-Order strategies for vehicle design in theautomotive industry, co-operative SME networks, the interoperability of enterprise systems andapplications, standardised business processes for effective collaboration across the full supply chain,cross industry and end-user involvement in RFID standardisation, Web-based services for costengineering, and ICT integration and the simultaneous collaboration amongst the companies in theentire supply chain to achieve far-reaching goals (e.g. the 5-day car).

The AITPL cluster starts from the conviction that future products and services will be designed tooffer customers more value and enable manufacturers to respond faster and in a flexible manner tochanging market demands. Customers are demanding ever more advanced and sophisticated products,greater choice and shorter delivery times. To satisfy this demand for differentiated and customisedproducts at competitive prices, companies with different expertise must collaborate. But they need todo so in ways which ensure that the value chain remains flexible, so as to realise the full benefits ofrapid product innovation and open competition. In addition, manufacturers are looking to make theirproducts smarter by designing in added-value services as part of the customer offering. This

extended product approach combines a product with services and enhancements that improvemarketability. The customer proposition may subsist more in the benefits of the value-added elementsthan in the physical product itself. Enhancements can incorporate tangible features that make theproduct more intelligent, customised or user-friendly, including embedded features like maintenance.Other aspects, such as services, engineering or software, are intangible and make the offering moreinformation- or knowledge-intensive.

Secondly, the cluster believes that the strength of the European economy is increasingly based onrelationships among many enterprises, which together form agile networks, able to react to marketdemands in shortest time. These networks (sometimes developed as a virtual enterprise for a specificproduct) are still competing successfully on a global scale with enterprises from distant countries,where labour costs are just a fraction of those in Europe. This success can be retained, only, if the

networks establish and maintain smooth interactions, which cover the complete life cycle of theproduct.

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The challenge facing supply chain management is easy to define but less easy to run! It is to providethe right products in the right quantity at the right place and time. As the papers in this publicationdemonstrate, any supply chain strategy should address key themes, such as the growing gap betweenthe financial performance of companies with disciplined supply chain management and the financialperformance of those with ad hoc supply chain management, the development of end-to-endprocesses (rather than local/functional processes) and their integration beyond organisationalboundaries to realise the benefits of vertical integration without integrating, the management ofuncertainty through various techniques of forecasting (range forecasting) and risk pooling (to buildflexibility), and the capability of supply chains to evolve as business conditions change.

Meanwhile, as companies are shifting from integrated, vertical business models to horizontal modelsthat rely heavily on outside vendors and suppliers, the entire supply chain needs to be strategicallyaligned. While managing the four clusters of the ICT for Enterprise Networking unit, we are wellaware that getting everyone working in concert (concertation) is very difficult inside the four wallsof a single organisation and, even more, when it is other organisations that are performing criticalactivities that a particular organisation used to handle itself. How to ensure that everyone has the samepriorities and, more fundamentally, that all stakeholders within a collaborative business network speak

the same language? The answer lies in large part in the strategic use of performance metrics, i.e.identifying the key supply chain indicators that drive the overall success of business and developingeffective means of tracking these indicators.

Work in the AITPL cluster has a high economic and political relevance. Because the stakes growhigher each year, we must change course now. Improving the knowledge of the product andproduction processes will in the longer term imply that the required engineering knowledge ismaintained, making Europe indeed more competitive on a global scale and enhancing the prospects foremployment in the networked economy1. The European Council report of March 2004 identified de-industrialisation as a risk and requested concrete steps from the European Commission to improve thecompetitiveness of the European industry2. In addition, the Kok report (November 2004) stated that inthe period 1996-2003 ICT investments contributed to half of Europes productivity gains. Therefore,

an ICT-focus on innovation in the product lifecycle seems a good measure to reduce the productivitydivide between the EU and the most dynamic regions in the world, to combatthe risk of de-industrialisation, and finally to get close to achieving the Lisbongoal of making the EU the most competitive knowledge-based economy in theworld.

Overall, without question we face immense challenges in Europe, as we workto keep our union and its member states at the forefront of the hypercompetitive global knowledge-based economy. Despite the enormity of thesechallenges, we in the Commission are optimistic that we can build a better andstronger Europe thanks to the leadership, the skills and devotion of so manyoutstanding professionals in academic and industrial research teams.

The views expressed in the articles are those of the authors and do not necessarily reflect those of theEuropean Commission. We would like to express particular thanks to the VERITAS project for co-ordinating the contributions and editing of the book.

Grald Santucci Florent FrederixHead of Unit Cluster Officer

1Although manufacturing creates less then 30% of the European jobs directly, it indirectly creates more then70% of the European jobs if the full product lifecycle is considered (Manufuture 2003 conclusions).

2 Presidency Conclusions Brussels, 25/26 March 2004, comm. SN 100/04, paragraph 17.

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Table of Contents

Foreword.................................................................................................................................................................

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22.. OOppeerraattiioonn oofftthhee ssuuppppllyy cchhaaiinn.................................................................................................................

2.1 Analysis and comparison of supply chain business processes in European SMEs.................................

2.2 Making Build to Order a reality: The 5-Day Car Initiative.....................................................................

33.. EEssttaabblliisshhiinngg aanndd mmaaiinnttaaiinniinngg SSMMEE nneettwwoorrkkss .........................................................................................

3.1 Co-operative SME networks in manufacturing .....................................................................................

3.2 Issues in the Management of COllaborative DEmand and Supply NETworks.......................................

44.. IInntteerrooppeerraabbiilliittyy aanndd ssttaannddaarrddiissaattiioonn........................................................................................................

4.1. Interoperability of Enterprise Systems and Applications.......................................................................

4.2. E-Business Standardisation in the Automotive Sector The situation of SMEs....................................

4.3 Challenges in the adoption of RFID standards .......................................................................................

55.. TToooollss aanndd tteecchhnnoollooggiieess ssttrreennggtthheenniinngg ccoommppeettiittiivveenneessss ..........................................................................

5.1 Virtual Cost Engineering Studio (V-CES): a new service for cost engineering professionals ...............

5.2 ICT as an Enabler to the 5-Day Car: A Central Challenge to the ILIPT Project ..................................

About the Authors...............................................................................................................................................

Index of Keywords (pages) .................................................................................................................................

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Sylvie Feindt, SFC, [email protected]

Introduction

Today there is significant global overcapacity in most industries. In this environment of scarcedemand customers are less forgiving of poor customer service and more demanding of customisedproducts or services. As the competition continues to introduce new offerings tailored to the specialneeds of different segments of the market, companies have to respond by similar custom made andhighly personalised offerings. The ensuring proliferation of product variety for multiple countries,customer segments and distribution outlets create headaches in forecasting, inventory management,production planning, and after sales service support (Lee, 2000). A key issue for many companies isthus managing the supply base including sourcing, supplier integration and inbound parts

management. In addition product life cycles are getting ever shorter and technology is evolving fast inmany sectors.

Under the impact of information technology and the resulting globalisation of markets and production,new methods of combining activities into offerings are generating new opportunities. In such a changedriven environment, a single company rarely provides everything on its own anymore. Rather the mostattractive offerings involve customers and suppliers, allies and business partners in variouscombinations. Consequently companies do not really compete with one another anymore. Rather, it isofferings that compete for the time, attention and money of customers (Norman and Ramirez, 1993).The networked business can take different shapes ranging from integrated supply changes around akey player, to collaborative SME networks, strategic alliances, virtual organisations, extendedenterprises, industrial districts, clusters, etc. Principally these enterprise networks can be divided into

more focal, vertical networks with a supply chain topology and more equal co-operative businessnetworks (Koeszegi, Gruber and Nster, 2005).

Although this co-operation across company boundaries is seen as a panacea for different types oforganisations their emulation of the existing best practice by all players in the market seems moredifficult than theory suggests. One reason is certainly insufficient interoperability and standardisation.There is however agreement in the management literature that equating the supply chain with atechnological concept is worst practice.

