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314 Chapter 11 • Supply Chain Management

behavior, consolidate orders to reduce product costs, eliminate maverick purchases, improve
payment process, and reduce cycle time and administrative processing fees. Ariba is a company
that offers procurement solutions. Dell, a well-known online computer sales company, has
written the book on front-end, made-to-order, on-time delivery of computers. According to a
study by Ariba, however, Dell’s back office was not quite as efficient. Dell has approximately
25,000 employees spread out across the United States. They spent around $5 billion a year on
nonproduction supplies from consulting to office equipment. Dell followed the traditional
procurement process that required a three-part form, needed between 8 and 10 signatures, and
took weeks to complete. The entire process carried a cost of about $110 per transaction. Tracking
was nonexistent, and maverick spending was out of control.
Dell researched three e-procurement systems with a five-part scorecard: ease of use, opti-
mization on Dell servers and the Microsoft NT platform, e-commerce links to a broad base of
suppliers, ease of integration with Dell’s back-end systems, and cost-effectiveness. Dell took the
big bang approach to implement the new system. Seven months were needed to create approxi-
mately 20 interfaces from the Ariba buyer to Dell’s legacy systems. With the new systems in
place, a Dell employee can make a purchase in less than one minute. Employees are able to
search by product, by a service, or by a certain Dell-approved supplier. When a catalog item is
selected, the necessary information is populated automatically, including Dell’s preferred prices
from that supplier and all accounting information. Once the requisition is submitted, an automat-
ed workflow approval process is followed. Once approved, the requisition moves out to the Ariba
Commerce Services network, a shared infrastructure that enables connectivity between buyers
and suppliers on the Ariba B2B commerce platform. Ariba takes responsibility for communicat-
ing orders via XML, e-mail, faxes, EDI, or whatever the supplier has required.
Dell benefited because there was no need to maintain a costly EDI infrastructure for
purchasing indirect materials. Orders are submitted over the Internet via XML, and the supplier
fills the orders. Once the orders have been received from the supplier, the receiving department
can match the packing slip with the online order via Ariba and automatically send it to account-
ing for payment. With Dell implementing Ariba’s e-procurement system, they were able to save
62 percent on the time it took to complete an order and ensure a 61 percent reduction in the cost
of the order. Dell is also able to use the data collected by the e-procurement system to go back to
suppliers and negotiate greater volume discount.

Collaborative Design and Product Development
Collaborative design and product development among parties in the supply chain are crucial
when product design and shortening the time it takes to get the product to market are the goals.
With online collaboration, all parties, engineering, suppliers, marketing, and even customers
can get involved in a product development before the first dollar is spent. In the early 1990s,
GM usually spent four years taking a car to market. When a GM vehicle would land on the
showroom floor, it was already stale. Around 1990 GM had more than 9,000 outside suppliers
and more than 7,000 legacy systems. Within GM, engineering and design departments had
23 computer-aided design (CAD) systems. No system integrated with another, and collabora-
tion was a nightmare. In 1996, GM chose electronic data systems’ (EDS) Unigraphics as its
standard CAD program. This program allowed the three-dimensional design documents to be
viewed, edited, and changed by more than 18,000 engineers and designers located in more
than 14 different locations all over the world. GM also chose to give access to the EDS to
more than 1,000 critical suppliers.