New Climate Sparks Government Demand for Supply Chain Management

New Climate Sparks Government Demand for Supply Chain Management<@VM>Snapshot of Key Supply Chain Management Players

Jim White

by Trish Williams

The corporate crusade to gain competitive advantage using new supply chain methods is extending to federal, state and local governments, where business-savvy leaders seek to replicate commercial successes.

At information technology companies staking out positions in the booming supply chain management market, officials chalk up surging public-sector interest to a service-to-the-citizen mantra that shows no signs of slowing and government leaders' zeal to do things better, cheaper and faster.

"You don't see the profit motive [on the government side], but you do see this value for money understanding coming out today," said Jim White, senior vice president of public sector, aerospace and defense and airlines at Dallas-based i2 Technologies Inc. The company opened a new office in Washington in May to pursue public-sector business.

"With pressures on the budget, and citizens wanting more for their tax dollars, there is an embracing of the idea, 'We've got to do things better. The old school of good is good enough is no longer good enough,' " said White. His goal is to grow the company's public-sector business by 100 percent or more annually in the next five years.

Terry Hisey, vice president and general manager of Unisys North American Commercial Industries, Blue Bell, Pa., echoed this sentiment.

"In private industry, it's called customer relationship management. In government, it's called constituent relationship management. So there are solutions that can be leveraged to provide the greatest value possible to citizens," he said.

The market research company Meta Group in Stamford, Conn., recently described the business impact of developing an intelligent supply chain as a strategic initiative that goes well beyond internal cost reduction. Intelligent supply chain architectures "enable rapid response to changes in customer requirements and events as well as continuous improvement initiatives," according to an article on Meta's Web site.

In the case of government organizations, that could spell greatly improved logistics capabilities and added flexibility for citizens growing accustomed to a 24-7 business climate, industry experts said.

Growth projections for the supply chain management market vary based on the definition of supply chain management used and the scope of services covered.

Supply chain management encompasses a wide set of interdependent, cross-industry business strategies that can reduce costs, expand revenue and increase market share through improved efficiency and effectiveness, according to a definition offered by the Gartner Group, Stamford, Conn.

i2 Technologies estimates that the federal supply chain marketplace will hit $1 billion in the next five years.

In August, the Defense Logistics Agency awarded Chicago-based Andersen Consulting a five-year contract worth $398.8 million to modernize the agency's business systems. Industry officials said the uptick in interest at the federal, state and local government level is palpable, with requests for information and proposals for work in these areas on the rise.

Additional evidence is the level of attention that many solution providers are paying to the public-sector space, they said.

Certainly, small and large companies alike are flexing their muscles daily in the supply chain arena, touting new solutions and strategic alliances and beefing up operations to capture business in the private and public sectors.

These companies run the gamut from small ones focused exclusively on the supply chain niche to leading software names, such as Oracle Corp. of Redwood Shores, Calif., and SAP of Waldorf, Germany.

Other prominent players include i2 and Siebel Systems. Both of these latter companies have made good names for themselves in the commercial supply chain software and customer relationship software arenas, respectively, and are now taking aim at the public sector.

Systems integrators such as IBM Corp. of Armonk, N.Y., TRW Inc. of Cleveland and Unisys Corp. of Blue Bell, Pa., are also taking steps to stay in the game.

But the list of players goes on and on.

For Unisys, which had $7.5 billion
in 1999 revenue, supply chain work encompassing customer-facing activities "is probably the fastest growing segment of the company's overall business," said Hisey. "The belief is that this will continue to be a more than double-digit growth area for the company as we go forward."

Indeed, industry officials are quick to point out that government supply chain needs frequently outpace those of the private sector.

"If you look at the federal government and lots of state governments, you'll see supply chain needs that dwarf those of many large companies in areas such as inventory management, purchasing and distribution," Hisey said.

Different government agencies are focusing on different aspects of the supply chain, but "there is a lot of activity out there," said Ron Hamrick, senior vice president, civil and commercial programs and strategic technology at Innolog, McLean, Va., which has provided supply chain services to the Army, Navy, Air Force and civilian agencies since 1989.

"You typically don't think of an agency like the [Federal Deposit Insurance Corp.] as a player, but they have a supply chain. There are also activities keyed to the control of assets, such as materials, supplies, people and money that all play into the supply chain," Hamrick said.

A case in point is the U.S. Census Bureau, which had to significantly ramp up its operations to support the 2000 census. The agency opened hundreds of offices throughout the United States that needed to be readied with everything from computer systems to desks to census forms.

Hamrick said Innolog ran the operations center "that allowed all of that to happen" under a contract with the Census Bureau worth $1.1 million that his company obtained through the General Services Administration schedule.

"If you go back to the last census in 1990, the bureau had a lot of issues. But we have been very effective at helping them through the 2000 census. The record this time around was every office was opened on time, without any major incidents," he said.

Many companies are targeting asset management as a hot growth area. Asset management can cover everything from computers to any major piece of equipment or furniture, and often involves not just the control of such assets but their maintenance as well, especially when it comes to the Defense Department, industry officials said.

"It's not intuitively obvious that supply chain is a slam-dunk application in the government. So stepping back, you look at who builds things or makes things or who needs to transport things and repair and overhaul things. Obviously at the top of that list is the Department of Defense," said i2's White.

Another IT contractor that plans to ride the supply chain business wave is GTSI Corp., Chantilly, Va. The company, which had sales of $668.5 million in 1999, derives 90 percent of its business from government customers.