Aim and structure of the book

Accordingly this book focuses on non-technical issues, without forgetting its background as a cluster

in information society technologies. The book aims to document the results of the first year of researchof the FP6 projects in the area of ICT for enterprise networking. Despite their diverging startingpoints, all projects involved ILIPT, SPIDER-WIN, ATHENA, Co-DESNet, NO-REST, V-CES andVERITAS are trying to enhance the competitiveness of organisations in the machinery and mechanicalengineering industry with a particular focus on the automobile sector.

The chapters have been divided into four broad categories: supply chain integration, SME networks,interoperability and tools and technologies to enhance competitiveness within a certain sector or groupof professionals.

The first two chapters look at supply chains.

The chapter of Rabe and Mussini presents IT solution requirements of companies indifferent supply chain positions, based on an assessment applying the integrated enterprisemodelling method to three supply chains addressing the product portfolios motorbikes,aircraft supply and helicopters.

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The second chapter by Stone/Miemczyk and Esser assesses the requirements with respect toconstruction, capacity, platform and IT in order to move to a build to order strategy (BTO) inthe automotive industry.

The following two contributions look at rather horizontal SME networks:

Nster and Gruber focus on structural settings and success factors for co-operative businessnetworks.

Villa/Antonelli and Cassarino present a model for the transformation of traditional industryclusters, characterised by geographic proximity, into collaborative SME networks.

Three contributions focus on interoperability and standards in technologies supporting inter-organisational co-operation:

The contribution of Ruggaber and Berre presents an interoperability framework based onindustry scenarios and pilot case studies in aerospace, automotive, furniture andtelecommunications.

Gerst and Jakobs look at the influence of SMEs on standardisation in the automobile sector,by examining the two different approaches: a sector specific portal and the participation in the

open standards-setting process. Gerst and Bunduchi assess the development process of Radio Frequency Identification (RFID)

standards, which are determined by the notable absence of cross industry user involvementand the resulting danger that future standards are shaped by interests of componentmanufacturers and large retailers.

A final group of contributions deals with specific tools and technologies to enhance thecompetitiveness of companies:

This includes a contribution of Rios et al who developed a set of virtual services to supportcost estimation (accuracy and speed) at different points in the product life cycle to enhance thecompetitiveness of suppliers in the automotive, aerospace and electronic equipmentmanufacturing.

The final contribution of Stone et al discusses the specificities of ICT supporting new logisticconcepts with flexible production to enable the 5-day-car.

Key issues tackledIn the following, the key issues around supply chain integration, interoperability, seller-buyerrelationships, cost reduction and SMEs, which were tackled across various contributions, are outlinedleading to a number of recommendations:

Supply chain integrationIn almost all industries, supply chains have become a much more important strategic and competitive

variable. Businesses are increasingly relying on their suppliers to reduce costs, improve quality anddevelop new processes and products faster that their rivals can (Liker and Choi, 2004). There are threekey dimensions of supply chain integration: information integration, co-ordination, and global linkage(Lee, 2000). The best supply chains identify structural shifts, sometimes before they occur, bycapturing the latest data, filtering out noise, and tracking key patterns. They create profits, increasemarket share, strengthen competitive positions and enhance the value of a company (Lee, 2004; Lee,2000).

Successful large companies such a DELL, IKEA, Japan Seven-Eleven or Zara have the ability tomanage transitions changing market conditions, evolving technology, different requirements as theproduct moves through the life cycle. Companies like that have a triple-A supply chain that providescompanies with sustainable competitive advantage (Lee, 2004). They have agility, adaptability and

alignment. An example is the Spanish apparel company Zara. After September 11, the company wasable to co-ordinate its designers, supply chain partners, and manufacturers to launch a new line ofapparel featuring black within two weeks. The result was a tremendous sales shift in their favour.

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(Supply chain challenges, 2003). Other major players such as Federal Express, Procter & Gamble orWal-Mart used the networked supply chain to dramatically transform the competitive landscape oftheir markets (Lawton and Michaels, 2001).

However, seamlessly integrated supply chains are rather an exception than the rule. As communicationis taking place sequentially from one tier to another, OEMs lack information from the component leveland suppliers fail to respond quickly to changes propagated on a short term notice (Rabe and Mussiniin this book). To alleviate this situation, large companies such as Cisco install eHubs, which enablenetworked rather than sequential communication. (Scherer, 2005, Stone et al in this book). In theautomobile chain however the introduction of collaborative networks and the modular approach(Doran, 2004) is beginning to entail a shift of the added value from the vehicle manufacturers tosuppliers and to other business partners such as system integrators (Gerst and Jakobs in this book).The now proliferating build-to-order strategies will have repercussions for all players in theautomobile supply chain. Considering a five-day car scenario with a manufacturing lead time of oneday, this would leave one day to receive orders and inform suppliers, and three days to deliver thefinished vehicle to the customer (Stone, Miemczyk and Esser in this book).

In recent years, companies have made significant investments in high level planning tools such as forexample advanced planning systems in order to optimise their supply chain management. However,these tools have failed to deliver real-time visibility on process, product and resources: organisationsstill cannot see what is going on in their supply chains (Gerst and Bunduchi in this book, Stone,Miemczyk, Hellingrath and Witthaut in this book). A Forrester Research survey found that more thanhalf of the companies interviewed have SCM systems that failed to meet their expectations (Sherer,2005).

InteroperabilitySuch integrated supply chains need collaboration, seamless information-flow and monitoringincluding RFID and extended system processing capacities. A basic element of the system might be an

ASP (application service provider) approach. The presence is however characterised by a plethora ofisolated systems and applications with limited to no interoperability. From a standards point of viewthe B2B space is rather characterised by a proliferation than a lack of standards (Ruggaber and Berrein this book). In the automotive industry, suppliers are currently concerned about the significant costsof IT system administration caused by the undisciplined approach by vehicle manufacturers (VMs)and the implications of adopting new technology on an unregulated, individual supplier/VM basis(Stone, Miemczyk, Hellingrath and Witthaut in this book). Ruggaber and Berre thus suggest aninteroperability framework. This baseline allows the viewpoint-based integration of enterprise specificsoftware.

As SMEs tend to do business with more than one company they have to adopt systems of severallarger customers or vertical networks. Accordingly a vast majority of SMEs see the lack of

standardisation as a main barrier to closer co-operation. Unfortunately, it appears that so fardevelopment of IT standards has almost exclusively been technology driven; with standards createdsolely reflecting providers and implementers priorities alike. Most other stakeholders and, mostnotably, SME users hardly participate in the standardisation activity. The result might be that the largecompanies agree on extremely complex specifications, leading to a failure of an initiative as their SMEsuppliers are not able to implement and manage the complex specifications. Also, the non-use of manystandards-based services by SMEs is largely due to the fact that insufficient knowledge and resourcesare available to employ these systems, which are perceived as being extremely complicated to dealwith. In fact, this perception may be considered as a major impediment to a more successful uptake ofstandards based systems by SMEs. This exemplifies an urgent need for simpler standards (Gerst andJakobs in this book).

An interesting case is RFID as it promises to significantly improve the end-to-end product visibility ofsupply chain operations. Despite the technology being 50 years old, the implementation is - from auser point of view - in its infancy notwithstanding some more advanced industries (e.g. retail). The

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discussion regarding RFID implementations often is driven by high promises in terms of costreduction and improved visibility of the supply chain. If these expectations are not fulfilled, potentialcustomers defect from the RFID vision. In this respect RFID standards are a major issue in securingthe high investments in RFID technology on different levels (e.g. interface protocol, data structure,tags etc.). Not only different standards co-exist in parallel, but also different actors with sometimesdivergent interests influence the standardisation life cycle. However, if several competing RFIDstandards exist at the same time, items would have to be re-labelled during their shipment whichwould offset all the benefits that RFID are supposed to deliver (Gerst and Bunduchi in this book).

