New paradigms in planning and control across manufacturing supply chains The utilisation of Internet technologies

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1 The current issue and full text archive of this journal is available at IJOPM 21,5/6 582 New paradigms in planning and control across manufacturing supply chains The utilisation of Internet technologies D.F. Kehoe and N.J. Boughton University of Liverpool, Liverpool, UK Keywords Planning, Supply chain management, Internet, Manufacturing, Information systems Abstract Discusses some of the key elements of research which will investigate the role of the Internet within the manufacturing supply chain and, in particular, focuses on its impact on the manufacturing planning and control operation. Although much of the current Internet discussion focuses on sales and marketing applications, step change improvements in the management of the supply chain are possible using the same fundamental technologies. However, it is argued that a paradigm shift in the way in which manufacturing companies plan and control their operations is required if full advantage is to be gained; an alternative to the traditional linear transfer of information within supply chains is required. The Internet provides the opportunity for demand data and supply capacity data to be visible to all companies within a manufacturing supply chain, consequently companies can be in a position to anticipate demand fluctuations and respond accordingly. This is in contrast to the more established reactive approach. This paper proposes the development of supply webs and a more interactive approach to supply chain partnering and identifies some of the research issues within this context to facilitate the development of Internet-based manufacturing planning and control. International Journal of Operations & Production Management, Vol. 21 No. 5/6, 2001, pp # MCB University Press, Introduction The objective of the Dynamic Operations Management Across the Internet (DOMAIN) research project (Kehoe and Boughton, 1998) is to investigate the role of the Internet across the manufacturing supply chain and, in particular, focus on its impact on the manufacturing planning and control operation. It is well established that planning and control systems make significant contributions to the successful operations of any manufacturing organisation both internally and across its supply chain. However, the role of such systems needs to be re-evaluated in the light of developments in communication and information technologies. The current and future technological capabilities of the Internet mean that it is possible for demand data as well as supply capacity data to be visible to all companies within a manufacturing supply chain. It is perceived that manufacturing supply chains will change from an order-drivenlot-sizing approach to one more akin to a capacity-availability-booking approach supported by appropriate search engines. Furthermore, using Internet-based information transfer, supply webs will replace the traditional linear movement of information within supply chains, thereby facilitating a more interactive approach to supply chain partnering. This reconfiguration of

2 supply chains will have major implications, not only for individual businesses, but also for national economies. Recognition of the importance of the supply chain and effective supply chain management has grown over recent years. Companies have reduced their core manufacturing capabilities and placed a greater reliance on both new and existing suppliers. In the continually exacting global economy, organisations need to be able to respond to the demands of their customers and, as a consequence, the effective management of supply chains is a critical factor differentiating the successful organisations from the rest. One of the key parameters affecting the operational success of a supply chain is the efficient flow of information through the supply chain. In an attempt to allow a smooth and timely flow of information, organisations are focusing on the business processes and breaking down functional barriers. However, it is the Internet, intranets and, in particular, the use of extranets which offer the opportunity to make step change improvements in this area. In fact the role of the Internet within the infrastructure of future supply chains is considered to be integral and one of the key drivers of change (Deloitte and Touche, 1998). Initial Internet attention has focused on the role of electronic commerce (e-commerce) and the retailing sector. For example, Amazon Books (see is the oft-cited example of the next generation, online bookstore; customers can browse and place orders from the virtual bookshelves. E-commerce is not, however, all business-to-consumer, it is the business-to-business commerce (i.e. e-business) which offers by far the greatest growth potential (The Economist, 1999). It appears that there is an almost exponential growth in companies, across all sectors, who are now establishing a ``Web presence in the form of a company Web page and thereby providing access to general customer advertising, product data and the opportunity to place an order or simply make contact with appropriate personnel. More specific to this discussion, manufacturing-based applications are continually being developed, albeit more towards the commercial areas of the business; see for example Internet Business (1998). However, the impact of digital business on the operation and cost structures within traditional manufacturing supply chains has been identified as both fundamental but poorly understood (Jackson, 1998). Within the more formal research community, work is being undertaken to address alternative applications of the Internet technologies; examples include design-to-manufacture tools (Smith and Wright, 1996), concurrent manufacturing (Lapsley et al., 1996) and virtual supply chain management (Baxter et al., 1996). The potential of Internet-based technologies to enhance the operations of the supply chain is recognised. A recent global manufacturing survey (Deloitte and Touche, 1998) raises the question of supply webs eventually replacing the more traditional supply chains. Future investment strategies identified the use of the intranets and extranets to enhance supply chain relations. Although applications have been developed, both this survey and a second, conducted by the DTI (DTI, 1998), indicate supply chain integration is far from satisfactory New paradigms in planning and control 583

