An online portal allowed Ingersoll Rand's Trane division to achieve better communication with its suppliers. The resulting inventory visibility helps to keep its continuous-flow manufacturing lines humming.
The expression "in the nick of time" has a special meaning for manufacturers engaged in continuous-flow manufacturing. Their factories have so little inventory on hand that failure to deliver the right part on time means production simply shuts down.
Continuous-flow manufacturing requires delivery of replenishment parts to the factory just ahead of the rolling assembling line. Tight coordination between the manufacturer and its suppliers is critical, and there's no room for miscommunication. That's why Ingersoll Rand, parent of the air conditioning and heating brands Trane and American Standard Heating and Air Conditioning, set up an online, collaborative supply chain portal in 2008. The Trane business unit uses the portal as a common communication platform with its suppliers and to obtain the end-to-end supply chain visibility that's essential for just-in-time replenishment.
Since establishing the portal, Ingersoll Rand's Trane business has seen improvements in inventory turns and a reduction in inventory levels. Just as important, the manufacturer has achieved tighter coordination with its suppliers. "In our eyes, we now have an integrated supply chain, thanks to the portal," says Michael Smith, multi-site material and supply chain leader for Ingersoll Rand's operations at its Tyler, Texas and Fort Smith, Ark., manufacturing plants.
Consume, then replenish
Headquartered in Dublin, Ireland, Ingersoll Rand is a US $14 billion global company that manufactures products for the industrial, commercial, and residential markets. Four years ago, Ingersoll Rand began using the online portal for two factories that make products for its Trane brand. One of those plants, situated in Tyler, Texas, manufactures residential air-conditioner and heat-pump condensers. The 1.34 million-square-foot facility runs five assembly lines that churn out 1.2 million products in 307 different models.
In nearby Fort Smith, Ark., Ingersoll Rand operates another plant that manufactures 200 different models of residential and commercial packaged heating and air conditioning systems. The 426,000 square-foot facility produces 100,000 units each year.
The two plants rely on 110 suppliers that furnish such items as compressors, electrical components, packaging, plastics, refrigeration units, and raw components. More than half of those suppliers are located in the United States, while another third are located across the border in Mexico, and a small number are in China.
Ingersoll Rand's Trane unit uses a continuous-flow system in the two factories. Because the manufacturer strives to keep only about two hours' worth of production inventory on hand in its factories, it sends a kanban, or demand signal, for parts replenishment frequently throughout the day. "With kanban, if we consume something, we signal for replenishment," Smith explains.
Many of the suppliers are located close to Ingersoll Rand's Trane plants, and they send parts and components directly to the factories. But almost one-third of the suppliers flow their parts and materials through a consignment warehouse in Tyler, Texas, which is run by a third-party logistics (3PL) company.
The consignment warehouse receives full trailer loads, which it breaks down into smaller lots, such as pallets or individual boxes. Every 10 minutes, the manufacturer electronically transmits replenishment requests. The electronic signal, initiated from a consumption-based replenishment system, requests parts and components from the warehouse. The 3PL obliges by trucking the requested items to the Tyler and Fort Smith plants. Ingersoll Rand and its suppliers split the cost of running that facility, with the manufacturer picking up the cost for the shipment breakdowns and the suppliers bearing the warehouse space-utilization charges.
Common communication system
Back in 2008, Ingersoll Rand's management decided that the company needed a better method of communicating with its suppliers. The first reason was that there were multiple systems for exchanging information with suppliers. "We had spread sheets, e-mail messages, and EDI [electronic data interchange] systems," Smith says. "We wanted a common communication system." A second concern was that the various types of information produced inaccuracies. "An Excel spreadsheet [could not] match the EDI information being sent," he says.
The online portal, which uses Ultriva software, was launched in 2009. It addresses those problems by providing a common repository of information that's visible to all parties in the supply chain, including suppliers, carriers, and 3PLs. The portal shows the whereabouts of inventory—whether it's located in the supplier's warehouse, in the back of a truck, or at one of the Trane plants. "The suppliers see everything in transit, the balance on hand (at the plant), the consumption pattern, and how they are performing," Smith says. "If their truck delivers two hours late, they see that."
