I recently interviewed Bill Petersen who is VP of Business Development at LCI Supply Chain Collaboration Network, Inc. Bill shared with me their plans to launch a new social network for supply chains product which will roll-out on Jan 1, 2012.
LCI has a rich history in supply chain management and dealing with companies that have large international complex supply chains. Over a period of the last 15 years they have developed solutions that automate a lot of the process. They automate things such as inventory management, creating documents for import/export, auditing those documents, doing rudimentary transportation and warehouse management and other similar types of activities.
The founder of the company had a vision where all this information would be put in a shared environment (This was the second-generation of the product. Linking the individual programs so they could talk to one-another and all of the supply chain partners had access.) so that for example, when a carrier makes a change to their invoice on a shipment, that change is automatically picked up by the customs broker that is preparing the documents which are declaring the value of the goods.
This update to that document can avoid a lot of problems downstream when someone goes to look and asks how you valued those goods. By doing this collaboratively instead of in a serial process, LCI’s customers are able to save a lot of time and money. They discovered what they call the 95/5 rule where before they installed the system people were spending 95% of their time putting out fires and chasing information. Only 5% of their time was spent doing what they were really hired to do, namely managing the process.
LCI is able to reverse this into a 5/95 ratio. They have had some absolutely startling results in some organizations (which are listed on their website) where they are saving the company millions of dollars per year in operating costs. For example, one of their customers which they are currently implementing has 8 people that do nothing full time but call vendors and confirm that a shipment is on its way. All these people do is confirm that an order is going out and that it is underway and will arrive on time. This is in the automotive industry where the cost per minute of shutting the line down runs into the thousands of dollars. The system LCI provides automates this process and eliminates the overhead. It also eliminates the issue of human frailty and failing to follow up on something.
Barriers to collaboration besides the technology
The barriers are chiefly things like time, distance, language, access to data etc. The problem is the business process itself ideally should be done face to face in real time. When you separate suppliers and users by time, distance and language that process just explodes. For example, if you have a release schedule on orders where manufacturing companies using a material requirements program to generate the forecast and they run it every day, the supplier will be getting a new instruction to ship on a daily basis. How does the customer know whether that supplier will be able and willing to comply?
That requires follow-up to close that loop. In the LCI system both the supplier and the customer are on the same network. When the release is made to send the order out to the supplier they have the opportunity to confirm or deny the order right there on the screen. If they confirm it there is no action taken. If they say no or change it in any way in terms of quantity, price, delivery time or any other parameter then the customer is notified automatically where it says “they want to do this, do you approve it?” It automates the back and forth process.
There are multiple examples of problems that can come up such as a carrier changing their invoice price, a customs broker changing their fee, or a supplier that does not produce required documentation such as a certificate of origin. These problems can be resolved sooner and much faster with the network type organization.
The future of collaboration
LCI will launch on Jan 1, 2012 with a $14 billion manufacturer. It will be a social network that uses these tools. You have Facebook where you have a bunch of profiles online that can be connected to do scheduling of soccer games, revolutions etc. What LCI is doing is taking the supply chain tools/apps and making them available in the social network environment.
What this means can be better understood with the following example: let’s say you have a shipment that is leaving China for the US. You have a vendor in China, a customs broker in China, a trans- ocean carrier, another customs broker in the US and rail and truckload transport. All of these people are involved in the shipment. By being in a social network together, if any of them have a problem they can send out an alert to the other people in that specific supply chain to notify them of a change made.
This type of networking capability is something that is not there today. There are companies such as Yammer which offers a Facebook type environment designed for business. However, there is no core application behind it. It doesn’t really do anything but link people together. LinkedIn is another example. It does a good job of providing information about people and allow you to find people in the network, but it doesn’t really provide any functionality on its own. This is how LCI differs.
Within the LCI system they can help their customers that are facing a problem such as hurricane Katrina on the Gulf coast, which created a lot of issues for the petroleum industry. Under the LCI system someone such as an engineer under the transportation network can send out an alert across the company to anyone that had transportation or material movement in their profile within the company to join a discussion group. They could create a blog on solving that problem and send it out to everyone in that company that had anything in their profile which indicated it would be of interest to them.
It is the information sharing you would have in something like Facebook, but focused on the business environment, and backed up by functional apps with proven track records. This is where LCI sees things going in the future. LCI is pleased that they are actually there.
Suggestions for those interested
LCI’s current attention is focused on getting the beta sites up and running on Jan 1, 2012. They made a decision in April of 2011 that they were going to suspend all sales and marketing activities in order to make this happen. They had been in business for 16 years and are doing very well with their existing product line. The company is currently not doing any demos or websites which reflect MACROLYNK, their social networking product, but will have one up early next year.
This will change after Jan 1, 2012 because they will then have a real live customer and will be able to cite exactly what they are doing. Bill suggests anyone who is interested contact him now and he will be able to get back with more specifics in January.
About Bill Petersen