Eastman Case

Consulting Summary Report

Recommendation: Adapt to the Eastman Chemical Integrated Systems Solution.

Potential benefits: * Improved profitability

* Improved working capital efficiencies (inventory)

* Improved demand planning

* Increased flexibility of production schedule

Potential hurdles: * Infrastructure and implementation costs

* Willingness to exchange company private information for the betterment of the company

Implementation:

(brief) Data from Nagase

* Automated forecasts

* APORO for inventory

* FINE for shipping and payment

Data from Eastman

* Detailed customer information

* Shipping information

* Inventory information

Integrated Supply-Chain Significance

The integrated supply-chain for Eastman Chemical called the Integrated System Solution (ISS), helps balance the following three issues facing chemical industry; demand planning, production scheduling, and efficient distribution of inventory. Significant efficiencies and increased profitability are primarily achieved by establishing interconnectivity among individual facets of the supply-chain via the Internet and XML. Through the use of ISS, Eastman can establish a direct connection to other companies including 'sales channels, fulfillment channels, financial service providers and logistics services providers'(31), stimulating a collaboration effort. ISS does not only benefit Eastman, but it benefits all the companies who adopt the technologic infrastructure as well. It creates a business advantage by increasing agility and operational effectiveness in optimally allowing information and knowledge to flow between participating companies. For example in 1999, when ISS was on a trial basis, Eastman Chemical experienced improved flexibility to demand through electronic purchase and sales orders.

Additional benefits include a spin off of an independent logistics service provider, Cendian. Cendian relies heavily on ISS due to the heavy amounts of information sent electronically to and from Eastman. As a result of the increased ease of information transfer, Eastman has experienced 'improved customer service, reduced transportation costs, timely deliveries and reliability, significantly reduced logistics planning time, high visibility and improved control over tracking shipments and optimization of transaction and processes'(34).

Connection Options

As stated in the case in Figure 2, Nagase has three different options to connect with Eastman Chemical Company; Online Store Front, eVentures, and System-to-System Integration(ISS).

Online Store Front:

The online store front is the most basic option of the three. Through Eastman Chemical's website Eastman.com, buyers can login and input their current orders. This option does not require optimal knowledge or technology. This is the current form of communication of orders between Nagase and Eastman. The considerable negative to this form of connectivity is the chance for human mistakes when entering in orders, compared to the automated entry of orders with eVentures and ISS.

eVentures:

eVentures is when a third party connects the buyers and sellers systems together through XML technology. This allows for companies, like Nagase, who are not completely confident they are ready, willing, and capable of incorporating and supporting a full interconnection with Eastman, to reap many of the benefits without the huge investment. With these benefits come some costs. These costs include but may not be limited to, subscription cost, transactions fees, and the cost of standardized infrastructure system.

System-to-System Integration:

The last option for Nagase to connect with Eastman is a direct connection of their ERP systems. This would create automation of the whole purchase order cycle, generating 'direct data transfer between systems' (30). ISS establishes more flexibility and allows more customization of the interfaces and processes. The connection of front-end and back-end systems has significant potential for the future of business.

Nagase's systems are simplistic but capable of implementing an ISS connection with Eastman Chemicals. Nagase needs to decide if they are willing to make the financial investment that is needed and if the company, especially management, is willing to change their way of doing business.

Requirements and Limitations for Integration

Implementing an e-supply chain system can be very demanding. There are considerable requirements and limitations which merit discussion. Underlying an integrated e-supply chain management system requires the following: