netsuite tackles global supply chain management and

NETSUITE TACKLES GLOBAL SUPPLY

CHAIN MANAGEMENT AND VISIBILITY

VIA THE CLOUD

NETSUITE

P.J. Jakovljevic, Principal Analyst

November 2017

WWW.TECHNOLOGYEVALUATION.COM

NetSuite Tackles Global Supply Chain Management and

Visibility via the Cloud

About NetSuite

A cloud computing pioneer, Oracle’s independent business unit (IBU) NetSuite

was the first enterprise software company dedicated to delivering business

applications over the internet. NetSuite provides a suite of cloud-based solutions

in the areas of financials, enterprise resource planning (ERP), human resources

(HR), and omnichannel commerce that run the business of more than 40,000

midmarket enterprises and subsidiaries in more than 100 countries. Companies

using NetSuite’s solutions operate in many industries, and include fellow cloud

software companies, service businesses, not-for-profit organizations, retailers,

wholesale distributors, and manufacturers.

NetSuite’s global financial management capabilities cater to the needs of global

companies, and consist of:

• global data management for managing and coordinating master data

around the enterprise,

• a global trading configurator for catering to complex trade relationships

between trading partners and their subsidiaries,

• an inter-company framework and journal for automating financial

transactions between countries and companies, and

• international reporting for all local statutory tax and compliance

requirements.

NetSuite’s software solutions are capable of handling complex financial

transactions with ease (figure 1). Consider the following example of a complex

transaction flow: A sales order is taken in the United States and three order lines

are shipped to, say, Toronto, London, and Sydney, and the customer is billed in

Spain. Then, let’s say that the Toronto order line is shipped from the United States

location, the London one is shipped from the Netherlands location with the

products made in Poland, and the Sydney one is shipped from the China location.

NetSuite Tackles Global Supply Chain Management and Visibility via the Cloud www.technologyevaluation.com 2

Figure 1. Example of a complex transaction flow

These capabilities enable NetSuite’s OneWorld cloud ERP software to easily

handle these global financial and logistics needs, while delivering new

localizations for even more countries. NetSuite’s other strong capabilities in this

realm include cash management, bank reconciliation, and planning and

budgeting.

Global Supply Chain Issues

NetSuite has many customers in the hi-tech and consumer electronics verticals

with a large need to outsource (contract) their product manufacturing and to have

global inventory visibility and global operational planning. These companies need

capabilities to achieve supply chain operational excellence (SCOPE), in addition to

the aforementioned capabilities for financial excellence.

The supply chain is the lifeblood of the operations for virtually all distributors and

manufacturers, particularly for global businesses. A poorly run supply chain

means missed customer order shipments, excess inventory in the wrong places,

and increased costs—resulting in disgruntled customers. The good news here is

that the cloud can take geography out of the equation, so that inventory is visible

regardless of where it is located.

NetSuite has made great strides in the realm of supply chain management (SCM).

Over the past two years, NetSuite has collaborated with more than 20

manufacturing customers to determine the features required to produce a

comprehensive and complete cloud ERP software solution for product-based

companies. The vendor has sought to foster its relationship with strategic

customers and enhance its understanding of the complex business processes


within the supply and demand chain in today’s global environment. SCOPE was

originally designed for high-tech and consumer electronic companies, which

largely outsource their manufacturing needs but almost all of the business

process requirements identified are applicable to in-house manufacturers and

distributors.

The participants of the initiative incorporated the Design Thinking Methodology

to identify opportunities for innovation and to design an SCM software product

that delights end users. Customers identified the following themes as being

important to them in the Design, Plan, Execute, and Service phases of the SCOPE

undertaking (figure 2):

• Subcontract process simplification

• Flexible and integrated product structure and documentation

• Control tower workbench with supply network visibility

• Quality management system (QMS)

• Automated and intelligent order fulfillment (rules-driven allocation)

• New product introduction (NPI) and end-of-life (EOL) management

• Serial number traceability

• Supply chain portal

Figure 2. Phases of NetSuite’s SCOPE initiative


The New and Upcoming NetSuite Cloud SCM

Solutions

Hence, NetSuite has invested significant resources into beefing up this critical

business area. The vendor launched a slew of solutions for managing complex

supply chains at the recent SuiteConnect 2017 customer conference, as part of

Oracle OpenWorld 2017, in San Francisco. With respect to the product design

phase of the SCOPE project, it is obvious that traditional bills of material (BOMs),

which handle one product with multiple revisions, no longer suffice in the

modern world.

Multiple different BOM types are thus needed based on who is making the

product and where the product is located, such as an engineering BOM, a

production BOM, a contract manufacturer #1 BOM, a contract manufacturer #2

BOM, etc. In consumer goods, the same product may need to be set up as a

different part number depending on the channel. For example, a part sold to Best

Buy, Target, and OfficeMax may need to have different item numbers for pricing,

costing, analysis, and visibility purposes.

NetSuite’s enhanced global BOM functionality allows users to manage BOMs

separately from the items they are associated with, reducing the overhead on

engineering teams. Each assembly can now use multiple BOMs that specify the

location and/or vendor, should companies have locations that source components

locally. Additionally, each BOM can be attached to multiple stock-keeping units

(SKUs), enabling manufacturers to sell the same item under different brand names

without needing to manage redundant BOMs when changes are required. Other

nifty features of NetSuite SCM solutions include alternative BOMs, revision

tracking and management, and component substitution.

Product Data Management

Engineering change order (ECO) capabilities enable companies to manage

changes that affect the supply chain. NetSuite’s native ECO system allows

engineers to easily manage BOMs in the ERP database, and integrate those BOMs

and ECOs with PLM software solutions. The ECO process uses native case

management processes, a where-used analysis, and mass updates capabilities.

The BOM comparison feature allows for comparison between two BOMs and/or

revisions, and for highlighting differences and automatically tracking changes.

These ECO capabilities allow NetSuite manufacturing customers to centrally

manage all product-related documentation, such as data sheets, assembly

instructions, quality specifications, and contract manufacturing procedures.

Customers can thus control the release of the correct product documentation


to the right supplier and automatically update it with changes and send

notifications.

Supply Chain Control Tower

Traditionally, inventory visibility has been limited to one subsidiary or company,

sometimes just within the four walls. With today’s global supply chains, master

schedulers, planners, and buyers need to be able to see the status of inventory

across the globe and the time frame for future supply and demand. This visibility

would allow them to make the right decisions, communicate effectively with

customers and suppliers, and hold just the right amount of inventory.

Companies typically ship their taxation and financials orders from one

location, limiting their ability to provide optimal customer service. With multiple

subsidiaries in many countries, enterprises can take advantage of a new cross-

subsidiary fulfillment capability that allows a single order to be shipped from

different countries. Companies can sell from the United States via a sales order

with multiple order lines, and use the inventory across the global supply chain to

determine what should be delivered to where—and thereby optimize

customer service.

NetSuite uses a Control Tower Workbench to provide manufacturers, distributors,

and retailers time-phased visibility of supply, demand, and resulting inventory and

movement of material across all supply chain locations, including vendors,

subcontractors, and logistics providers. The control tower workbench will address

the Design, Plan, Execute, and Service aspects of SCOPE. The Design area includes

NPI and product data management (PDM) information.

The Planning area includes ATP calculations and allocation of inventory and supply

orders across multiple subsidiaries, along with a planner’s workbench. The

Execution area includes functionality for quality management and traceability,

along with better support for contract manufacturing. The Support area includes

capabilities to manage products’ aftermarket life and end of life.

Supply Chain Execution

As for the Execution aspect, NetSuite’s new Inbound Shipment Management

module allows customers that order large quantities of product, often from

multiple suppliers, to consolidate multiple purchase orders into a single container

in order to simplify future tracking and status updates. Upon receipt, all items in

the container are scanned at once, and the billing process is streamlined.


NetSuite’s Inbound Container Management capability allows companies to

manage incoming shipments by creating an Inbound Shipment record (figure 3).

The shipment record may contain multiple purchase orders, and conversely, a

single order could be split across multiple inbound shipment records. The

capability provides visibility of in-transit inventory and item status, and landed

cost tracking. It allows users to receive the entire inbound shipment record or

receive items on purchase orders individually, thereby streamlining the receiving

process.