Apart from the technical issues surrounding the development of standardised business processes acrossthe entire industry, a range of organisational, social and economic factors have influenced the OEMsand the suppliers choices and actions. This has eventually led to the undesired outcome of failing toaccomplish the initial vision of industry wide collaboration supported by common industry widestandards. (Gerst and Jakobs in this book). Thus, interoperability does not only include technicalissues of infrastructure and applications but soft issues such as co-operation cultures, trust, businessmodels and communities (Athena contribution to Interoperability, 2005).

More sophisticated buyersInformation transparency is an increasing challenge to producers. On-line auctions give customersmore information than ever about producers pricing and in particular reverse auctions tend to yieldlower prices. Although in some sectors the new sales channels have not caught on, for many industrialproducts they have quietly become part of the normal way of doing business. In addition, downstreamconsolidation of industrial distributors and large retailers makes information exchange easier becauseit passes through fewer companies. This environment has an impact on prices that manufacturers cancharge (Abele, et. al., 2003).

An interesting case of a sectoral marketplace is Covisint, initiated by three large automobile producers.Due to the distribution of power that historically characterised the relations between OEMs and

suppliers, the latter were apprehensive of Covisint. They saw it as just another exercise to intensifyOEMs power pressure as market places are a tool for reverse auctions and market testing against theincumbent supplier (Sherer, 2005). Some suppliers also feared that Covisint would require significantadditional resources and investments from their side, whereas the benefits would mostly materialise atthe OEMs side. Suppliers already struggled with the administration of a number of suchstandardised portals and their requirements were by and large neither part of the Covisint vision, norpart of the development of the standardised technology. One result was the creation of another e-marketplace, named SupplyOn, by a number of large tier-1 suppliers who defected from the Covisintvision (Gerst and Bunduchi in this book).

Also the implementation of demand-side approaches (build-to-order or assemble-to-order) makesOEMs and large retailers more powerful. A case in point is the Dell model. It relies on demand side

pull rather than supply side push - no computer is produced unless there is a corresponding demand inthe marketplace. Thus inventory of the OEM is virtually eliminated. Due to the direct made-to-orderapproach, Dell can also see on a daily basis, if customer preferences are shifting, and which customersegments are concerned. (Magretta, 1998). Other industries such as the clothing industry with vendormanaged inventory systems (Au and Ho, 2002) or efficient consumer response initiatives of thegrocery industry (Sherer, 2005) follow the example. A simple transfer of the Dell assemble-to-ordersystem to the automotive sector is however not possible. Dells supply chain keeps sufficientcomponent inventory on site in order to build computers to order once the order is received. Theinventory thus represents the de-coupling point in the supply chain that largely buffers componentsupply from demand variability and lead time reduction requirements. Dell only handles 15-50 keycomponents per computer, whereas the average vehicle consists of 2.000-4,000 components, many ofwhich are currently customised by colour, engine size, etc. Consequently holding a component stockin the same fashion is cost-prohibitive in the automotive industry. Rather BTO strategies depend on acapable and responsive supply chain, and subsequently, on the logistics operations that connect

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suppliers to the assembly plants, and assembly plants to dealers and customers (Stone, Miemczyk andEsser in this book).

Cost reduction or optimal use of innovative capacityCost reduction is one highly desired result of supply chain integration, but not the only one and tosome not even the most important one. Do immediate benefits of low wage costs outweigh the long-term benefits of investing in relationships? Certainly the spread of Internet technologies to getsuppliers to compete fiercely on cost efficiency, for instance introducing reverse auctions to get thelowest price for components as Ford did, has enabled OEMs to push prices down (Liker and Choi,2004).

However, examples that not all manufacturing is going to move to low-wage countries are the twoJapanese car manufacturers Toyota and Honda. They do not source much from low-wage countries.Their suppliers innovation capabilities are more important than their labour costs. Accordingly thetwo companies aim at a long-term relationship that involves trust and mutual well-being. At the sametime the relationship connotes discipline and the expectation of improvement and growth. Whencreating the partnerships the two car producers try to learn as much as possible about the suppliers,

thus being able to co-operate effectively with the suppliers to make their processes leaner (Liker andChoi, 2004, Jackson and Winkler, 2005).

Whatever approach is chosen, manufacturers require accurate and rapidly available cost estimates atdifferent points in the product life cycle for the decision process. An online learning and mentoringservice with a supporting cost engineering database developed by one of the projects promises to be avaluable service in the future (Rios et al in this book).

SMEs in the more competitive environmentThe Triple A supply chains of SMEs with high agility, adaptability and alignment exist, but remainrare species in value chains of SMEs (these companies are also likely to outgrow their SME statusrapidly). While the majority of interactions between organisations are still limited to e-mail,

companies are, albeit selectively, upgrading technology. Throughout the supply chains, there tend tobe different levels of IT infrastructure and e-commerce solution complexity and upgrading does nothappen systematically and with all partners at the same time. For example, a retailer might use vendormanaged inventory and never out of stock (NOS) systems with a specific supplier, order occasionallyonline from its buyer group and procure in a traditional way with a listed supplier of its buyer group.However, others are moving quickly to a high level of sophistication, pulling their value chain partnerswith them. More complex e-commerce solutions integrate automated value activity interactions. Theydo not only automate value chain processes in a linear fashion, but they automate bundles of valueactivity interactions (Feindt et al. 2005).

In the IT market many solutions can be found which support the operation of supply chains. However,they are mostly tailored to larger companies, requiring some substantial IT infrastructure, or they force

the participants into the use of specific ERP and/or APS systems (Rabe and Mussini in this book).Typically, SMEs opt for readily available off-the shelf systems and services, which need to be cheapand easy to install, maintain and use. Proprietary systems are also used frequently where SMEs arecompelled to do so by e.g. a major business partner -with all associated problems (Gerst and Jakobs inthis book).

Recent field research shows that each companys IT requirements are related to the level of thecompany in the supply chain. Of course, all detected requirements converge to a unique objective,which can be synthesised as: maximum flexibility in manufacturing keeping stocks at the minimumlevel. An ASP software solution based on these requirements of SMEs at different tiers in the supplychain is structured into the four areas modelling, operation, integration and intelligence (Rabe andMussini in this book).

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SME NetworksA trend in manufacturing is that original equipment manufacturers (OEMs) want to co-operate withfewer suppliers but on a worldwide scale. As a result, small and medium sized suppliers will besuppliers to integrators, that is, tier 1 or 2 suppliers. There are very few small suppliers that areestablished in such specialised niche markets so that they can remain direct suppliers to, for instance,the automobile or aerospace industries. A strategy that small companies pursue is to group themselvesin networks with the aim to be perceived as a larger organisation and to gain visibility. Companies joinforces in a co-operative SME network to bid for larger projects, subcontract to each other but also toparticipate in a learning environment and benefit from increased purchasing power (Feindt et al,2005).

Such networks are rather horizontal and are based on alternating customer-supplier relations, whereone time a company sub-contracts products or services from the network and another time suppliesproducts or services to another partner in the network. Accordingly, co-operative networks display apeer-to-peer network topology. This type of network seems to correspond more than the vertical onesto the actual business concept of a VO, where companies stay independent and act as equal partners

while working together (Nster and Gruber in this book).

There is however no structural blueprint for successful co-operation in a network. The kind of virtualstructures in place eventually depends on the specific business, geographical and cultural factors. One candistinguish externally initiated networks and strategically (internally) driven networks. The first cluster ischaracterised by equal power distribution, regional dimension and clearly defined strategy. The second isfocal, international and aims at fulfilling a specific business case. There is no indication that networks thatwere initiated with external support are less successful than those created on the companies owninitiative. The correlation of ICT with focal power shows that it is used to help the leading enterprises co-ordinate activities and processes of the VE. Success factors for a network are business opportunities, trust,commitment to co-operation, exchange of information and network management. ICT as such does,however, not have a direct effect on success of co-operation (Nster and Gruber in this book).

