Manufacturers are under increasing pressure to document their impact on the environment. This pressure is coming—for North American manufacturers—primarily from the private sector. Major manufacturers are asking their upstream supply chain partners to document its environmental impact as part of green supply chain initiatives. Green supply chain programs may be initiated in order to help manufacturers position themselves to its own customers or investors, or to facilitate environmental compliance.
This focus on green extends well beyond the simple carbon footprint, which in and of itself can be a challenge to track given that almost any business activity, from turning on the lights to running a metal press, results in consumption of at least some fossil fuels. In coming to grips with an environmental footprint, a number of other impacts including discharges to waterways, landfills, and other gas emissions must be monitored. The life cycle impact of a product—ranging from shipability, energy consumption, offgassing, service requirements, and end-of-life disposal or recycling, must be taken into consideration.
In this article, I will address the various drivers for this green supply chain trend, share important considerations for satisfying a customer’s green supply chain initiative or initiating your own green supply chain initiative, and discuss the role of enterprise software like enterprise resource planning (ERP) in keeping pace with this industry trend.
Why Green Your Supply Chain?
From a practical standpoint, green supply chains are smart moves for manufacturers because they can present a marketing advantage. Here are more pressing and immediate reasons for green supply chain management (SCM):
Investor demand for sustainability data is increasing. This should be a serious consideration for public companies and their suppliers. In February of 2010, the Securities and Exchange Commission (SEC) issued guidance requiring publicly-held companies to disclose their environmental liabilities that could become problematic if cap and trade regulation came into effect.
The concern for sustainability of public companies from an investor perspective is not driven by altruism, but rather by a need to increase the degree of transparency and visibility of potential risks and liabilities that could harm long-term returns. While manufacturers can expect more rather than less in the way of environmental reporting requirements, substantial rules are already in force, including several statements of position (SOP) from the Accounting Standards Executive Committee (AcSEC) of The American Institute of Certified Public Accountants (ACPAs):
• Guidance on "Accounting for Contingencies" requires that liabilities be recognized in the financial statements if a loss is probable and the amount is estimable. At the very least, even if the loss is not estimable, the likely loss must be accounted for in footnotes to financial reporting.
• These position statements also require that environmental contamination costs be expensed as incurred unless they extend the life or increase capacity of the property, mitigate or prevent future environmental contamination, or are realized while preparing the asset for sale.
• The standard operating procedure (SOP) for Environmental Remediation Liabilities details the responsibilities of corporations involved in mandated environmental cleanup, and responsibilities of corporations to avoid environmental destruction.
Regulation is advancing. While myriad regulations impact North American manufacturers, touching on discharge to the air, water, and landfills, perhaps the area of environmental regulation that is advancing most quickly is in the area of Restriction of Hazardous Substances (RoHS). In the European Union (EU), RoHS already governs the allowability of certain hazardous substances in a variety of products.
RoHS generally restricts the use of hazardous substances in electrical and electronic equipment, while associated regulation, Waste Electrical and Electronic Equipment (WEEE) regulates the disposal of these products. RoHS and WEEE focus on "certain heavy metals," specifically lead, mercury, cadmium, and hexavalent chromium. In Europe, these regulations also cover the flame retardants polybrominated biphenyl (PBB) and polybrominated diphenyl ethers (PBDE), while states like California do not, as of yet, deal with these substances in their RoHS regulations. California does, however, already have separate regulations that make it illegal to manufacture, process, or distribute products containing more than one-tenth of 1 percent of these substances by mass, which once again has green supply chain implications.
California’s RoHS regulation currently applies to a very narrow set of products, including computer monitors, televisions or other products that involve cathode ray or liquid crystal display (LCD) screens, but bills have been advanced through the state legislature that would expand that state’s RoHS initiative to mirror that of the EU in scope.
This means you will need to roll up in each of your assemblies the materials that are in each product with great detail. Some companies are also already manufacturing distinct product lines for Europe that, for instance, use mechanical electrical connectors instead of solder joints or welds. Manufacturers will need excellent functionality for tracking of the raw materials going into component parts sourced through a supply chain and for decision support in the area of product design.
You may need to provide documentation for your customers’ green supply chain. This is actually a more daunting task than is reporting for regulatory compliance because a manufacturer can expect individual requirements from each of its customer with a green supply chain program. Each of these customers cares about certain things that they track for their supply chain and their green emphasis. So, because most manufacturers have more than one customer, there is the need for a great deal of flexibility in an environmental footprint solution. Each customer with a green supply chain program is likely to have unique requirements for tracking different hazardous materials and environmental impacts depending on what it is that they are purchasing from you and what industry they are in. The six heavy metals included in RoHS, like lead and cadmium, may be typical and broadly of interest. But beyond that there will be other needs based on what customers want. Therefore, manufacturers need flexibility to track environmental impact by product, and also need the ability to customize the queries and reports so they can display what that customer cares about.
The takeaway here is that you will need the flexibility and the ability to track and report on a variety of rapidly changing metrics rather than one standardized set of environmental metrics.
The most advanced ERP tools may allow you to break down your environmental impact by discrete part, so you can document the environmental impact of each item you sell customers.
Whether you are manufacturing something yourself, or purchasing it from a supplier, the single most important thing to keep in mind when planning to measure and manage your environmental footprint is that it has equal impact on the total environmental footprint of the product you sell. In some cases, your supplier may be liable for reclamation costs for components of subassemblies they sell you, but unless this is covered specifically in a contract, you should count on being solely responsible for what you sell when it comes to environmental impact. This means that you need excellent integration between your supply chain solution and your ERP system.
You will want to document what your suppliers are consuming for the products you are buying from them. For example, let’s say you are buying a printed circuit board from a supply chain partner; you will still want to know by weight how much lead it has in it before you can sell that product in the EU. Plastic components will need to comply with regulations on the amount of PBDE, and so on. The degree of post consumer waste incorporated in materials, subassemblies, and products can also be something that must be documented and managed.
Apart from constituent parts and materials and their impact, there is also the environmental impact of logistics and transportation to consider. There will be an increasing need to factor in the environmental impact of different transportation methods and the distance of supply chain partners from your own location, along with the ability to roll that data up into the environmental impact for each individual product.
There are real implications not only for external vendors and suppliers but for multi-site companies because you are not just tracking the amount of potentially hazardous materials in your product but the impact of getting them, and their component parts, from one place to the next. For companies with multiple sites or business units located any distance apart, this can be a major factor for your internal supply chain. Enterprise applications that combine environmental footprint management with multi-site capabilities will be essential for companies with more than one site as they quantify their impact on the environment.
The environmental impact of transport logistics between your own sites and between your site and your customers and vendors also has implications for product design. Can products, subassemblies, or parts nest in shipping, or otherwise fit into a truck more effectively?
Product design is only one area where environmental footprint management in ERP is important for decision support. But perhaps a more critical area for environmental decision support in ERP software is risk management. An enterprise application ought to be able to help you evaluate the risks from an environmental standpoint when it comes to getting involved with a particular supplier—or even the risk of working with an internal supplier like a different location or subsidiary.
In implementing a green supply chain or participating in the green supply chain of a customer organization, it will also be important to document and track the history of your environmental impact program. The ability to look back on where you were in the past will allow you to respond intelligently to changing legislation and other mandates that impact life cycle and end of life cycle products in the field. In the case or durable and complex assets like capital manufacturing equipment and aircraft, changing environmental rules could have implications for ongoing support, maintenance and sustainment, and for spare parts and life cycle extensions of these assets.
The Role of ERP
It quickly becomes clear that the depth and breadth of information required to track an environmental footprint is substantial. While manufacturers might look at third-party products that purport to offer some degree of environmental management functionality, it probably makes more sense for them to look at whether their central ERP package carries enough information about each of the components that they buy or manufature to help them towards their initial environmental reporting or decision support goals. It is a simple matter of determining how your ERP package tracks what goes into each product and how it tracks what comes out of the product when it is disposed of, so you can ensure that it is disposed of in a manner appropriate for the environment.
A next level of sophistication is an ERP product with environmental footprint tracking tool already embedded in the package. This delivers a level of futureproofing and simplicity that will become more and more demand in the market as manufacturers continue to document their impact on the environment.
According to a survey conducted for IFS North America, the vast majority of respondents said they wanted ERP vendors to offer embedded environmental footprint management capabilities, eliminating the cost and hassle of integrations.
SOURCE:
http://www.technologyevaluation.com/research/articles/erp-for-green-supply-chain-management-in-manufacturing-20770/
Wednesday, August 18, 2010
ERP for Green Supply Chain Management in Manufacturing
0 comments 12:58 AM Posted by amma
Manufacturers are under increasing pressure to document their impact on the environment. This pressure is coming—for North American manufacturers—primarily from the private sector. Major manufacturers are asking their upstream supply chain partners to document its environmental impact as part of green supply chain initiatives. Green supply chain programs may be initiated in order to help manufacturers position themselves to its own customers or investors, or to facilitate environmental compliance.
This focus on green extends well beyond the simple carbon footprint, which in and of itself can be a challenge to track given that almost any business activity, from turning on the lights to running a metal press, results in consumption of at least some fossil fuels. In coming to grips with an environmental footprint, a number of other impacts including discharges to waterways, landfills, and other gas emissions must be monitored. The life cycle impact of a product—ranging from shipability, energy consumption, offgassing, service requirements, and end-of-life disposal or recycling, must be taken into consideration.
In this article, I will address the various drivers for this green supply chain trend, share important considerations for satisfying a customer’s green supply chain initiative or initiating your own green supply chain initiative, and discuss the role of enterprise software like enterprise resource planning (ERP) in keeping pace with this industry trend.
Why Green Your Supply Chain?
From a practical standpoint, green supply chains are smart moves for manufacturers because they can present a marketing advantage. Here are more pressing and immediate reasons for green supply chain management (SCM):
Investor demand for sustainability data is increasing. This should be a serious consideration for public companies and their suppliers. In February of 2010, the Securities and Exchange Commission (SEC) issued guidance requiring publicly-held companies to disclose their environmental liabilities that could become problematic if cap and trade regulation came into effect.
The concern for sustainability of public companies from an investor perspective is not driven by altruism, but rather by a need to increase the degree of transparency and visibility of potential risks and liabilities that could harm long-term returns. While manufacturers can expect more rather than less in the way of environmental reporting requirements, substantial rules are already in force, including several statements of position (SOP) from the Accounting Standards Executive Committee (AcSEC) of The American Institute of Certified Public Accountants (ACPAs):
• Guidance on "Accounting for Contingencies" requires that liabilities be recognized in the financial statements if a loss is probable and the amount is estimable. At the very least, even if the loss is not estimable, the likely loss must be accounted for in footnotes to financial reporting.
• These position statements also require that environmental contamination costs be expensed as incurred unless they extend the life or increase capacity of the property, mitigate or prevent future environmental contamination, or are realized while preparing the asset for sale.
• The standard operating procedure (SOP) for Environmental Remediation Liabilities details the responsibilities of corporations involved in mandated environmental cleanup, and responsibilities of corporations to avoid environmental destruction.
Regulation is advancing. While myriad regulations impact North American manufacturers, touching on discharge to the air, water, and landfills, perhaps the area of environmental regulation that is advancing most quickly is in the area of Restriction of Hazardous Substances (RoHS). In the European Union (EU), RoHS already governs the allowability of certain hazardous substances in a variety of products.
RoHS generally restricts the use of hazardous substances in electrical and electronic equipment, while associated regulation, Waste Electrical and Electronic Equipment (WEEE) regulates the disposal of these products. RoHS and WEEE focus on "certain heavy metals," specifically lead, mercury, cadmium, and hexavalent chromium. In Europe, these regulations also cover the flame retardants polybrominated biphenyl (PBB) and polybrominated diphenyl ethers (PBDE), while states like California do not, as of yet, deal with these substances in their RoHS regulations. California does, however, already have separate regulations that make it illegal to manufacture, process, or distribute products containing more than one-tenth of 1 percent of these substances by mass, which once again has green supply chain implications.
California’s RoHS regulation currently applies to a very narrow set of products, including computer monitors, televisions or other products that involve cathode ray or liquid crystal display (LCD) screens, but bills have been advanced through the state legislature that would expand that state’s RoHS initiative to mirror that of the EU in scope.
This means you will need to roll up in each of your assemblies the materials that are in each product with great detail. Some companies are also already manufacturing distinct product lines for Europe that, for instance, use mechanical electrical connectors instead of solder joints or welds. Manufacturers will need excellent functionality for tracking of the raw materials going into component parts sourced through a supply chain and for decision support in the area of product design.
You may need to provide documentation for your customers’ green supply chain. This is actually a more daunting task than is reporting for regulatory compliance because a manufacturer can expect individual requirements from each of its customer with a green supply chain program. Each of these customers cares about certain things that they track for their supply chain and their green emphasis. So, because most manufacturers have more than one customer, there is the need for a great deal of flexibility in an environmental footprint solution. Each customer with a green supply chain program is likely to have unique requirements for tracking different hazardous materials and environmental impacts depending on what it is that they are purchasing from you and what industry they are in. The six heavy metals included in RoHS, like lead and cadmium, may be typical and broadly of interest. But beyond that there will be other needs based on what customers want. Therefore, manufacturers need flexibility to track environmental impact by product, and also need the ability to customize the queries and reports so they can display what that customer cares about.
