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DOW CORNING

Smart Innovation series brought to you by Dow Corning

Supply Chain Innovations Key to Global Strategy

Innovations in many industries, as well as infrastructure requirements and economic development in emerging markets, are creating unprecedented de- mand tor raw materials around the world. That's why it is now so crucial to have supply chain management at the center of any long-term business strat- egy for the chemicals sector. Successful supply chains are never static; they must be dynamic and innovative to meet burgeoning global needs.

Alex Royez is Vice President, Executive Director of Global Supply Chains at Dow Coming, the supplier of silicon-based products, technologies and solutions^ Greg Mekjian is Executive Vice President, North American Operations at

Bristlecone, Inc

a leading provider of supply chain and business process solu-

tions. Previously he was Vice President. Extended Supply Chain Management Solutions, at SAP.

Framing the supply chain issue—where should a company define the boundaries when considering its supply chain and where should its concerns stop?

so we hear first-hand the voice of the customer and can match that with our total solution offering.

where supply chain boundaries become blurred, where it's no longer possible to see where one company starts and another ends. We once thought information translated to

Alex Royez(AR) Onesizedoesnot fit all. There are no text-

GM The concept of the extended supply chain takes into consideration product development/design, strategic sourc-

power, but, today, the power is in the sharing of informa- tion which, in this context, provides an opportunity to re-

book rules or mathematical equations

ing. customer requirements, and their expectations about

duce

costs that can be shared by all the constituents within

that help a company define the bound- aries of a supply chain. It is impoiiani 10 take a "voice of the customer" and "voice of the business" approach,

service. When devising strategies for supply chains that are heavily customer centric (discrete manufacturing), specific attention must be given (o how customers channel their re- quirements into the entry funnel of an adaptive supply

the supply chain. Of course, in other business models, where you want your customers to be self-suflicient, you will want to share the information necessary for them to sustain that self-sufficiency This requires sharing credit

and balance those two perspectives

chain. Users of advanced technologies can make this trans-

history and status, order status, histoiy. profile informa-

and nc-eds. Custoniei-s need to be able

parent to the customer and to the serving enterprise.

tion,

pricing, and market pricing. Its about managing

to identify where they fit within the

your

own destination, being responsible and accountable

defined supply chain, and employees

must have a clear line of sight to cus- tomers and know how they fit into the supply chain. The key is ensuring balance and harmony within the internal enterprise and externally—and then employing good change management and communication skills.

Alex Royez

Greg Mekjian (GM) Any issue that impacts customer ful- filment is a company's supply chain responsibility, whether the company owns the physical elements of the supply chain, only a portion of the supply chain, or none at all. The chal- lenge is to identify the critical com- ponents of the supply chain, internal or external, that need to be planned,

monitored and acted upon. This is

Greg Mekjian

not easy, because the critical compo- nents of the supply chain morph on an on-going basis.

How do you ensure the customer's voice is inte- grated into your supply chain strategy so there is a common understanding of what the customer wants and not a series of interpretations of what the cus- tomer wants?

,AR Getting the information closest to the source that will act on the information is critical. In some cases, a custom- er's manufacturing schedule might trigger an electronic replenishment signal, eliminating the information passing through the hands of purchasing, sales, and customer service. In other cases, it's a self-service model that best facilitates this requirement and allows customers to choose "exactly" the solution that meets their needs. For example, our Xiameter® business is a self-service model with clearly defined business rules, so everyone is working with the same information. Any deviation from the business rules triggers an exception handling process. Still in other cases, its establishing trusting relationships in which customer operations staff talk to supplier operations staff. At Dow Coming, we work directly with our custom- ers to help them with their internal process needs, work- ing side-by-side with them to develop new opportunities.

Has the increasing globalization of trade placed more strain on tbe supply chain system, and, if so, what is tbe best way to respond to these issues?

AR With soaring global demand for raw materials, infor- mation about price, demand, supply, transportation, and labor rates needs to be available at the fingertips of key decision makers. My company is responding to this signifi- cant increase in global demand by optimizing production wherever possible through supply chain improvements. productivity enhancements, and investments in additional manufacturing capacity. For example, in the first half of 2004, we increased volumes over 15 percent, compared to the same period in 2003. We may not have mastered turning an ocean freighter on a dime, but we can ensure we have the right material on that ocean freighter and that the freighter is routed via an optimal channel, so it can deliver the material to the customer on-time at the most competitive price. That translates into market share, long-term relationships and limitless future opportunities.

GM Globaliziition of trade and trade restrictions has defi- nitely complicatc-d the extended supply chain requirements. This has necessitated investment in ERP, including the capa- bility to support global trade and trade restrictions and de- mand and supply planning solutions. While these implemen- tations started out being country-specific, the trend is more to regional and global implementation, as Dow Coming has done. Tliis move supports the requirement for one "truth" without significant effort spent in consolidation and reconciliation of operational andfinancialdata. To a large extent, this has been made possible by advances in informa- tion technology, including the internet.

To what extent should a company enable tbe supply cbain around its technical abilities, and bow mucb in- formation sbould it share witb its business partners?

AR To address this question thoroughly, a company must understand its business model and strategy. Perhaps there is a segment of the business that is seeking a long-term, trusted advisor, joint partner relationship - in other words.

for performance and success.

CM The technology is not really a constraint when it

comes to supply chain management. The real challenge is the ability and willingness to collaborate between supply chain trading partners. MuUi-level supply chain visibility and planning is the next frontier. There are definite ben- efits to this in terms of eost savings, however, the cultural change and distrust factors have to be overcome. With the advent of the internet, we have a low-cost way for trading partners to see demand and supply which was previously not available to them. I am seeing a higher degree of com- fort with more information-sharing than ever before.

How key are behavioral aspects? Do you need to cbange tbe behavior of people in the supply cbain or adjust tbe system to reflect tbe people in it?

AR Chemistry, technology and advanced algorithms are simple in comparison to changing behaviors within an organization. However, with good change management models, it is possible to spark the momentum and enthu- siasm that will develop into ownership, empowerment and an ellective supply chain culture. It's not about adjusting the system to accommodate the people, nor is it really about changing the people -rather it's about providing the information, tools, desire and vision that allows the supply chain incumbents to own the vision, live the vision, and be empowered to achieve the vision.

( ; M Many organizations have not yet addressed the issue of increasing supply chain complexity Change management and training initiatives can help improve operational efiec- tiveness, but there is a bottleneck if the technical and business sophistication required by the new tools/technologies isn't present within the organization. The system is only the en- abling tool to personify the core competency of the people.

For more information about Dow Corning and its innovative products and solutions, go to \vw\\\do\\'corning.comlinnovate.

For more information about Bristlecone. Inc. and its supply chain solutions, go to www.hcone.com.

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