Throughout the late 1990's, consultants talked about the anticipated benefits of the real-time supply chain.

For all the upbeat talk about visibility and connectivity, one big question remained. What exactly would a real-time supply chain look like?

That question was answered by Lucent Technologies in 1999, when it launched a real-time trading network using a supply chain visibility, event management, and communications tool (Optum, 914-993-3400).

The goal was both simple and audacious, says Jim Schoessling, Lucent's senior manager of supply chain networks. The company wanted to create connectivity and synchronization across its vast network of suppliers, customers, business units, equipment installers, transportation carriers, warehouses and third-party logistics providers.

At the same time, Lucent wanted to use that tool to shrink the size of that network. Goals included using fewer trading partners, operating or outsourcing to fewer warehouse and distribution facilities, relying on fewer carriers, and carrying less inventory.

Four years later, the results are impressive.

While Lucent once operated 200 warehouses just in North America, the company can now meet customer service requirements with just 15 strategically located facilities. Most of those are managed by third-party logistics providers like Ryder System (305-500-3726).

Where the telecom giant once dealt with 1,700 distinct logistics carriers to ship its product, transportation needs are now coordinated by just two 'lead logistics providers.' Logistics operating costs have been slashed by 20%.

Despite turning logistics over to third parties 'we've increased our on-time performance,' Schoessling says. 'We simply couldn't operate without real-time visibility.'

Prior to 1999, keeping track of what was—or was not—happening with any given order was nearly impossible.

'Our customers knew that we hadn't shipped long before we knew,' says Schoessling.

To compensate for that lack of visibility, installers preparing to work on a job often double ordered and expedited inventory just to make sure everything they needed for an installation was on hand when they were ready to begin.

That happened thousands of times a day on a global basis. Inventories ballooned, margins dropped and customers were unhappy.

'We needed a tool that could look across our entire business to provide a global view of what was happening with any particular order in real time,' says Schoessling.

But Lucent wanted more than just global visibility. The company also wanted to be notified when scheduled events failed to occur so it could act on those exceptions.

That way, if an important component was delayed, the system could notify the other parts and service providers. They could then rearrange their schedules so that Lucent was not sitting on inventory longer than necessary.

Lucent wanted a solution based on a standard messaging system. This would let customers and suppliers easily plug into or unplug from the network.

In its simplest form, the tool implemented by Lucent met all three of those criteria. Initially, Lucent used the system to monitor the real-time events that occurred after a product was shipped from a supplier. Lucent tracked shipments from suppliers to a Lucent warehouse; from a Lucent warehouse to a customer's job site; from one Lucent facility to another; or from a supplier to a customer's warehouse and then to the customer's job site.

If nothing else, that allowed Lucent to keep better track of shipments, and proactively respond to exceptions.

'If we were alerted that a shipment was going to be late, we could ask our key supplier if there was a way to move the shipment up,' says Schoessling. 'If not, we could automatically go to the other suppliers and readjust their ship dates.'

With Lucent's largest vendors, that process could literally be done electronically with a keystroke or two. Many smaller vendors still don't have the infrastructure to handle real-time information. Those are still dealt with over the phone or with fax machines.

Once the system was working with order tracking, Lucent expanded the scope of what it monitored.

'Initially, we were just talking about logistics events,' says Schoessling. 'Now, we're using the same B2B pipeline to exchange purchase orders with suppliers; to capture commitments from the suppliers; and to do invoice remittance against those orders.'

Finally, it has also allowed Lucent to successfully launch an extensive outsource model. 'Where we used to manage suppliers at arms length, we're now partners,' says Schoessling. 'You can only do that if you're very integrated and have seamless communication.'

But it's not just suppliers who use the tool. When a customer logs on to Lucent.com to check the status of an order, that information is coming from the visibility tool.

Now that Lucent is managing forward logistics electronically, the next step is to use the same system to manage reverse logistics, repairs, and spare parts. When that happens, Lucent will have one unified view of all product moving out of or into its facilities, regardless of whether it's filling an order or part of a repair.

'I cannot imagine going back to our old supply chain model,' Schoessling says. 'Once again, we'd be filling up warehouses with inventory and reducing our customer satisfaction numbers.'

Click on the icon to learn how Ryder System uses the real-time network to synchronize Lucent's orders. (Web-exclusive)