The takeaway here is that you will need the flexibility and the ability to track and report on a variety of rapidly changing metrics rather than one standardized set of environmental metrics.
The most advanced ERP tools may allow you to break down your environmental impact by discrete part, so you can document the environmental impact of each item you sell customers.
Whether you are manufacturing something yourself, or purchasing it from a supplier, the single most important thing to keep in mind when planning to measure and manage your environmental footprint is that it has equal impact on the total environmental footprint of the product you sell. In some cases, your supplier may be liable for reclamation costs for components of subassemblies they sell you, but unless this is covered specifically in a contract, you should count on being solely responsible for what you sell when it comes to environmental impact. This means that you need excellent integration between your supply chain solution and your ERP system.
You will want to document what your suppliers are consuming for the products you are buying from them. For example, let’s say you are buying a printed circuit board from a supply chain partner; you will still want to know by weight how much lead it has in it before you can sell that product in the EU. Plastic components will need to comply with regulations on the amount of PBDE, and so on. The degree of post consumer waste incorporated in materials, subassemblies, and products can also be something that must be documented and managed.
Apart from constituent parts and materials and their impact, there is also the environmental impact of logistics and transportation to consider. There will be an increasing need to factor in the environmental impact of different transportation methods and the distance of supply chain partners from your own location, along with the ability to roll that data up into the environmental impact for each individual product.
There are real implications not only for external vendors and suppliers but for multi-site companies because you are not just tracking the amount of potentially hazardous materials in your product but the impact of getting them, and their component parts, from one place to the next. For companies with multiple sites or business units located any distance apart, this can be a major factor for your internal supply chain. Enterprise applications that combine environmental footprint management with multi-site capabilities will be essential for companies with more than one site as they quantify their impact on the environment.
The environmental impact of transport logistics between your own sites and between your site and your customers and vendors also has implications for product design. Can products, subassemblies, or parts nest in shipping, or otherwise fit into a truck more effectively?
Product design is only one area where environmental footprint management in ERP is important for decision support. But perhaps a more critical area for environmental decision support in ERP software is risk management. An enterprise application ought to be able to help you evaluate the risks from an environmental standpoint when it comes to getting involved with a particular supplier—or even the risk of working with an internal supplier like a different location or subsidiary.
In implementing a green supply chain or participating in the green supply chain of a customer organization, it will also be important to document and track the history of your environmental impact program. The ability to look back on where you were in the past will allow you to respond intelligently to changing legislation and other mandates that impact life cycle and end of life cycle products in the field. In the case or durable and complex assets like capital manufacturing equipment and aircraft, changing environmental rules could have implications for ongoing support, maintenance and sustainment, and for spare parts and life cycle extensions of these assets.
The Role of ERP
It quickly becomes clear that the depth and breadth of information required to track an environmental footprint is substantial. While manufacturers might look at third-party products that purport to offer some degree of environmental management functionality, it probably makes more sense for them to look at whether their central ERP package carries enough information about each of the components that they buy or manufature to help them towards their initial environmental reporting or decision support goals. It is a simple matter of determining how your ERP package tracks what goes into each product and how it tracks what comes out of the product when it is disposed of, so you can ensure that it is disposed of in a manner appropriate for the environment.
A next level of sophistication is an ERP product with environmental footprint tracking tool already embedded in the package. This delivers a level of futureproofing and simplicity that will become more and more demand in the market as manufacturers continue to document their impact on the environment.
According to a survey conducted for IFS North America, the vast majority of respondents said they wanted ERP vendors to offer embedded environmental footprint management capabilities, eliminating the cost and hassle of integrations.
SOURCE:
http://www.technologyevaluation.com/research/articles/erp-for-green-supply-chain-management-in-manufacturing-20770/
This focus on green extends well beyond the simple carbon footprint, which in and of itself can be a challenge to track given that almost any business activity, from turning on the lights to running a metal press, results in consumption of at least some fossil fuels. In coming to grips with an environmental footprint, a number of other impacts including discharges to waterways, landfills, and other gas emissions must be monitored. The life cycle impact of a product—ranging from shipability, energy consumption, offgassing, service requirements, and end-of-life disposal or recycling, must be taken into consideration.
In this article, I will address the various drivers for this green supply chain trend, share important considerations for satisfying a customer’s green supply chain initiative or initiating your own green supply chain initiative, and discuss the role of enterprise software like enterprise resource planning (ERP) in keeping pace with this industry trend.
Why Green Your Supply Chain?
From a practical standpoint, green supply chains are smart moves for manufacturers because they can present a marketing advantage. Here are more pressing and immediate reasons for green supply chain management (SCM):
Investor demand for sustainability data is increasing. This should be a serious consideration for public companies and their suppliers. In February of 2010, the Securities and Exchange Commission (SEC) issued guidance requiring publicly-held companies to disclose their environmental liabilities that could become problematic if cap and trade regulation came into effect.
The concern for sustainability of public companies from an investor perspective is not driven by altruism, but rather by a need to increase the degree of transparency and visibility of potential risks and liabilities that could harm long-term returns. While manufacturers can expect more rather than less in the way of environmental reporting requirements, substantial rules are already in force, including several statements of position (SOP) from the Accounting Standards Executive Committee (AcSEC) of The American Institute of Certified Public Accountants (ACPAs):
• Guidance on "Accounting for Contingencies" requires that liabilities be recognized in the financial statements if a loss is probable and the amount is estimable. At the very least, even if the loss is not estimable, the likely loss must be accounted for in footnotes to financial reporting.
• These position statements also require that environmental contamination costs be expensed as incurred unless they extend the life or increase capacity of the property, mitigate or prevent future environmental contamination, or are realized while preparing the asset for sale.
• The standard operating procedure (SOP) for Environmental Remediation Liabilities details the responsibilities of corporations involved in mandated environmental cleanup, and responsibilities of corporations to avoid environmental destruction.
Regulation is advancing. While myriad regulations impact North American manufacturers, touching on discharge to the air, water, and landfills, perhaps the area of environmental regulation that is advancing most quickly is in the area of Restriction of Hazardous Substances (RoHS). In the European Union (EU), RoHS already governs the allowability of certain hazardous substances in a variety of products.
RoHS generally restricts the use of hazardous substances in electrical and electronic equipment, while associated regulation, Waste Electrical and Electronic Equipment (WEEE) regulates the disposal of these products. RoHS and WEEE focus on "certain heavy metals," specifically lead, mercury, cadmium, and hexavalent chromium. In Europe, these regulations also cover the flame retardants polybrominated biphenyl (PBB) and polybrominated diphenyl ethers (PBDE), while states like California do not, as of yet, deal with these substances in their RoHS regulations. California does, however, already have separate regulations that make it illegal to manufacture, process, or distribute products containing more than one-tenth of 1 percent of these substances by mass, which once again has green supply chain implications.
California’s RoHS regulation currently applies to a very narrow set of products, including computer monitors, televisions or other products that involve cathode ray or liquid crystal display (LCD) screens, but bills have been advanced through the state legislature that would expand that state’s RoHS initiative to mirror that of the EU in scope.
This means you will need to roll up in each of your assemblies the materials that are in each product with great detail. Some companies are also already manufacturing distinct product lines for Europe that, for instance, use mechanical electrical connectors instead of solder joints or welds. Manufacturers will need excellent functionality for tracking of the raw materials going into component parts sourced through a supply chain and for decision support in the area of product design.
You may need to provide documentation for your customers’ green supply chain. This is actually a more daunting task than is reporting for regulatory compliance because a manufacturer can expect individual requirements from each of its customer with a green supply chain program. Each of these customers cares about certain things that they track for their supply chain and their green emphasis. So, because most manufacturers have more than one customer, there is the need for a great deal of flexibility in an environmental footprint solution. Each customer with a green supply chain program is likely to have unique requirements for tracking different hazardous materials and environmental impacts depending on what it is that they are purchasing from you and what industry they are in. The six heavy metals included in RoHS, like lead and cadmium, may be typical and broadly of interest. But beyond that there will be other needs based on what customers want. Therefore, manufacturers need flexibility to track environmental impact by product, and also need the ability to customize the queries and reports so they can display what that customer cares about.
The takeaway here is that you will need the flexibility and the ability to track and report on a variety of rapidly changing metrics rather than one standardized set of environmental metrics.
The most advanced ERP tools may allow you to break down your environmental impact by discrete part, so you can document the environmental impact of each item you sell customers.
Whether you are manufacturing something yourself, or purchasing it from a supplier, the single most important thing to keep in mind when planning to measure and manage your environmental footprint is that it has equal impact on the total environmental footprint of the product you sell. In some cases, your supplier may be liable for reclamation costs for components of subassemblies they sell you, but unless this is covered specifically in a contract, you should count on being solely responsible for what you sell when it comes to environmental impact. This means that you need excellent integration between your supply chain solution and your ERP system.
You will want to document what your suppliers are consuming for the products you are buying from them. For example, let’s say you are buying a printed circuit board from a supply chain partner; you will still want to know by weight how much lead it has in it before you can sell that product in the EU. Plastic components will need to comply with regulations on the amount of PBDE, and so on. The degree of post consumer waste incorporated in materials, subassemblies, and products can also be something that must be documented and managed.
Apart from constituent parts and materials and their impact, there is also the environmental impact of logistics and transportation to consider. There will be an increasing need to factor in the environmental impact of different transportation methods and the distance of supply chain partners from your own location, along with the ability to roll that data up into the environmental impact for each individual product.
There are real implications not only for external vendors and suppliers but for multi-site companies because you are not just tracking the amount of potentially hazardous materials in your product but the impact of getting them, and their component parts, from one place to the next. For companies with multiple sites or business units located any distance apart, this can be a major factor for your internal supply chain. Enterprise applications that combine environmental footprint management with multi-site capabilities will be essential for companies with more than one site as they quantify their impact on the environment.
The environmental impact of transport logistics between your own sites and between your site and your customers and vendors also has implications for product design. Can products, subassemblies, or parts nest in shipping, or otherwise fit into a truck more effectively?
Product design is only one area where environmental footprint management in ERP is important for decision support. But perhaps a more critical area for environmental decision support in ERP software is risk management. An enterprise application ought to be able to help you evaluate the risks from an environmental standpoint when it comes to getting involved with a particular supplier—or even the risk of working with an internal supplier like a different location or subsidiary.
In implementing a green supply chain or participating in the green supply chain of a customer organization, it will also be important to document and track the history of your environmental impact program. The ability to look back on where you were in the past will allow you to respond intelligently to changing legislation and other mandates that impact life cycle and end of life cycle products in the field. In the case or durable and complex assets like capital manufacturing equipment and aircraft, changing environmental rules could have implications for ongoing support, maintenance and sustainment, and for spare parts and life cycle extensions of these assets.
The Role of ERP
It quickly becomes clear that the depth and breadth of information required to track an environmental footprint is substantial. While manufacturers might look at third-party products that purport to offer some degree of environmental management functionality, it probably makes more sense for them to look at whether their central ERP package carries enough information about each of the components that they buy or manufature to help them towards their initial environmental reporting or decision support goals. It is a simple matter of determining how your ERP package tracks what goes into each product and how it tracks what comes out of the product when it is disposed of, so you can ensure that it is disposed of in a manner appropriate for the environment.
A next level of sophistication is an ERP product with environmental footprint tracking tool already embedded in the package. This delivers a level of futureproofing and simplicity that will become more and more demand in the market as manufacturers continue to document their impact on the environment.
According to a survey conducted for IFS North America, the vast majority of respondents said they wanted ERP vendors to offer embedded environmental footprint management capabilities, eliminating the cost and hassle of integrations.
SOURCE:
http://www.technologyevaluation.com/research/articles/erp-for-green-supply-chain-management-in-manufacturing-20770/
Squeeze Play in the Supply Chain Management Market
1 comments 12:57 AM Posted by amma
To increase market share, vendors are expanding and offering more services to customers. On one hand, enterprise resource planning (ERP) vendors are adding such functionality as warehouse management systems (WMS) and transportation management systems (TMS) into their suites; on the other hand, supply chain management (SCM) vendors are including business intelligence (BI) or supplier relationship management (SRM) functionalities in their applications. Consequently, the IT market is seeing a convergence of functionality for ERP and SCM systems.
In pushing downward into the supply chain space, ERP vendors are incorporating such additional functionality as product lifecycle management (PLM), SRM, advanced planning, WMS, TMS, event and performance management, labor, slotting, yard management, and radio frequency identification (RFID) to their ERP product suites. This business model of ERP vendors pushing downward has expanded, and it is consuming valuable supply chain execution (SCE) market share. This is in accordance with market demand, as organizations are now expected to have one system to address all needs collaboratively.
This article examines the upward push of supply chain vendors into the ERP space and the downward penetration of ERP into the supply chain market, as well as the overall impact on the market.
The Downward Push of ERP Vendors
ERP vendors are expanding their market share at the expense of SCM vendors. ERP solutions encompass a wide range of functionality that includes most of the business processes of an organization. Traditional modules like accounting, BI, customer relationship management (CRM), advanced planning and scheduling, manufacturing, warehousing, and shipping are all standard ERP offerings today.