3 IJOPM 21,5/6 584 in today s demanding economic climate. Undoubtedly, the diffusion of Internetbased applications within organisations and across their supply chains is increasing, but not as universal as one might be led to believe. An important opportunity exists for the international manufacturing research community and key (strategic) industrial supply chains to investigate and understand the implications of Web-based manufacturing control and develop the alternative methods and strategies necessary to support this new manufacturing paradigm. This research opportunity represents a key challenge to developing an international manufacturing infrastructure for the millennium. Relevant UK research to date In May 1997 the UK Research Council undertook a review of the research and training support provided by the Design and Integrated Production (DIP) programme for the period 1992 to 1997 (EPSRC, 1997). With reference to ``operations and production planning it was commented that most of the research focused on methodologies for more effective implementation of existing production planning and control systems or upon improved scheduling or modelling algorithms, as illustrated in Table I. For whatever reasons, little of this research has examined alternative manufacturing planning and control paradigms, and the current industrial progression from MRPII to ERP through products such as SAP, Baan and Oracle have dominated the research mindset. As a result, the research base in the UK has been somewhat retrospective and provided limited ``vision in terms of the next generation of systems. Though the quality of the research has not been questioned, there needs to be an activity determining the structural and operational characteristics of the manufacturing planning and control systems which are likely to be part of the ``factories of the future. The significance of the supply chain and effective supply chain management has grown over recent years and the role of planning and control systems is pivotal in this context. Not only do planning and control systems co-ordinate the operations of any one company but there are also associated knock-on effects across the complete supply chain. It is important, therefore, to develop Generic area No. projects % Implementation and audit methodologies Scheduling algorithms and modelling/systems specification Other topics Table I. EPSRC operation and production planning research (OPPR) Research factor Average Variation Quality: 1, world class; 2, competitive; 3, useful; 4, limited Dispersion: groups attracting three or more grants 26% (OPPR) 40% (DIP)

4 collaborative work between these areas if a more holistic understanding is to be obtained. Not only is there opportunity to investigate these important relationships, but, using the developing Internet-based technologies, radically different designs or approaches can be explored and a mindset more akin to supply-chain resource planning (SRP) can emerge. This is underlined by leading manufacturing organisations who consider supply chain integration to be one of the factors essential for future for success (Deloitte and Touche, 1998). Moreover, future competition will be between supply chains rather than individual companies (Bhattacharya et al., 1995). Future operational improvements must, therefore, lead to net benefits to the complete supply chain as well as individual organisations. New paradigms in planning and control 585 System classifications Recent research at the University of Liverpool (Kehoe, 1997) has identified the important relationship between the business classification of a manufacturing company and the information systems requirements in terms of the contingent variables of complexity and uncertainty. The research indicated the need to map the business unit classification (assessed in terms of the Puttick-style grid) onto the information system configuration (assessed in terms of contingency theory) as shown in Figure 1. Significantly, the research indicated the need for appropriate manufacturing information systems and that for particular business sectors the requirement is for simple, supply-chain based systems rather than complex within-enterprise configured solutions. Although there are some developments within commercial planning and control systems to encompass supply chain requirements, reports suggest some way to go before such systems become mainstream. Moreover, developments are such that systems are intended to Figure 1. Information systems contingency map

5 IJOPM 21,5/6 586 work in conjunction with conventional MRPII and ERP systems (Newing, 1997). A further factor is that composite planning and control systems are not uncommon within manufacturing organisations. Composite (hybrid) systems are likely to increase for those companies within a supply chain who acquire additional value adding activities previously within the brief of their customers. Inevitably, the variety of manufacturing planning and control systems in operation across any one supply chain adds complexity to the efficient flow of information. Harland (1997) categorises the alternative definitions of the term supply chain along with their development, and provides a useful framework in terms of systems levels. This classification of supply chains can be further extended to reflect both the classification of business units (as indicated in Figure 1) and also the developments in the application of Internet technologies to supply chain management, as shown in Figure 2. Internal supply chains essentially focus on processing raw materials and components through the manufacturing enterprise to delivery of the finished product to the customer. The dyadic relationship extends the business and characterises the integration of the commercial functions, essentially, purchasing-sales, of the customer-supplier organisations involved. The external chain takes a more holistic viewpoint of the supply chain. It starts from the original source of raw materials, through the different companies involved in transforming the raw materials, through the various parts, components, assemblies to the final product, and includes the distribution and retailing elements, and finally to the customer. As Harland (1997) points out, increasing attention is being paid to the supply network; essentially the network of relations that exist between a company, its suppliers, its suppliers suppliers and so on upstream, and its customers, its customers customers and so on downstream. Figure 2. Supply chain concepts and developments

