ing for warehouse fulfillment?
It would be great if manufacturers could
emulate Amazon’s automated process.
There’s just one problem: direct materials.
Direct material requirements, the parts that
compose the products you sell, are calculated by sophisticated software that reviews
what’s been sold and what’s available. Then,
calculating down to the screw, it determines
how much new material needs to be ordered
and when it needs to arrive. This Materials
Requirements Planning (MRP) software
then records all this purchasing data in a database. Most manufacturers then print it to
paper or push it to Excel for fingers and keyboards and shopping carts to manipulate.
We questioned this and explored how to
move data directly from the MRP system
to our suppliers’ shopping carts without a
single keystroke in the middle. Now, as fast
as we create our factory requirements, our
suppliers have confirmed they will ship to
Here’s how it’s done: When you web order, you are communicating through a bit
of code called an Application Program
Interface. APIs describe the way that data
must be formatted to talk to a database. For
example, when you enter a Google search,
APIs allow you to send it, process it on their
computer and get the results back. The
beauty of an API is that a single API can be
downloaded onto a million smart phones,
and the developer still has only that single
instance of software to manage. Simple.
Cheap. Efficient. APIs are proven to be the
lowest cost solution for suppliers and customers to communicate with one another.
Your suppliers’ web stores are typically
built on APIs. Their staff already has the
technical wherewithal to give you and the
market a universal API that can accept
direct calls from your computer. For your
remaining suppliers that do not have web-
stores, APIs are inexpensive to develop.
They often require just a few days or weeks
of programming time by perhaps a single
developer to create a single piece of code
for the market. It is a completely different cost model than funding an IT project
team to create point-to-point connections
with every individual business as with older technologies such as Electronic Data Interchange.
Our largest suppliers have confirmed
that we are the first to successfully go from
MRP to API to purchase orders without
human touch. All of them believe that the
market must inevitably go in this direction.
As such they are writing their APIs for the
market, not just for Sonic.
Does Speed Matter?
Some of you may be thinking that this is a nice trick, but what does it really matter? So you place a few orders
faster. How does that possibly change the
overall performance of the supply chain?
First, consider purchasing-related activities. At Sonic, we are crossing the 40%
mark for orders placed without human
touch through API. Assuming 75% of the
procurement department’s time is spent on
new buys, this could be a 30% headcount
However, for Sonic, this is instead a 30%
bump in solving “the last part problem.”
You can’t improve your factory performance or customer metrics until the last
part arrives and you can ship the product.
API procurement takes care of the repetitive ordering so that people take care of
strategy, exceptions, problem solving, and
escalations. Our API procurement will
grow to 65% over the coming year, and so
will our capacity for problem solving.
“If you had
cal of both
cost and your
of parts in
the blink of
an eye, you