y Phoebe Magdirila
May 1, 2012
Supply chain management, or overseeing goods go through a long process of transfer from the supplier to the manufacturer all the way down to the customer, is a tedious processthat both the key people in the procurement and their clients both track down to ensure smooth-sailing delivery of products. This occurs while also taking into consideration the regulations to adhere to before the actual course of delivery. With this long-drawn-out process, IT now plays a key role in easing up the operations and ensure risks are mitigated before it comes.
In this month’s Computerworld Philippines’ CIO Roundtable, key people involved in this process shares how this industry has evolved from a simple order processing to a multi-faceted environment.
IT In Process Management
Chemira Inc. President Miraluz Tan, shares that from what is known to be purchasing, the now supply chain management, has evolved from not only buying, but also moving “into all in facts of the supply chain of the suppliers and of the customers.” Most of the part levels they need to look at – like the warehouse, port, customs and transportation – needs to be efficiently tracked for accuracy. DHL Global Forwarding (Phils.), Inc. Country IT Director, Abet Cabungcal agrees to this as he reveals that the challenge in this industry hasbeen the “visibility in all aspects of the chain.”
In this age of computing, software and other IT systems become their partner in answering these challenges. “Supply chain management’s evolution has brought it to a more collaborative process now,” says On Semiconductor Senior Purchasing Officer, Raymond Desengano.
“IT’s role nowadays has become more easy-driven to ensure faster and reliable data transmission and processing,” Cabungcal says. “[It] allows intelligent decision-making and planning across the global network of the supply chain,” says Cabungcal.
Putting Value Into The Chain
As a go-between of the processes and the clients, these experienced professionals agree that apart from ensuring the prompt movement within the supply chain, understanding the needs of their customers also fall as a critical factor in offering solutions. Tan highlights how interacting with clients is but one of the few important aspects that practitioners in this industry should not take for granted. “We should address the clients’ needs or wants,” she shares.
Through IT, supply chain managers can start offering holistic approaches which will work for both parties. “As a service provider, we need to sit down with the customers or have a live workshop and understand their whole supply chain in order to become valuedriven,” Cabungcal shares. Part and parcel of this task is to also ensure that IT investments are fully-utilized. Taking for example DHL, who intensifies incorporation of IT into their work force and clients by providing mobility devices to their customer-facing staff and a tracking application for their customers.
With these varying roles of supply management practitioners, re-tooling oneself to adapt to these changes is inevitable. “Re-tooling sometimes is just learned from the job experience,” says Accenture Country Procurement Lead, Andrew Angelo Abrenica. But he admits that in-house and third party trainings also help a lot in this initiative to increase learnings in this field.
The challenges supply chain managers face now spans from the high costs of developing such IT systems upto ensuring the security of their databases. But notwithstanding, they still agree that there is a growing number of SMEs manifesting interest in making technology a central part of their operations.
“IT nowadays is fast becoming an enabler,” Cabungcal says. “More and more CEOs are telling their IT people that they shouldn’t be just fixing computers anymore; they should be going to the customers, they should be developing a software that will enhance the productivity of other departments.”
Participants of this month’s CIO Roundtable are: Miraluz Tan, President, Chemira Inc., Raymond Desengano, Senior Purchasing Officer, On Semiconductor Philippines Incorporated, Andrew Angelo
P. Abrenica, Country Procurement Lead, Accenture, Inc., Abet Cabungcal, Country IT Director, DHL Global Forwarding (Phils.), Inc., and also representatives from Sophos, sponsor of the event.
Excerpts of the discussion follows:
Computerworld: How has supply chain management changed over the years?
Miraluz Tan, President, Chemira Inc.: Previously, supply chain was not called ‘supply chain,’ it was like purchasing only. And then it evolved to having logistics, then warehousing, then transport. All in all, it has evolved in a way that, as a purchasing practitioner, one is involved only in buying, but also into all in facts of the supply chain of the suppliers and of the customers.
Computerworld: Chemira is basically a trading company?
Tan: Trading and consulting. As a small SME I would like to help the other people in the SME market because I saw how difficult it was dealing with other big players. I was also the former president of the Philippine Institute for Supply Management (PISM), so the advocacy is there.
Computerworld: Did PISM also begin as a purchasing management association? Tan: Yes, it was formerly the Purchasing Association of the Philippines and was renamed as the then Purchasing Materials Management Association of the Philippines (PMMAP). In 2003, we changed it to Philippine Institute for First Advantage.
