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910E13

WOODSYNERGY INC: INTEGRATING IT INTO THE SUPPLY CHAIN

Owen P. Hall, Jr., Andrea Scott and Mark Chun wrote this case solely to provide material for class discussion. The authors do not
intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names
and other identifying information to protect confidentiality.

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Copyright © 2010, Richard Ivey School of Business Foundation Version: (A) 2010-08-17

WoodSynergy Inc. had become a mid-sized player in the fine woods supplier industry. The firm purchased
stock woods from a number of producers and processed them to meet specific customer specifications.
Approximately 60 percent of WoodSynergy’s sales were in the high-end furniture and cabinets sector. The
firm’s annual total revenue for the last reporting period was $110 million. WoodSynergy had recently
launched a number of information technology-based supply chain management initiatives and was
interested in assessing the current progress. The senior management at WoodSynergy had long felt that
efficiency improvements to the firm’s supply chain could be made through increased information
integration. They also understood the importance of having data and information aligned with their
business model; specifically, the firm was committed to delivering information to the right people at the
right time so that strategic and operational decisions were made properly and quickly. Improved data
sharing through the firm’s supply chain management (SCM) was meant to enable WoodSynergy to
develop and execute strategies that efficiently integrated manufacturing with suppliers and distributors. A
primary goal of the company was to meet order demand with the highest quality and on-time delivery: this
objective became more challenging in light of the financial and economic turbulence affecting the
woodcraft industry on a worldwide basis.

At a recent management meeting, WoodSynergy’s chief executive officer (CEO) asked the chief
information officer (CIO) to report on current SCM and information technology (IT) initiatives. The CIO
reported that he had recently looked at both the supplier and distributor-customer sides of the supply chain
and found that immediate near-term gains could be realized by incorporating IT into the firm’s SCM. He
went on to say that he had formed a project team and charged them with implementing a single, unified
web-based interface to centralize and synchronize data access across the firm’s supplier channels. The CIO
also reported that he had reviewed the following three types of mediation implementation strategies:

 Classic disintermediation — Removal of intermediaries in a supply chain, such as distributors or

wholesalers. This removal of the middleman strategy connected the supplier directly with its
customers.
 Remediation — Working more closely with existing middlemen partners. This strategy could be
affected by high contracting risks.

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 Network — Building alliances and partnerships with both existing and new suppliers and distributors,
involving a complex set of relationships. Networks tended to reduce search costs for obtaining
information, products and services.

Based on his review, the CIO reported that he had selected a remediation approach because it best fit the
firm’s goal of simplifying data sharing throughout the supply chain; furthermore, the CIO noted that
WoodSynergy had a long-term and positive relationship with its primary distributors, which would
ameliorate the high contracting risk issue. The project team spent the first few weeks researching Internet
sources in order to understand how other organizations (consumer and job sites) used web-based gateways,
and to identify the different types of technology available on the market. The organizations that were
examined were selected based on their ability to translate value chain performance into productivity and
market share leadership. These organizations understood that supply chain leadership meant more than just
low cost and efficiency; SCM leadership also required a capability to shape and respond to demand shifts
with innovative products and services. This best practices process was the first step in the standard five-
step implementation procedure, which also included selecting the hardware system, choosing the software
system, obtaining consulting expertise and prototyping the system.

The project team learned that the best-known model for managing supply chain performance was the
Supply Chain Operations Reference model (SCOR), created by the Supply Chain Council, an independent
non-profit organization (see Exhibit 1). This model contained standard descriptions of the following
management processes: plan, source, make, deliver and return. It also characterized the practices and
standard metrics that benchmarked “best-in-class” performance. The project team used SCOR to identify
and prioritize improvement opportunities because it recognized the linkages between supply chain process
elements, metrics and best practices.

Due to budget and time constraints, the project team chose to build a gateway prototype without addressing
problems of integrity and timeliness with the systems’ data. The project team decided to improve the data
quality at a future date. Two of the key drivers included in the gateway design were data standardization
and real-time interface. Three months after the Phase I system was implemented, regional distribution
managers (RDMs) were given a survey to provide feedback on the gateway. The survey indicated that 90
percent of the RDMs were satisfied with the gateway, and that 85 percent had experienced productivity
gains. The survey also revealed that the gateway:

 boosted the efficiency of RDMs by enabling them to reduce the time required to prepare order and
demand information by 15 percent,
 improved the communications process by optimizing the information flowing to RDMs,
 enhanced access to company information with faster access speeds and simplified navigation to
information and applications.

