Supply chains begin turning to real-time software applications to improve their efficiency.When your company is called by such high-tech manufacturers as Dell to turn around a specialised order in two hours, you can’t be using a business system that relies on week-old data. At least that’s the view of Q-Media, a Canadian-based supply chain services corporation for the high-tech industry.
“We’re real time,” says Lars Agger, Q-Media’s information manager. Q-Media has moved away from a “batch” mode of processing data weekly into a fully integrated e-commerce system from software company Navision. “We didn’t want to wait on information that was seven days old.”
The firm’s customers can browse its stock and non-stock items, order online in real time and check availability 24 hours a day. “As a ‘just-in-time’ operation, it is crucial to our customer service that we have this instant connectivity and collaboration with each other. Many of our customers are big blue-chip companies that demand that we have this kind of capability,” says Agger.
“Real time,” says Carsten Sørensen, a product manager for Navision, “is about going from the reactive age to the proactive age.” And this is beginning to be the case with more and more businesses – from automobile manufacturing to distribution to retail and even to services such as health care, according to Richard Wilding, a supply chain logistics expert at Cranfield School of Management in England.
Quite simply, real-time integration is about automating the systems in a supply chain to coordinate among a company’s suppliers, partners and customers to reduce lead times and greatly enhance responsiveness.

Time compressed
The need for real-time integration has increased as the world has sped up. Wilding says that customers take lower cost and higher quality for granted, demanding product availability as soon as the need arises. Thus, time has become today’s competitive factor. “In order to survive, companies need to provide more value for less cost in less time,” he says. “Doing things in real time increases the ability of a business to cope within a supply chain.”
US clothing retailer The Limited relies on live data pouring in via real-time software applications, allowing managers to make rapid decisions on real information instead of intuition, the company’s Jon Ricker told Info World. For example, stores on the US west coast can react to the first east coast sales figures of the day and, if necessary, rework their displays to highlight fast-selling items before their doors open for business. Before, to make crucial business moves, The Limited had relied heavily on historical data that had been collected in batches.

Where it comes from
It was, in fact, department stores that first preached of real time’s wonders back in the 1980s. But it took technology another decade or so to bring the application to a place where it may well change the way supply chains operate.
Advances in three categories of technology are behind real-time computing: cheaper and more powerful processors, faster networking equipment and software that can handle bigger loads of data across networks with greater frequency, according to Red Herring Magazine, an analytical journal that watches the IT sector.
As one recent Red Herring review of the technology found, several new real-time systems today focus on managing capacity instead of just the flow of materials. This integrates the needs of multiple companies. By managing inventory on demand, these companies can create options around demand flows and capacity needs. This lowers manufacturing costs significantly, but more importantly, it allows a company to create real pricing options and capture additional demand at the margin.
Wilding says that in the big picture, real-time applications are only being used by a small number of companies, and these are usually on the cutting edge of their field. “A company in spares and after-market business-critical systems might need to move information down the supply chain so fast that it can have a service crew at the customer’s site within an hour,” he says.

Difficulties
Even if a company is interested in installing real-time software, a few critical hurdles must be cleared. The first of these is to have one’s own house in order. “If you’re going to be running in real time, you need to have excellent control of your organisation,” says Wilding. “There needs to be a very good transparency of inventory.”
Göran Ljungdahl, technical director for Endorsia.com International AB, adds: “If a supplier is going to connect with its customers in real time, it must have good operating procedures and a system that is operating well. Say you have a buyer seeking the availability of a product. He sends a request and expects to get an answer immediately.” (See box story.)
What is also required for real time integration is more than business integration software alone, says Sørensen. To be able to offer true real-time data, a company must also have the capability for real-time data collection. When dealing with the movement of physical goods, for instance, automatic bar-coding devices must be in place to zap packages as they move from point to point. Otherwise, inputting the information manually challenges the data accuracy of a process at any given moment, he says.

Results
Companies using real-time integration together with other supply chain management tools have seen strong results on the bottom line. Wal-Mart and Sara Lee, for instance, increased sales by 45 percent and reduced weeks-on-hand inventory by 23 percent, according to a 2002 study by Wilding.
While it’s still early days to pin down more solid figures in terms of time or money saved, Wilding notes that the concept of time in supply chains is turning on its head. “Business systems used to process data once a month. Now we’re generally looking at once a week. It wouldn’t surprise me that soon we’ll be needing to process data once a day, once an hour or even once a minute.”

Jack Jackson
a freelance journalist based in Århus, Denmark