Ingersoll Rand places all of its parts orders through the portal, even for those items that are not regularly used in the continuous-flow manufacturing process, which are managed through its materials resource planning (MRP) system. Because both MRP parts requests and kanban replenishments are made through the portal, the supplier receives requests for any type of part in the same format. "The supplier does not know if it's a kanban or MRP part," Smith says.
For kanban parts, the signal conveys an appropriate lead time based on the kanban formula. For the MRP parts, Smith explains, the signal is sent based on a firm order requirement comparing inventory with expected demand and current lead times. "In both instances the delivery time is the same, but the lead time from the supplier could be different or longer," he says.
When a replenishment part arrives at the plant, the bar code on the item is scanned. Once that item has been used on the assembly line, the portal sends a request for another. According to Smith, the Tyler plant on average tallies about 1,600 bar-code scans a day. Recently, the company has begun using radio frequency identification (RFID) tags on some supplier shipments to speed receipt into inventory and trigger the kanban replacement signal. (See the sidebar "RFID speeds receipt of inbound shipments.")
A clearer view for all
The benefits of using the portal are many. It has given Ingersoll Rand visibility over the two Texas plants' supply chains in real time, no matter whether a supplier is located in the United States, China, or Mexico. The portal is especially helpful for suppliers in Mexico; once an order is placed, the portal triggers a notice to an expediter, who then helps facilitate cross-border shipments into Texas.
Along with a view of inventory at the supplier's own factory, the portal shows the status of shipments. "The supplier can see everything in transit," Smith says. "And on our side, we can see everything in transit and in process. A buyer or planner can click on a parts order and get directed to a carrier portal, and know where the part is at and when it will get here."
The portal has had a significant and welcome impact on inventory levels. Thanks to expanded visibility and tighter coordination, the first supplier to use the portal was able to reduce inventory on hand from four weeks to 10 days of material. Once again, communication and collaboration between manufacturer and supplier was key.
"The biggest change was adjusting the lead time from the supplier and working with the supplier to adjust the safety stock," Smith says. "With the suppliers being able to see the entire supply chain, they were better able to understand the variation they had to plan to and work together to create a more predictable and smoother flow." In October 2010, it became mandatory for the suppliers to communicate with Ingersoll Rand through the portal.
Since then, Ingersoll Rand's Tyler plant has seen inventory turns increase from 70 to 90 per year, largely as a result of the more rapid and more accurate communication the portal makes possible. "We now see in real time when a supplier is having difficulty with an order or if they need to adjust the size [of the order]," Smith says. "With this information, we are also able to see the impact of the problem immediately. When a supplier or customer adjusts an order, there is immediate feedback and data retention," he observes. "There is no guessing whether or not they got the order or if they acknowledged it."
Ingersoll Rand plans to use the portal to improve integration with its suppliers in other ways. The manufacturer will use it to allow suppliers to view its long-range forecasts. Smith says his company also plans to use the data collected through the portal to examine how it could make its processes more efficient. With so much detail about the timing or orders and deliveries in hand, he says, he and his colleagues can now identify the sources of problems like transportation delays. Now, he says, "we are able to start fixing problems instead of spending time chasing something."
RFID speeds receipt of inbound shipments
In a just-in-time manufacturing environment, real-time visibility into inventory is critical. Ingersoll Rand's Trane division understands that very well. It keeps only about two hours of replenishment parts on hand in the two continuous-flow manufacturing plants it operates in Texas, so knowing the whereabouts of inbound parts and materials is an absolute must. Until recently, however, the company had no quick way of determining whether the right materials had been delivered when a truck arrived at its facilities.
Under the process it had in place, workers had to record the receipt of incoming goods by scanning bar-code labels. It could take as long as 30 minutes to scan all of the items in the back of a truck.
In a kanban operation, where replenishment orders are placed as soon as an item has been used on the production line, that's a fairly serious delay. The manufacturer began searching for a swifter solution—which it eventually found in radio frequency identification (RFID).
