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Using the Internet: from designing your product to managing the supply chain Add to ...

Using online collaboration to improve your design process

Working with your customers, suppliers, and colleagues online will maximize expertise and shrink product development cycles. According to a Manufacturing.Net survey conducted in 2000, 59 per cent of design engineers use the Internet every day, for everything from file sharing to real-time conferencing. Here's why:

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  • Get the best people for the job The Internet is a quick and inexpensive way to bring your best resources together for every project. Virtual teams in a variety of buildings, cities, or countries can work together or hold meetings with customers wherever they happen to be.
  • Get immediate, accurate feedback Sharing design iterations speeds up the product development cycle. When projects require customer approval and signoff, collaborative software also makes it easier to share redline drawings.
  • Make the best use of your software through online collaboration Engineers appear to be divided over the merits of real-time collaborative tools. Some critics say that current applications are not intuitive and that their effectiveness is limited by a lack of adequate bandwidth. Nevertheless, collaborative CAD tools continue to transform the speed, cost, and processes surrounding manufacturing design and product development. In fact, the advent of Java-based design tools and open-architecture machining platforms makes for a seamless flow between collaboration, design, and production.
  • Save time on patent searches Design engineers can obtain information about patents online at Industry Canada's website where they can also link directly to the Canadian Patents Database and the patent offices of Canada's major trade partners.
  • Conduct competitive research and share industry knowledge Engineers can search online catalogs for products, materials, and CAD drawings as well as obtain a line on competitors' activities. They can also monitor vendor products, either by actively searching or by subscribing to newsletters.

Forecast demand

Improve the accuracy of demand forecasts and production plans with easy-to-use, automated statistical forecasting systems:

  • Several opinions, not just one Forecasting systems reach the desktop of every line manager and bring company-wide input into the process through interactive Web-based applications.
  • Real-life data, not just estimates There is plenty of "real-life" and highly accurate, raw data to feed your forecasts. Authorized users can obtain historical data, forecasts, and future orders, as well as updates and adjustments. If the central database is linked to the company's Web server, you can include branch plants and remote sales offices.
  • Automated calculations Projections are fast and you can do scenario planning with ease. You can forecast inventory needs for thousands of categories in a matter of minutes, or plan "what if" scenarios for special promotions, spike orders, or slowdowns for each product.
  • Compensate for data shortcomings New developments make it possible to accurately forecast average demand and customer service requirements using slow-moving or intermittent data; this is a situation that has long proved challenging for capital goods manufacturers and organizations with large inventories of spare parts.
  • Reduce inventory requirements by shrinking planning horizon Forecasting tools work in tandem with the central database and your manufacturing systems, allowing you to tie production closely to actual customer demand. The result is an opportunity to reduce inventories and adopt a just-in-time relationship with suppliers and customers.

Sourcing & procurement

Reducing the transaction costs of purchasing goods and services through online procurement is becoming increasingly popular, and for good reason. A recent time-management study for a major auto parts supplier discovered that the system reduces transaction costs to between $0.50 and $10 (from $48 to $105 using a manual system).

How it works

Typically, the procurement officer uses a Web browser to enter a company purchasing site that contains electronic catalogs from approved suppliers. The user can search the site by supplier, specific product, or service. He or she simply selects items from as many suppliers as necessary; the system consolidates the order into one requisition and automatically places the order to each supplier. If the value of the order is beyond the purchaser's authority, it is automatically routed to the supervisor who needs to approve it first.

Purchasers have the convenience of ordering once, easily, and quickly, thus saving both time and transactions costs. Depending on how sophisticated their systems are, they can also integrate automatic ordering based on inventory levels or order history. Ordering can also be automatically planned to achieve economies of scale.

For suppliers, the initial advantage is reduced transaction costs. As they go further into e-procurement, however, they often find a related benefit that is even more attractive: freeing up resources previously spent on transaction processing and applying them to strategic sourcing activities that save money.

