The supply chain isn't only comprised of supplier and customer with the manufacturer in the middle. In this day and age, it's very likely that your supplier is also an outsource resource for your company. As an example, the actual manufacturing of CD-ROMs and packaging of software for many, if not most, of the largest mass marketers of computer applications and operating systems is outsourced. In the case of Microsoft, the worldwide source for its products is often Modus Media International (Westwood, MA). Modus Media, with facilities in 12 countries and 4,600 employees, is a prime supplier of computer software on CDs, disks, and DVD formats. It also provides kitting services for computer hardware companies, such as Dell and Compaq, and configures keyboard, mouse, and documentation packages for specific countries.
Microsoft, like many others, has come to rely on Modus Media. In 1995, the company produced millions of CDs of Microsoft Windows 95 for worldwide release, doing the job in just eight weeks. It boasts of being a supplier of packaged software for nine of the 10 largest software developers.
Privately held, Modus Media reported $1.6 billion of gross revenue in 1995 and has been growing ever since. One factor in this growth is the application of on-demand manufacturing; another is the company's willingness to assume all aspects of the operation from the order processing to final delivery of software anywhere in the world.
Modus Media can act as the vendor's sales organization, capturing orders by phone, fax, e-mail, or on the World Wide Web. The company can establish online stores under the customer's brand name; handle purchase orders and credit card sales; deal with coupons, returns and credits; process local and VAT taxes; register users electronically or by mail; and make all shipping arrangements. By taking over these customer-side operations from the OEM, Modus Media becomes more than an outsourcer, it becomes a critical partner.
Typically, software is stored digitally to allow CDs to be burned on demand. Manuals and user materials are also stored in a database, readily available for printing to requirements. This allows the company to provide fully customized and configured packages for a variety of languages and locations. In fact, customer service operators at their 20 Solutions Centers can deal with requests in more than a dozen languages.
There is another side, the supplier side, that takes equal effort and provides equal payback. According to Don Westerhoff, director of manufacturing engineering for Modus Media, "We used EDI (electronic data interchange) with our suppliers for years. However, now we are using the online capabilities in our ERP (enterprise resource planning) system, a change that gives us a much better way to maintain those critical relationships with our customers."
He continues, "Just on the human side, our order takers around the world handle more than 5 million calls a year. Orders can be processed faster, shipments tracked easier, and in general the supply chain maintained at a faster pace. This is particularly important in our business. As an outsourcer, or contract service company, in the dynamic computer software and hardware marketplace, we have been experiencing a greatly increased velocity of orders and order processing requirements from our customers. This high velocity represents literally millions of units ordered per year. Without a solid e-commerce capability, we'd be swamped."
By offering online ordering, both for direct customers through store front Web sites and major customers on secure servers, the human error is avoided. The customer enters the order directly and the system processes it. No additional data entry by an order taker is needed.
The ERP system at Modus Media is the Internet-enabled package from IFS Inc., (Tucson, AZ). More than a traditional ERP system, it acts as an "e-backbone." This backbone approach provides both the manufacturing and financial software you'd expect from an ERP package along with special e-commerce applications that allow the building of online stores and connections for EDI-style transactions.
By forging alliances with Intershop Communications Inc. (San Francisco) and InterWorld Corporation (New York City) for the e-commerce front-end software, and tightly integrating it with its ERP system, IFS has brought companies such as Modus Media into the fast lane of electronic business.
As used at Modus Media, the system provides scheduling and ordering information necessary to meet delivery dates. For example, Microsoft places a large order on Thursday for a variety of packages, configured to its needs. Modus can broadcast this order through the ERP system to make sure the CDs and other media are available, machines are scheduled for the processing, and manuals and other documents are up-to-date and ready for download to the printing facilities.
Normal turnaround time for a shipment of Microsoft products is 17 days after the order is received. These orders can be in the tens of thousands of individual packages going to what must sometimes seem to be almost as many different locations.
Modus Media takes the approach that by using on-demand methods, they have minimal warehousing of inventory. E-commerce adds functionality to the supply chain management necessary for this lean, demand flow manufacturing technique. In fact, Modus Media uses the slogan "The Supply Chain Management Company." By taking on the full customer-to-supplier relationship management for a company, it needs and uses all the modern tools available.
With Modus' ERP providing the link, the company's supply chain is made much stronger and more responsive to the demands of customers who are both developers, such as Microsoft, and end users who call or e-mail both single and small orders. The variety of sources for these orders, and their widely different quantities makes the operation highly dependent on rapid information processing.
Using e-commerce methods has made a significant difference in the speed of response and quality of order fulfillment. The customer enters the order directly into the e-commerce system, which then replicates the information throughout the ERP system. Multiple applications receive the information from this one entry. This tightly integrated coupling of e-commerce and ERP indicates a new way of doing business.
Quality is a critical commodity. All of Modus Media's facilities are ISO 9000-certified and Westerhoff explains, "We obtained ISO 9000 certification before we implemented the IFS software in order to see how it handles the documentation of processes - with what IFS calls its Business Modeler. I can envision this function helping us in our re-certification and the initial certification at other sites. Being able to track all quality and business functions within the program will allow us to speed up the documentation and improve the quality of the information in it."
With the high expectations of the business community, suppliers and commercial customers, electronic commerce models are developing into better ways to do business. Modus Media has linked its front office order processing and delivery promise functions while connecting all the "dots" - or rather, the "dot-coms" - of its online customers and those of its suppliers with its own manufacturing capabilities through an integrated ERP and e-commerce application suite.
Some companies are hesitant to enter the world of e-commerce. There may be technical concerns and cost considerations, or a feeling that making such a big change could harm customer service and create a down turn in business. If that sounds like you, listen to this from Westerhoff: "For our customers, the implementation of IFS and its e-commerce capabilities at 15 sites around the world was a non-event. There was no disruption of customer service, orders or deliveries. This even though we were in implementation at as many as six sites simultaneously and completed all 15 in 18 months. More important from the business standpoint, I honestly feel we have already achieved a positive ROI (return on investment) from this implementation, even as we finished the final site this June. There is no doubt in my mind that electronic commerce is the wave of the future and one that all companies must catch to be successful."