6 With respect to the work described here, the operation of the manufacturing planning and control system(s) is pivotal in all cases and, again, it is important to acknowledge that different companies in the chain will have different systems in place, varying in refinement of both functionality and application. Furthermore, companies may be part of several supply chains within an industrial sector. What is crucial is that the combined systems should form an integrated infrastructure, enhancing, rather than restricting, the operation of the whole supply chain. The role of the DOMAIN project is to explore the role of the Internet in support of manufacturing planning and control across the whole supply network or supply web. New paradigms in planning and control 587 The Internet, intranets, extranets and the supply chain The enveloping presence of the Internet within business has been phenomenal and growth is set to continue; US analysts Killen and Associates estimate that by 2003 the global Internet market for consumer goods will be over $600 billion. In response, recent commentary suggests that although organisations will need to fundamentally change the way they do business (Manchester, 1997), the barriers lie with the business processes rather than the technology (Taylor, 1998). In fact, prior to the arrival of the Internet in the more commercial sense, organisations have been concentrating on their business processes in order to break down functional barriers and enhance the flow of information. Improvements in performance are restricted, however, by the traditional sequential nature of operations and an overall inability to exploit the concepts of concurrency. The availability of the Internet and the associated technologies provide the opportunity to make further significant, even radical, improvements in this area. Although business-to-business electronic trading has been around for more than 20 years, using electronic data interchange (EDI) networks, the complexity of early EDI packages, rival standards and relatively high costs have traditionally excluded many smaller suppliers. These problems reflect those identified in an earlier study of the automotive supply chain (DTI/SMMT, 1994). Current estimates suggest EDI usage among UK companies ranges from as few as 2 per cent (Moran, 1998) up to 30 per cent (DTI, 1998). In principle, access to the Internet is simplified through the use of more universal technologies: most organisations have a telephone and a PC and are thereby Internet enabled, initial access is therefore unlikely to be an issue, particularly for those companies further down the supply chain. Initial Internet attention has principally focused on the role of electronic commerce (e-commerce) and in particular business-to-consumer applications. E-commerce applications do, however, extend to business-to-business applications which themselves naturally extend over supply chains. Leading examples of manufacturing applications of extranet-enabled supply chains include General Electric s aero-engine business and the US-based Automotive Network Exchange established by Ford, Chrysler and General Motors. It is within business-to-business applications where the volume of activity is likely

7 IJOPM 21,5/6 588 to be the greatest. Inter-company trade over the Internet provides businesses with the opportunity to cut costs, reduce order-processing time and improve information flow. Organisations have already been reaping the benefits of the Internet through the use of intranets: essentially private networks based on Internet technology where access is restricted to company personnel only. Typical applications include the publication of internal documentation, such as quality manuals, technical/product data and telephone directories, as well as providing a means of internal communication (e.g. bulletin boards). Benefits accrue not only from the availability of up-to-date information, but the ease by which this data can be updated as well as the cost savings of generating less hard copy. Extranets, or extended intranet, continues Internet supported applications beyond the boundaries of the single organisation to provide the business-tobusiness applications between the organisation and its suppliers and/or customers. An extranet typically uses the same infrastucture and technologies as the public Internet but includes essential security measures to prevent (as far as is currently possible) unwanted access. Through the use of extranet applications, organisations can be in a position to gain access to information such as product data, order status and inventory levels. Alternatively, and perhaps more conventionally, using less vulnerable technologies customers have access to browse product catalogues and place orders across the Internet. Unfortunately, a great deal of hype surrounds the Internet and its potential, it is therefore important to place current manufacturing practice into context. One commentator has suggested that the level of Internet comprehension within manufacturing, on a scale of one to ten, is considered less than one; whereas organisations in the banking and retail sector have been much quicker to exploit the capabilities (Internet Business, 1998). Even with regard to the more conventional intranet application, manufacturing are viewed as reluctant users (Nairn, 1998). Useful examples from retailing can, however, be found which provide some insight into the way forward. Safeway, the UK supermarket group, has begun an initiative to share live sales data with suppliers using network computers linked to the Internet (Field, 1997); a small components manufacturer provides an up-to-date work-in-progress list on its Web site, thereby allowing customers direct access to the status of their orders (Malkani, 1998); Boeing is running its spares business through an extranet (The Economist, 1998). Although these are encouraging applications, they are relatively static applications and ones which relate more to the dyadic relationships outlined in Harland (1997). Opportunities now exist to explore more dynamic applications of Internet technologies, particularly within the areas of manufacturing planning and control and the supply chain. A more fundamental investigation of how Internet technologies can support manufacturing operations across the supply chain, or supply network, is required; in other words, extending its application to the external and network supply chain classifications shown in Figure 2. Importantly, the issues are not necessarily to do with the technology but more