In June 2011 Ingersoll Rand began working with some key suppliers to place passive RFID tags made by Alien Technologies on inbound shipments. The tags allow the manufacturer to quickly update inbound inventory on the online portal it maintains for communication with suppliers and other participants in its supply chain.
Now when a trailer with tagged items arrives at a plant, it passes by an antenna that reads the RFID tags. Information encoded in the tags is then uploaded to the electronic portal and made available for immediate viewing.
The time savings have been impressive. Instead of 30 minutes, it now takes about five minutes to record the arrival of inventory and update the portal, says Michael Smith, multi-site material and supply chain leader for Ingersoll Rand's operations at its Tyler and Fort Smith, Texas, manufacturing plants.
As of February 2012, about 25 of Trane's 110 suppliers were tagging their shipments. The suppliers bear the cost of the tags—about 10 cents apiece, according to Smith. So far, none has balked at the requirement, he says. That's because the suppliers have an incentive—prompt payment for their materials. Once the information from the tag has been sent to the portal and reconciled with the invoice, the supplier is approved for payment. "If the suppliers do the job right with RFID, they get paid on time," Smith says.
Not all of the shipments from these vendors are suitable for tagging, however. Some items—like shipments of metals or components that arrive in metal tubs—aren't being tagged because metal can interfere with the signal transmission. Shipments that aren't suitable for tagging are recorded by scanning a bar code. All incoming materials—including those with RFID labels—carry a bar code because Ingersoll Rand requires them for auditing purposes.
Ingersoll Rand is reaping savings as well. The automatic recording process has enabled it to reassign two receiving workers to other tasks. Overall, Smith estimates that the RFID implementation will save the company something on the order of $120,000 a year.
Next year, Ingersoll Rand plans to extend the use of RFID to all members of its supply base as well as to additional manufacturing plants. It also wants to begin tagging individual items—as opposed to boxes or entire trailerloads—to achieve unit-level visibility. "We want to be able to see each and every component and manage all those components," Smith says.
Smith considers RFID tags to be critical technology that fits well into his company's overall portal strategy with its suppliers. "If you're looking for velocity, inventory turns, and cash flow," he says, "then RFID is what you have to consider."
As I assume the role of Chair of the Board of Directors for the Council of Supply Chain Management Professionals (CSCMP), I fondly reflect on the more than 10 years that I’ve had the privilege of being part of this extraordinary organization. I’ve seen firsthand the impact we have had on individuals, companies, and the entire supply chain profession.
CSCMP’s journey as an organization began back in 1963. It has since grown from a small, passionate community to the world’s premier association for supply chain professionals. Our mission—to connect, educate, and develop supply chain professionals throughout their careers—remains not only relevant, but vital in today’s world.
As we look ahead, the opportunities are vast. What stands out the most to me is simply this:We are stronger together. Every individual brings a unique perspective, and it’s through our collective wisdom and efforts that we will continue to advance the work we do. The road ahead is not one we travel alone. It’s a path we navigate as a community—one united in purpose and direction.
My vision for the year ahead centers around growth—growth in our global reach and, perhaps even more importantly, growth in how we engage and support each other. We have tremendous opportunities for international expansion, especially in Europe, the U.K., Mexico, Central and South America, and Canada. I’m happy to share that we're already seeing progress in our reach to these regions.
I'm incredibly excited about the potential for even more growth ahead. One of the initiatives I am most passionate about is our Centers of Excellence. These centers will provide members the space to engage deeply in key supply chain disciplines. I invite each of you to dive into these areas, share your experiences, and contribute to the innovative solutions we develop together. There will be plenty of opportunity to do so. These centers are not only academic spaces—they are hubs for innovation, where we can share best practices and work together to solve our industry’s biggest challenges.
Education and thought leadership will continue to be at the heart of what we do. By expanding our research capacity, we will offer cutting-edge insights that keep our members at the forefront of industry trends and innovation. Through our platforms, we will create even more opportunities for connection and collaboration—ensuring that every voice is heard. Your insights, curiosity, questions, and engagement will drive the transformation we seek. We all play a part in the advancement of our industry and our profession.
