Supply Chain Brain - October/November 2011

improving its cash conversion cycle by improving visibility and
agility. “We did not know what we did not know,” he says.
Brooks says Baker Hughes needed to conduct a step-by-step
examination of its global supply chain. It had to understand all of
the trade-offs involved in making key decisions about sourcing,
production and logistics. “We need to bring some measure of visi-
bility into what’s going on in a real-time environment,” he says.
The answer lay in business activity monitoring. All aspects of the
company’s products—volume, velocity, quality, value and risk—
had to be scrutinized. A system of alerts was needed, to inform the
company when something was going wrong.
The exercise is being implemented across all nine regions of the
world in which Baker Hughes operates, Aming says. Key to that
effort is the standardization of busi-
ness processes, to ensure the partici-
pating and understanding of
everyone involved. As with any
large company, there were a num-
ber of corporate “silos” that had to
be dismantled. “We are redefining
processes so that we can measure
them properly,” he says.
To cut across traditional barriers,
companies need to obtain “buy-in”
at all levels of the organization.
Steering committees are a valuable
tool to promote leadership, and
assign responsibility for sponsoring
various projects. “Make sure that
everybody sees ‘what’s in it for me,’”
Aming says.
Baker Hughes has already real-
ized a number of benefits from its
initiative, including a reduction in
days sales outstanding amounting
to “tens of millions of dollars,” says
Aming. The next step, adds
Brooks, is to incorporate historical
data into a simulation model to
predict future developments. Such
capability will help the company to
tackle the difficult task of risk
analysis and mitigation.

The Changing World of Global
Manufacturing

Simon Jacobson, research director for manufacturing with
Gartner, discusses the key trends that are driving efforts by
companies to reduce costs, boost product quality and gain
greater visibility into the key processes among all supply-
chain partners.
The globalization of supply chains is causing companies to take a
fresh approach to their manufacturing strategies, says Jacobson.
They are working to align capabilities with vendors based on com-
mon technologies, products and market clusters.
Leading organizations are also focusing on aligning metrics
across their supply chains. And they are beginning to incorpo-
rate sustainability concerns into their decision-making
processes. In addition to the traditional emphasis on maximizing
the use of equipment, they are factoring in the usage of water
and other resources.
Although some original equipment manufacturers are rethink-
ing their reliance on China and other parts of Asia as sources of low-
cost production, they are still committed to outsourcing. “Contract
manufacturing remains a massive option for a lot of companies,”
says Jacobson. What’s changing is the depth of their “make-versus-
buy” analyses. They are beginning to collaborate more closely with
vendors in areas such as customer demand and product creation.
Their goal is to move beyond the old transactional relationship,
with its sole focus on price.