Similar horizontal SME networks have emerged from some of the traditional Italian districts inresponse to increasing competitive pressures: the Demand & Supply Network (DESNET). Inpractice, the new organisation emerged from an agreement among a set of SME and is structured as anextended virtual enterprise. This structure makes the Demand and Supply Networks much morerobust against the increasing variability of the products and labour markets. Such a chain of SMEs isstructurally co-operative, and the naturally leading SME is the most efficient firm. The analysis ofexisting Industrial Districts highlights how far most of the districts are away from the desirable targetof a collaborative network. A notable exception is the industrial district Torino Wireless. In thiscontext, the importance of non-competitive institutions, like Research Centres and Universities,involved in the DESNET organisation cannot be underestimated. They have to play a core role in the

proliferation of the collaborative networks in the industrial districts in Italy (Villa, Antonelli andCassarino in this book).

ConclusionsFocusing on different types of networked organisations and their requirements, a number ofconclusions and research recommendations can be drawn from the articles:

- Following the shift of the value creation from the OEMs in some value chain, also researchneeds to shift from OEM to their suppliers and beyond and their specific needs with respect toIT systems. Sector oriented projects need to contain a critical mass of partners to make animpact, not forgetting the smaller players in the chain.

- As in the areas of ICT for businesses, technical issues are closely linked to a range oforganisational, process, social, economic and cultural issues, projects need to be

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interdisciplinary, bringing together researchers from various cultures around a core set ofideas. Research into soft factors/issues should also be included in technology projects.

- With the creation of new businesses high on the agenda in Europe, SMEs which, after all,form the employment and growth engine of the EU, need to take part in shaping the ITinfrastructure upon which they very much rely. Consequently they need to be an essential partof research projects (e.g. as dedicated user groups to align context specific user requirementsand in validation through application trials).

- Similarly SMEs need to be involved in the standardisation process, if a wide implementationof less complex standards is aspired. The latter might be achieved through the participation ofSME umbrella organisations in the standardisation process or the change of procedures tofacilitate SME participation, for instance the increased use of electronic communication meansin order to minimise travel and time budgets.

- Further research also needs to go into different types of SME networks. There is, for instance, aneed for developing more accurate means to identify and measure the value added for the

companies, as well as the costs, in order to ultimately assess the success of a virtual organisation.

- A number of projects will produce interesting results which the Commission might want tosupport with technology diffusion or take-up initiatives, market validation, and initialdeployment.

ReferencesAbele, J.M./Caesar, W.K., Roland, J.H. (2003): Rechanneling Sales, McKinsey Quarterly, Issue 3, pp.64-78Athena contribution to Interoperability. Policy Action Plan Version 1, March 2005, www.athena-IP.org.Au, K.F. and Ho, Danny C.K. (2002), Electronic Commerce and Supply Chain Management: Value-Adding

Service for Clothing Manufacturers, Integrated Manufacturing Systems 13/4, pp.247-254.

Doran, D. (2004): Rethinking the supply chain: an automotive perspective, in: Supply Chain Management,Vol.9/1, pp.102-109.

Feindt, S., Jeffcoate, J., Chappell, C. (2005): E-commerce links for SMEs within the industry value chain,Nabeel A. Y. Al-Qirim (ed.), Global Electronic Business Research in Small to Medium-Sized Enterprises:Contemporary Issues, Implications and Future Trends, London.

Gruber, M., Koeszegi, S., Nster, M. (2005): Initiated Networks A strategic Alternative for SMEs, presented atthe 21st EGOS-colloquium, 30th of June 2nd of July, Berlin.

Jackson, B., Winkler, C. (2005): Building the Advantaged Supply Network, in: Supply Chain Management

Review Jay/June, pp.42-49.Lawton, T.C., Michaels, K.P. (2001): Advancing to the Virtual Values Chain: Learning from the Dell Model, in:

The Irish Journal of Management, Vol. 22/1, pp.91-112.

Lee, H.L. (2004): The Triple-A Supply Chain, in: Harvard Business Review, October, pp102-112.Lee, H.L. (2000): Creating Value trough Supply Chain Integration, in: Supply Chain Management Review,

September/October, pp.30-36.Liker, J.K., Choi, T.Y. (2004): Building Deep Supplier Relationships, n: Harvard Business Review December,

pp. 104-113.Magretta, J. (1998): Fast, Global and Entrepreneurial: Supply Chain Management, Hong Kong Style,Harvard

Business Review, September-October.Norman, R., Ramirez, P. (1993): From Value Chain to Value Constellation: Designing Interactive Strategy, in:

Harvard Business Review, July-August, pp 65-77.

Sherer, S.A. (2005): From Supply-Chain Management to Value Network Advocacy: Implications for e-SupplyChains, in: Supply Chain Management, Vol 10/2, pp 77-83.

Supply chain challenges: Building Relationships (2003) Harvard Business Review, July, pp.65-73.

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22.. OOppeerraattiioonn oofftthhee ssuuppppllyy cchhaaiinn

2.1 Analysis and comparison of supply chain businessprocesses in European SMEs

Markus Rabe, Fraunhofer IPK,[email protected] Mussini, Joinet S.P.A., [email protected]

In many European regions, SMEs are part of intense customer-supplier networks. These companiessurvive, only, because of the excellent skills of their employees and the extreme flexibility of theirprocesses. Co-ordination mechanisms are poor, and the extremely lean organisations do not allowfor any substantial IT overhead. SCM tools are too complex, expensive and personnel-intensive forthese enterprises.The SPIDER-WIN project (IST 507 601) aims to achieve efficient, simple and context-aware SME

co-operation with low-level local software requirements and adapted to the typical availability andquality of resource data in very small enterprises, focused on the exchange of order status changes.This will be achieved by an ASP platform with asynchronous data exchange between the platformand the enterprises (but, never between the enterprises, directly). In the first eight months of the project, in order to analyse the specific constraints and potentialswithin the targeted enterprise types, a substantial analysis of the supply business processes wasperformed at three supply networks in Europe. The study was based on a reference model, includingguidelines, reference classes, template models and other auxiliary documents. The results from thesingle companies have then been merged, first into supply network models and finally into onegeneral model, which mirrors the specifics and potentials. Analysing these potentials and prioritising them with respect to the economic benefit, the majormethods have been identified which will support the processes.

IntroductionOn the IT market many solutions can be found which support the operation of supply chains.However, they are mostly tailored to larger companies, requiring some substantial IT infrastructure, orthey force the participants into the use of specific ERP and/or APS systems. The SPIDER-WINprojects goal is to provide solutions for networks including SMEs with very low level ITinfrastructure. Furthermore, there should be no need to change from existing IT systems, nor shouldthere be the requirement for any external online connection, which might give the feeling of a bigbrother to the companies. The means provided will clearly depend on the specific (mostly low)quantity and quality of data available.

This paper is reporting major results of the first year of the SPIDER-WIN project. This first period

was mostly dedicated to analyse in great detail the specific requirements of the enterprises in focus, todefine typical workflows which can be supported, and to investigate the available data and interfaces.For this purpose, several tasks had to be performed:

Analysis of the workflow within the companies, with respect to the supply chain processes. Determination of the (economic) potentials, both qualitative and quantitative, which could be

provided by the new co-operation platform.

Analysis of the data which could be provided (or maintained) by the companies in order tosupport new mechanisms.

Specification of a general workflow model, which serves as a base (a) for the definition of a newco-operative supply chain model and (b) which supports the clear identification of work flowpeculiarities in the single companies or company networks.

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For a substantial analysis, three supply networks from different European regions have been analysed.As languages are a major issue in SMEs, where even the managers often are not very fluid withEnglish, the studies have been conducted by local companies (coaches). The companies involved inthe study have been:

Emilia Romagna (Italy): Bentivogli, CIAP, Ducati, PM and Joinet (coach).

