Course Code / Title: MIS348/Concepts in ERP Source: Textbook Page 109 Caselet 3 : Supply Chain Management: It's All About Relationships Procurement, the ordering of raw materials and supplies, has the potential to save companies millions of dollars. According to FinListics, an Atlanta consulting company, if an average Standard & Poor's-listed company with $5 billion in revenue could reduce cost through better procurement by 5 percent, it could increase profits by $20 million. The network technology; namely, the Internet, is in place. When a customer places an order on the Internet, it starts a chain of reaction from all suppliers and manufacturers to fill that order. With the network technology in place, companies need only manage the relationships that go into these savings. Companies must open themselves up and share their sales forecasts, and manufacturing and inventory management systems. Traditionally, companies 'suppliers and manufacturers have had adversarial relationships rather than open ones. One company, Cisco, has taken a friendlier approach with its suppliers, and has modeled itself after the Japanese automakers enabling their suppliers rather than challenging them. Cisco's philosophy is that if it can help suppliers be more efficient, it too can be more efficient. Cisco, for example, operates an extranet to include suppliers on future product plans so suppliers can start to gear up for future orders. Cisco, which makes networking equipment, handles over 90 percent of orders over the Internet. Less than half of Cisco employees even touch an order. Incoming orders trigger alerts to suppliers that make components for that specific order. Throughout order assembly, Cisco's manufacturing system is checking to make sure all assembly processes are set up perfectly. The supply chain basically runs itself. According to AMR Research, Cisco's revenue was $713,000 per employee compared with the average $192,000 per employee of a Fortune 500 company in 1999. Cisco says its administrative overhead has gone from $100 per order to between $5 and $6 per order. With this sharing information, ERP systems are more important than ever, according to Tim Lambeth, the Vanity Fair vice president of global finance. [ERP is] more critical than ever. If you are going to begin to collaborate with your suppliers, you will have to have real-time information available to them. If Wal-Mart wants to come into my system to place or track orders, it expects my system to tell it precisely what I can do and when I can do it. Lambeth states that companies who have not used the Web for their supply chain management will soon be forced to by their customers. Supply chain management comes down to relationships. Communication between trading partners is critical. For example, Staples, the office supply chain, wanted to know why Hewlett-Packard required a 21-day lead time for orders. HP had believed that Staples required the 21-day lead time, when in fact neither company required it the parameter was some leftover decision from the days when purchasing agents cut deals. Now the two companies have a seven-day lead time for orders. Staples can hold less safety stock, has fewer stock-outs, and HP has reduced its order-to-cash cycle time. Staples shares a lot of information with its suppliers. In 2005, Staples set up a secure Web site where its suppliers can log on and view Staples supply chain metrics. The metrics act as a report card for each company, allowing for further communication with suppliers and thus improvement with the supply chain. Question: 1. How can Fitter Snacker improve its relationships with its suppliers of raw materials