Figure 3. NetSuite’s inbound shipment dashboard

In addition, the Outsourced Purchase Order and Work Order Automation feature

allows users to issue work order components and backflush them automatically

against the subcontracted purchase order. This is done by placing a purchase

order to a contract manufacturer, while creating a corresponding background

work order in the principal manufacturer’s system of record. Users can then

backflush (automatically consume in terms of inventory management) the BOM

components based on an update to the purchase order.

Companies can define how the material moves from one location (e.g., a contract

manufacturer) to the next during the manufacturing process. They can define how

long the manufacturing process should take at each location and how long it

should take to move materials between locations. This feature allows contract

manufacturers to account for all the material, labor, overhead, and service costs

incurred, and to update or integrate their software solutions with NetSuite.

Moreover, a new QMS module, based on the 2016 acquisition of IQity Solutions,

allows companies to define inspection plans, which dictate how an item is to be


tested, along with the parameters deemed acceptable and other product details.

The solution also includes role-specific dashboards for quality managers,

engineers, and inspectors, along with a tablet-driven user interface (UI) for plant-

level workers.

The solution enables customers to establish quality specifications and evaluate

vendors against them. Customers can also evaluate and track supplier quality as

well as their own production quality. The new module enables both the

inspection of received and in-process shipments and the management of quality

inspectors and qualifications. Using NetSuite’s advanced Workflow engine users

are able to define Alerts and Actions based on non-conformance conditions.

NetSuite expects to add many more capabilities over the next 18 months.

NetSuite Case Study: Akustica

SCOPE efforts aim to provide improved operational intelligence and business

processes (efficiency), reduced cost, faster growth, and a better customer

experience. As an example of an early adopter of NetSuite solutions, Akustica,

headquartered in Pittsburgh, Pennsylvania, is the world’s first manufacturer of

tiny digital MEMS microphones found inside desktops, laptops, tablets,

smartphones, and gaming systems. The company fully designs its MEMS

microphones in-house. Founded in 2001, Akustica was acquired by the world’s

leading supplier of MEMS sensors Bosch in 2009.

NetSuite serves as a glue in the Akustica enterprise system architecture to link

together the logistics and engineering data from the latter company’s outdoor

factory, third-party logistics (3PL) carriers, and 3PL warehouse, as well as its

financial data and BOM data (figure 4). All this information is then available to

Akustica users through NetSuite, and supplemented with business intelligence (BI)

and visualization tools, including iCharts for NetSuite.


Figure 4. Central position of NetSuite in Akustica’s enterprise software

architecture

Akustica leverages NetSuite to help bring lean principles to its processes:

• Streamlining processes to efficiently get data from production to end

users by connecting machines on the factory floor to ERP software and

mobile devices

• Connecting different production sites (including the contract

manufacturer and 3PLs) to operate as one cohesive supply chain

• Reducing key efficiency metrics, including transport times,

overproduction, and wait times

• Automating back-office processes, from monthly close to daily invoicing

• Automating scheduling plans for the factory and distribution

The manufacturer operates with a connected supply chain, whereby NetSuite

connects inventory and vendors (both inside and outside the firewall) and thereby

simulates one company working together to build products. Dell Boomi

middleware links data and transactions from suppliers with NetSuite (running 30

data import-export jobs per night to keep NetSuite updated). The result is a fully

automated supply chain, from raw material purchase through customer

fulfillments from the 3PL warehouse, including full traceability of the build.

Akustica has also been using NetSuite’s custom records (fields) as a means of

capturing all its manufacturing data within NetSuite via the factory connection

capability. The company’s production and parametric info is also stored in

NetSuite to help complete the production picture. The improved visibility via real-

time key performance indicators (KPIs) and dashboards, and access to data

pushes Akustica beyond mere production monitoring. Now Akustica can detect

early warnings of problems and predict future product behavior from early

production line parametric data.


Akustica has done the following to improve its manufacturing and warehouse

scheduling:

• Akustica has implemented order board automation of the warehouse

pick-list for the Asia distribution. So as soon as a sales order gets into the

system, the order board updates with a new schedule line for the target

delivery date.

• On the manufacturing side, the company has implemented scheduling

automation for a local manufacturing facility in Pittsburgh, which uses

sales orders, inventory, saved searches, and reminders.