Basque (Spain): Fibertecnic, GAMESA, Metaltrek and Sisteplant (coach). Mazovia (Poland): PZL Swidnik, PZL Warszawa and IMIK (coach).However, it would not be very likely to achieve comparable data out of three different studies per-formed by different coaches, nor would it be likely that any valuable general model could be derivedout of this procedure. Therefore, a process was started led by Fraunhofer IPK which integrated thestudies in three phases:

In thepreparation phase, reference models and documents have been developed as the base for thelocal studies, and the coaches trained in applying these means.

In the KPVGTXKGYRJCUG, preliminary results have been analysed and experiences exchanged in coachworkshops. As a result, the reference models have been adjusted where necessary.In the CPCN[UKURJCUG, similarities between the different workflows have been identified and (wherenecessary) proved in discussions with the companies. A general model has been developed, whichincludes relevant information about available documents and data as well as the potentials.

Modelling Techniques

Integrated Enterprise Modelling (IEM) MethodThe subject of analysis requires a process oriented approach. Therefore, the Integrated Enterprise

Modelling (IEM) Method [Mertins and Jochem 1999] has been applied, with the tool MOGO for itsefficient use. This method is very flexible, and the tool supports the application specific definition ofresource sets, evaluation schemes etc. Furthermore, through the object oriented approach of the IEMthe use of reference classes is very efficient, simplifying the task of defining common terms, structuresand attributes.

Reference Models for Distributed Business ProcessesReference models increase the efficiency of modelling, raise the quality level of the developed models,and improve the reusability of the models. Such reference should include class structures, templatemodels and a manual which describes the correct and efficient use of the reference models as well asthe validity and constraints of the model [Rabe and Mertins 1998]. Especially for distributed systems,where different persons perform the modelling task at different locations, reference models can

improve the work, significantly [Rabe and Jaekel 2003 and 2004].

The Supply Chain Operations Reference Model (SCOR) was designed for the effective communi-cation among supply chain partners [Supply Chain Council 2002]. SCOR is a reference model, too,and not just a BPM technique, as it incorporates additional elements like standard descriptions ofprocesses, standard metrics and best-in-class practices. Furthermore, SCOR has been turned out to bea good base for enhanced models [e.g., cp. Stich and Weidemann 2002].

Modelling Languages for Distributed ModellingWhen analysing the processes of interoperating enterprises, there are multiple challenges due todifferent terms, structures and philosophies. Furthermore, sometimes there are already businessprocess models, but they have been set up using different modelling techniques and tools, which arevery often incompatible. There is recent research for the development of meta languages or unifiedlanguages, which would enable the transfer of business models between different modellingapproaches [Berio, Anaya and Ortiz 2004].

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Distributed Modelling Approach

Business Process Model ApproachAs a base for comparable models, which could later be integrated into one general model, the IEM wasselected as a common modelling method. In order to ensure that the regional consultants Joinet,SISTEPLANT and IMIK use the IEM in a proper and successful manner, the personnel of thesepartners were trained in the due application of this method, as well as the use of the related MOGOsoftware and the specific issues to be regarded when generating a model on a distributed basis.Furthermore, techniques of process analysis, interview methodology and modelling were on the topicslist of the training sessions. This includes techniques of systematic and fundamental analysis ofprocess objects and their features like activities, products or services, orders, resources, users andcustomers.

This task was directly followed by a learning on the job, where a short sample process study wasperformed in each region. This ensured that (1) the reference model and the guidelines are operational

for this application case and (2) that the regional coaches have really internalised the IEM and therequired open interview technique. Based on these (distributed) experiences, the reference model wasadapted, improved and finally decided.

GuidelinesA Guideline Document Suite for open interviews was set up, adapted to the specific case, and relatedto typical roles in the users enterprises. The suite includes a description of the processes, variablesand metrics to be considered as well as supporting documents and document templates. The guidelinessupported the structure and completeness of the interview as well as the comparison of the results fromthe different supply networks.The complete Interview Guideline Suite consists of the following elements:

1. Open Interview Guideline, including the interview structure and checklists of the major points toaddress.

2. General Procedure and Hints, providing hints and tips for all steps of the interview, from thepreparation via the interviewing and modelling up to reporting. The interviewer is not expected touse this document during the interview, but for the preparation phase of the interview and for therework of the interview results.

3. List of Expected Documents and Information developed as a checklist to compare the results ofthe interview with the expected information. This checklist can be used by the interviewer himselfor herself to check after the interview whether all information has been collected during theinterview and whether all documents are collected.

4. Interview Protocol Template, created to ease the editing and formatting of all information whichis not included within the process model. One protocol should be gathered for each interview.

Reference ModelA common model sketch in form of different template models was developed by IPK, Joinet andSISTEPLANT, in order to guarantee that all information and requirements detected can be syste-matically documented within one single, consistent model.

Class StructureThe reference class structures define common terms for objects and enable overall evaluationprocedures of the model. Furthermore, these classes inherit specific attributes which enable to holdtwo names for each object in parallel: An English name and the name in the native language. These

names can be switched, enabling the discussion based on the native terms within the companies, andusing the English terms when discussing and comparing the model in the coach team.

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These classes should be used for modelling wherever possible. However, the objects based on theseclasses may be extended with additional attributes. Additional sub-classes may be appended, if thecompany specifics require the clear differentiation of such types of objects (e.g., because they includedifferent sets of attributes, or because they are handled by different processes). The high-level classstructures for resources and orders are illustrated in figure 1.

Single Enterprise Template ModelThe Single Enterprise Template Model was developed with three objectives. First, the template can beused during the interview (together with the guideline) to ask the interviewee each area of interest andto structure the interview along the process under consideration.

The second objective of the template model is a common naming of the process elements. This isimportant because there are four different regions involved in the SPIDER-WIN project (Germany,Italy, Poland and Spain) but the project language is English and none of the project partners is a nativeEnglish speaker. The wording and structure of the template model is orientated at the Supply-ChainOperations Reference-model (SCOR).

Figure 1: High levels of the reference class structures for resources and orders

Third, the template serves as the base for the individual process model of the interviewed company.This individual process model is the core documentation of the interview results, as (different to theinterview protocol) this model is structured with respect to the processes as well as to the objects andattributes.

Basing the single enterprise models on the template, each enterprise within the supply chain ismodelled in a similar structure. This will increase the comparability of the different models and also

enable a simpler merge of the models into a general overall model.

The main focus of the project is the communication between the companies and its support by ITsystems. Therefore, the order transfer between the enterprises is modelled in more detail than theproduct transfer (fig. 2). The model structure is based on the highest level of SCOR (fig. 3).

Supply Chain Template ModelIn opposite to the Single Enterprise Template, the Template Model for the Supply-Chain wasdeveloped to support the modelling of the supply network as a whole, thereby connecting the singlemodels. This model shows the relation of different enterprises along the supply chain with respect totheir exchange of information and goods (fig. 4). However, this model is only used during the study, inorder to highlight the interfaces and to structure the discussions about interface details. At the end, thefull model will not just be a sequence, but a network of different customer supply relations.

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INPUTINPUT OUTPUTOUTPUT

Planning

and

Contr

olling

Planning

and

Contr

olling

Product

Chain

Product

Chain

Figure 2: IEM template model for a single enterprise (level 0, main model areas marked)

Figure 3: IEM template model with SCOR related areas

Tier 3 Tier 2 Tier 1

Figure 4: Template model for the supply chain - overview

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Metrics

The variables and metrics have to be defined, structured and mutually related in order to identifysolutions for cross-enterprise networking. As the result of a pre-analysis the following structure ofmetrics was set up for the interviews:

Category I: Figures or indicators which show the quantitative resources needed for the SCMprocess itself (potentials of saving effort e.g. in terms of personnel effort, finance, or resources).

Category II: Figures or indicators which can be used as input for the control or predictionalgorithms.

Category III: Figures or indicators which are of interest to the end users, mainly in order toidentify processes in the supply chain which promise optimisation potentials.

Since the main influencing factor for most of the metrics is time, certain general points of the order lifecycle (e.g. order issue, order receive, order agreement, start of production, order change issue, etc.)should be found at all companies within the supply chain. Those points should be marked on theprocess models in order to achieve transparency about the calculation of the certain metrics and in

order to avoid different calculation and presentation of the metrics at various companies.