Our impact begins with membership. Expanding collaborations with public, private, and nonprofit sectors will give us new ways to drive progress. In a world where our ecosystem is even more interconnected than ever before, the ability to engage with diverse stakeholders will help us unlock new solutions and truly make a difference on a global scale. None of this would be possible without the strong foundation that has been built over the years by serving our supply chain community. Each of you holds the ability to shape the future of the supply chain, and I can’t wait to see what we will achieve together.
The concept of using a neutral third party to resolve conflicts between suppliers and customers is not new. Mediation and arbitration have long been considered as more efficient and less costly ways to resolve contractual disputes than litigation. In fact, 2025 marks the 100th anniversary of the Federal Arbitration Act, which allows for contract disputes to be resolved through a private resolution process instead of going to court.
Over the years, the concept of using a neutral has expanded to include more preventive techniques for keeping business relationships healthy and addressing potential contractual misalignments earlier. For example, the construction industry has been utilizing the concept of a dispute review board (DRB) since 1975 to solve issues that arise during major projects, such as cost overruns, schedule delays, and disputes over payment or the quality of workmanship. The DRB is typically a panel of three independent expert advisors who are immediately available to help resolve disputes that arise during the contractual relationship.1 The panel is formed at the beginning of the construction project with the goal of resolving any issues or differences before they become formal claims.
Recently the concept has evolved further into what is now known as a “standing neutral” and has been adopted by companies in many industries outside of construction. A standing neutral is a highly qualified and respected expert, selected by both parties in a business relationship to help them resolve issues and maintain a healthy relationship. This can best be described as a proactive approach where the neutral provides quick, informal, flexible, adaptable, and nonadversarial ways for preventing disputes.
The role of the standing neutral
Unlike a neutral third party used on an ad-hoc basis for dispute resolution in mediation or arbitration, a standing neutral is a readily available “fast response” technique. It is designed to prevent any issues from escalating into adversarial disputes that might otherwise go to mediation, arbitration, or litigation. A key feature is that the neutral is “standing,” meaning it is integrated into the parties' continuing governance structure. Another key concept is that the standing neutral supports the relationship itself and both parties equally; the goal is to ensure the success of the relationship.
Embedding a standing neutral into a contracting party's governance structure can have a powerful impact on the success of the business relationship. The standing neutral provides a helpful "dose of reality" to the parties and encourages them to be more objective in their dealings with each other. When differences of opinion arise, the parties can quickly use the standing neutral as an objective sounding board, obtaining a recommended course of action that is minimally disruptive to the business relationship.
While the classic role of a standing neutral is to serve as a “real-time” issue-resolver throughout a relationship, companies have begun to expand how they have used a standing neutral. The University of Tennessee’s research—which is detailed in the white paper “Unpacking the Standing Neutral”—reveals the creative ways that companies are using a standing neutral.2 For example, some companies are increasing the role of their standing neutral to support annual relationship health checks and even using neutrals as “deal facilitators” to help craft highly complex or strategic outsourcing agreements.
Today, there are many different variations of a standing neutral. Figure 1 shows some of the most common options companies can consider when designing the role and scope of their standing neutral. In the figure, these options are organized across nine design principles or considerations. For an example of how a standing neutral can operate in a real-world setting see the sidebar “Idea in action: EY case study."
Getting ramped up
If you think using a standing neutral would benefit one of your relationships, we suggest going through the following simple stages. It’s important to note that the cost and expenses of the standing neutral are absorbed equally by both parties.
1. Selection: At the outset of their relationship, parties select one person (or three) with whom they trust and have confidence to serve as standing neutral throughout their relationship. A single standing neutral should always be entirely independent. In most cases where there is a panel of neutrals, each party nominates one member, and the two nominated neutrals will select a third member; in such cases, it is typically required that every panel member be acceptable to both parties and that all panel members be independent and impartial, with no special allegiance to the nominating party.
