New Study From University of Michigan Business School and QAD Verifies Business Value of Implementing a Lean Supply Chain

Business Wire, August 27, 2002

Business Editors

DETROIT, Mich.--(BUSINESS WIRE)--Aug. 27, 2002

Results Confirm that Auto Suppliers Can Achieve Reductions in

Inventory, Transaction Costs and Lead Times

With Automated Replenishment

Today at the AUTO-TECH 2002 Conference, QAD (Nasdaq: QADI) released results from a study conducted with the University of Michigan Business School Multidisciplinary Action Project (MAP) that verify and demonstrate the business value automotive manufacturers can expect to achieve by automating the replenishment process as part of a lean manufacturing initiative. The study is available for download at www.qad.com.

The study concludes that when automotive suppliers can access real-time demand data and dynamically source products from within their supplier network, they can reduce lead times and the cash-to-cash cycle, prompting more on-time deliveries and increased customer satisfaction. According to the University of Michigan Business School/QAD study, automotive manufacturers automating the replenishment process within their supply chains can reduce inventory up to 60-percent in-house and up to 30-percent throughout the supply chain, reduce transaction costs by up to 88-percent and cut lead times by up to 75-percent.

In a lean environment, customer demand is the signal that pulls product throughout the supply chain. Automating replenishment is a way to facilitate the lean process by integrating and synchronizing not only manufacturing, but the entire supply chain.

"Increased competitive pressures in the automotive industry are driving manufacturers to streamline operations and reduce costs, while also requiring them to improve customer satisfaction and loyalty," said Dhananjay Nanda, The Fuqua School of Business, Duke University. "By streamlining and automating the procurement process and implementing a lean manufacturing model, automotive manufacturers gain significant efficiencies, and can now manufacture vehicles as they are ordered by end-consumers -- which means they can be more responsive and are able to customize."

"The supply chain of the future is a forum for continuous, real-time interaction between companies, suppliers and customers," said Gary Flum, general manager of automotive at QAD. "Online collaboration throughout the supply chain can facilitate the necessary information sharing, but integrating and synchronizing the entire supply chain and manufacturing process require efficient logistics, increased flexibility and reduced variability. As a trusted provider in the automotive industry, QAD can deliver solutions that enable manufacturers to realize the benefits of a lean model."

Methodology

The study methodology was five-pronged, and consisted of the following areas:

-- Reduce inventory by up to 60-percent in-house and up to 30-percent throughout the supply chain. By facilitating a perfect pull model, inventory levels can be minimized for all trading partners in the supply chain. By automating the replenishment process and facilitating real-time information flow, automotive manufacturers can eliminate the bullwhip effect and reduce the need to carry safety stock to meet demand fluctuations and unexpected events.

-- Reduce lead times up to 75-percent. By eliminating the lag in order and information flow in the supply chain and automating the replenishment process, all trading partners in a supply chain can gain increased efficiencies in production and transportation and can offer greater product customization.

-- Reduce Transaction Costs up to 88-percent compared to EDI and phone/fax methods. Pre-programmed instructions and parameters allow all replenishment correspondences between trading partners to be systematic and accurate. This simplifies the myriad of details between vendors, parts, time lags, price points etc.

Conclusions

According to the study, by implementing Internet-based collaboration in the supply chain companies can:

-- Reduce inventory by up to 60-percent in-house and up to 30-percent throughout the supply chain. By facilitating a perfect pull model, inventory levels can be minimized for all trading partners in the supply chain. By automating the replenishment process and facilitating real-time information flow, automotive manufacturers can eliminate the bullwhip effect and reduce the need to carry safety stock to meet demand fluctuations and unexpected events.

-- Reduce lead times up to 75-percent. By eliminating the lag in order and information flow in the supply chain and automating the replenishment process, all trading partners in a supply chain can gain increased efficiencies in production and transportation and can offer greater product customization.

-- Reduce Transaction Costs up to 88-percent compared to EDI and phone/fax methods. Pre-programmed instructions and parameters allow all replenishment correspondences between trading partners to be systematic and accurate. This simplifies the myriad of details between vendors, parts, time lags, price points etc.

About QAD

QAD delivers value through collaborative commerce for manufacturers, empowering enterprises to integrate diverse business processes and increase profitability. Manufacturers of automotive, food and beverage, consumer, electronics, industrial and medical products use QAD applications at more than 5,400 licensed sites in more than 80 countries and in as many as 26 languages. For more information about QAD, telephone 1 805 684 6614, or visit the QAD Web site at: www.qad.com. To receive any of QAD's press releases via facsimile, contact 1 800 356 0747, or outside the U.S. contact 1 213 253 5647.