Supply Side – Keeping the Giant Fed

Delphi manages its supply chain using a portal developed by Covisint.

When Delphi became fully independent of General Motors Corp. it found itself in need of a new way to stay in touch with its suppliers.

Faced with the challenge of creating a new communication network, Delphi’s E-Business Program Office used this as an opportunity to improve the link between Delphi — and its more than 5,000 suppliers — and improve efficiencies in the process.

“We went through some prioritization,” says Dan Holland, director of E-Business at Delphi, “and one of the areas we focused on really early on was how to better flow information between ourselves and our suppliers. We saw the web as one way to approach that.”

Delphi’s first step was launching a new supplier portal working with Covisint, leveraging the infrastructure Covisint had already invested in.

Delphi replaced its North American problem reporting and resolutions (PR/R) system used for GM with Covisint problem solver services. The problem solver services consist of three primary functions: problem reporting, controlled shipping and cost recover.

Holland admits that the communication network between Delphi and its suppliers is still evolving and that not everything they’ve tried will be implemented system wide. “One area that we explored as part of the E Business Program Office, and we actually launched the program with one of our divisions, is the area of better managed inventory — or providing our suppliers with the ability to view the inventory levels that are on our docks and adjust those based on predetermined maximizing conditions and ship when flags turn from green to red,” says Holland. “We used a company called Supply Solutions for that. We rolled that out at one of our divisions and it’s worked, but long term, we are not sure if that is the business model we are going to follow. There is a lot of competing philosophies on how to manage inventory.” “What we are trying to do is be schedule focused and not inventory focused,” says Christopher Desautel, director of supply chain management at Delphi. “Today we make significant use of Kanban within the four walls of the plant and we are looking to extend that out to our supply base to do an electronic Kanban with our suppliers.”

The term push/pull system is often associated with Kanban, but in Holland’s opinion, a push system is bad because it creates too much inventory.

“You might be thinking, having an abundant inventory will allow you to continue with the manufacturing process because you always have parts,” says Holland. “However, your company must pay for storage space and your company has paid for an inventory that will take a longer amount of time to realize the profits from.” Delphi continues to do traditional electronic data interface (EDI) transactions with a majority of its supply community. According to the company, EDI is Delphi’s preferred method of electronic communications with supplier.

“We’ve developed a web EDI solution that we are beginning next year,” says Holland. “It is a system that will be able to supply EDI messages more effectively to some of our smaller suppliers that can’t afford the overhead of traditional EDI.”

“The new EDI fits within our electric Kanban and allows suppliers to use standard web browsers to receive schedules, forecasts and pull signals that are sent back to the Delphi plant when the supplier makes its shipment,” adds Desautel. “Then we can receive it against their advance ship notice.

We would give the supplier the pull signals when we need replenishment. We’ve done that so far at a few plants and we are looking to extend that throughout our network.

“Additionally,” says Desautel, “we’ve rolled out a payment visibility application to a lot of our suppliers. Instead of calling and asking, ‘what is my payment status,’ they can check online.”

In an effort to further improve the communication and efficiencies between itself and its suppliers, Delphi is currently in the process of replacing its enterprise resource planning (ERP) systems with SAP software company wide.

“As we roll out SAP and have that as our standard at each of our facilities, that builds the base that will allow us to consistently and commonly share more information and start moving into areas of supply chain planning activities,” says Desautel. “We’d like to have the SAP rollout completed by 2005. We are about 60 percent through now. We have all of Europe and one-third of North America transferred over.”

With all that is going on within Delphi’s EBusiness Office, Holland is quick to point out that each of these initiatives is working toward a common goal. “These are not separate efforts in the grand scheme of things,” he says. “They are integrated so that as we move various parts of an overall program forward, at the end of the day we end up with a tightly integrated Delphi information club, and then we extend that out to our suppliers as well. “This is an evolving process and an evolving network,” Holland says. “The benefits of all of this are more timely and accurate information. If our suppliers aren’t getting the right information and they are shipping more than they should or less than they should or we are not managing quality tight.”

“On the supplier side,” Desautel says, “they now have better visibility to what is necessary to provide to us. From a payment visibility, instead of multiple phone calls to determine the status is of payments, they can go online and check. They can get information faster and we don’t have to have as many people sitting around answering phones.”