Most ERP functionality is usually stronger within a particular function of the enterprise (such as financials), while accommodating the other functions within its infrastructure. Other business functions within the ERP infrastructure are incorporated within the same platform, and there is no need for additional interfacing between each operation. Although ERP software covers many modules, its functionality within a module may vary widely, and may not incorporate an adequate level of detail for a particular function like an engineered-to-order product.
Many organizations have elected to implement best-of-breed SCE software on top of their current ERP system to address the shortcomings of functionality within the supply chain. An example where additional functionality was needed in the warehouse is Indigo Books & Music. Indigo implemented SAP corporate-wide, and then had to install an additional WMS (HighJump) to cater to its warehousing requirements. This is common for other companies, such as Nike, Daydots, and 99 Cents Only Stores, where ERP systems have been installed along with WMS solutions to manage the warehouse.
Companies like Catalyst, HighJump, Manhattan Associates, and RedPrairie have all interfaced to SAP successfully, and Catalyst is even approved by SAP for its interface between the WMS and the ERP. Generally speaking, new SCM functionality now incorporated into the ERP products is more detailed and stable from a platform and functionality aspect.
This new level of functionality incorporated within ERP may be the element that is currently missing to handle today’s increasing need for real-time information and accuracy. Tier one vendors, aware that their solutions were lacking in detailed supply chain functionality, have spent extensive research and development resources to improve these shortcomings. SAP, for instance, has dramatically increased functionality within its WMS offering.
Figure 1 outlines most of the traditional functionality included with most ERP and SCM systems software.
The left-hand side of the chart shows traditional ERP modules, and the right-hand side displays typical SCM functionality. Within each of these modules, there are submodules, as in advanced demand planning (outlined in gray). In demand management alone, several components that were not previously included in earlier versions of ERP have now been incorporated. Likewise, within SCM software, modules such as BI, manufacturing, and SRM are now included as part of SCE software.
The SCM Push Upward
Supply chain vendors of the past only provided a single product that addressed one aspect or function within the supply chain. However, certain business requirements have become the norm, such as vendor collaboration, changes in workflow, event management, performance management, PLM, labor requirements, key performance indicator (KPI) analysis, real-time inventory, manufacturing execution systems, WMS, transportation requirements, advanced planning and scheduling, and partner-supplier collaboration. SCM vendors feeling the tightening of the market have started to address their shortcomings, and are including more ERP-like modules to expand their solutions.
SCM software traditionally employs a strategy of covering everything within the four walls of the warehouse. The addition of ERP modules aims at tying into the entire supply chain and its collaborative aspects. Trading partners (and now logistic companies) are coming together with manufacturers to unite services, products, and customer experience. Demand management and SRM are intricate parts of SCE, and tier one vendors like HighJump, RedPrairie, and Manhattan Associates have now included very detailed iterations of this module.
Since detailed information is required, most tier one WMS vendors, and even the smaller vendors (ASI, Radio Beacon, RF Pathways, and Scancode) within the SCM space, have also added and developed new functionality to compete with this shift in business model.
For example, HighJump has evolved to fit this shift in business strategy and technology. Its initial offering was a best-of-breed WMS. HighJump’s WMS competes with Manhattan and RedPrairie, and all three vendors now offer a full suite of SCE products (see figure 2).
SOURCE:
http://www.technologyevaluation.com/research/articles/squeeze-play-in-the-supply-chain-management-market-19481/
In pushing downward into the supply chain space, ERP vendors are incorporating such additional functionality as product lifecycle management (PLM), SRM, advanced planning, WMS, TMS, event and performance management, labor, slotting, yard management, and radio frequency identification (RFID) to their ERP product suites. This business model of ERP vendors pushing downward has expanded, and it is consuming valuable supply chain execution (SCE) market share. This is in accordance with market demand, as organizations are now expected to have one system to address all needs collaboratively.
This article examines the upward push of supply chain vendors into the ERP space and the downward penetration of ERP into the supply chain market, as well as the overall impact on the market.
The Downward Push of ERP Vendors
ERP vendors are expanding their market share at the expense of SCM vendors. ERP solutions encompass a wide range of functionality that includes most of the business processes of an organization. Traditional modules like accounting, BI, customer relationship management (CRM), advanced planning and scheduling, manufacturing, warehousing, and shipping are all standard ERP offerings today.
Most ERP functionality is usually stronger within a particular function of the enterprise (such as financials), while accommodating the other functions within its infrastructure. Other business functions within the ERP infrastructure are incorporated within the same platform, and there is no need for additional interfacing between each operation. Although ERP software covers many modules, its functionality within a module may vary widely, and may not incorporate an adequate level of detail for a particular function like an engineered-to-order product.
Many organizations have elected to implement best-of-breed SCE software on top of their current ERP system to address the shortcomings of functionality within the supply chain. An example where additional functionality was needed in the warehouse is Indigo Books & Music. Indigo implemented SAP corporate-wide, and then had to install an additional WMS (HighJump) to cater to its warehousing requirements. This is common for other companies, such as Nike, Daydots, and 99 Cents Only Stores, where ERP systems have been installed along with WMS solutions to manage the warehouse.
Companies like Catalyst, HighJump, Manhattan Associates, and RedPrairie have all interfaced to SAP successfully, and Catalyst is even approved by SAP for its interface between the WMS and the ERP. Generally speaking, new SCM functionality now incorporated into the ERP products is more detailed and stable from a platform and functionality aspect.
This new level of functionality incorporated within ERP may be the element that is currently missing to handle today’s increasing need for real-time information and accuracy. Tier one vendors, aware that their solutions were lacking in detailed supply chain functionality, have spent extensive research and development resources to improve these shortcomings. SAP, for instance, has dramatically increased functionality within its WMS offering.
Figure 1 outlines most of the traditional functionality included with most ERP and SCM systems software.
The left-hand side of the chart shows traditional ERP modules, and the right-hand side displays typical SCM functionality. Within each of these modules, there are submodules, as in advanced demand planning (outlined in gray). In demand management alone, several components that were not previously included in earlier versions of ERP have now been incorporated. Likewise, within SCM software, modules such as BI, manufacturing, and SRM are now included as part of SCE software.
The SCM Push Upward
Supply chain vendors of the past only provided a single product that addressed one aspect or function within the supply chain. However, certain business requirements have become the norm, such as vendor collaboration, changes in workflow, event management, performance management, PLM, labor requirements, key performance indicator (KPI) analysis, real-time inventory, manufacturing execution systems, WMS, transportation requirements, advanced planning and scheduling, and partner-supplier collaboration. SCM vendors feeling the tightening of the market have started to address their shortcomings, and are including more ERP-like modules to expand their solutions.
SCM software traditionally employs a strategy of covering everything within the four walls of the warehouse. The addition of ERP modules aims at tying into the entire supply chain and its collaborative aspects. Trading partners (and now logistic companies) are coming together with manufacturers to unite services, products, and customer experience. Demand management and SRM are intricate parts of SCE, and tier one vendors like HighJump, RedPrairie, and Manhattan Associates have now included very detailed iterations of this module.
Since detailed information is required, most tier one WMS vendors, and even the smaller vendors (ASI, Radio Beacon, RF Pathways, and Scancode) within the SCM space, have also added and developed new functionality to compete with this shift in business model.
For example, HighJump has evolved to fit this shift in business strategy and technology. Its initial offering was a best-of-breed WMS. HighJump’s WMS competes with Manhattan and RedPrairie, and all three vendors now offer a full suite of SCE products (see figure 2).
SOURCE:
http://www.technologyevaluation.com/research/articles/squeeze-play-in-the-supply-chain-management-market-19481/
To increase market share, vendors are expanding and offering more services to customers. On one hand, enterprise resource planning (ERP) vendors are adding such functionality as warehouse management systems (WMS) and transportation management systems (TMS) into their suites; on the other hand, supply chain management (SCM) vendors are including business intelligence (BI) or supplier relationship management (SRM) functionalities in their applications. Consequently, the IT market is seeing a convergence of functionality for ERP and SCM systems.
In pushing downward into the supply chain space, ERP vendors are incorporating such additional functionality as product lifecycle management (PLM), SRM, advanced planning, WMS, TMS, event and performance management, labor, slotting, yard management, and radio frequency identification (RFID) to their ERP product suites. This business model of ERP vendors pushing downward has expanded, and it is consuming valuable supply chain execution (SCE) market share. This is in accordance with market demand, as organizations are now expected to have one system to address all needs collaboratively.
This article examines the upward push of supply chain vendors into the ERP space and the downward penetration of ERP into the supply chain market, as well as the overall impact on the market.
The Downward Push of ERP Vendors
ERP vendors are expanding their market share at the expense of SCM vendors. ERP solutions encompass a wide range of functionality that includes most of the business processes of an organization. Traditional modules like accounting, BI, customer relationship management (CRM), advanced planning and scheduling, manufacturing, warehousing, and shipping are all standard ERP offerings today.
Most ERP functionality is usually stronger within a particular function of the enterprise (such as financials), while accommodating the other functions within its infrastructure. Other business functions within the ERP infrastructure are incorporated within the same platform, and there is no need for additional interfacing between each operation. Although ERP software covers many modules, its functionality within a module may vary widely, and may not incorporate an adequate level of detail for a particular function like an engineered-to-order product.
Many organizations have elected to implement best-of-breed SCE software on top of their current ERP system to address the shortcomings of functionality within the supply chain. An example where additional functionality was needed in the warehouse is Indigo Books & Music. Indigo implemented SAP corporate-wide, and then had to install an additional WMS (HighJump) to cater to its warehousing requirements. This is common for other companies, such as Nike, Daydots, and 99 Cents Only Stores, where ERP systems have been installed along with WMS solutions to manage the warehouse.
Companies like Catalyst, HighJump, Manhattan Associates, and RedPrairie have all interfaced to SAP successfully, and Catalyst is even approved by SAP for its interface between the WMS and the ERP. Generally speaking, new SCM functionality now incorporated into the ERP products is more detailed and stable from a platform and functionality aspect.
This new level of functionality incorporated within ERP may be the element that is currently missing to handle today’s increasing need for real-time information and accuracy. Tier one vendors, aware that their solutions were lacking in detailed supply chain functionality, have spent extensive research and development resources to improve these shortcomings. SAP, for instance, has dramatically increased functionality within its WMS offering.
Figure 1 outlines most of the traditional functionality included with most ERP and SCM systems software.
The left-hand side of the chart shows traditional ERP modules, and the right-hand side displays typical SCM functionality. Within each of these modules, there are submodules, as in advanced demand planning (outlined in gray). In demand management alone, several components that were not previously included in earlier versions of ERP have now been incorporated. Likewise, within SCM software, modules such as BI, manufacturing, and SRM are now included as part of SCE software.
The SCM Push Upward
Supply chain vendors of the past only provided a single product that addressed one aspect or function within the supply chain. However, certain business requirements have become the norm, such as vendor collaboration, changes in workflow, event management, performance management, PLM, labor requirements, key performance indicator (KPI) analysis, real-time inventory, manufacturing execution systems, WMS, transportation requirements, advanced planning and scheduling, and partner-supplier collaboration. SCM vendors feeling the tightening of the market have started to address their shortcomings, and are including more ERP-like modules to expand their solutions.
SCM software traditionally employs a strategy of covering everything within the four walls of the warehouse. The addition of ERP modules aims at tying into the entire supply chain and its collaborative aspects. Trading partners (and now logistic companies) are coming together with manufacturers to unite services, products, and customer experience. Demand management and SRM are intricate parts of SCE, and tier one vendors like HighJump, RedPrairie, and Manhattan Associates have now included very detailed iterations of this module.
Since detailed information is required, most tier one WMS vendors, and even the smaller vendors (ASI, Radio Beacon, RF Pathways, and Scancode) within the SCM space, have also added and developed new functionality to compete with this shift in business model.
For example, HighJump has evolved to fit this shift in business strategy and technology. Its initial offering was a best-of-breed WMS. HighJump’s WMS competes with Manhattan and RedPrairie, and all three vendors now offer a full suite of SCE products (see figure 2).
SOURCE:
http://www.technologyevaluation.com/research/articles/squeeze-play-in-the-supply-chain-management-market-19481/
In pushing downward into the supply chain space, ERP vendors are incorporating such additional functionality as product lifecycle management (PLM), SRM, advanced planning, WMS, TMS, event and performance management, labor, slotting, yard management, and radio frequency identification (RFID) to their ERP product suites. This business model of ERP vendors pushing downward has expanded, and it is consuming valuable supply chain execution (SCE) market share. This is in accordance with market demand, as organizations are now expected to have one system to address all needs collaboratively.
This article examines the upward push of supply chain vendors into the ERP space and the downward penetration of ERP into the supply chain market, as well as the overall impact on the market.
The Downward Push of ERP Vendors
ERP vendors are expanding their market share at the expense of SCM vendors. ERP solutions encompass a wide range of functionality that includes most of the business processes of an organization. Traditional modules like accounting, BI, customer relationship management (CRM), advanced planning and scheduling, manufacturing, warehousing, and shipping are all standard ERP offerings today.
