When a global business issues thousands of purchase orders (POs) to hundreds of suppliers and contract manufacturers, maintaining communication and visibility into supplier operations all over the world gets complicated quickly. For consumer products maker Conair, the solution to this longstanding challenge came in the form of a niche IT solution.
Conair manufactures and distributes health and beauty products and kitchen and electronic appliances globally under several brands, and the business outsources the vast majority of its manufacturing to more than 200 contract manufacturers located primarily in Asia. This strategy is solid from a manufacturing perspective, but from an inventory planning and supply chain visibility perspective, it can lead to issues.
Conair has used SAP solutions for 12 years and has been running a single instance of SAP ERP since 2007, recently upgrading to version 6.0. All of its locations and divisions worldwide access the same SAP ERP system to provide clear visibility into when a PO is placed anywhere across the globe. But historically, once the PO went to a contract manufacturer, the trail became less clear. For example, Conair’s purchasing team in the US would issue a PO to a contract manufacturer. The contract manufacturer would then sporadically update a web-based legacy system to provide limited visibility into the progress of the PO.
In some instances, Conair would learn about the status of an order only when it received notification from its freight forwarder that the order was on a ship sailing from China, which could result in the risk of unanticipated delays. The order could incur a rush-shipment fee if it had to arrive at a certain location on a certain date.
“This lack of visibility made it difficult for us to predict when some products would arrive at our distribution centers and to our customers,” says Jon Harding, CIO at Conair. “The visibility our supply chain group was able to gain was very time consuming because it required manually checking in with various other groups. We were increasing our risk of not meeting delivery promises to customers.”
“The lack of visibility into our supply chain made it difficult for us to predict when some products would arrive at our distribution centers and to our customers.”
— Jon Harding, CIO, Conair
To complicate matters further, by 2008, the web-based legacy system was no longer supported. All of these convergent factors led the Conair team to look for a new solution to provide the optimal level of visibility with less manual effort.
“We didn’t want to simply replicate the level of visibility we were accustomed to in the legacy environment,” says Harding. “We wanted to get daily reports on vendor progress against each of our purchase order lines. We wanted to receive notification that a shipment of goods was ready for quality control and inspection at the manufacturer’s facility. We wanted to be able to record the quality control results and the approval for the goods to be moved to the port. And finally, we were looking for confirmation that the goods had been shipped and left the port.”
That level of visibility and frequency of updates would help Conair more accurately estimate when its products would complete production and when they could reach customers so the business could plan its supply chain processes further out in time.
Turning on the Lights
As an SAP customer, it made sense for Conair to turn to SAP for a solution to its supply chain visibility challenge. In 2009, Conair began a pilot of SAP Supply Network Collaboration (SAP SNC), version 5.1 for work order collaboration, with six of its manufacturers in Asia, and went live with the solution at the end of the year.
To leverage the power of SAP SNC, Conair transformed its purchase order process for the pilot. Now, when a Conair buyer enters a PO into SAP ERP, or if an existing PO is updated, that PO automatically moves from SAP ERP into SAP SNC and is converted into a work order. From there, Conair’s Hong Kong-based vendor management group reviews the work order information to make sure the manufacturer can easily understand it. After the manufacturer receives the work order, it updates the project status along the way, indicating how many pieces it completes each day, when the order is ready for quality control, what the results of the inspection are, and when the order is handed off to the freight forwarder. The manufacturer then updates the work order when the goods have shipped. From there, SAP SNC is no longer used to track the goods and another system takes over to track shipments on the water. (See the “Spotlight on the Water” sidebar.)
Think Globally, Train Locally
From the inception of this workflow, the Conair team understood that its success rested on getting vendor personnel to update the work orders, and the team took several key precautions to help get the project moving during the pilot phase. For starters, the user interface on the SAP SNC screens is designed to resemble the interface of the legacy system to reduce the amount of change management required for the vendors.
The manufacturing partners that participated in the SAP SNC pilot program were chosen by members of Conair’s Hong Kong vendor management team because this group had the most detailed knowledge of both the manufacturers’ capabilities and willingness to participate in such a program.
“These are the Conair people who interact with these vendors every day, and they knew which vendors were using the legacy system and to what extent,” says Harding.
The SAP SNC training was also administered by team members based in Hong Kong. Whenever possible, the training was done in person at the manufacturer’s location or at a centralized Conair training facility in China. While this approach wasn’t as cost-efficient as training them remotely, it limited the chance of miscommunication that could potentially derail a training session and slow adoption.
Moving to Full Volumes
Due in large part to the fact that so much planning was done ahead of time, the pilot was a success — SAP SNC 5.1 provided much more visibility into Conair’s manufacturing and supply chain processes.
“We piloted the full scope of the functionality with only a small group of manufacturers, so once it was successful, our goal became to expand the use of the system to include more POs going to more manufacturers,” says Harding.
Conair went live with SAP SNC 5.1 in 2010 and quickly expanded the number of POs put through the system. This was accomplished by requesting that all manufacturers access and update all POs for the company’s tier-one vendors. This rapid increase in order volume, however, slowed the response times in the system, so Conair decided to upgrade the software.
“When we started this project, SAP SNC 5.1 was the latest version available,” says Harding. “But when we saw the drop in response times after go-live, we upgraded to version 7.0 and that resolved many of the issues.”
The upgrade required some customization and data conversions to make sure the screens still resembled the legacy system screens, as well as additional training. But this system adoption strategy was preferred over the alternative, which would have required the contract manufacturers to learn two new interfaces in a short period of time.
Today, the system is running smoothly and tracks work orders issued to hundreds of manufacturers across Asia.
Seeing the Future
The biggest benefit that Conair has realized from the use of SAP SNC is the ability to see delays or issues in its supply chain much earlier than in the past, which allows the business to adjust schedules and expectations accordingly. Rather than continuously check in with hundreds of manufacturers, Conair’s vendor management team can look for exceptions or red flags using this system and focus on managing those problems.
"We have improved our ability to promise inventory to our retail customers,” says Harding. “By living up to our inventory plans, Conair’s reputation is improved in the eyes of our customers.”
In the future, Conair envisions using SAP SNC for more communication and collaboration both internally and with vendors. For example, if a customer requires custom labeling or a particular testing protocol, that information could be shared with Conair’s vendors and teams in Asia via SAP SNC instead of manually in a separate communication.
“We see SAP SNC as a main operations communication platform in China,” says Harding.