As part of the selection process, the parties formalize an agreement with the standing neutral, which includes determining the standing neutral's responsibilities and authority. The nine design principles in Figure 1 can be used to accomplish this.
2. Briefing: The parties brief the standing neutral regarding the nature, scope, and purpose of the relationship or venture. As part of the briefing, the standing neutral is usually equipped with a basic set of contract materials and supporting documents.
3. Continuing involvement: A key part of designing a standing neutral program is embedding your standing neutral as part of your ongoing governance. For example, we recommend at a minimum that the parties have their standing neutral attend the parties’ quarterly business reviews and lead an annual relationship health check. This enables the standing neutral to meet regularly with the parties to review the progress of the relationship, even if there are no issues.
Alternatively, it is possible to have a
standby neutral (versus a standing neutral). In the case of a standby neutral, the neutral is merely available on an ad-hoc basis to be called on whenever necessary to give an advisory opinion.
Why standing neutrals work so well
Standing neutrals have had a remarkable record—especially for resolving issues before they become disputes. A study of the use of standing neutrals in the construction industry found that, in the vast majority of cases, the parties never look to the standing neutral to make any dispute resolution recommendations or decisions. (And in the small minority of cases where the standing neutral actually makes a recommendation, 95% of the recommendations are accepted by the parties without resorting to mediation, arbitration or litigation.
3)
It may seem counterintuitive that having a standing neutral reduces the likelihood of needing a third party to resolve disputes. But research has found that the presence of others causes people to behave more honestly and reign in unethical behavior such as cheating. These effects are amplified when the third-party observer is knowledgeable in the subject matter of the agreement and in the nature of the agreement.
The establishment of a standing neutral—which appears at first to be merely an efficient technique for quickly resolving disputes—creates a dynamic situation in which the participants change their relationship and their attitudes toward each other. The changes usually are an evolution, rather than a conscious effort. For example, at first it is common for contracting parties to feel they are simply choosing a neutral expert for resolving conflicts between them promptly. However, as the standing neutral interacts with the parties during ongoing governance forums, the parties develop a greater sense of confidence in the standing neutral's ability to quickly alleviate friction in the relationship. When this happens, the parties shift their view of the standing neutral from “dispute-resolver” to one of “sensible sounding board.”
The presence of a standing neutral also encourages teamwork and improved performance by all parties. The contracting parties become incentivized to concentrate on “fixing the problem” rather than “fixing the blame,” and use their mutual knowledge to solve the problem rather than relinquishing control to the neutral. A side benefit is when the parties construct their own solutions to problems, they often increase their trust and confidence in each other's abilities, which ultimately strengthens the relationship. For these reasons, the standing neutral serves as not only a standby dispute resolution process, but also as a remarkably successful dispute prevention process.
Notes:
1 For more information see A. A. Mathews, Robert J. Smith, Paul E. Sperry, and Robert M. Matyas, Construction Dispute Review Board Manual, (New York: McGraw-Hill, 1996): p. 10
The global consulting firm EY was looking to outsource the food services, cleaning services, and maintenance at its facilities to the provider Integrated Service Solutions (ISS). But the company wanted to do so in a way that was completely different from how it had approached outsourcing workplace services in the past. EY and ISS wanted to create an outsourcing agreement that was highly collaborative and beneficial for both parties.
To do so, they incorporated a standing neutral in the contracting process from the outset. Together the parties selected one standing neutral—Erik Linnarsson, a lawyer from Cirio Law Firm—as a deal facilitator. Linnarsson was trained as a certified deal architect (CDA) to craft complex outsourcing agreements.
Post contract signing, the parties continued to use a standing neutral, embedding Linnarsson into the outsourcing relationship’s ongoing governance. Linnarsson supported both mid- and higher-level governance forums. He also acted as both an expert coach and evaluator for issue resolution, providing advice as problems arose. If needed, Linnarsson had the authority to make formal, nonbinding recommendations. When Linnarsson decided to retire, EY, ISS, and Linnarsson ramped up one of Linnarsson’s colleagues, who now serves the role of standing neutral.