Most ERP functionality is usually stronger within a particular function of the enterprise (such as financials), while accommodating the other functions within its infrastructure. Other business functions within the ERP infrastructure are incorporated within the same platform, and there is no need for additional interfacing between each operation. Although ERP software covers many modules, its functionality within a module may vary widely, and may not incorporate an adequate level of detail for a particular function like an engineered-to-order product.
Many organizations have elected to implement best-of-breed SCE software on top of their current ERP system to address the shortcomings of functionality within the supply chain. An example where additional functionality was needed in the warehouse is Indigo Books & Music. Indigo implemented SAP corporate-wide, and then had to install an additional WMS (HighJump) to cater to its warehousing requirements. This is common for other companies, such as Nike, Daydots, and 99 Cents Only Stores, where ERP systems have been installed along with WMS solutions to manage the warehouse.
Companies like Catalyst, HighJump, Manhattan Associates, and RedPrairie have all interfaced to SAP successfully, and Catalyst is even approved by SAP for its interface between the WMS and the ERP. Generally speaking, new SCM functionality now incorporated into the ERP products is more detailed and stable from a platform and functionality aspect.
This new level of functionality incorporated within ERP may be the element that is currently missing to handle today’s increasing need for real-time information and accuracy. Tier one vendors, aware that their solutions were lacking in detailed supply chain functionality, have spent extensive research and development resources to improve these shortcomings. SAP, for instance, has dramatically increased functionality within its WMS offering.
Figure 1 outlines most of the traditional functionality included with most ERP and SCM systems software.
The left-hand side of the chart shows traditional ERP modules, and the right-hand side displays typical SCM functionality. Within each of these modules, there are submodules, as in advanced demand planning (outlined in gray). In demand management alone, several components that were not previously included in earlier versions of ERP have now been incorporated. Likewise, within SCM software, modules such as BI, manufacturing, and SRM are now included as part of SCE software.
The SCM Push Upward
Supply chain vendors of the past only provided a single product that addressed one aspect or function within the supply chain. However, certain business requirements have become the norm, such as vendor collaboration, changes in workflow, event management, performance management, PLM, labor requirements, key performance indicator (KPI) analysis, real-time inventory, manufacturing execution systems, WMS, transportation requirements, advanced planning and scheduling, and partner-supplier collaboration. SCM vendors feeling the tightening of the market have started to address their shortcomings, and are including more ERP-like modules to expand their solutions.
SCM software traditionally employs a strategy of covering everything within the four walls of the warehouse. The addition of ERP modules aims at tying into the entire supply chain and its collaborative aspects. Trading partners (and now logistic companies) are coming together with manufacturers to unite services, products, and customer experience. Demand management and SRM are intricate parts of SCE, and tier one vendors like HighJump, RedPrairie, and Manhattan Associates have now included very detailed iterations of this module.
Since detailed information is required, most tier one WMS vendors, and even the smaller vendors (ASI, Radio Beacon, RF Pathways, and Scancode) within the SCM space, have also added and developed new functionality to compete with this shift in business model.
For example, HighJump has evolved to fit this shift in business strategy and technology. Its initial offering was a best-of-breed WMS. HighJump’s WMS competes with Manhattan and RedPrairie, and all three vendors now offer a full suite of SCE products (see figure 2).
SOURCE:
http://www.technologyevaluation.com/research/articles/squeeze-play-in-the-supply-chain-management-market-19481/
How Supply Chain Management Helps Today's Engineer-to-order Companies
0 comments 12:57 AM Posted by amma
How Supply Chain Management Helps Today's Engineer-to-order Companies
David Bourque
In today's dynamic manufacturing industry, companies are feeling the squeeze of fierce competition, as goods are being produced more cheaply in developing countries. Because of this, global sourcing for parts is a huge factor in cost reduction.
In the project-based nature of the engineer-to-order (ETO) world's manufacturing processes, specific parts are needed at precise times. As well, because ETO manufacturing must meet stringent milestones and deadlines, it is critical that firms obtain parts on time. Otherwise, project costs go up, timelines are extended, and budgets are blown.
How can these manufacturers mitigate the pressures of this competitive landscape? Supply chain management (SCM) can play a vital role in an ETO manufacturing environment, enabling milestones to be met and parts to arrive on time so that production can continue on schedule.
This article details how SCM helps firms that manufacture ETO goods, as well as how SCM integrates with ETO to improve business processes.
The Role of SCM in ETO Firms
The ETO environment is a very detailed type of manufacturing because it involves many changes in the engineering and design of a product throughout its production. In this manufacturing environment, orders are based on contracts as opposed to work orders, which means it is crucial that the manufacturer meets its project deadlines.
ETO enterprise resource planning (ERP) software manages project deadlines and milestones within the manufacturing environment. However, with today's increasing amount of global sourcing, additional functionality is required, and this is where SCM software comes into the picture.
Because precise components need to be routed from different sources during the process of designing and manufacturing of the product, suppliers need to be made aware of the product requirements in enough time to be able to deliver these requirements to the client.
How can suppliers be linked into the operations of the manufacturing firm, which can make demands on a whim?
How SCM Software Components Relate to the ETO Manufacturing Environment
The main modules of SCM software include the following:
*
Warehouse management system (WMS)—enables firms to optimize methods of storing and moving inventory through the warehouse.
*
Transportation management system (TMS)—enables transportation firms to manage and optimize any mode of transportation.
*
International trade logistics (ITL)—helps organizations with the logistics of importing and exporting, the finances related to these activities, and collaboration between firms across multiple locations.
*
Supplier relationship management (SRM)—manages the relationships between suppliers, distributors, and manufacturing firms. SRM is one of the key features that enables manufacturing firms to source products quickly.
*
Demand management (DM)—forecasts how much product to move through the supply chain, how much product to produce, and how much product will need to be produced in the future, based on historical data.
*
Supply chain analytics—enables supply chain managers to create work-arounds if problems within the supply chain occur. Supply chain analytics is comprised of supply chain optimization, supply chain event management (SCEM), and production and supply planning.
*
Order management—enables suppliers (or manufacturers) to take an order, search within their inventory to see if the item is available, and ship the item to its final destination.
SCM software integrates into the ETO software infrastructure, enabling manufacturers to source goods from multiple suppliers. Because of the project-based nature of ETO manufacturing, the need for different and multiple components, as the engineering of a product changes, is essential for the manufacturing project to succeed.
Here's a look at how the seven main SCM modules can be applied to the ETO manufacturing environment:
*
Using warehouse optimization techniques built into the software, the WMS will facilitate the quick movement of goods coming into the manufacturing environment in order to get the goods to the workstations as soon as possible.
*
The TMS will enable ETO manufacturers to obtain the components as quickly as possible by choosing the most appropriate means of transportation. Also, if a transportation route is blocked, the TMS will help drivers find an alternate route, which ensures and improves delivery times, and enables the project costs of the ETO product to fall within a tolerable range.
*
The SRM software will choose the appropriate supplier. (A detailed example is shown below.)
*
Finally, because multiple orders are being delivered to the manufacturer at the same time as engineering changes are happening throughout the design of the good, the order management system will integrate with the ETO software to send out the appropriate orders to each supplier. This helps to ensure that suppliers send the correct components needed for ETO production.
SOURCE:
http://www.technologyevaluation.com/research/articles/how-supply-chain-management-helps-today-s-engineer-to-order-companies-19343/
David Bourque
In today's dynamic manufacturing industry, companies are feeling the squeeze of fierce competition, as goods are being produced more cheaply in developing countries. Because of this, global sourcing for parts is a huge factor in cost reduction.
In the project-based nature of the engineer-to-order (ETO) world's manufacturing processes, specific parts are needed at precise times. As well, because ETO manufacturing must meet stringent milestones and deadlines, it is critical that firms obtain parts on time. Otherwise, project costs go up, timelines are extended, and budgets are blown.
How can these manufacturers mitigate the pressures of this competitive landscape? Supply chain management (SCM) can play a vital role in an ETO manufacturing environment, enabling milestones to be met and parts to arrive on time so that production can continue on schedule.
This article details how SCM helps firms that manufacture ETO goods, as well as how SCM integrates with ETO to improve business processes.
The Role of SCM in ETO Firms
The ETO environment is a very detailed type of manufacturing because it involves many changes in the engineering and design of a product throughout its production. In this manufacturing environment, orders are based on contracts as opposed to work orders, which means it is crucial that the manufacturer meets its project deadlines.
ETO enterprise resource planning (ERP) software manages project deadlines and milestones within the manufacturing environment. However, with today's increasing amount of global sourcing, additional functionality is required, and this is where SCM software comes into the picture.
Because precise components need to be routed from different sources during the process of designing and manufacturing of the product, suppliers need to be made aware of the product requirements in enough time to be able to deliver these requirements to the client.
How can suppliers be linked into the operations of the manufacturing firm, which can make demands on a whim?
How SCM Software Components Relate to the ETO Manufacturing Environment
The main modules of SCM software include the following:
*
Warehouse management system (WMS)—enables firms to optimize methods of storing and moving inventory through the warehouse.
*
Transportation management system (TMS)—enables transportation firms to manage and optimize any mode of transportation.
*
International trade logistics (ITL)—helps organizations with the logistics of importing and exporting, the finances related to these activities, and collaboration between firms across multiple locations.
*
Supplier relationship management (SRM)—manages the relationships between suppliers, distributors, and manufacturing firms. SRM is one of the key features that enables manufacturing firms to source products quickly.
*
Demand management (DM)—forecasts how much product to move through the supply chain, how much product to produce, and how much product will need to be produced in the future, based on historical data.
*
Supply chain analytics—enables supply chain managers to create work-arounds if problems within the supply chain occur. Supply chain analytics is comprised of supply chain optimization, supply chain event management (SCEM), and production and supply planning.
*
Order management—enables suppliers (or manufacturers) to take an order, search within their inventory to see if the item is available, and ship the item to its final destination.
SCM software integrates into the ETO software infrastructure, enabling manufacturers to source goods from multiple suppliers. Because of the project-based nature of ETO manufacturing, the need for different and multiple components, as the engineering of a product changes, is essential for the manufacturing project to succeed.
Here's a look at how the seven main SCM modules can be applied to the ETO manufacturing environment:
*
Using warehouse optimization techniques built into the software, the WMS will facilitate the quick movement of goods coming into the manufacturing environment in order to get the goods to the workstations as soon as possible.
*
The TMS will enable ETO manufacturers to obtain the components as quickly as possible by choosing the most appropriate means of transportation. Also, if a transportation route is blocked, the TMS will help drivers find an alternate route, which ensures and improves delivery times, and enables the project costs of the ETO product to fall within a tolerable range.
*
The SRM software will choose the appropriate supplier. (A detailed example is shown below.)
*
Finally, because multiple orders are being delivered to the manufacturer at the same time as engineering changes are happening throughout the design of the good, the order management system will integrate with the ETO software to send out the appropriate orders to each supplier. This helps to ensure that suppliers send the correct components needed for ETO production.
SOURCE:
http://www.technologyevaluation.com/research/articles/how-supply-chain-management-helps-today-s-engineer-to-order-companies-19343/
How Supply Chain Management Helps Today's Engineer-to-order Companies
David Bourque
In today's dynamic manufacturing industry, companies are feeling the squeeze of fierce competition, as goods are being produced more cheaply in developing countries. Because of this, global sourcing for parts is a huge factor in cost reduction.
In the project-based nature of the engineer-to-order (ETO) world's manufacturing processes, specific parts are needed at precise times. As well, because ETO manufacturing must meet stringent milestones and deadlines, it is critical that firms obtain parts on time. Otherwise, project costs go up, timelines are extended, and budgets are blown.
How can these manufacturers mitigate the pressures of this competitive landscape? Supply chain management (SCM) can play a vital role in an ETO manufacturing environment, enabling milestones to be met and parts to arrive on time so that production can continue on schedule.
This article details how SCM helps firms that manufacture ETO goods, as well as how SCM integrates with ETO to improve business processes.
The Role of SCM in ETO Firms
The ETO environment is a very detailed type of manufacturing because it involves many changes in the engineering and design of a product throughout its production. In this manufacturing environment, orders are based on contracts as opposed to work orders, which means it is crucial that the manufacturer meets its project deadlines.
ETO enterprise resource planning (ERP) software manages project deadlines and milestones within the manufacturing environment. However, with today's increasing amount of global sourcing, additional functionality is required, and this is where SCM software comes into the picture.
Because precise components need to be routed from different sources during the process of designing and manufacturing of the product, suppliers need to be made aware of the product requirements in enough time to be able to deliver these requirements to the client.
How can suppliers be linked into the operations of the manufacturing firm, which can make demands on a whim?
How SCM Software Components Relate to the ETO Manufacturing Environment
The main modules of SCM software include the following:
*
Warehouse management system (WMS)—enables firms to optimize methods of storing and moving inventory through the warehouse.
*
Transportation management system (TMS)—enables transportation firms to manage and optimize any mode of transportation.
*
International trade logistics (ITL)—helps organizations with the logistics of importing and exporting, the finances related to these activities, and collaboration between firms across multiple locations.
*
Supplier relationship management (SRM)—manages the relationships between suppliers, distributors, and manufacturing firms. SRM is one of the key features that enables manufacturing firms to source products quickly.
*
Demand management (DM)—forecasts how much product to move through the supply chain, how much product to produce, and how much product will need to be produced in the future, based on historical data.