The first phase of the gateway implementation took under five months and cost approximately $400,000.
Immediate results were that the RDMs became significantly more efficient, as they decreased the time and
resources needed to acquire information from the firm’s wood products applications and distribution
managers; furthermore, WoodSynergy recognized a cost savings of $1.5 million through a more efficient
use of employee and IT resources. The CIO reported that the next step (Phase II) was to improve the
integrity and timeliness of the overall reporting system and to finalize the integration of the distributors and
suppliers into WoodSynergy’s supply chain. He specifically cited the following tasks and estimated times
for the Phase II effort:

This document is authorized for use only in Sanjay Verma, Swanand Deodhar's PGP I (Term 2) : Transforming Business through Information Technology (TBIT) 2019-20 at Indian Institute of
Management - Ahmedabad from Sep 2019 to Dec 2019.
 Page 3 9B10E013

 Develop and promulgate Phase II requirements and specifications — (one month);

 Continue upgrading the IT supply chain component — (three months);
 Provide system access and training to distributors and suppliers — (two months);
 Finalized selection of performance metrics — (one month);
 Conduct system evaluation using identified performance metrics — (two months);
 Prepare final report — (one month).

The CIO indicated that the estimated labor costs would average $150,000 per month, and that the
additional system costs would be approximately $500,000. He stated that enhancing distributor and
supplier integration using the new system would increase revenue and profit growth by gaining access to
new process innovations and by accelerating time-to-market cycles. This, he said, was particularly
important given the uncertain market conditions that tended to cloud outsourcing decisions. On the supplier
side, having a seamless IT connection would assist in the exchange of bills of materials (BOMs) and
component performance data. The CIO concluded his presentation by saying that organizational utilization
and cost-effectiveness were two key drivers of a successful supply chain, and that he would be providing
the management team with an update on these performance metrics over the coming months. Some
specific metrics would include processing accuracy, upside flexibility, material value added and inventory
turns. The CIO also reported that he would be working on additional IT strategic and tactical SCM
initiatives during the Phase II implementation.

As the meeting concluded, the CEO asked the CIO to prepare a one-page executive summary on the results
of Phase I and the challenges associated with Phase II. The CEO stated that he planned to present this
information at an upcoming board meeting. He further requested more information on the SCOR model
and on the rationale behind the selection of the remediation strategy. He also directed the CIO to prepare
goals and performance metrics for Phase II. He stated that the analysis should take into account
WoodSynergy’s current situation and the general uncertainty associated with the marketplace because of
increased imports from China and Vietnam. Finally, the CEO asked the CIO to identify specific IT
strategic and tactical initiatives beyond the current Phase II effort.

This document is authorized for use only in Sanjay Verma, Swanand Deodhar's PGP I (Term 2) : Transforming Business through Information Technology (TBIT) 2019-20 at Indian Institute of
Management - Ahmedabad from Sep 2019 to Dec 2019.
 Page 4 9B10E013

Exhibit 1

SUPPLY CHAIN OPERATIONS REFERENCE MODEL (SCOR)

The Supply Chain Operations Reference model, commonly known as SCOR, is a diagnostic tool for
supply chain management. SCOR identifies the various processes involved in a business and the important
things that lead to customer satisfaction. The SCOR model was developed by the Supply Chain Council
and is based on the following three factors:

 Process modeling,
 Performance measures,
 Best practices sharing.

SCOR is used to identify and prioritize improvement opportunities. It recognizes the linkages between
supply chain process elements, metrics and best practices, thereby helping companies measure the flow of
information and physical goods. Demand forecast accuracy, order fulfillment efficiency, supply chain cost
and cash-to-cash cycle time are four of the most critical metrics that a company can use to get a quick,
balanced snapshot of its supply chain performance. The SCOR paradigm consists of three distinct yet
interconnected levels: at level one, the scope and content of the supply chain — including setting
performance targets — is specified; in level two, the supply chain strategy is configured; level three aligns
available and anticipated resources to meet expected demand requirements: this is where the firm fine-
tunes its operation strategy through best practices.

This document is authorized for use only in Sanjay Verma, Swanand Deodhar's PGP I (Term 2) : Transforming Business through Information Technology (TBIT) 2019-20 at Indian Institute of
Management - Ahmedabad from Sep 2019 to Dec 2019.