Lower materials costs through worldwide sourcing and competitive bidding

The Internet gives new meaning to the principle that an open marketplace will set the best possible price. Purchasers can actively search for new suppliers via the Internet - or they can let the suppliers come to them. Dedicated Web sites allow buyers to hold what is known as a reverse auction-where suppliers bid prices down to win contracts. Check search engines for bid sites in your industry.

Worldwide sourcing, competitive bidding

The purchaser starts the bidding by selecting from a list of known suppliers (some reverse auctioneers also provide additional lists of worldwide suppliers.) The purchaser then e-mails the request for proposal (RFP) to eligible suppliers and sets a date for the auction. At the selected time, auctions take place in about 20 or 30 minutes. One US site, FreeMarkets.com, claims it saves buyers an average of 13% on purchase prices.

Improve productivity, costs, and quality by tapping into supplier expertise

Web-based collaboration with suppliers makes the bidding process much more flexible, and allows you to tap into their expertise without losing valuable time. For example, an RFP may set specifications that a supplier believes will add unnecessary costs. The supplier can send drawings or documents that demonstrate how to change the specifications to lower the cost without affecting product performance. The buyers' engineers can review the proposals, authorize the change, and notify other suppliers, all online. The quotes can then proceed with little time lost.

Eliminate payment errors

Web-based procurement eliminates many mistakes in the procurement process. When a supplier receives an electronic purchase order, the recipient simply clicks an "Invoice" button to generate an invoice to send to the purchaser. It automatically fills in the correct price from the purchase order, eliminating transcription errors and payment delays.

Volume purchasing pricing without the volume

Electronic procurement options such as auctions and buying consortia (buying in groups) assist strategic sourcing of materials for which a single company doesn't have volume-purchasing or other leverage. It also allows dot.com suppliers to sell unique products or parts that other distributors may not offer to a larger market.

Reap the rewards of supply chain management: increased profitability and lean, on-demand production

E-procurement and e-commerce may well be able to deliver on their promise to allow manufacturers to build a true partnership with their suppliers, the ultimate goal of supply chain management (SCM). The Internet simplifies the sharing of electronic data; it also provides a framework for improved information systems and electronic management of the flow of orders central to these efforts.

The "pull" system

If suppliers are alerted automatically when your inventories are low, when you are expecting more orders, and concerns regarding the size of those orders, they can plan ahead to make on-time deliveries. This means your need for materials "pulls" the products from your suppliers, which reduces the need for large inventories and eliminates a lot of paper pushing.

Added value

When buyers and suppliers are sharing planning information, both can schedule their purchases to obtain the best possible pricing.

Free-flowing information

The true advantage of e-procurement, desktop requisitioning systems, and order-entry systems is that they can work seamlessly with forecasting tools, corporate databases, management information systems, and supplier inventory databases to build a lean (or "free-flowing") manufacturing environment.

Some of SCM's initial benefits:

  • Logistics: reduced freight and distribution costs;
  • Order entry: improved accuracy and speed when entering and filling orders;
  • Inventory management: reduced inventories, greater inventory turnover, and better control over true inventory levels.

These initial savings are meaningless, however, if suppliers merely increase their inventory, freight, or warehousing costs to obtain higher volume orders. The real benefits of supply chain management occur when networks of key suppliers, distributors, and customers integrate to the point where they eliminate steps in their business processes and reduce the actual need for inventory and freight.

Some of SCM's ultimate benefits:

  • Accurate forecasting;
  • Reduced cycle time;
  • Shorter time-to-market;
  • Higher white-collar productivity
  • Less waste;
  • Improved delivery lead times;
  • Improved return on assets.

The ultimate benefits of supply chain management occur when the company sees its future in setting up the best supply chain network, and not through individual company performance alone.

Content in this section is provided in partnership with the Business Development Bank of Canada. BDC provides entrepreneurs with financing, venture capital and consulting services. To find out more go to BDC.ca.


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