Conduction of the StudyThe study was performed in each region, separately. The coaches exchanged the models, interviewprotocols etc. by e-mail in this period, in order to get feedback, to synchronize the models and tobecome aware of aspects detected in one region, which could be of importance to other regions. Due tothe careful preparation, very few physical meetings of the coaches were required in this phase.

First, the single company models were established. They were then merged to models of the threesupply networks, thereby identifying additional potentials and challenges at the company interfaces. Intotal, 103 sub-models (levels) were established, with a total of 1852 process elements.

Then, a general model was derived from the as-is-models. This general model contains the standardprocesses and identifies possible variants. Therefore, by comparison of a specific supply chain modelwith the general model, the specifics of the supply chain can be identified. The result is the first stepfor customising a supporting software system for the supply network, identifying the modules requiredas well as the data and processes to be adapted.

Findings

Definition of Supply RolesThe driving companies of the enterprise networks (prime contractors) are in different supply chain

positions: they can be OEMs, or suppliers at first or second level (sometimes, the level depends on thespecific product, and not only on the company). In order to establish a common model for the supplychain execution support, the prime contractors are defined as tier-1 in the following analysis: the tier-1is the downstream end of the supply chain which is supported by the new methods and software.

Similar, the position of the suppliers depends strongly on the product. The same enterprise mightsupply some parts in tier-2 to their customer, and (indirectly) other parts as tier-3 or tier-4. However,one of the major distinctions in terms of the business processes is found to be the companys role inthe product development process. Classically, enterprises producing on-design parts have been directsuppliers (tier-2). Today, however, the supply chain execution process is often separated from thedesign process. In such cases the supplier is selected by the tier-1, and the product design as well asthe production (especially in quality aspects) is conducted in direct interaction with the tier-1.However, the order management is performed through an intermediate supplier, who will also manageadditional value generation (e.g. kitting, assembly).

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Therefore, the SPIDER-WIN project has defined the following roles:

tier-2a suppliers produce on-design parts (designed by or in close co-operation with the tier-1), onorders directly communicated by the tier-1.

tier-2b suppliers produce on-design parts on orders communicated by tier-2a, which do notnecessarily depend, directly, on orders from tier-1 to tier-2a (e.g., because of economic lot sizes

or longer lead times). tier-3 suppliers produce catalogue parts on orders which come from tier-1, tier-2a or tier-2b.These definitions are applied (even if they need explanation), because from the process analysis theyturn out to classify the supply execution processes very precisely, and enable to describe therequirements of the enterprises according to these roles. The level tier-3 is not subject of the furtherstudy.

The results of the field study clearly show that each companys requirements are related to the level ofthe company in the supply chain. The tier-1s have some requirements close to the tier-2as ones, andsome requirements specific to their role. The same is for the tier-2as and tier-2bs requirements.

Of course, all detected requirements converge to a unique objective, which can be synthesized as:maximum flexibility in manufacturing keeping stocks (wherever they are and whatever their status is,raw material, subassembly parts, etc.) at the minimum level. In the following sections, therequirements are presented classified by the supply level.

Requirements of Tier-1The major challenge of the tier-1 enterprises is to follow the market demand in an agile way, whichimplies to make significant short term changes to the production plan. The complexity of the supplynetwork makes it very hard to understand whether the supply network (tier-2as and tier-2bs) cansatisfy these requests or not. The tier-1 experience expressed in the interviews documents that quiteoften short term changes, even if quickly propagated to tier-2as and tier-2bs, can not be satisfied by

the suppliers. Therefore, the main requirement is to create conditions which enable the whole supplychain to satisfy tier-1s requests even if they are frequently changed or updated, and in the case that thesupply chain can not satisfy these requests, tier-1s requires to be informed as long in advance as everpossible. This requirement can be divided into a set of sub-requirements:

Capability to know the exact quantity of a final product that tier-1 can manufacture when specificparts expected from suppliers are missing.

Capability to know supply problems as much in advance as possible, in order to be able toelaborate alternative production plans.

Capability to know whether an alternative production plan can be satisfied by parts (or sub partsor raw material) existing along the supply chain.

Push suppliers (2as and 2bs) in better managing stocks and the respective suppliers, in order tohave significant price reductions (that tier-2as and 2bs will be able to apply thanks to thefinancial saving coming from their internal stock reduction and the better management of therespective suppliers).

Capability to know real stock values along the supply chain when they think to a part update orsubstitution (phase out).

Dispose of significant indicators which enable to monitor the suppliers behaviour in terms offlexibility, in order to be able to push suppliers in improving flexibility and to measure realimprovements. These indicators are expected to push suppliers in improving their (generallypoor) organisation, based on the assumption that significant flexibility improvements are not

likely to be achieved without organisational improvements.

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Dispose of a unique communication tool with all suppliers, able to propagate significantinformation directly to the tier-2bs. This tool will enable to save a lot of time which is currentlyspent in very low added value activities.

Dispose of a communication tool for all the partners of supply chain, including the transportationproviders, in order to reach information about status of transport, unexpected events, plan of milk

runs etc.

Requirements of Tier-2aTier-2as play the most critical role, as they interface the tier-1 with the tier-2b, and have to manage allinterfacing tasks like economic lot sizing, stocking with respect to lead times and possible product-phase-out, handling different parts number and many other issues. Of course, their main requirementswould be to have more stable production plans, and production forecasts both on a longer term andmore reliable. However, tier-1s declare that they can not follow this request due to the customer-oriented strategy.

Tier-2as put in place several organisational procedures for reacting to medium-short term tier-1s

changes, but there are no shortcuts for solving the problem of the tier-2bs delivery time, which veryoften is significantly longer than the delivery time requested by the tier-1 (especially for raw material).Tier-2as very often issue orders to tier-2bs before having the related tier-1s orders, by making ownrisk forecast based on their long-term experience.

Tier-2as have very often significantly reduced management capability with respect to the tier-1s, evenif they have a quite good organisation and use suitable IT tools. They do not have a possibility topropagate to tier-2bs very quickly the changes generated by tier-1s. Often they do not want to do this,anyway. The reduced tier-2b management capabilities make the direct propagation to tier-2bs notconvenient for the tier-2as. Tier-2as take care of smoothing market disturbs coming from tier-1s,and so they send orders and plans to tier-2bs less frequently and less hysterically with respect to theorders from tier-1 to tier-2a.

Therefore, the tier-2as requirements can be summarised as follows:

1. Dispose of longer term tier-1 material requests.2. Dispose of tools able to support them in an intelligent propagation of information coming from

tier-1.

3. Dispose of a smart communication tool with all suppliers and with customers. This tool willenable to save a lot of time currently spent in very low added value activities (the expected timesaving has been estimated by Italian tier-2as users, and considered significant by all the rest ofusers).

4. Dispose of simple tier-2bs logistic/flexibility behaviour indicators, in order to push tier-2bs inimproving organisation, which is mandatory for achieving appreciable improvements in the

aforementioned simple indicators.

5. Dispose of simple tools which enable a deeper integration between planning (ERP) andproduction management (scheduler).

Requirements of Tier-2bTier-2bs requirements mainly refer to the visibility on tier-1 requirements (and to the visibility oftier-1 on real tier-2bs behaviour). They partially agree on the filter that tier-2as apply on informationcoming from tier-1. However, they would anyway appreciate a better visibility and transparency withtier-1. As described above, tier-2bs may for specific parts take also the role of tier-2as, and they areaware of the delay introduced by the tier-2as in propagating the information.

For tier-2bs, also, this main requirement can be declined into sub requirements:1. Direct visibility on tier-1 forecasts, possibly in longer terms than today.2. Fast propagation of material request changes generated by tier-1s.