*
Supply chain analytics—enables supply chain managers to create work-arounds if problems within the supply chain occur. Supply chain analytics is comprised of supply chain optimization, supply chain event management (SCEM), and production and supply planning.
*
Order management—enables suppliers (or manufacturers) to take an order, search within their inventory to see if the item is available, and ship the item to its final destination.
SCM software integrates into the ETO software infrastructure, enabling manufacturers to source goods from multiple suppliers. Because of the project-based nature of ETO manufacturing, the need for different and multiple components, as the engineering of a product changes, is essential for the manufacturing project to succeed.
Here's a look at how the seven main SCM modules can be applied to the ETO manufacturing environment:
*
Using warehouse optimization techniques built into the software, the WMS will facilitate the quick movement of goods coming into the manufacturing environment in order to get the goods to the workstations as soon as possible.
*
The TMS will enable ETO manufacturers to obtain the components as quickly as possible by choosing the most appropriate means of transportation. Also, if a transportation route is blocked, the TMS will help drivers find an alternate route, which ensures and improves delivery times, and enables the project costs of the ETO product to fall within a tolerable range.
*
The SRM software will choose the appropriate supplier. (A detailed example is shown below.)
*
Finally, because multiple orders are being delivered to the manufacturer at the same time as engineering changes are happening throughout the design of the good, the order management system will integrate with the ETO software to send out the appropriate orders to each supplier. This helps to ensure that suppliers send the correct components needed for ETO production.
SOURCE:
http://www.technologyevaluation.com/research/articles/how-supply-chain-management-helps-today-s-engineer-to-order-companies-19343/
David Bourque
In today's dynamic manufacturing industry, companies are feeling the squeeze of fierce competition, as goods are being produced more cheaply in developing countries. Because of this, global sourcing for parts is a huge factor in cost reduction.
In the project-based nature of the engineer-to-order (ETO) world's manufacturing processes, specific parts are needed at precise times. As well, because ETO manufacturing must meet stringent milestones and deadlines, it is critical that firms obtain parts on time. Otherwise, project costs go up, timelines are extended, and budgets are blown.
How can these manufacturers mitigate the pressures of this competitive landscape? Supply chain management (SCM) can play a vital role in an ETO manufacturing environment, enabling milestones to be met and parts to arrive on time so that production can continue on schedule.
This article details how SCM helps firms that manufacture ETO goods, as well as how SCM integrates with ETO to improve business processes.
The Role of SCM in ETO Firms
The ETO environment is a very detailed type of manufacturing because it involves many changes in the engineering and design of a product throughout its production. In this manufacturing environment, orders are based on contracts as opposed to work orders, which means it is crucial that the manufacturer meets its project deadlines.
ETO enterprise resource planning (ERP) software manages project deadlines and milestones within the manufacturing environment. However, with today's increasing amount of global sourcing, additional functionality is required, and this is where SCM software comes into the picture.
Because precise components need to be routed from different sources during the process of designing and manufacturing of the product, suppliers need to be made aware of the product requirements in enough time to be able to deliver these requirements to the client.
How can suppliers be linked into the operations of the manufacturing firm, which can make demands on a whim?
How SCM Software Components Relate to the ETO Manufacturing Environment
The main modules of SCM software include the following:
*
Warehouse management system (WMS)—enables firms to optimize methods of storing and moving inventory through the warehouse.
*
Transportation management system (TMS)—enables transportation firms to manage and optimize any mode of transportation.
*
International trade logistics (ITL)—helps organizations with the logistics of importing and exporting, the finances related to these activities, and collaboration between firms across multiple locations.
*
Supplier relationship management (SRM)—manages the relationships between suppliers, distributors, and manufacturing firms. SRM is one of the key features that enables manufacturing firms to source products quickly.
*
Demand management (DM)—forecasts how much product to move through the supply chain, how much product to produce, and how much product will need to be produced in the future, based on historical data.
*
Supply chain analytics—enables supply chain managers to create work-arounds if problems within the supply chain occur. Supply chain analytics is comprised of supply chain optimization, supply chain event management (SCEM), and production and supply planning.
*
Order management—enables suppliers (or manufacturers) to take an order, search within their inventory to see if the item is available, and ship the item to its final destination.
SCM software integrates into the ETO software infrastructure, enabling manufacturers to source goods from multiple suppliers. Because of the project-based nature of ETO manufacturing, the need for different and multiple components, as the engineering of a product changes, is essential for the manufacturing project to succeed.
Here's a look at how the seven main SCM modules can be applied to the ETO manufacturing environment:
*
Using warehouse optimization techniques built into the software, the WMS will facilitate the quick movement of goods coming into the manufacturing environment in order to get the goods to the workstations as soon as possible.
*
The TMS will enable ETO manufacturers to obtain the components as quickly as possible by choosing the most appropriate means of transportation. Also, if a transportation route is blocked, the TMS will help drivers find an alternate route, which ensures and improves delivery times, and enables the project costs of the ETO product to fall within a tolerable range.
*
The SRM software will choose the appropriate supplier. (A detailed example is shown below.)
*
Finally, because multiple orders are being delivered to the manufacturer at the same time as engineering changes are happening throughout the design of the good, the order management system will integrate with the ETO software to send out the appropriate orders to each supplier. This helps to ensure that suppliers send the correct components needed for ETO production.
SOURCE:
http://www.technologyevaluation.com/research/articles/how-supply-chain-management-helps-today-s-engineer-to-order-companies-19343/
PeopleSoft Supply Chain Is Music To Mid Market Ears
0 comments 12:56 AM Posted by amma
PeopleSoft recently announced that O-Cedar Brands has licensed PeopleSoft Accelerated Supply Chain Management (SCM). This mid market solution offers a full suite of Supply Chain Management applications, a rapid implementation methodology and flexible deployment options that give users a predictable implementation timeframe. Accelerated SCM automates core e-business functionality, including general ledger, payables, receivables, billing, purchasing, order management, inventory, production management, bills and routings, cost management, and production planning.
O-Cedar, a consumer products company based in Springfield, Ohio, makes a variety of bathroom and kitchen-cleaning supplies at facilities across the Midwest. The company selected the internet-hosted Accelerated Supply Chain Management solution to link critical business processes such as order-to-cash, procure-to-pay and plan-to-procure. By linking these key business processes, O-Cedar hopes to achieve a dramatic reduction in operating costs.
Says Bob French, PeopleSoft project leader and CIO at O-Cedar, "PeopleSoft's Supply Chain Management solutions will help us meet our continued growth initiatives by improving operations efficiency and managing customer profitability. Driving bottom-line cost savings into the supply chain has become an imperative for companies our size. We found this fixed-price solution to be a very strategic investment."
The solution will be hosted by PeopleSoft eCenter, PeopleSoft's application service provider. PeopleSoft eCenter provides single-vendor accountability for the Accelerated Supply Chain Management solution. PeopleSoft eCenter will implement the solution, manage operations, and provide on-going customer support.
Designed for businesses ranging from start-ups to companies with $500 million in annual revenue, PeopleSoft's fixed-price Accelerated eBusiness Solutions allow companies to extend business processes to include their customers, suppliers and employees. "In shopping for software vendors, we found that other mid-market Supply Chain solutions couldn't compete," French said. "PeopleSoft is committed to our success."
Market Impact
PeopleSoft has long endured criticism from competitors and analysts at what they have portrayed as a lightweight supply chain product unable to compete effectively with applications from pure-play vendors like i2 Technologies and ERP rivals like Oracle and SAP. The win at O-Cedar Brands proves otherwise and is not merely a fluke. PeopleSoft has a distinct advantage over the pure-plays by its ability to offer a broader range of applications in conjunction with its supply chain solution.
The components of Accelerated SCM that offer the most differentiation are certainly the financials, such as general ledger, payables, and receivables. These represent critical areas in any organization that usually are not well integrated to manufacturing and distribution functions. Pure-play vendors focused solely on supply chain planning do not have the expertise or inclination to provide financial capabilities in spite of some half-hearted attempts in response to customers. As time goes by, ERP vendors like PeopleSoft are sure to gain ground on the pure-plays in offering solutions that address enterprise-wide needs with comparable depth of functionality.
Accelerated Supply Chain Management is deployed around specific industry verticals, including consumer products, technology, discrete manufacturing, and wholesale distribution. Vertical deployment is a strategy that most vendors attempt to pursue although many do not succeed. PeopleSoft has targeted segments that have been profitable in the past, such as consumer products, but others, like technology and discrete manufacturing are hotly contested in the supply chain management space and may prove to be an uphill battle.
User Recommendations
Among the more alluring selling points of Accelerated SCM is the guarantee of "on-time and under budget" delivery, something that PeopleSoft implies can be accomplished in as little as 12 weeks. We generally frown on bold promises of speedy, trouble-free implementations and recommend that users conduct detailed interviews with PeopleSoft and ask for sample timelines and references from past clients who have achieved quick return on investment.
PeopleSoft delivers Accelerated Supply Chain Management in three ways. For users who want the security of an in-house application with implementation assistance, PeopleSoft will work with IS departments onsite to integrate the suite with existing legacy systems. Users with more resources may want to opt to have PeopleSoft perform the set-up, quality check and installation, but let internal resources make desired customizations and enhancements. Finally, for users interested in a truly "hands-off" deployment, PeopleSoft hosts Accelerated SCM through its eCenter. Whatever the option, users will find PeopleSoft's graphical interface to be intuitive and easy to use. As always, prospective clients should choose the option that best suits their business environments and IT skill base.
SOURCE:
http://www.technologyevaluation.com/research/articles/peoplesoft-supply-chain-is-music-to-mid-market-ears-16427/
O-Cedar, a consumer products company based in Springfield, Ohio, makes a variety of bathroom and kitchen-cleaning supplies at facilities across the Midwest. The company selected the internet-hosted Accelerated Supply Chain Management solution to link critical business processes such as order-to-cash, procure-to-pay and plan-to-procure. By linking these key business processes, O-Cedar hopes to achieve a dramatic reduction in operating costs.
Says Bob French, PeopleSoft project leader and CIO at O-Cedar, "PeopleSoft's Supply Chain Management solutions will help us meet our continued growth initiatives by improving operations efficiency and managing customer profitability. Driving bottom-line cost savings into the supply chain has become an imperative for companies our size. We found this fixed-price solution to be a very strategic investment."
The solution will be hosted by PeopleSoft eCenter, PeopleSoft's application service provider. PeopleSoft eCenter provides single-vendor accountability for the Accelerated Supply Chain Management solution. PeopleSoft eCenter will implement the solution, manage operations, and provide on-going customer support.
Designed for businesses ranging from start-ups to companies with $500 million in annual revenue, PeopleSoft's fixed-price Accelerated eBusiness Solutions allow companies to extend business processes to include their customers, suppliers and employees. "In shopping for software vendors, we found that other mid-market Supply Chain solutions couldn't compete," French said. "PeopleSoft is committed to our success."
Market Impact
PeopleSoft has long endured criticism from competitors and analysts at what they have portrayed as a lightweight supply chain product unable to compete effectively with applications from pure-play vendors like i2 Technologies and ERP rivals like Oracle and SAP. The win at O-Cedar Brands proves otherwise and is not merely a fluke. PeopleSoft has a distinct advantage over the pure-plays by its ability to offer a broader range of applications in conjunction with its supply chain solution.
The components of Accelerated SCM that offer the most differentiation are certainly the financials, such as general ledger, payables, and receivables. These represent critical areas in any organization that usually are not well integrated to manufacturing and distribution functions. Pure-play vendors focused solely on supply chain planning do not have the expertise or inclination to provide financial capabilities in spite of some half-hearted attempts in response to customers. As time goes by, ERP vendors like PeopleSoft are sure to gain ground on the pure-plays in offering solutions that address enterprise-wide needs with comparable depth of functionality.
Accelerated Supply Chain Management is deployed around specific industry verticals, including consumer products, technology, discrete manufacturing, and wholesale distribution. Vertical deployment is a strategy that most vendors attempt to pursue although many do not succeed. PeopleSoft has targeted segments that have been profitable in the past, such as consumer products, but others, like technology and discrete manufacturing are hotly contested in the supply chain management space and may prove to be an uphill battle.
User Recommendations
Among the more alluring selling points of Accelerated SCM is the guarantee of "on-time and under budget" delivery, something that PeopleSoft implies can be accomplished in as little as 12 weeks. We generally frown on bold promises of speedy, trouble-free implementations and recommend that users conduct detailed interviews with PeopleSoft and ask for sample timelines and references from past clients who have achieved quick return on investment.
PeopleSoft delivers Accelerated Supply Chain Management in three ways. For users who want the security of an in-house application with implementation assistance, PeopleSoft will work with IS departments onsite to integrate the suite with existing legacy systems. Users with more resources may want to opt to have PeopleSoft perform the set-up, quality check and installation, but let internal resources make desired customizations and enhancements. Finally, for users interested in a truly "hands-off" deployment, PeopleSoft hosts Accelerated SCM through its eCenter. Whatever the option, users will find PeopleSoft's graphical interface to be intuitive and easy to use. As always, prospective clients should choose the option that best suits their business environments and IT skill base.
