New study from University of Michigan Business School and QAD verifies business value of Implementing a lean supply chain

Results Confirm that Auto Suppliers Can Achieve Reductions in Inventory, Transaction Costs and Lead Times With Automated Replenishment

Detroit, MI, August 27, 2002 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 http://www.qad.com/company/publications/white_papers/

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 manufacturer 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:
    Benchmarking - Pertinent metrics and data from independent research and academic papers were used to gauge the validity of findings from other methodologies.

    Case Studies - Companies that have implemented lean processes were analyzed to quantify the impact of lean operations, lean supply chain and batch sizing.

    Simulation - A simulation of a vertical automotive supply chain was created to demonstrate the potential impact of automating replenishment.

    Financial Analysis - The costs and benefits associated with four key factors were quantified, with and without a lean supply chain process, to measure the potential dollar savings to be realized by implementing automated replenishment.

    General Research - Research reports, news publications, and other published sources were used to further validate and complement the findings.

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.

"QAD," "MFG/PRO" and "MFG/PRO eB are registered trademarks. All other products or company names herein may be trademarks of their respective owners.

Note to Investors: This press release contains certain forward-looking statements made under the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. A number of risks and uncertainties could cause actual results to differ materially from those in the forward-looking statements. These risks include, but are not limited to, evolving demand for the company's software products and products that operate with the company's products; the publication of opinions by industry analysts about the company, its products and technology; the entry of new competitors and their technological advances, delays in localizing the company's products for new markets; delays in sales as a result of lengthy sales cycles; changes in operating expenses, pricing, timing of new product releases, the method of product distribution or product mix; and general economic factors. In addition, revenue and earnings in the enterprise resource planning (ERP), e-business and collaborative commerce software industries are subject to fluctuations and the growth rates recently experienced by the company do not necessarily represent future operating results. Investors should not use any one quarter's results as a benchmark for future growth. For a more detailed description of the risk factors associated with the company and the industries in which it operates, please refer to the company's Annual Report on Form 10-K for the fiscal year ended January 31, 2002.

For additional information, contact:

Wendy Allen
QAD Public Relations
+1 805 566 6161
wla@qad.com