8 to do with their application both within organisations and across their supply chains. Dynamic Operations Management Across the Internet (DOMAIN) ± a research agenda The objective of the DOMAIN project (Kehoe and Boughton, 1998) is to investigate the role of the Internet across the manufacturing supply chain and, in particular, focus on its impact on the planning and control operation. This research will build on existing work in the analysis of manufacturing information systems (Kehoe et al., 1993), supply chain management (for example, Jones, 1989), supply chain modelling (Towill, 1996) and manufacturing planning and control system modelling (Boughton, 1995). Jones (1989) noted that demand information relating to the end customer is typically collected independently by companies with little or no sharing of this information or co-operation between chain members. This lack of demand visibility contributes to what has been termed the Forrester effect (Forrester, 1961). An opposite approach is suggested here; if demand data and supply capacity data are available to all companies within a manufacturing supply chain, then companies are in a position to respond more proactively and, as Youssef (1992) suggests, with greater speed. This is in contrast to the more traditional reactive approach. Within the global survey conducted by Deloitte and Touche (1998), organisations were recognising that simply responding to changes in demand is not enough, and that through the application of developing information technologies they should be able to anticipate fluctuations in demand and respond accordingly. Furthermore, timely information availability and not just efficient information transfer is the key to enhanced supply chain operations. There is some synergy here with the production planning and control approach described by Childe (1998) when discussing the extended enterprise, ``the supplier company becomes more like a supplier of resource to the principle company, so that its processes are the commodity that is traded. It is proposed that, through the adoption of the emerging Internet-based manufacturing philosophy, supply chains will be able to change from an order-driven-lotsizing approach to a capacity-booking-availability approach supported by appropriate search engines. This approach, which will actively promote information sharing and co-operation, will be supported by what have been called presentation layers. Defining the information requirements and modelling the effectiveness of operation of the presentation layer illustrated in Figure 3 represents one of the core issues for the DOMAIN research programme. By considering the external and network supply chain classifications (see Figure 2) there will be several presentation layers and, based on earlier results (Harland, 1997), it is anticipated that the requirements of the different presentation layers will vary according to their relative position. The research implications of what has been termed Internet-based interactive partnering, or I-BIP, are therefore immense both in terms of the technological New paradigms in planning and control 589

9 IJOPM 21,5/6 590 Figure 3. DOMAIN: a model for supply chain manufacturing planning and control using Internet technologies and the organisational challenges. A key part of the aims of the DOMAIN project is to promote activity in this area within the UK research community in order to examine these issues. There are essentially four aspects to the DOMAIN project and these are: (1) A detailed examination of the current usage and operation of the Internet within manufacturing supply chains, and establishing industry practice in this area. Specifically, sectors will be examined which have well developed but operationally different characteristics. This aspect of the research will define the conventional production planning and control information flows within/across the supply chains and build a Web-orientated model based on the client/server supply net shown in Figure 3. The work will build upon the existing UK supply chain research base including that at Cardiff (Towill, 1997), Bradford (Webster et al., 1997) and Bath (Harland, 1997). (2) Building a dynamic model of the Web-based supply chains in each of the collaborative industrial sectors. The modelling of the dynamic performance of I-BIP will assist manufacturing companies in evaluating alternative strategies in terms of supply chain parameters such as the number of partners, supply capability indices or inventory distribution, as well as the typical manufacturing metrics; for example lead time, throughput and delivery performance. The subsequent results will provide an important stimulus to the implementation of I-BIP strategies within specific supply chains. (3) The third aspect of the research will involve the development of an HTML prototype. A supply-web model will be created illustrating the information requirements and the optimised manufacturing control

