Mar 28, 2001 The euphoria surrounding Web-based business-to-business (B2B) is passing in the wake of the dot-com crash, yet supply chain management (SCM) solutions still have considerable traction. SCM is taking off in industries as disparate as hospitality, automotive and consumer packaged goods.
Electronic components distribution is getting its share of supply-chain transformation, too, particularly mammoth global companies such as Avnet Inc. and Arrow Electronics Inc. Even during a slowdown, distributors find it in their budgets to continue their e-transformation.
"We've made our technology investments and we're not seeing budget cuts," said Lori Hartman, executive vice president of e-business at Avnet Electronics Marketing (Avnet EM), Phoenix. "Since November, we haven't seen any slowdown in our investment. We are cautious in our spending, though. It's important to spend wisely because this market is hyped."
Matt Sheerin, an analyst at Thomas Weisel Partners in New York, believes distributors are making progress in automating their supply operations.
"The better distributors have made a lot of investments in IT infrastructure and they're making strides in supply-chain automation," Sheerin said. "Avnet and Arrow are leaders in making investments in this area."
Phoenix-based Avnet (nyse: AVT) has been working on a number of electronic fronts to make its business process more efficient and collaborative. "We're integrating our supply chain across the entire product life cycle," Hartman said. "It goes from right to left, from design concept and new product, through life cycle and obsolescence."
In the area of concept and design, Avnet is implementing collaboration tools to bring together suppliers and customers. "We help design engineers and component engineers," Hartman said. "We're creating tools for the engineer desktop that feeds in supply chain information. This allows the engineer to select the right parts and design them for manufacturing."
Many companies hit a roadblock during Web-enabling, when they find that their trading partners are stuck in phone and fax mode. Avnet found this to be a nonissue. "The great majority of our suppliers are Internet-enabled," Hartman said. "But there is a difference between being Web-enabled and being in the process (of) transforming themselves into an e-business. Only a few are really transforming themselves."
There is some question as to whether the supply chain automation systems are working efficiently enough to lower inventory levels and make corporations less vulnerable to the ups and downs of the business cycle. "Some of the distributors have been very aggressive in gaining supply chain efficiencies and they've moved into collaboration, but we're still in the situation where inventories are out of whack," Sheerin said. "If they were getting really efficient, we wouldn't have this inventory problem."
Sheerin acknowledges that some of the inventory glitches are beyond the control of distributors alone. He believes RosettaNet initiatives are needed before the industry will become efficient enough to solve inventory buildups. "RosettaNet initiatives will help improve the efforts," Sheerin said. "But it's not just the distributors. The front and back of the supply chain also have to be on the same page. I think RosettaNet is the right direction, but a lot of work still has to be done."
Some companies claim they were fast to notice the slowdown because of the information systems they installed over the past two years, but Sheerin remains skeptical. "The inventories are at their highest level in five years," Sheerin said. "That's due to the human element. Purchasing managers were under pressure to get components to their production line, so they were over-ordering, double-ordering and ordering from multiple sources. At the end of the day, you have a decision-maker making orders based on need."