SOURCE:
http://www.technologyevaluation.com/research/articles/peoplesoft-supply-chain-is-music-to-mid-market-ears-16427/
PeopleSoft recently announced that O-Cedar Brands has licensed PeopleSoft Accelerated Supply Chain Management (SCM). This mid market solution offers a full suite of Supply Chain Management applications, a rapid implementation methodology and flexible deployment options that give users a predictable implementation timeframe. Accelerated SCM automates core e-business functionality, including general ledger, payables, receivables, billing, purchasing, order management, inventory, production management, bills and routings, cost management, and production planning.
O-Cedar, a consumer products company based in Springfield, Ohio, makes a variety of bathroom and kitchen-cleaning supplies at facilities across the Midwest. The company selected the internet-hosted Accelerated Supply Chain Management solution to link critical business processes such as order-to-cash, procure-to-pay and plan-to-procure. By linking these key business processes, O-Cedar hopes to achieve a dramatic reduction in operating costs.
Says Bob French, PeopleSoft project leader and CIO at O-Cedar, "PeopleSoft's Supply Chain Management solutions will help us meet our continued growth initiatives by improving operations efficiency and managing customer profitability. Driving bottom-line cost savings into the supply chain has become an imperative for companies our size. We found this fixed-price solution to be a very strategic investment."
The solution will be hosted by PeopleSoft eCenter, PeopleSoft's application service provider. PeopleSoft eCenter provides single-vendor accountability for the Accelerated Supply Chain Management solution. PeopleSoft eCenter will implement the solution, manage operations, and provide on-going customer support.
Designed for businesses ranging from start-ups to companies with $500 million in annual revenue, PeopleSoft's fixed-price Accelerated eBusiness Solutions allow companies to extend business processes to include their customers, suppliers and employees. "In shopping for software vendors, we found that other mid-market Supply Chain solutions couldn't compete," French said. "PeopleSoft is committed to our success."
Market Impact
PeopleSoft has long endured criticism from competitors and analysts at what they have portrayed as a lightweight supply chain product unable to compete effectively with applications from pure-play vendors like i2 Technologies and ERP rivals like Oracle and SAP. The win at O-Cedar Brands proves otherwise and is not merely a fluke. PeopleSoft has a distinct advantage over the pure-plays by its ability to offer a broader range of applications in conjunction with its supply chain solution.
The components of Accelerated SCM that offer the most differentiation are certainly the financials, such as general ledger, payables, and receivables. These represent critical areas in any organization that usually are not well integrated to manufacturing and distribution functions. Pure-play vendors focused solely on supply chain planning do not have the expertise or inclination to provide financial capabilities in spite of some half-hearted attempts in response to customers. As time goes by, ERP vendors like PeopleSoft are sure to gain ground on the pure-plays in offering solutions that address enterprise-wide needs with comparable depth of functionality.
Accelerated Supply Chain Management is deployed around specific industry verticals, including consumer products, technology, discrete manufacturing, and wholesale distribution. Vertical deployment is a strategy that most vendors attempt to pursue although many do not succeed. PeopleSoft has targeted segments that have been profitable in the past, such as consumer products, but others, like technology and discrete manufacturing are hotly contested in the supply chain management space and may prove to be an uphill battle.
User Recommendations
Among the more alluring selling points of Accelerated SCM is the guarantee of "on-time and under budget" delivery, something that PeopleSoft implies can be accomplished in as little as 12 weeks. We generally frown on bold promises of speedy, trouble-free implementations and recommend that users conduct detailed interviews with PeopleSoft and ask for sample timelines and references from past clients who have achieved quick return on investment.
PeopleSoft delivers Accelerated Supply Chain Management in three ways. For users who want the security of an in-house application with implementation assistance, PeopleSoft will work with IS departments onsite to integrate the suite with existing legacy systems. Users with more resources may want to opt to have PeopleSoft perform the set-up, quality check and installation, but let internal resources make desired customizations and enhancements. Finally, for users interested in a truly "hands-off" deployment, PeopleSoft hosts Accelerated SCM through its eCenter. Whatever the option, users will find PeopleSoft's graphical interface to be intuitive and easy to use. As always, prospective clients should choose the option that best suits their business environments and IT skill base.
SOURCE:
http://www.technologyevaluation.com/research/articles/peoplesoft-supply-chain-is-music-to-mid-market-ears-16427/
O-Cedar, a consumer products company based in Springfield, Ohio, makes a variety of bathroom and kitchen-cleaning supplies at facilities across the Midwest. The company selected the internet-hosted Accelerated Supply Chain Management solution to link critical business processes such as order-to-cash, procure-to-pay and plan-to-procure. By linking these key business processes, O-Cedar hopes to achieve a dramatic reduction in operating costs.
Says Bob French, PeopleSoft project leader and CIO at O-Cedar, "PeopleSoft's Supply Chain Management solutions will help us meet our continued growth initiatives by improving operations efficiency and managing customer profitability. Driving bottom-line cost savings into the supply chain has become an imperative for companies our size. We found this fixed-price solution to be a very strategic investment."
The solution will be hosted by PeopleSoft eCenter, PeopleSoft's application service provider. PeopleSoft eCenter provides single-vendor accountability for the Accelerated Supply Chain Management solution. PeopleSoft eCenter will implement the solution, manage operations, and provide on-going customer support.
Designed for businesses ranging from start-ups to companies with $500 million in annual revenue, PeopleSoft's fixed-price Accelerated eBusiness Solutions allow companies to extend business processes to include their customers, suppliers and employees. "In shopping for software vendors, we found that other mid-market Supply Chain solutions couldn't compete," French said. "PeopleSoft is committed to our success."
Market Impact
PeopleSoft has long endured criticism from competitors and analysts at what they have portrayed as a lightweight supply chain product unable to compete effectively with applications from pure-play vendors like i2 Technologies and ERP rivals like Oracle and SAP. The win at O-Cedar Brands proves otherwise and is not merely a fluke. PeopleSoft has a distinct advantage over the pure-plays by its ability to offer a broader range of applications in conjunction with its supply chain solution.
The components of Accelerated SCM that offer the most differentiation are certainly the financials, such as general ledger, payables, and receivables. These represent critical areas in any organization that usually are not well integrated to manufacturing and distribution functions. Pure-play vendors focused solely on supply chain planning do not have the expertise or inclination to provide financial capabilities in spite of some half-hearted attempts in response to customers. As time goes by, ERP vendors like PeopleSoft are sure to gain ground on the pure-plays in offering solutions that address enterprise-wide needs with comparable depth of functionality.
Accelerated Supply Chain Management is deployed around specific industry verticals, including consumer products, technology, discrete manufacturing, and wholesale distribution. Vertical deployment is a strategy that most vendors attempt to pursue although many do not succeed. PeopleSoft has targeted segments that have been profitable in the past, such as consumer products, but others, like technology and discrete manufacturing are hotly contested in the supply chain management space and may prove to be an uphill battle.
User Recommendations
Among the more alluring selling points of Accelerated SCM is the guarantee of "on-time and under budget" delivery, something that PeopleSoft implies can be accomplished in as little as 12 weeks. We generally frown on bold promises of speedy, trouble-free implementations and recommend that users conduct detailed interviews with PeopleSoft and ask for sample timelines and references from past clients who have achieved quick return on investment.
PeopleSoft delivers Accelerated Supply Chain Management in three ways. For users who want the security of an in-house application with implementation assistance, PeopleSoft will work with IS departments onsite to integrate the suite with existing legacy systems. Users with more resources may want to opt to have PeopleSoft perform the set-up, quality check and installation, but let internal resources make desired customizations and enhancements. Finally, for users interested in a truly "hands-off" deployment, PeopleSoft hosts Accelerated SCM through its eCenter. Whatever the option, users will find PeopleSoft's graphical interface to be intuitive and easy to use. As always, prospective clients should choose the option that best suits their business environments and IT skill base.
SOURCE:
http://www.technologyevaluation.com/research/articles/peoplesoft-supply-chain-is-music-to-mid-market-ears-16427/
SAP Highlights Supply Chain Management Tools
0 comments 12:56 AM Posted by amma
At last week's eBusiness Conference & Expo, SAP AG updated attendees on its supply chain management application, Advanced Planner and Optimizer (APO). The solution is designed to enable companies to perform collaborative optimization across their supply networks to facilitate customer service and order fulfillment. Available supply chain management modules include collaborative planning, forecasting and replenishment (CPFR), Internet-enabled vendor-managed inventory, ATP and shipment tendering. SAP has extended its pilot customer base to more than 350 installations in multiple industries worldwide.
Market Impact
SAP is working hard to win acceptance for APO amid the multitude of other supply chain offerings flooding the market. The number one ERP vendor has expanded its test sites to comprise more than 350 separate installations, a number that rivals the customer base of best-of-breed SCM vendor Logility. Its flood of APO applications parallels the deluge of press articles that filled news wires for two years prior to the beta release. SAP is able to maintain the intense campaign by virtue of its strong market position and wealth of development resources it can devote to ironing out bugs in the software and making enhancements based on pilot user feedback. SAP will eventually be successful in overcoming much of its competition, if only by using its sales and marketing muscle to quash efforts by other ERP and best-of-breed vendors (See TEC's Technology Research Note: "SAP AG - ERP Leader with a New Dimension" September 1st, 1999). SAP's marketing department is aided considerably through the company's decision to develop APO from the ground up, a fact that appeals to IT professionals who are looking for a seamless integration between ERP and supply chain. Less inspired is their attempt to differentiate APO's Available-To-Promise functionality by reshuffling it from the standard term into "Promise-to-be-Available."
User Recommendations
Users wishing to acquire transportation planning, vehicle scheduling, repetitive manufacturing, or supply chain network design solutions should look to third party vendors such as i2 or Logility, as these modules will not be available until the second quarter of 2000 or later. Keep in mind that, although these vendors have certified interfaces to SAP R/3, access to the integrated system via an Internet portal will not be straightforward. Users should also approach the broader issue of SAP's ability to offer truly Internet-enabled solutions with trepidation. Ironically, initial reports of version 1.1 pilot tests indicated some limitations of APO regarding web enablement (See: "SAP APO: Will it Fill the Gap?" September 2nd, 1999). In any event, SAP's product test of APO version 2.0 was only completed within the last several weeks, leaving the "field test" in the hands of new clients.
SOURCE:
http://www.technologyevaluation.com/research/articles/sap-highlights-supply-chain-management-tools-15527/
Market Impact
SAP is working hard to win acceptance for APO amid the multitude of other supply chain offerings flooding the market. The number one ERP vendor has expanded its test sites to comprise more than 350 separate installations, a number that rivals the customer base of best-of-breed SCM vendor Logility. Its flood of APO applications parallels the deluge of press articles that filled news wires for two years prior to the beta release. SAP is able to maintain the intense campaign by virtue of its strong market position and wealth of development resources it can devote to ironing out bugs in the software and making enhancements based on pilot user feedback. SAP will eventually be successful in overcoming much of its competition, if only by using its sales and marketing muscle to quash efforts by other ERP and best-of-breed vendors (See TEC's Technology Research Note: "SAP AG - ERP Leader with a New Dimension" September 1st, 1999). SAP's marketing department is aided considerably through the company's decision to develop APO from the ground up, a fact that appeals to IT professionals who are looking for a seamless integration between ERP and supply chain. Less inspired is their attempt to differentiate APO's Available-To-Promise functionality by reshuffling it from the standard term into "Promise-to-be-Available."
User Recommendations
Users wishing to acquire transportation planning, vehicle scheduling, repetitive manufacturing, or supply chain network design solutions should look to third party vendors such as i2 or Logility, as these modules will not be available until the second quarter of 2000 or later. Keep in mind that, although these vendors have certified interfaces to SAP R/3, access to the integrated system via an Internet portal will not be straightforward. Users should also approach the broader issue of SAP's ability to offer truly Internet-enabled solutions with trepidation. Ironically, initial reports of version 1.1 pilot tests indicated some limitations of APO regarding web enablement (See: "SAP APO: Will it Fill the Gap?" September 2nd, 1999). In any event, SAP's product test of APO version 2.0 was only completed within the last several weeks, leaving the "field test" in the hands of new clients.
SOURCE:
http://www.technologyevaluation.com/research/articles/sap-highlights-supply-chain-management-tools-15527/
At last week's eBusiness Conference & Expo, SAP AG updated attendees on its supply chain management application, Advanced Planner and Optimizer (APO). The solution is designed to enable companies to perform collaborative optimization across their supply networks to facilitate customer service and order fulfillment. Available supply chain management modules include collaborative planning, forecasting and replenishment (CPFR), Internet-enabled vendor-managed inventory, ATP and shipment tendering. SAP has extended its pilot customer base to more than 350 installations in multiple industries worldwide.
Market Impact
SAP is working hard to win acceptance for APO amid the multitude of other supply chain offerings flooding the market. The number one ERP vendor has expanded its test sites to comprise more than 350 separate installations, a number that rivals the customer base of best-of-breed SCM vendor Logility. Its flood of APO applications parallels the deluge of press articles that filled news wires for two years prior to the beta release. SAP is able to maintain the intense campaign by virtue of its strong market position and wealth of development resources it can devote to ironing out bugs in the software and making enhancements based on pilot user feedback. SAP will eventually be successful in overcoming much of its competition, if only by using its sales and marketing muscle to quash efforts by other ERP and best-of-breed vendors (See TEC's Technology Research Note: "SAP AG - ERP Leader with a New Dimension" September 1st, 1999). SAP's marketing department is aided considerably through the company's decision to develop APO from the ground up, a fact that appeals to IT professionals who are looking for a seamless integration between ERP and supply chain. Less inspired is their attempt to differentiate APO's Available-To-Promise functionality by reshuffling it from the standard term into "Promise-to-be-Available."