The parties also have tapped into their standing neutral for additional post-support services that are preventive in nature. These include ongoing performance management alignment and performance relationship health monitoring. For example, one role of the standing neutral is conducting an annual relationship health check, which includes measuring the level of trust and compatibility between the two partners.
The standing neutral also supports strategic reviews, including reviewing the contract for any misalignments. For example, when the parties initially created the agreement, they had decided to use a specific sustainability metric. However, since signing the contract, regulatory requirements around sustainability have become stricter. In addition, EY wanted to be a global leader in sustainability. As part of the proactive review, and with the help of the standing neutral, the parties worked together to revamp the metric.
Magnus Kuchler, EY’s markets leader and country managing partner for EY Sweden, believes that using a standing neutral has had a positive impact on the outsourcing relationship. “Simply having a trusting and credible standing neutral post-contract signing gives team members a sounding board that helps people make better decisions,” he said. “Using a standing neutral is truly a powerful tool to help contracting parties maintain a healthy relationship—which ultimately prevents costly disputes.”
Global trade will see a moderate rebound in 2025, likely growing by 3.6% in volume terms, helped by companies restocking and households renewing purchases of durable goods while reducing spending on services, according to a forecast from trade credit insurer Allianz Trade.
The end of the year for 2024 will also likely be supported by companies rushing to ship goods in anticipation of the higher tariffs likely to be imposed by the coming Trump administration, and other potential disruptions in the coming quarters, the report said.
However, that tailwind for global trade will likely shift to a headwind once the effects of a renewed but contained trade war are felt from the second half of 2025 and in full in 2026. As a result, Allianz Trade has throttled back its predictions, saying that global trade in volume will grow by 2.8% in 2025 (reduced by 0.2 percentage points vs. its previous forecast) and 2.3% in 2026 (reduced by 0.5 percentage points).
The same logic applies to Allianz Trade’s forecast for export prices in U.S. dollars, which the firm has now revised downward to predict growth reaching 2.3% in 2025 (reduced by 1.7 percentage points) and 4.1% in 2026 (reduced by 0.8 percentage points).
In the meantime, the rush to frontload imports into the U.S. is giving freight carriers an early Christmas present. According to Allianz Trade, data released last week showed Chinese exports rising by a robust 6.7% y/y in November. And imports of some consumer goods that have been threatened with a likely 25% tariff under the new Trump administration have outperformed even more, growing by nearly 20% y/y on average between July and September.
North American manufacturers have begun stockpiling goods to buffer against the impact of potential tariffs threatened by incoming Trump Administration, building up safety stocks to guard against higher imported costs, according to a report from New Jersey business software firm GEP.
That surge in orders has sparked a jump in production, shrinking the level of spare capacity in global supply chains to its lowest level since June, the firm said in its “GEP Global Supply Chain Volatility Index.” By the numbers, that index rose to -0.20 in November, from -0.39 the month before, based on GEP’s measurement of demand conditions, shortages, transportation costs, inventories, and backlogs from its monthly survey of 27,000 businesses.
Another impact of the trend has been to trigger a surge in procurement activity by manufacturers in Asia—especially China—as new orders rebounded sharply. Only India reported a greater rise in raw material purchases than China in November. And preparations to ramp up production even further were evidenced data showing factory procurement activity across Asia rising at its fastest pace for three-and-a-half years, GEP said.
In sharp contrast, Europe's industrial recession worsened in November, in large part due to Germany's deepening manufacturing downturn. Factories in that region went deeper into retrenchment mode, as demand for inputs from manufacturers in Europe was its weakest since December 2023.
"In November, U.S. manufacturers, particularly in the consumer goods sector, increased their safety stocks to help blunt any immediate tariff increases," John Piatek, vice president, GEP, said in a release. "In contrast, Chinese manufacturers are getting busier as a result of government stimulus and growth in exports, led by automotives and technology products. Strategically, many global companies have a wait-and-hope approach, while simultaneously planning to remake their global supply chains to respond to a tariff and trade war in 2025 and beyond."