• Akustica uses its own BI and auto-mails tools alongside the Kanban

reorder trigger with saved search and auto-mails. The process can be

further automated with a triggered workflow following a sales order.

• Akustica implemented the lean pull-principle for monthly planning using

its monthly forecast data.

Before NetSuite, Akustica was manually syncing inventory with financials. Post-

NetSuite deployment, the company established an integration between

operations and finance via direct factory links. Lately, it has set more aggressive

goals for closing the books—it needs to close out the previous month in the first

week of the next month. Using NetSuite capabilities for auto-mails for errors and

saved searches, Akustica can address errors in early in the process to meet book-

close timing targets of a two-day book close.

Down the track, the company plans to implement Autodesk Fusion PLM to

streamline its product innovation process. It is also busy building out a data

warehouse in the cloud, increasing visualization automation, bringing in

document management, and creating portals for vendors and customers.

Future NetSuite SCM Outlook

These initiatives aim to allow the operations teams of NetSuite’s manufacturing

customers to make the best use of their assets without worrying about financial

complications. The NetSuite platform is a natural fit for global supply chains,

primarily because of its cloud deployment model. The goal is to track all inventory,

regardless of where it is and who owns it.

NetSuite brings sophisticated global SCM capabilities to the midmarket, with

native functionality that supports the growth of its small-to-medium (SMB)

customers. The vendor is investing heavily in collaboration tools to deliver

innovative ways for supply chain partners to communicate. Tracking the details of

the manufacturing process is key to this initiative, regardless of who is doing the

manufacturing. NetSuite wants to deliver the same level of detail as if the

manufacturer were doing it itself.


The Supply Chain Control Tower and other SCM software modules are expected to

greatly increase the value of NetSuite’s system to customers in the manufacturing

and distribution industries. Such companies will no longer need the likes of Smart

Software, DemandWorks, Kinaxis, Logility, Demand Solutions, Forecast Pro, and

others to complement NetSuite’s cloud ERP software.

For customers that have much more complex planning and optimization needs

(requiring sophisticated or advanced algorithms, machine learning, in-memory

computing, etc.), NetSuite might offer integration with the Oracle Planning

Central. NetSuite will further benefit from using Oracle’s cloud services such as

the Internet of Things (IoT) Cloud (for asset monitoring, predictive and

prescriptive maintenance, production monitoring, and other purposes) and

blockchain services. On the other hand, NetSuite’s success in innovative high-tech

start-up companies with global supply networks helps Oracle’s brand, which is a

good thing considering that the giant has had only sporadic success in that

midmarket segment.

Existing and prospective NetSuite cloud ERP customers should check out the

vendor’s capabilities, and ERP competitors should take notice. SCM is not only

about technology but also about organizational learning. A successful deployment

requires a combination of best business practices, big data management, SCM

skills development, and underlying technology—and NetSuite is tackling all these

tenets.


About the Author

Predrag (PJ) Jakovljevic focuses on the enterprise

applications market. He has over 20 years of

industrial experience within the discrete

manufacturing sector, including the machinery and

equipment, automotive, construction and

engineering, and electronics industries.

Prior to joining TEC, Jakovljevic was a senior

consultant in the package-based solutions (PBS)

group of CAP Gemini in Houston, Texas (US), with

Baan's Manufacturing and Logistics modules as his

main field of expertise. At CAP Gemini, Jakovljevic

was involved in system demonstrations, software gap

analysis for prospective clients, and Baan implementation assignments.

Before CAP Gemini, Jakovljevic was employed as a senior consultant for Deloitte &

Touche Consulting Group in Johannesburg (South Africa), where he specialized in

Baan's Manufacturing and Logistics modules, and engaged in the processes of ERP

package selections, as well as in proposal preparation. Jakovljevic served as a

team lead for manufacturing, and for service and maintenance package system

integration. As a consultant he has been involved in business requirements

definition and software gap analysis, business process mapping to software

functionality, software configuration and parameter setup, and key user training.

Jakovljevic holds a degree in mechanical engineering from the University of

Belgrade in Serbia. He has also been certified in production and inventory

management (CPIM) and integrated resources management (CIRM), and is an

Association for Operations Management (APICS)-certified supply chain

professional (CSCP).


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