Less Touch, More Value
As more value is extracted from the supply chain, business systems become more
automated, requiring less human intervention. What was once a person-to-person
process is evolving into a machine-to-machine process. As internal systems become
more automated and business processes between trading partners become more standardized,
there will be fewer steps within the process, thus less "touch" will occur. Less
touch means more value for the entire supply chain because all trading partners
realize the efficiency and productivity gains possible in true electronic business
systems. Intel Corporation is moving rapidly towards a more automated machine
to machine, or business-to-business integration (B2Bi), environment.
Connecting Points
At Intel, there are more than 200 different touch-points occurring during business with customers and suppliers. A touch-point occurs when a person or separate system needs to get involved in making the business process complete. Each touch-point, therefore, has the potential to become an automated process, if the systems supporting the business process can start to communicate dynamically and automatically. For example, an order is placed using a machine-to-machine (M2M) solution. If that product is in constraint mode, the transaction process data falls out of the system and goes into a spreadsheet. Thus, the M2M solution failed due to business process. Somebody then needs to walk that spreadsheet through the system, which will involve more touch-points.
There are also judgement points involved in the course of doing business, which lead to high-touch interactions. Judgment points occur when a human being needs to make a judgement call before a transaction can continue, especially with sensitive materials and information. For example, Intel has a complex electronic information management system used to send confidential and sensitive documents to its customers. Many documents need an approval by a field sales person, or marketing manager, before the document can be sent to the customer.
Finally, there are plenty of internal processes that can hinder a company's
ability to respond to itself, let alone respond to its trading partners in a timely manner. For instance, Intel has a goal to reduce by half the time it takes for a demand signal,
or order process, to get through from a customer request to sending that request to a supplier. It currently takes hundreds of planners to work this manual process. Imagine the time to market and productivity savings that could be realized with internal automated processes in place.
Supply Chain Value
These are all good reasons why Intel is finding ways to extract more value out of the supply chain by implementing operational efficiency improvements and increasing the speed of data and information across its
e-business systems. The corporation is getting more value out of the supply chain by reducing time and costs in every e-business program. In addition, by sharing real-time data with customers and suppliers, and promoting and enabling standards, e-business value is shifting from competing businesses to competing supply chains.
Intel's goal is to double the e-business productivity gains realized over the past two years. They will achieve this through focusing on several things. One, by reducing internal planning touch points the corporation will run more efficiently. Two, with continued system integration, more trading partners can benefit from e-business programs. Three, cutting out the inefficiencies in the system means that Intel and its customers can spend more time on value-added activities. Employees have more job satisfaction when they are in more rewarding analytical (instead of task-oriented) jobs. The corporation experiences lower undesired turnover due to the automation of undesirable tasks.
Moving to Less Touch
There are many examples of electronic systems in place today that have enabled Intel and its trading partners to move from all (or "heavy" touch) manual processes, to semi-automated "soft" or "no touch" processes based on B2Bi. Systems are becoming more transparent; Intel is letting trading partners look into, and be apart of, the corporation's internal business systems. This creates a business environment of real-time dynamic interaction. Transparent systems lead to more automated transactions and faster time to information. Here are a few examples of "soft touch" business systems and processes in place today with Intel suppliers:
Forecast Sharing and Inventory Management
Intel created online applications that allow suppliers to access Intel's latest inventory needs and forecast estimates. Materials planners used to have regular meetings with suppliers to inform them of the corporation's latest inventory or forecast needs. By offering these tools online, suppliers can see the latest forecast needs and changes to inventory targets, directly from Intel's MRP system. Most of the manual transactions and processes are taken out of the system. For Intel the new business process is completely "no touch." It will be no touch for suppliers when they provide for automated receipt of the forecast and inventory information directly into their back end systems.
The supplier managed inventory tools have created a huge time and cost savings for both the supplier and Intel. Instead of materials planners communicating changes in inventory and forecast needs, the suppliers can see the information in real time.
This creates an increase in efficiency and productivity through moving the information to the right person. In addition, since the suppliers know Intel's forecast, and inventory needs, Intel no longer needs to send them purchase orders. Intel eliminated POs and invoices for the 80 percent of direct materials purchases by using the inventory and forecast tools.
Supply Side Purchase Orders and Accounts Payable
The accounts payable process historically has been a manual one. The Intel Web procurement suite, however, lets Intel and its suppliers automate the process. As usual, a PO is placed to buy something, and an invoice is needed for payment. However, when an Intel purchase order (PO) is placed, the Intel Web PO tool automatically generates an email notification to suppliers. When the order is shipped, the supplier logs into the Intel Web Advanced Shipping Notice (ASN) and confirms shipment. The purchaser is then notified automatically that the order has been shipped. After shipping, the supplier in turn invoices the PO online and Intel pays the bill automatically according to the agreed payment terms. On Intel's side, the invoice automatically goes into the corporation's accounting system and is checked for errors. If there are none, it is automatically paid. A cumbersome manual administrative process is now a no touch, machine-to-machine process.
Since Intel has automated the payment process, there are fewer mismatches that require intervention of purchase order to invoice. The ROI has been substantial. The corporation now has 98 percent no touch POs with suppliers, which has allowed an $8 million reduction in data entry payroll costs. On-time payments allows better cash management, and Intel now gets more early payment discounts Ð about $5 million in discounts during 2000.