User Recommendations
Users wishing to acquire transportation planning, vehicle scheduling, repetitive manufacturing, or supply chain network design solutions should look to third party vendors such as i2 or Logility, as these modules will not be available until the second quarter of 2000 or later. Keep in mind that, although these vendors have certified interfaces to SAP R/3, access to the integrated system via an Internet portal will not be straightforward. Users should also approach the broader issue of SAP's ability to offer truly Internet-enabled solutions with trepidation. Ironically, initial reports of version 1.1 pilot tests indicated some limitations of APO regarding web enablement (See: "SAP APO: Will it Fill the Gap?" September 2nd, 1999). In any event, SAP's product test of APO version 2.0 was only completed within the last several weeks, leaving the "field test" in the hands of new clients.
SOURCE:
http://www.technologyevaluation.com/research/articles/sap-highlights-supply-chain-management-tools-15527/
Market Impact
SAP is working hard to win acceptance for APO amid the multitude of other supply chain offerings flooding the market. The number one ERP vendor has expanded its test sites to comprise more than 350 separate installations, a number that rivals the customer base of best-of-breed SCM vendor Logility. Its flood of APO applications parallels the deluge of press articles that filled news wires for two years prior to the beta release. SAP is able to maintain the intense campaign by virtue of its strong market position and wealth of development resources it can devote to ironing out bugs in the software and making enhancements based on pilot user feedback. SAP will eventually be successful in overcoming much of its competition, if only by using its sales and marketing muscle to quash efforts by other ERP and best-of-breed vendors (See TEC's Technology Research Note: "SAP AG - ERP Leader with a New Dimension" September 1st, 1999). SAP's marketing department is aided considerably through the company's decision to develop APO from the ground up, a fact that appeals to IT professionals who are looking for a seamless integration between ERP and supply chain. Less inspired is their attempt to differentiate APO's Available-To-Promise functionality by reshuffling it from the standard term into "Promise-to-be-Available."
User Recommendations
Users wishing to acquire transportation planning, vehicle scheduling, repetitive manufacturing, or supply chain network design solutions should look to third party vendors such as i2 or Logility, as these modules will not be available until the second quarter of 2000 or later. Keep in mind that, although these vendors have certified interfaces to SAP R/3, access to the integrated system via an Internet portal will not be straightforward. Users should also approach the broader issue of SAP's ability to offer truly Internet-enabled solutions with trepidation. Ironically, initial reports of version 1.1 pilot tests indicated some limitations of APO regarding web enablement (See: "SAP APO: Will it Fill the Gap?" September 2nd, 1999). In any event, SAP's product test of APO version 2.0 was only completed within the last several weeks, leaving the "field test" in the hands of new clients.
SOURCE:
http://www.technologyevaluation.com/research/articles/sap-highlights-supply-chain-management-tools-15527/
Supply Chain Management Is Evolving toward Interdependent Supply Networks
0 comments 12:55 AM Posted by amma
The advent of the Web as a major means of conducting business transactions and business-to-business communications, coupled with evolving web-based supply chain management (SCM) technology, has resulted in a transition period from "linear" supply chain models to "networked" supply chain models. This is where interdependent supply networks (ISN) come into play. Enterprises are moving toward real time operations by sharing information and interlacing processes with trading partners. Despite the millions of dollars enterprises have spent in recent years to optimize and connect the supply chain, further innovations and investments are expected. Enterprises are under continued pressure to work more closely with trading partners in order to stay even with, or gain advantage over, their competitors. The technologies to enable dynamic process changes and real time interactions between extended supply chain partners are emerging and being deployed at an accelerated pace. However, this transition is expected to take a considerable time.
Various software industry studies indicate that over the next five to seven years, inter-enterprise business relationships, information structures, and processes will evolve dramatically. Enterprises will blend internal production and supply chain processes with those of their external trading partners. Supply chain "champions" and "channel masters" like Walmart will drive partners toward a common set of business processes. We are also witnessing the rising adoption of radio frequency identification (RFID) as a supply chain tool and technology in virtually every industry. Over time, participating organizations will focus more on fulfilling the requirements of the customer more efficiently, rather than putting a more limited focus on what the direct "intermediate" customer requires. Linear interactions will give way to interactions that occur in parallel. Slowly, businesses are evolving toward the concept of the lean supply chain, working together toward a common set of customer-driven goals, and acting as an ISN.
SCM needs to become more about information exchange among the entire supply chain, and to expand beyond limited point-to-point integration with a select few partners. As manufacturing operations embrace and adopt "lean manufacturing" concepts and tools within their production operations, they are also refining the meaning of, and means for, SCM. A lean supply chain entails examination of any step, process, or movement of product in which value is gained or lost. The impact on suppliers and customers can be significant, and for this reason practices using lean techniques need to be deployed.
Supply Chains Moving beyond Optimization to Synchronization
Many enterprise resource planning (ERP) and SCM deployments have contributed little in the way of meaningful system and process integration or trading partner collaboration. Manual processes, "un-rationalized" data, and stand alone systems that churn out best-guess forecasts remain the rule, rather than the exception. Yet supply chain optimization will be a strategic factor for company competition and survival in 2005 and beyond. Enterprises "roll up their sleeves" in order to undertake the hard work of dealing with the most basic aspects of SCM process alignment and connectivity with trading partners.
Progressive enterprises are looking to move beyond optimization of internal production operations to the synchronization of networked supply chain business processes as part of their vision to increase the integrated value chain. The sophistication of multi-enterprise SCM processes will force such businesses to look outside of their four walls to ensure value is profitably delivered to customers.
The dynamic nature of customer-driven demand, along with the adaptive nature of SCM networks, will make the process of synchronization more complex. As customer requirements become more demanding, supply chains will be forced to move from linear to dynamic configurations of supply chain networks. In a non-linear model, core competencies and capital asset utilization and efficiencies come into focus. This will concentrate attention on how enterprises work and integrate with partners to extend visibility through multiple tiers of the supply chain.
As the mandate for capital asset efficiency and collaboration capabilities is enabled by Internet technologies, enterprises will look for supply chain projects to go beyond the optimization of internal production processes and focus on the synchronization of activities among trading partners. Despite huge advances on the internal side—reduced costs and shortened lead-times through lean supply chain initiatives and other efforts—the fact is that manufacturers are dependent on suppliers, distributors, transportation providers, consolidators, outsourcers, and other partners to help make and deliver products to customers. While parts and products travel "up" the supply chain, supply and demand information moves in both directions and is critical for responding rapidly to demand. Enterprises are beginning to realize that using workflow and business processes to automate the communication of critical information throughout their operations allows systems to respond to pre-defined conditions and stimuli.
Service Oriented Architecture (SOA)—the Future for ISN
In its simplest form, service oriented architectures (SOA) are defined as self-contained modular applications of business process logic or services that can be mixed and matched; are platform independent; and can be dynamically located, invoked, and called into use by whoever needs them from anywhere within a platform infrastructure. SOAs make developing, structuring, and using an enterprise system much more efficient and flexible. It is this type of flexibility that is required in an interdependent supply network.
The independent nature of the objects and services also makes the system and the users invisible to the service. The user could be an in-house employee working through a browser or desktop screen, another application on the same computer, another computer within the network, a trading partner accessing a service through the Internet, or a trading partner's application accessing data or service. Workflows and business processes can invoke services from anywhere, and are no longer confined to, or limited by, an individual internal system. SCM in an SOA provides the environment to extend workflow and business processes beyond the company's internal systems, thus facilitating interdependent supply network activity.
SAP Addresses SOA to the Forefront
During SAP's recent Teched conference, the emphasis was on how SOA and SAP's Enterprise Service Architecture (ESA) will accelerate process changes among trading partners and provide an opportunity for more flexible business process reengineering. The SAP installed base is huge, with some of the most progressive enterprises in business today as members. SAP clients who aggressively strive for SOA are most likely to reach the status of ISN interoperability. Yet applying SOA remains a vision or at least a long journey for most enterprises. Issues of process proliferation, guidelines, costs, and performance are not totally understood, and the difficulties associated with them cannot be underestimated. Early adopters, such as Intel, will be revealing case studies in the SOA evolution and ISN transformation.
Summary
SOA provides the environment to extend the workflow idea beyond a company's internal systems, thus enabling ISN activities. Preparation for ISN starts with demand management. The ability to respond to demand is enhanced when trading partners are connected and information sharing is automatic, consistent, and allow for rapid-response. The transfer of data and event stimuli must be delivered in a standardized fashion and with flexible, actionable responses. Removing information barriers and tying supply chain partners closer together for rapid response are key to improving supply chain performance. ISN capabilities are achievable in the not so distant future, but will be dependent in large part on SOA frameworks.
SOURCE:
http://www.technologyevaluation.com/research/articles/supply-chain-management-is-evolving-toward-interdependent-supply-networks-18253/
Various software industry studies indicate that over the next five to seven years, inter-enterprise business relationships, information structures, and processes will evolve dramatically. Enterprises will blend internal production and supply chain processes with those of their external trading partners. Supply chain "champions" and "channel masters" like Walmart will drive partners toward a common set of business processes. We are also witnessing the rising adoption of radio frequency identification (RFID) as a supply chain tool and technology in virtually every industry. Over time, participating organizations will focus more on fulfilling the requirements of the customer more efficiently, rather than putting a more limited focus on what the direct "intermediate" customer requires. Linear interactions will give way to interactions that occur in parallel. Slowly, businesses are evolving toward the concept of the lean supply chain, working together toward a common set of customer-driven goals, and acting as an ISN.
SCM needs to become more about information exchange among the entire supply chain, and to expand beyond limited point-to-point integration with a select few partners. As manufacturing operations embrace and adopt "lean manufacturing" concepts and tools within their production operations, they are also refining the meaning of, and means for, SCM. A lean supply chain entails examination of any step, process, or movement of product in which value is gained or lost. The impact on suppliers and customers can be significant, and for this reason practices using lean techniques need to be deployed.
Supply Chains Moving beyond Optimization to Synchronization
Many enterprise resource planning (ERP) and SCM deployments have contributed little in the way of meaningful system and process integration or trading partner collaboration. Manual processes, "un-rationalized" data, and stand alone systems that churn out best-guess forecasts remain the rule, rather than the exception. Yet supply chain optimization will be a strategic factor for company competition and survival in 2005 and beyond. Enterprises "roll up their sleeves" in order to undertake the hard work of dealing with the most basic aspects of SCM process alignment and connectivity with trading partners.
Progressive enterprises are looking to move beyond optimization of internal production operations to the synchronization of networked supply chain business processes as part of their vision to increase the integrated value chain. The sophistication of multi-enterprise SCM processes will force such businesses to look outside of their four walls to ensure value is profitably delivered to customers.
The dynamic nature of customer-driven demand, along with the adaptive nature of SCM networks, will make the process of synchronization more complex. As customer requirements become more demanding, supply chains will be forced to move from linear to dynamic configurations of supply chain networks. In a non-linear model, core competencies and capital asset utilization and efficiencies come into focus. This will concentrate attention on how enterprises work and integrate with partners to extend visibility through multiple tiers of the supply chain.
As the mandate for capital asset efficiency and collaboration capabilities is enabled by Internet technologies, enterprises will look for supply chain projects to go beyond the optimization of internal production processes and focus on the synchronization of activities among trading partners. Despite huge advances on the internal side—reduced costs and shortened lead-times through lean supply chain initiatives and other efforts—the fact is that manufacturers are dependent on suppliers, distributors, transportation providers, consolidators, outsourcers, and other partners to help make and deliver products to customers. While parts and products travel "up" the supply chain, supply and demand information moves in both directions and is critical for responding rapidly to demand. Enterprises are beginning to realize that using workflow and business processes to automate the communication of critical information throughout their operations allows systems to respond to pre-defined conditions and stimuli.
Service Oriented Architecture (SOA)—the Future for ISN
In its simplest form, service oriented architectures (SOA) are defined as self-contained modular applications of business process logic or services that can be mixed and matched; are platform independent; and can be dynamically located, invoked, and called into use by whoever needs them from anywhere within a platform infrastructure. SOAs make developing, structuring, and using an enterprise system much more efficient and flexible. It is this type of flexibility that is required in an interdependent supply network.
The independent nature of the objects and services also makes the system and the users invisible to the service. The user could be an in-house employee working through a browser or desktop screen, another application on the same computer, another computer within the network, a trading partner accessing a service through the Internet, or a trading partner's application accessing data or service. Workflows and business processes can invoke services from anywhere, and are no longer confined to, or limited by, an individual internal system. SCM in an SOA provides the environment to extend workflow and business processes beyond the company's internal systems, thus facilitating interdependent supply network activity.