Computerworld: That also is an indication of how much the practice has evolved. Raymond Desengano, Senior Purchasing Officer, On Semiconductor Philippines Incorporated: Formerly, even for semiconductors, procurement is one department reporting directly to the CEO or the managing director. But nowadays, the supply chain of the procurement, materials planning, warehouse link and the transport logistics is also covered by supply chain.
Andrew Angelo P. Abrenica, Country Procurement Lead, Accenture, Inc.: Supply chain management’s evolution has brought it to a more collaborative process now. Unlike before, it used to be purchasing. But accounts payable department is still accounts payable. Even the way we talked and discussed in the company are more of cost functionality. We have a weekly meeting with accounts payables, weekly meeting with finance and even the other stake holders. It helps to an efficient supply chain, so that the supplier can be comfortable with our company. They can be sure that they can get paid on time.
Computerworld: Mr. Abet Cabungcal, being the only IT guy here, what is the role of IT in this evolution?
Abet Cabungcal, Country IT Director, DHL Global Forwarding (Phils.), Inc.: Before, it used to be simple and all under inhouse domain of some manufacturer—that’s the former supply chain management. Now, often times it involves more outsourcing partners around the world, it has become far more complex and visibility is always a challenge. In fact it is near perfect visibility to every part of the chain. IT’s role nowadays has become more easy-driven to ensure faster and reliable data transmission and processing.
Just like what Andrew said, now supply chain has evolved from IT—as a simple developer of systems like warehouse management system, simple inventory system—to becoming a multi-tasker, coupling previous tasks with order processing and visibility tracking of the part levels all the way to the warehouse, port, customs and transportation. Then it goes back to tracking the customs to the warehouse all the way down the customer. All throughout that process, there comes various complexities. There are a lot more processes involved like government regulations, global trade regulations and customs regulations among others.
Luckily, nowadays we now have a machine-to-machine (M2M) technology that somehow speeds up the releasing of cargos. But then again, we still have to go through all these processes and every customer has to be informed of every part of the supply chain. They would always want to respond to every situation. For example, there’s an issue for a particular delivery, they should be informed even in the wee hours of the morning so they can mitigate the cost or the risks involved.
Computerworld: How does this growing complexity affect DHL? Has it been good to DHL or not?
Cabungcal: Yes it’s good for us in a way that it’s more challenging. For us, we have a third party provider where we integrate all these systems and we can provide additional solutions that would enable tracking each step of the way of the cargos, from ordering all the way to the delivery. That’s where we come in.
Computerworld: How do you transform the supply chain into a value chain?
Cabungcal: As a service provider, we need to sit down with the customers or have a live workshop and understand their whole supply chain in order to become value driven. We can only be a value-based provider if we can identify the process improvements and continuous plans for the services they used from us, and from there, monitor the success of each. It’s no longer that people pick-up from a store and deliver it just like before.
There should be a holistic approach in delivering process improvement to make it sustainable and post-proof. Exception management should also be considered and if something goes wrong, we should also have several options readily available as contingency action plans. These should be activated to mitigate the impact and other risks involved. By providing these solutions and contingency plans, that’s how we increase the value of the supply chain, because as I’ve mentioned earlier, it’s important for these customers to have feedback.
I think, in my years in this service company, me as a customer myself, it’s a different feeling when the service provider does not attend to you right away. You’ll start to think of the value this company gives to its customers. So we are trying our best to give value.
For us to be able to develop more business with the customers we should provide more value and by helping them with their requirements and then in return if they like our proposal solution then they will get our services.
Computerworld: You have mentioned about an example of an existing client, how about the new clients?
Cabungcal: You should be clever enough that the client is not just using you.
Desengano: Even with an existing client, it’s still mandatory for us as a purchasing professional, to still look for other options.
Cabungcal: But if you are the service provider, you should also weigh-in all the things that you think will help the customer. If not, it’s important not to waste your time and the customer’s time.
Computerworld: Is that really it, if you think that you cannot give value to the customer you turn them down?
Cabungcal: It depends on the requirement of the customer. For example, if we’re talking about supply chain, it’s really about what services we can give.
Desengano: But if it’s free, they only give you a bird’s eye view.
Tan: We should address the clients’ needs or wants. If it’s something which the client would appreciate, there may be nothing for you since it wouldn’t cost you anything at all, but to the clients, it could mean a lot of things. I would say that’s value added. Especially for new players or new SMEs all over the world, the focus is on how you can add value in terms of what is really important to the customer.