10 strategies proposed. The DOMAIN prototype will provide server-based access to manufacturing capacity and transaction management and a client interface using standard Web presentation formats. The emphasis will be to provide a demonstration facility that can be used as an on line research tool to focus user evaluation of the I-BIP concepts. (4) Finally, sector-based models and prototypes of I-BIP working will be disseminated through a Web-based newsgroup (to co-ordinate the UK research in this area) and will be demonstrated through sector-based workshops. The novelty of the research is illustrated in the comparison between the traditional manufacturing planning and control approach and the I-BIP philosophy shown in Table II. Making a comparison in this way raises the question of legacy systems. Most organisations will have invested heavily in manufacturing planning and control systems, at varying levels of sophistication and, inevitably, at varying stages of implementation. The research described here does not propose to replace existing systems with yet another new suite but seeks to establish an enhanced way of performing manufacturing planning and control operations across the supply chain. Fundamentally, it is not a question of replacing systems but one of enhancing and simplifying the way we currently use those already in place. A comparison can be made within the JIT philosophy to planning and control. Kanban-controlled systems are not fundamentally new, merely a variation on the re-order point and two-bin approaches; what is different, however, is how these systems are used within everyday operations, moving from a push to a pull application. Inevitably investment will be required, but an affordable level (PC/modem links and the development of an extranet). A less daunting prospect, particularly for smaller companies at a lower level in the supply chain. New paradigms in planning and control 591 Summary This paper has discussed the role of emerging Internet technologies within the areas of manufacturing planning and control and the management of the manufacturing supply chain. The work outlined has been placed in context both of earlier research work and relevant recent developments. Although there Characteristic Traditional manufacturing planning and control Internet-based interactive partnering (I-BIP) Planning approach ERP (e.g. Oracle, SAP) SRP (DOMAIN) Data management Data warehouse Data retailer Organisational basis Enterprise based Supply chain based Business focus Multi-site Multi-business Technology base SQL technology HTTP technology Table II. Comparing alternative planning and control approaches

11 IJOPM 21,5/6 592 has been considerable growth in Internet activity, in particular e-business, there is considerable scope for more dynamic applications across the supply chain. Current practice within the manufacturing sector is piecemeal and rarely extends beyond the dyadic relationships that exist primarily within the commercial areas of businesses. The work outlined here sees substantial benefits to be gained by considering the integration and synchronisation of the whole supply chain. In this context, the academic challenges are to develop and evaluate alternative business models, as well as determine the tools and techniques by which the business benefits of such models can be demonstrated to practitioners. Clearly there are many important research questions and implications that need to be addressed; for example operational stability, alternative planning and control approaches, their implementation and their positioning relative to existing systems and infrastructures, as well as those relating to access and security. However, in order for genuine improvements to be realised, a radical overhaul of the current planning and control mechanisms, practices and systems is required; the DOMAIN project offers one alternative way forward. References Baxter, L.F., Ritchie, J.M. and Seeto, H.H. (1996), ``Management and control in the virtual supply chain, Proceedings of the International Conference on Engineering & Technology Management, pp Bhattacharya, A.K., Coleman, J.L. and Brace, G. (1995), ``Re-positioning the supplier: an SME perspective, Production Planning & Control, Vol. 6 No. 3, pp Boughton, N.J. (1995), ``Modelling manufacturing planning and control systems: the application of object-oriented principles and discrete-event simulation, PhD thesis, The University of Aston in Birmingham, Birmingham. Childe, S.J. (1998), ``The extended enterprise ± a concept of co-operation, Production Planning & Control, Vol. 9 No. 4, pp Deloitte and Touche (1998), ``1998 vision in manufacturing (global report), global manufacturing survey by Deloitte & Touche and Deloitte Consulting. DTI (1998), Moving into the Information Age ± 1998 benchmarking study, DTI/Information Society Initiative, London. DTI/SMMT (1994), A Review of the Relationships between Vehicle Manufacturers and Suppliers, DTI/Pub 1264/2k/3.94AR. (The) Economist (1998), ``No factory is an island, The Economist, 20 June, pp (The) Economist (1999), ``A survey of business and the Internet, The Economist, 26 June, p. 5. EPSRC (1997), ``Evaluation of research and training provision by EPSRC s Design and Integrated Production programme, EngProg\Eval.law, EPSRC Publication, Swindon. Field, C. (1997), ``Suppliers get share of data, Financial Times, 28 November. Forrester, J.W. (1961), Industrial Dynamics, MIT Press, John Wiley & Sons, New York, NY and Chichester. Harland, C. (1997), ``Supply chain operational performance roles, Integrated Manufacturing Systems, Vol. 8 No. 2, pp Internet Business (1998), ``Made in heaven: Internet adoption in the manufacturing industry, Internet Business, July, No. 18, pp

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