Here are some Intel Web PO results and quotes from suppliers using the tools:
• Increased PO to invoice match rate from approximately 80 to 95 percent
• Facilitated on-time payment
• Reduced float due to mail
• Provided better tracking of invoices through the payment process
Overall Savings
The impact of the supplier side e-business tools has been great. Intel's cash-to-cash operating cycle has decreased by 25 percent, allowing the corporation to run with more cash and less inventory and receivables. The cash-to-cash cycle is the amount of days of inventory plus the amount of days of receivables (not including the payable cycle).
True "No Touch" with the Help of Standards
Intel, as a staunch supporter and leader of the computer industry standards consortium, RosettaNet, is starting to see the benefits of standards. The RosettaNet standard is an XML-based e-business language that organizes data for transmission over the Internet. The organized data fields become Partner Interface Processesª (PIPs). PIPs are specialized system-to-system, XML-based dialogs that define business processes among trading partners. All trading partners must agree to use the same description of their data fields in order to create a PIP.
Here is how the RosettaNet Order PIP works for Intel and its trading partners. An order is keyed in once on the ERP/MRP system of either Intel, (placing an order with a supplier), or a customer (placing an order with Intel), using the RosettaNet PIP definition. The order is received and processed by the back-end ERP systems. From that point on, the B2Bi does the rest. The order can, of course, be monitored using Internet-based e-business tools, but there is no need to log-on, or "touch," the order. This is an example of how Intel is pushing the envelope in implementing standards based tools and making them easier to use, ultimately benefiting Intel's suppliers and creating supply chain value.
Intel has about 20 customers and suppliers using the Order Placement PIP with Intel today. In fact, the suppliers that started using the Order PIP now use it exclusively. The standard eliminates so many touch-points in the transaction, they decided not to use previous ordering methods. As more PIPs are standardized the corporation will continue to enable real-time B2Bi. Intel's Web suite of tools is RosettaNet ready; it is built with XML standards in mind. With standards in place between trading partners, true B2B integration is happening. Besides moving to less touch in order to extract more value from the supply chain, Intel is also focusing on bringing e-business solutions to more and more trading partners, regardless of size or geographic distance.
E-Business on the Factory Floor
To further e-business efficiency and productivity gains and cost savings, Intel rebuilt the internal systems manufacturing data system to optimize factory uptime. First, it modified weekly database maintenance procedures to use backup servers instead of production servers. Then they developed online data trim program. Then they upgraded servers and improved maintenance procedures. The result: Factories are now up and running a higher percent of the time, optimizing the corporation's expensive manufacturing capacity through breakthroughs in e-business infrastructure changes to our automation.
The corporation saved $132 million by:
• Reducing planned downtime equals 910 hours (91 hours per site times 10 sites)
• Reducing unplanned downtime equals 91 hours (51 hrs in 1999, 40 hrs in 2000; approximate cost of the factory being idle is $100K per hour)
• Eliminated downtime for data-trims equals 320 hours (32 hrs/year times 10 sites)
After all, e-business is all about more efficiently managing information. Intel puts a strong emphasis on data integrity and quality. The quality of internal data is monitored throughout the corporation. Quality data is made available to trading partners to streamline and automate business processes. Significant business value is found in providing suppliers with online real-time factory quality data. This has allowed suppliers to fix problems faster, avoiding scrapped lots. When suppliers and subcontractors have access to online manufacturing data it can produce a 20 to 33 percent reduction in product cycle time.
Reaching Beyond Intel's Supply Chain
Intel wants to create e-business solutions that customer's customers and supplier's suppliers can use, therefore increasing the supply chain reach and expanding the efficiency and productivity gains beyond merely Intel's own supply chain. In RosettaNet's initial scope of work, large-sized companies, like Intel and Arrow, were the models for creating standards. Most of the trading partners in the computer industry supply chain, however, are small to medium-sized companies. Intel initiated a new RosettaNet Basics program that was chartered to define a set of core partner interface processes (PIPs), which will address baseline B2B functionality. The objective of RosettaNet Basics is to increase the number of small- to medium-sized companies that are able to implement RosettaNet B2B connections, as well as to create a reusable, affordable solution for B2B integration reference designs with major ISVs and system integrators. For many smaller trading partners, there are several tools available that convert data from their database into XML code so they can take advantage of XML-based applications. Once in the standard format, their business system can become semi-automated. This is a simple solution that is often better than browser-based tools, which offer no automation.
Conclusion
Developing and agreeing on PIPs is a slow, painful process for the large companies in the RosettaNet consortium. Implementing paperless transaction laws has been difficult for certain governments around the world. Developing cost-effective, real-time B2B integration is a real challenge both for small companies and for system integrators. As we peel the onion and reach further into the supply chain, the changes and evolutions become more challenging. The value of e-business and the expansion the supply chain, becomes more clear as we progress. The next step in the evolution of e-business is machine-to-machine automation. The more we collectively automate business processes, the more value we all will see from e-business. Essential to this is the ability to get real-time data quickly and efficiently. By adopting standards, workloads will become automated.
When the next time the opportunity to automate presents itself at your company, remember the new e-business maximl—less touch, more value.