"Supply chain issues are very real in government, and we have been investing for more than four years in putting together the basic infrastructure that allows us to deliver products and related services," said Joel Lipkin, GTSI's senior vice president for sales and support.

The company also has organized its Web site so that government contracting officials can process orders more efficiently. "It simplifies their processes and we provide them with reports on the delivery status and tracking numbers for delivery companies such as United Parcel Service or Federal Express," Lipkin said.
by Trish Williams

i2 Technologies Inc.

Founded in 1988, the fast-growing i2 Technologies Inc., whose supply chain management software helps manufacturers plan and schedule production and related operations, is taking aim in a big way at the federal market. Its 1999 sales totaled $591 million.

"I2 has a strong legacy of providing value to customers, and it's this proposition we are taking to the public sector and in particular the federal market," said Jim White, senior vice president of public sector, aerospace and defense and airlines at the Dallas-based company. He expects his public-sector staff to rise from 20 to 40 or 50 employees next year.

As a result of its federal focus, the company has renewed and realigned an alliance with Computer Sciences Corp., El Segundo, Calif., White said. I2's overall strategy "is not to prime but rather to collaborate and align with partners who do most of the implementation work," he said.

One recent win for i2 involved a partnership with IBM Corp. For this effort, the IBM-led team applied commercial, off-the-shelf software to help the Navy optimize the overhaul and repair of its ships, said White, who expects to announce additional federal wins in the next 60 to 90 days.

Ticking off areas where he sees new business potential, White cited the Defense Department, the Government Printing Office, the Bureau of Engraving and Printing, the U.S. Mint and the U.S. Postal Service. I2's chief competitors are Manugistics, Rockville, Md., and Oracle Corp., Redwood Shores, Calif., which is developing a supply chain capability as is SAP of Waldorf, Germany.

In addition, i2 has products that can optimize planning and scheduling at a local level. For instance, company officials have modeled problems involving getting snow plows to the right place at the right time.

"We want to establish our beachhead in the federal market first and provide that as our base of operations. The idea is to provide [federal] wins that will reference into the state and local arena, White said.

JD Edwards & Co.

Touting the theme that collaboration is the key to organizational effectiveness, JD Edwards & Co. has managed to snare significant supply chain management business at the state and local government level.

"Just over the last two months, we have seen a tremendous surge in requests for information and requests for proposals at the state and local level, mostly for traditional [enterprise resource planning], but it's more outward focused ERP, which is really what we have been focusing on in the collaborative model," said Allen Winder, vice president and general manager of public services.

The Denver-based company's enterprise and supply chain software products manage an array of functions such as human resources, logistics and manufacturing. The company also offers applications that enable its customers to modify applications and implement networkwide changes. Its top competitors are Oracle Corp.; PeopleSoft Inc., Pleasanton, Calif.; and SAP.

With electronic procurement and e-government now at the top of everyone's list, JD Edwards is looking at both expansion into the federal government arena and broadening its partnerships. In the past, such partnerships have included strategic alliances with the likes of IBM, Andersen Consulting of Chicago and Deloitte & Touche of New York, as well as pacts with platform providers like Hewlett-Packard and Sun Microsystems, both in Palo Alto, Calif.

The company also has arrangements with implementation service providers that are specifically focused on
e-procurement, said Winder.

While many government organizations started out with static Web pages, being able to interact with citizens through work order management or being able to automatically bring asphalt into the warehouse when needed requires a component-based work-flow architecture, Winder said.

JD Edwards plans to be a key player in extending the government enterprise by focusing on four areas: citizen relationship management, supply chain services and e-procurement, employee self-service benefits and knowledge management.

Among JD Edwards' clients are the city of Oceanside, Calif., which has made it easy for citizens to obtain licensing and permits through the Internet. And Illinois' Cook County is making strides in the realm of work-order processing. County officials want taxpayers who encounter a broken traffic light or a pothole to be able to come home and report the problem via the Internet, triggering an immediate work order.

JD Edwards also is working on an electronic procurement project for the city of Orlando, Fla., that would enable authorization routing and warehouse management to be conducted over the Internet.

Unisys Corp.

The primary focus at Blue Bell, Pa.-based Unisys Corp. is working with clients as they support their customers around three main business areas: understanding demand, fulfilling demand and managing customers.

The company assists clients in the work they do as it relates to supporting their customers both "in a client-
facing perspective and a back-operations perspective," said Terry Hisey, vice president and general manager of Unisys North American Commercial Industries.

Through the company's partners, Unisys officials see an emerging interest in trying to think through how to vertically apply to the public sector solutions they have developed for more horizontal business areas.

"You have Siebel Systems, which is trying to think about how to leverage a CRM tool to better serve citizens, and SAP, which is trying to think through what are the parallels between running a state and running a corporation as it relates to enterprisewide systems," Hisey said.

A lot of governments are starting to think and act like traditional businesses, Hisey said. They are interested in the supply chain, call centers and the ability to integrate information across disparate systems in the government.

"A lot of the supply chain issues really transcend multiple disciplines. The reality is, it's not just the manufacturing industries; you have supply chain issues in the health care and financial industries as well as in government," he said.

Plans call for Unisys to extend current partnerships and identify new ones. Hisey said the company wants to combine its intellectual capital around consulting, systems integration, outsourcing and operations support with the world-class software developed by its partners.

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