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3. Dispose of a tool which enables the final customer (tier-1) to identify the real origin of the delays.4. Centralise information related to orders, invoices, etc. so that it can be easily accessed.5. Dispose of a tool which enables the management of urgency based planning.6. Avoid the loss of information during the transmission of orders from tier-1 to tier-2b.7.

The contract terms tend to disappear due to the continuous changes made during the sourcing. Inthis aspect, a tool could help to accelerate the transmission of these changes.

8. Improve the speed of new material requests from tier-2a and tier-2b to tier-1 when a sourced rawmaterial is damaged and has to be replaced.

9. Real time information on parts phase in and phase out.

Further Requirements Detected During the Study

Several significant additional potentials have been identified, which are not clearly related to thesupply level, but to the network as a whole:

1. Easier management of unexpected events. These events can be last minute demand changes,unpredictable delays somewhere in the supply chain etc. Thanks to the availability of sharedmultilevel communication tools (highly integrated with the companies IT legacy systems) themanagement of these events related information will be more and more transparent and easier.This information will be propagated faster up and down in the supply chain and the prediction ofthe impact of these events will be more reliable. This is not only a matter of time saving but also amatter of reliability of answers to the final customers.

2. Easier management of components phase-out. The visibility of lower tiers stock would enable acareful and piloted components phase out.

3. Availability of independent logistic/flexibility performance indicators. These indicators will act asstrategic decision support tools for organisation changes all along the supply chain. Tier-1s couldmore widely evaluate their suppliers (today mainly based on the evaluation of the quality of the

provided parts and with respect of the requested delivery time), and lower tiers will be enabled toevaluate the stability of their customers delivery requests.

4. Managerial-cultural growth of smaller companies in the supply chain. This aspect mainly refers totier-2bs. The analysis carried out clearly shows that tier-1s prefer to have within the supply chainvery limited changes of suppliers. They prefer long term agreements, because very often lowertiers have a deep knowledge of a certain manufacturing process which is critical for tier-1. Whenthese suppliers have limited managerial-organisational capabilities, it is worth to support them toimprove these aspects. The adoption of a multi-tier communication platform based on the ASPconcept will achieve two basic objectives in that direction:

it will introduce to these companies an advanced but low impact IT tool. it will make logistic/flexibility independent performance indicators available, which can be

used by these companies as a starting point for internal projects targeted to improvements ofthe logistic and organisational processes.

5. Availability of information related to transportation. A shared communication tool managing thetransportation documents enables all network members to see and monitor the transportationstatus.

Consequences for the SPIDER-WIN SCM Model Development

From the result of the field study, the SPIDER-WIN project was focused on providing methods andnew solutions in four main areas:

1. Modelling area for description, modelling and start-up of a SPIDER-WIN multi-tier network ofcompanies.2. Operation area for running operations in a SPIDER-WIN multi-tier network.22


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3. Integration area for enabling members of a SPIDER-WIN multi-tier network to integrate the newplatform with existing ERP systems and/or shop floor management tools.

4. Intelligence area for providing significant performance indicators and consequently runimprovement projects.

In the following sections a preliminary description of the solutions is presented per area.

Modelling AreaThis solution is expected to model all aspects of a SPIDER-WIN multi-tier network of companies. Themain aspects refer to:

Roles of companies modelling (e.g. roles of companies, roles of users, expected communicationworkflows).

Document template description (e.g. orders, invoices, transportation documents). Interlink modelling, modelling of the information requested for running cross companies

solutions (namely propagation and prediction).

Local models, defining relations between the interlink model and the companies operationalsystems (e.g. Manufacturing Execution Systems).

Operation AreaDue to the specific requirements of IT systems for SMEs as described above, most of the functionalitywill be provided in ASP mode. With respect to collaboration and negotiation, the related solution isexpected to address the following aspects:

1. New orders (purchasing/production).2. Changes of orders (e.g. withdrawn, date/qty/price changes, delivery problems).3. Other documents related to order, which are not related to production but affecting administrative

stuff (e.g. transport document or delivery note, invoices, goods entry sheet).

4. Forecast (publication of production plan). This information differs from order because (a) it is apublication of a set of product-code to be delivered in a given time-range (time-bucket) for agiven amount. Each datum is a forecast and will become, or not, an order in the next future and(b) due to the previous point, each datum making part of a forecast is not negotiable (it has not alife-cycle ruled by a workflow as the lines of order have).

The solution is expected to propagate data about tier-1 delivery plans in the upstream direction(propagation). The propagation process will be possible thanks to:

1. Incoming orders or forecast from downstream.2. Incoming interlink data provided by tier-2a.The way by which forecasts are propagated depends on the configuration (see modelling area). It willenable tier-2bs to see real time information about tier-1 delivery plans without any tier-2a filtering andin a format understandable by tier-2b (thanks to interlink information).

Furthermore, the related solution is expected to predict and signal possible problems/criticalitiesaffecting the tier-1 requests (order), not only due to changes made directly on that orders by tier-2asupplier, but from a variety of further important data (prediction). The prediction process will bepossible thanks to:

1. Incoming order from tier-1 (and their current state on the platform).2. Incoming order from tier-2a (and their current state on the platform).3. Incoming intermediate production information data from tier-2a (and eventually from tier-2b).

The way in which all these data are managed and prediction alerts calculated depends on theconfiguration (see modelling area).

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Integration AreaA specific CFCRVGT will be required in order to enable a unified link between the SPIDER-WINplatform (ASP mode) and the local control system(s). It specifies all the data and events managed inthis relation. Therefore, any software system which provides the required functionality can be linkedto the Platform through this adaptor. The adapter consists of two elements:

1. A guideline specifying which functionality is required, and how it should be accessed.2. Local and web software modules for running information exchange.The information to be collected from the ERP system will be constituted by manufacture orders andphases. The manufacture orders describe the actions to be taken in the shop floor to manufacture theproducts. These orders can be split into several steps (sections). Every section describes an actionperformed at the shop floor which causes a change in the materials or semi-finished productsincorporated to the productive process.

In order to achieve a better stock control, material traceability and to know which material batcheshave been incorporated to every manufacture order and phase, also information about the materialconsumption can be transferred.

Intelligence AreaThe solution is expected to provide relevant statistical information (Key Performance Indicators, KPI)about the supply chain performance, in order to measure global supply chain performance and logisticperformances of the single companies. The major goal is to identify elements or sections of the supplychain, which contain significant potential for improvement.

ConclusionsThe study has demonstrated that a well-adapted reference model is an important base for theconduction of cross-enterprise business process studies. There was significant additional effortrequired for the preparation and adaptation of the reference model. However, this effort was by farovercompensated, as the result was a smooth and efficient field study, which led to transparent andcomparable results. Achieving such a smooth process was not trivial, as the study was performed atenterprises of minor size, and included three different languages (plus English as the lingua franca,but not natively spoken by any of the persons involved in the study).

The Integrated Enterprise Modelling (IEM) Method turned out to be a very efficient means for thispurpose, allowing switching the terms between two languages (the native interview language andEnglish), providing glossaries of the company specific terms as a side effect. The reference class trees,

adapted for the study and then carefully maintained through the interview phase significantlyimproved the development of models with comparable structures, without urging the interviewers intopre-defined processes. SCOR was a good base to establish common understanding between thecoaches. However, it was not very helpful in the interviews themselves, as only rarely the intervieweeshave been aware of SCOR in sufficient detail.

Based on the study results, a general model of the as-is-situation could be extracted, which describesgeneral and specific process elements, systematically documented within one single, consistent model.It contains the SCOR compliant process names, specific information categories, relations betweenprocesses and information categories and further application rules.The analysis of the general model led to requirements, classified by the enterprises level in the supplychain, which then have been merged to a description of the envisaged software solution, structured

into the four areas modelling, operation, integration and intelligence.

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The modelling area comprises software to describe the company network with the roles of thecompanies in the network (one model per network), the local models and interlink between thedifferent tiers (once per tier-1 product) as well as supportive information like auxiliary documents.