Desengano: I don’t know if in the future the industry will have issues with occupational human resources because for example, in our company, we‘re looking at sub-contracting or outsourcing the internal warehousing. We have internal warehousing and a distribution center. The distribution
center caters to different segments of our company. It’s already outsourced because it’s now our core competency, even internally; manufacturing is our core competency and not warehousing.
If you’re a multinational company and you’ve been operating in the Philippines for so long, you value people, and if you outsource, there will be fog issues that may take place in the future because the supply chain itself within the company has a big percentage of manpower.
Tan: I’ll say yes or no, because the third party would be also hiring. Even if you have a good IT software, not everything can be automated. In fact here in the Philippines, it’s still manual. The labor expense is still cheaper compared to the other countries. A lot of the other company needs full-time staff for manual work. If you really know what you are doing so you start to have a focus and specialty especially for purchases.
Computerworld: So do you see that problem in the coming years, the fact that some supply chain work will be outsourced?
Abrenica: There are some clients who are outsourcing procurement process to Accenture. It depends on the core business.
The second question is how to transform supply chain into a value chain. It’s important to take into account what your customers want. The customer would want better product, better service, better price, and if they can also get it done faster so to transform it into a value chain. First you get a procurement lead in Accenture.
When I became a part of the team, there were a lot of problems; some processes were very manual. The first thing you do take a look at is the potential operation, so when you get rid of manual work everything will be organized. For example when I started to talk to suppliers the first statement were “we are not yet paid,” “we don’t know where the invoice went,” “we don’t have any order reference,” etc. You have to fix these in terms of process. Although it is also crucial to make sure that the IT investment are fully-utilized.
For your supply chain buyers who opts to move into more value-adding activity, talk about developing a product or solutions for your internal client. Part of the value-adding activity is getting ideas from the suppliers.
You can’t do that if you’re always tied up with the production. If the transactions are working smoothly, then you can talk about how to improve the delivery and make it fast. It becomes more of a collaborative effort to bring down cost, make the product come in the company faster and also makes the product or service better.
Tan: There are actually varying roles of supply chain practitioners. Tactical operations now start to exist, not only focusing on operational roles. There are supply management people who are really working closely with our clients.
Computerworld: How did you re-tool yourself to be able to handle this bigger responsibility?
Desengano: I think the bottom line is cost production. Everything boils down to cost. Every time or every year the company requires you to make a 10% reduction, you have to find a way.
Abrenica: Re-tooling sometimes is just learned from the job experience over time. We also have computer-based trainings available but sometimes it is not enough. We also go to third party trainers to gain a different experience.
Computerworld: Are there schools that offer such training?
Tan: Yes, through PISM.
Computerworld: PISM is partnering with some schools? Like what school?
Tan: The first one we had was University of Makati. They even have courses which focused on purchasing and supply chain management.
Computerworld: So this is an undergraduate course?
Tan: It is. And then we have tied-up with Ateneo for an accepted program. We also have the College of St. Benilde, JRU, TIP and we have one in Pampanga. We are also working on a similar program in Davao.
Abrenica: I think what’s important is continuous learning. The source of talent could come from anywhere. Like for myself, I am a civil engineer by profession but I was able to be in the procurement industry by accident.
Desengano: Before we don’t have courses on supply chain compared to other countries.
Cabungcal: Even in IT, we also do procurement. And with all these services that we are acquiring from different providers and the vendor management that we need to deal with, we are also learning more.
Computerworld: What role does IT play in
supply chain management?
Cabungcal: IT being used in management should aid in creating integrated end-to-end solutions combining visibility, transportation management, and business intelligence in a seamless solution. This should allow intelligent decision-making and planning across the global network of the supply chain.
Tan: If I were the manufacturer, my concern is my core competence to use these products. The information that I need to know is what the client needs, I would need this to create the product that will be beneficial to the client.
Cabungcal: It doesn’t end there; the idea of business intelligence begins after collecting all the data from all these back-and-forth communication. At the latter part of the transaction, you can now start to generate a report for your demand management, replenishment and other things. And as an IT person, you will become proactive becauseas soon as you gather all these data in to one database, you can do a lot of things.
Desengano: That’s the added value for the server because they can track, say, which items will soon expire. One can customize it. But right now cost is still a factor. We still cannot implement technologies abruptly because of high cost.