The operation area consists of three major modules. The collaboration and negotiation moduleprovides all features required for processing (legally binding) orders. Such orders are always bilateral;therefore, this module involves exactly two partners from the network at each point of time. To thecontrary, the propagation module and the prediction module always include three or more partners.Based on specific events in the supply chain, they filter relevant information for partners eitherdownstream (prediction) or upstream (propagation).

The integration area links local IT systems with the platform. As there might be different local ITsystems, the integration area includes a general guideline (independent from local software), plussupportive software.

Finally, the intelligence area provides statistics about the performance of the supply chain. Thisinformation is to be used to improve the supply chain, addressing sections which show insufficient key

performance indicators (KPI). In addition, the KPIs can be used to identify and improve potentialweak parts of the platform itself.

The methods and prototypes are now under development, and will undergo detailed tests in late 2005.First prototypic installations are planned for early 2006, and the project partners expect to be able toprovide a commercial product series no later than 2007.

AcknowledgementThe SPIDER-WIN project is carried out with financial contribution of the European Commission under the 6 thFramework Programme, IST Project 507 601. The partners are Bentivogli (I), CIAP (I), Ducati (I), Fibertecnic

(E), Fraunhofer IPK (D), Joinet (I), P.M. (I), PZL Swidnik (PL), Sisteplant (E) and IMIK/University of Warsaw(PL).

ReferencesBerio, Giuseppe; Anaya, Victor; Ortiz, Angel: Supporting enterprise integration through a unified enterprise

modelling language. Proc. 16th Conf. Advances Information Systems Engineering for NetworkedOrganisations, Riga (Latvia) 2004, Vol. 3, pp. 165-176.

McLoughlin, Michael; Heavey, Cathal; Rabe, Markus: Research into developing a training tool federate in themanufacturing systems domain. In: Mertins, K.; Rabe, M. (Eds.): Experiences from the Future. FraunhoferIRB, Stuttgart, 2004, pp. 341-350.

Mertins, Kai; Jochem, Roland: Quality-oriented design of business processes. Kluwer Academic Publishers,Boston, 1999.

Rabe, Markus; Mertins, Kai: Reference models of Fraunhofer DZ-SIMPROLOG. In: Bernus, P.; Mertins, K.;

Schmidt, G. (Eds.): Handbook on Architectures of Information Systems. Springer, Berlin, Heidelberg, NewYork, 1998, pp. 639-649.Rabe, Markus; Jaekel, Frank-Walter: The MISSION project demonstration of distributed supply chain simulation.

In: Kosanke, K.; Jochem, R.; Nell, J.G.; Ortiz Bas, A. (Eds.): Enterprise inter- and intra-organisational inte-gration. Kluwer, Boston, Dordrecht, London, 2003, pp. 235-242.

Rabe, Markus; Jaekel, Frank-Walter; Dassisti, Michele; Erriquez, Mauro: Generic adaptor for distributed

simulation. In: Proc. Simulation and Visualization, Magdeburg (Germany) 2003, pp. 205-216.Rabe, Markus; Jaekel, Frank-Walter: Distributed simulation and supply chains. In: Proc. Int. Conf. Competitive

Manufacturing COMA04, Stellenbosch (South Africa) 2004, pp. 437-442.

Stich, Volker; Weidemann, Martin: Decision support for improvement of logistics performance in productionnetworks. In: Stanford-Smith, B.; Chiozza, E.; Edin, M. (Hrsg.): Challenges and Achievements in E-businessand E-work. Amsterdam et al.: IOS Press: Amsterdam 2002, pp. 638-645.

Supply-Chain Council: Supply-Chain Operations Reference Model - Overview of SCOR 5.0. Supply Chain

Council, Pittsburgh, 2002.

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2.2 Making Build to Order a reality: The 5-Day CarInitiative

Gareth Stone, University of Bath, [email protected]

Joe Miemczyk, University of Bath, [email protected] Esser, ThyssenKrupp Automotive, [email protected]

The automotive industry in Europe faces fierce competition in all its major markets and is dealingwith a customer who is less patient and more demanding in terms of vehicle choice. The currentsystem of making vehicles represents a vicious circle where forecast based production and push-based selling using discounts and incentives is leading to lower profits,thus more volume is neededto maintain the equilibrium. Build to Order (BTO) strategies may offer a new direction for

manufacturers who suffer in this climate of spiralling costs and punctured profits. The articlediscusses current usage of BTO and requirements for its successful implementation in theautomotive industry.

IntroductionThe automotive industry in Europe faces fierce competition in all its major markets and is dealing witha customer who is less patient and more demanding in terms of vehicle choice. Whilst vehiclemanufacturers develop shorter product lifecycles and offer a greater variety of models, this providesshorter market windows in which to generate the sales volume necessary to support the massivedevelopment costs of a new vehicle. The current system of making vehicles represents a viciouscircle where forecast based production and push-based selling using discounts and incentives isleading to lower profits, thus more volume is needed to maintain the equilibrium (Holweg & Jones,2001). Build to Order (BTO) strategies may offer a new direction for manufacturers who suffer in this

climate of spiralling costs and punctured profits.

The global environment of the automotive market has forced many companies to return to theiroperations strategies with new eyes. Companies are moving or have moved from centralisedoperations to decentralised operations in order to take advantage of the available resources and inmany cases, simply to be closer to their markets. Automotive manufacturers have undergonenumerous changes in terms of strategies, tactics, and operations with the aim of meeting the rapidlychanging business environment. Currently, companies have to compete based on a range ofperformance objectives such as quality, price, delivery, responsiveness and flexibility (Miemczyk &Holweg, 2001).

Consequently, the automotive supply chain is undergoing a major transition. Current vehicle supplysystems are for the most part based on stock push, whereby the majority of vehicles are sourced fromexisting finished goods inventory in the marketplace. In the UK for example, only 33% of all newvehicles sold in 1999 were actually built to order (BTO), and the remainder was sold from the averagetwo months stock held at any one time (ICDP, 2000). This is not a bad strategy and has worked well inthe past. However, there is a major flaw in the thinking. Not all the cars built will have a ready andwilling customer. The industry can deal with this situation by discounting, effectively paying thecustomer to take cars off their hands. Customers are far more sophisticated, better informed, anddemanding and competition is global and oversupplied. The industry now understands the benefits ofmoving towards a build-to-order model where production exactly matches the market requirements. Aplethora of Lean production programmes have been launched but many have failed to address a keyphilosophy: let the customer pull and produce only when an item is needed. It is mass customisation,rather than mass production has become a major objective of automotive companies. BTO is nowbecoming a popular operations paradigm after the success of its notable implementation at BMW.

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6QVCEMNGVJKUKUUWGKPCEQORTGJGPUKXGOCPPGTVJG+PVGNNKIGPV.QIKUVKEUHQT+PPQXCVKXG2TQFWEV6GEJPQNQIKGU(ILIPT) is funded by the European Commissions 6th Framework Programme, running from July2004 for 48 months. With an overall budget of over 16 Million (9 million from the EC), theoverall objective of the project is to develop new methods and technologies to facilitate theimplementation of a new manufacturing paradigm for the European automotive industry. This newparadigm, the 5-day car initiative, will approach the building of cars to order in a reduced time

scale. This includes customer order at the dealership (or even at home) through all manufacturingprocesses through to delivery to the customer. With the automotive industrys current 40-daycapability, achieving a 5-day order to delivery cycle in Europe is certainly a far reaching challenge.

Although the project has as a broad remit, it will focus on three specific themes to ensure a holisticapproach to developing technologies that will enable the 5-day car. Modular Car - aims to develop adigital prototype of a passenger vehicle using an innovative system and new approaches of flexiblespace frame and skin panels and modules for rapid build to order based on a high level of modularity.Flexible Supply Network - aims to make significant breakthroughs in information and materiallogistics by radically reducing time lags, stock piles and unused capacity which are the trademark ofthe dynamic automotive network environment. And finally ILIPT will look at the Integration of

Complex Product Processes which will develop a vision and roadmap of the future