Abrenica: We want to take IT seriously in Accenture.
Computerworld: The procurement of Accenture is centralized globally?
Abrenica: We are directly reporting to chief procurement officer, but in terms of execution, it still depends on the country — what is good for you in terms of the technologies available.
Cabungcal: But for the SMEs, I think they have more flexibility when it comes to IT. Say, start-up companies don’t have to have their own e-mail server and can simply start with Gmail and Yahoo. They don’t even have to have applications like the Microsoft Office Suite. Because of the Internet technology, resources have become affordable and easily available to SMEs
Abrenica: In fact, I think there are also other technologies like, for the payment procedure, there’s PayPal. DHL is very much SME-friendly. Our suppliers just give us the premium number and they’ll just take a look where the item is through the Web.
Cabungcal: Not just simply through the Web, now even from mobile phones, suppliers can track their shipment.
Computerworld: Internally, are you using mobile devices to increase efficiency of the employees?
Cabungcal: Of course, for our customerfacing employees, we have provided them with BlackBerry phones that are installed with pieces of information that can help them verify details for the customers. For the customer side, we also have a mobile tracking system.
Julius Suarez (Sophos): In terms of security, how do you implement the system, especially you are now opening up now your data to a third party?
Cabungcal: We are not actually opening up our data to third party, we are just allowing them to pick-up this information. There is no interaction, in our case, our tracking phase is available for public viewing for customers. When it comes to security, definitely if there will be a link between the customer and our network, there will have to be a stringent process for that which will satisfy the security requirements of DHL, and of course the customers. There will be committees to verify it. The process won’t be easy.
Computerworld: Can cloud computing transform supply chain management?
Tan: One of our main concerns is security and privacy, and then what I just realized is that, I was in cloud computing all along, like e-mails or Google apps.
Cabungcal: We are not yet using cloud here in the Philippines because as I’ve mentioned, normally the direction is always coming from the global solutions. They need to evaluate it first before they can implement it. While it’s still under evaluation, I’m here to get more insights about cloud. What I know about cloud is, everything is a service from the cloud infrastructure, platform, software and others.
Tan: And you don’t need to pay more.
Abrenica: Cloud computing is just a new terminology that has long been present. The advantage of cloud is its faster deployment. With cloud services, companies are actually tapping an expert that what’s really good for the company. They have experiences in integration with systems like SAP or in-house.
Plus when you buy the service, included in it is the maintenance and updating the software as well.
Computerworld: Is supply chain talent in demand and out of stock?
Desengano: Nowadays, it is, in demand.
Computerworld: But is the pool of resources adequate?
Desengano: No, it’s still limited. Even though we have announced that we have new graduates from our tie-ups, it is still difficult to seek qualified talents from the market. As an option, we get from the engineering graduates because they know the products and the items that we are going to buy most of the time.
Computerworld: That means there’s training involved?
Desengano: Just a few details that needs to highlight, plus for the product itself, just for familiarization.
Computerworld: Do you still not welcome newbies to work in the industry right after graduation?
Tan: Let’s put it this way, there are a lot of supply chain practitioners in the 20 to 30 age bracket, especially those on the demands and supply, planning and replen ishment fields. It’s because they are very articulate and they know computers well. But if you want the more seasoned ones, it’s really hard to find here locally.
Since supply chain management entails a lot of processes and the people in this industry deal from end-to-end processes, you have to know things like CRM, Supplier Relationship Management and Customer Relationship Management.
Abrenica: The best authority comes from operation and probably also accounting. But these people come from the internal staff because most of supply chain solutions were developed for the company’s particular product and these are mostly customized.
Cabungcal: As someone from IT, I mentioned that it’s part of our job to integrate everything from end-to-end. My question is how do you treat IT in your own organization? Managing services? Delivering value to your supply chain?
Desengano: I think it’s management of IT services, because they concentrate more on connectivity, on internal processes. But for supply chain, it’s more on outsourcing processes from a third party.
Cabungcal: Everything is outsourced except for local applications that are managed by IT.
Desengano: The concentration really of manufacturing is not really on the supply chain but with the connectivity with the data for manufacturing.
Tan: For me I think IT is key because especially now with very advanced communication systems. It’s not excuse anymore that you don’t know what the package is, where it is or what’s happening. IT and the communication is the key for supply chain management. If you don’t have a good IT system, I don’t think you can create that value for your clients.
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