SAP Addresses SOA to the Forefront
During SAP's recent Teched conference, the emphasis was on how SOA and SAP's Enterprise Service Architecture (ESA) will accelerate process changes among trading partners and provide an opportunity for more flexible business process reengineering. The SAP installed base is huge, with some of the most progressive enterprises in business today as members. SAP clients who aggressively strive for SOA are most likely to reach the status of ISN interoperability. Yet applying SOA remains a vision or at least a long journey for most enterprises. Issues of process proliferation, guidelines, costs, and performance are not totally understood, and the difficulties associated with them cannot be underestimated. Early adopters, such as Intel, will be revealing case studies in the SOA evolution and ISN transformation.
Summary
SOA provides the environment to extend the workflow idea beyond a company's internal systems, thus enabling ISN activities. Preparation for ISN starts with demand management. The ability to respond to demand is enhanced when trading partners are connected and information sharing is automatic, consistent, and allow for rapid-response. The transfer of data and event stimuli must be delivered in a standardized fashion and with flexible, actionable responses. Removing information barriers and tying supply chain partners closer together for rapid response are key to improving supply chain performance. ISN capabilities are achievable in the not so distant future, but will be dependent in large part on SOA frameworks.
SOURCE:
http://www.technologyevaluation.com/research/articles/supply-chain-management-is-evolving-toward-interdependent-supply-networks-18253/
The advent of the Web as a major means of conducting business transactions and business-to-business communications, coupled with evolving web-based supply chain management (SCM) technology, has resulted in a transition period from "linear" supply chain models to "networked" supply chain models. This is where interdependent supply networks (ISN) come into play. Enterprises are moving toward real time operations by sharing information and interlacing processes with trading partners. Despite the millions of dollars enterprises have spent in recent years to optimize and connect the supply chain, further innovations and investments are expected. Enterprises are under continued pressure to work more closely with trading partners in order to stay even with, or gain advantage over, their competitors. The technologies to enable dynamic process changes and real time interactions between extended supply chain partners are emerging and being deployed at an accelerated pace. However, this transition is expected to take a considerable time.
Various software industry studies indicate that over the next five to seven years, inter-enterprise business relationships, information structures, and processes will evolve dramatically. Enterprises will blend internal production and supply chain processes with those of their external trading partners. Supply chain "champions" and "channel masters" like Walmart will drive partners toward a common set of business processes. We are also witnessing the rising adoption of radio frequency identification (RFID) as a supply chain tool and technology in virtually every industry. Over time, participating organizations will focus more on fulfilling the requirements of the customer more efficiently, rather than putting a more limited focus on what the direct "intermediate" customer requires. Linear interactions will give way to interactions that occur in parallel. Slowly, businesses are evolving toward the concept of the lean supply chain, working together toward a common set of customer-driven goals, and acting as an ISN.
SCM needs to become more about information exchange among the entire supply chain, and to expand beyond limited point-to-point integration with a select few partners. As manufacturing operations embrace and adopt "lean manufacturing" concepts and tools within their production operations, they are also refining the meaning of, and means for, SCM. A lean supply chain entails examination of any step, process, or movement of product in which value is gained or lost. The impact on suppliers and customers can be significant, and for this reason practices using lean techniques need to be deployed.
Supply Chains Moving beyond Optimization to Synchronization
Many enterprise resource planning (ERP) and SCM deployments have contributed little in the way of meaningful system and process integration or trading partner collaboration. Manual processes, "un-rationalized" data, and stand alone systems that churn out best-guess forecasts remain the rule, rather than the exception. Yet supply chain optimization will be a strategic factor for company competition and survival in 2005 and beyond. Enterprises "roll up their sleeves" in order to undertake the hard work of dealing with the most basic aspects of SCM process alignment and connectivity with trading partners.
Progressive enterprises are looking to move beyond optimization of internal production operations to the synchronization of networked supply chain business processes as part of their vision to increase the integrated value chain. The sophistication of multi-enterprise SCM processes will force such businesses to look outside of their four walls to ensure value is profitably delivered to customers.
The dynamic nature of customer-driven demand, along with the adaptive nature of SCM networks, will make the process of synchronization more complex. As customer requirements become more demanding, supply chains will be forced to move from linear to dynamic configurations of supply chain networks. In a non-linear model, core competencies and capital asset utilization and efficiencies come into focus. This will concentrate attention on how enterprises work and integrate with partners to extend visibility through multiple tiers of the supply chain.
As the mandate for capital asset efficiency and collaboration capabilities is enabled by Internet technologies, enterprises will look for supply chain projects to go beyond the optimization of internal production processes and focus on the synchronization of activities among trading partners. Despite huge advances on the internal side—reduced costs and shortened lead-times through lean supply chain initiatives and other efforts—the fact is that manufacturers are dependent on suppliers, distributors, transportation providers, consolidators, outsourcers, and other partners to help make and deliver products to customers. While parts and products travel "up" the supply chain, supply and demand information moves in both directions and is critical for responding rapidly to demand. Enterprises are beginning to realize that using workflow and business processes to automate the communication of critical information throughout their operations allows systems to respond to pre-defined conditions and stimuli.
Service Oriented Architecture (SOA)—the Future for ISN
In its simplest form, service oriented architectures (SOA) are defined as self-contained modular applications of business process logic or services that can be mixed and matched; are platform independent; and can be dynamically located, invoked, and called into use by whoever needs them from anywhere within a platform infrastructure. SOAs make developing, structuring, and using an enterprise system much more efficient and flexible. It is this type of flexibility that is required in an interdependent supply network.
The independent nature of the objects and services also makes the system and the users invisible to the service. The user could be an in-house employee working through a browser or desktop screen, another application on the same computer, another computer within the network, a trading partner accessing a service through the Internet, or a trading partner's application accessing data or service. Workflows and business processes can invoke services from anywhere, and are no longer confined to, or limited by, an individual internal system. SCM in an SOA provides the environment to extend workflow and business processes beyond the company's internal systems, thus facilitating interdependent supply network activity.
SAP Addresses SOA to the Forefront
During SAP's recent Teched conference, the emphasis was on how SOA and SAP's Enterprise Service Architecture (ESA) will accelerate process changes among trading partners and provide an opportunity for more flexible business process reengineering. The SAP installed base is huge, with some of the most progressive enterprises in business today as members. SAP clients who aggressively strive for SOA are most likely to reach the status of ISN interoperability. Yet applying SOA remains a vision or at least a long journey for most enterprises. Issues of process proliferation, guidelines, costs, and performance are not totally understood, and the difficulties associated with them cannot be underestimated. Early adopters, such as Intel, will be revealing case studies in the SOA evolution and ISN transformation.
Summary
SOA provides the environment to extend the workflow idea beyond a company's internal systems, thus enabling ISN activities. Preparation for ISN starts with demand management. The ability to respond to demand is enhanced when trading partners are connected and information sharing is automatic, consistent, and allow for rapid-response. The transfer of data and event stimuli must be delivered in a standardized fashion and with flexible, actionable responses. Removing information barriers and tying supply chain partners closer together for rapid response are key to improving supply chain performance. ISN capabilities are achievable in the not so distant future, but will be dependent in large part on SOA frameworks.
SOURCE:
http://www.technologyevaluation.com/research/articles/supply-chain-management-is-evolving-toward-interdependent-supply-networks-18253/
Various software industry studies indicate that over the next five to seven years, inter-enterprise business relationships, information structures, and processes will evolve dramatically. Enterprises will blend internal production and supply chain processes with those of their external trading partners. Supply chain "champions" and "channel masters" like Walmart will drive partners toward a common set of business processes. We are also witnessing the rising adoption of radio frequency identification (RFID) as a supply chain tool and technology in virtually every industry. Over time, participating organizations will focus more on fulfilling the requirements of the customer more efficiently, rather than putting a more limited focus on what the direct "intermediate" customer requires. Linear interactions will give way to interactions that occur in parallel. Slowly, businesses are evolving toward the concept of the lean supply chain, working together toward a common set of customer-driven goals, and acting as an ISN.
SCM needs to become more about information exchange among the entire supply chain, and to expand beyond limited point-to-point integration with a select few partners. As manufacturing operations embrace and adopt "lean manufacturing" concepts and tools within their production operations, they are also refining the meaning of, and means for, SCM. A lean supply chain entails examination of any step, process, or movement of product in which value is gained or lost. The impact on suppliers and customers can be significant, and for this reason practices using lean techniques need to be deployed.
Supply Chains Moving beyond Optimization to Synchronization
Many enterprise resource planning (ERP) and SCM deployments have contributed little in the way of meaningful system and process integration or trading partner collaboration. Manual processes, "un-rationalized" data, and stand alone systems that churn out best-guess forecasts remain the rule, rather than the exception. Yet supply chain optimization will be a strategic factor for company competition and survival in 2005 and beyond. Enterprises "roll up their sleeves" in order to undertake the hard work of dealing with the most basic aspects of SCM process alignment and connectivity with trading partners.
Progressive enterprises are looking to move beyond optimization of internal production operations to the synchronization of networked supply chain business processes as part of their vision to increase the integrated value chain. The sophistication of multi-enterprise SCM processes will force such businesses to look outside of their four walls to ensure value is profitably delivered to customers.
The dynamic nature of customer-driven demand, along with the adaptive nature of SCM networks, will make the process of synchronization more complex. As customer requirements become more demanding, supply chains will be forced to move from linear to dynamic configurations of supply chain networks. In a non-linear model, core competencies and capital asset utilization and efficiencies come into focus. This will concentrate attention on how enterprises work and integrate with partners to extend visibility through multiple tiers of the supply chain.
As the mandate for capital asset efficiency and collaboration capabilities is enabled by Internet technologies, enterprises will look for supply chain projects to go beyond the optimization of internal production processes and focus on the synchronization of activities among trading partners. Despite huge advances on the internal side—reduced costs and shortened lead-times through lean supply chain initiatives and other efforts—the fact is that manufacturers are dependent on suppliers, distributors, transportation providers, consolidators, outsourcers, and other partners to help make and deliver products to customers. While parts and products travel "up" the supply chain, supply and demand information moves in both directions and is critical for responding rapidly to demand. Enterprises are beginning to realize that using workflow and business processes to automate the communication of critical information throughout their operations allows systems to respond to pre-defined conditions and stimuli.
Service Oriented Architecture (SOA)—the Future for ISN
In its simplest form, service oriented architectures (SOA) are defined as self-contained modular applications of business process logic or services that can be mixed and matched; are platform independent; and can be dynamically located, invoked, and called into use by whoever needs them from anywhere within a platform infrastructure. SOAs make developing, structuring, and using an enterprise system much more efficient and flexible. It is this type of flexibility that is required in an interdependent supply network.
The independent nature of the objects and services also makes the system and the users invisible to the service. The user could be an in-house employee working through a browser or desktop screen, another application on the same computer, another computer within the network, a trading partner accessing a service through the Internet, or a trading partner's application accessing data or service. Workflows and business processes can invoke services from anywhere, and are no longer confined to, or limited by, an individual internal system. SCM in an SOA provides the environment to extend workflow and business processes beyond the company's internal systems, thus facilitating interdependent supply network activity.
SAP Addresses SOA to the Forefront
During SAP's recent Teched conference, the emphasis was on how SOA and SAP's Enterprise Service Architecture (ESA) will accelerate process changes among trading partners and provide an opportunity for more flexible business process reengineering. The SAP installed base is huge, with some of the most progressive enterprises in business today as members. SAP clients who aggressively strive for SOA are most likely to reach the status of ISN interoperability. Yet applying SOA remains a vision or at least a long journey for most enterprises. Issues of process proliferation, guidelines, costs, and performance are not totally understood, and the difficulties associated with them cannot be underestimated. Early adopters, such as Intel, will be revealing case studies in the SOA evolution and ISN transformation.
Summary
SOA provides the environment to extend the workflow idea beyond a company's internal systems, thus enabling ISN activities. Preparation for ISN starts with demand management. The ability to respond to demand is enhanced when trading partners are connected and information sharing is automatic, consistent, and allow for rapid-response. The transfer of data and event stimuli must be delivered in a standardized fashion and with flexible, actionable responses. Removing information barriers and tying supply chain partners closer together for rapid response are key to improving supply chain performance. ISN capabilities are achievable in the not so distant future, but will be dependent in large part on SOA frameworks.
SOURCE:
http://www.technologyevaluation.com/research/articles/supply-chain-management-is-evolving-toward-interdependent-supply-networks-18253/
Does Supply Chain Management Software Make Sense in Wholesale Distribution?
0 comments 12:54 AM Posted by amma
Growing competitive pressures compel strategies and tactics that yield efficiency and efficacy within virtual supply chains. This is especially true for middle tier suppliers. For example, distributors are finding that they need managers who are not only good expediters and know their products, but who also understand how to use decision support tools to make their work more effective. Advances in information technology now make it more feasible for distributors to adopt these tools such as supply chain management software. This paper examines the steel service center segment of the wholesale distribution industry as a case in point of the challenges facing distributors and the relief offered through supply chain software.
This is Part One of a three-part note. This part defines the Challenge faced by wholesale distributors. Part Two discusses the Critical Objectives in meeting this challenge. Part Three covers meeting the objectives with Supply Chain Management Software.
Distribution Evolves
In many ways, steel service centers (SSC's) typify the evolution of wholesale distribution in general. Historically, wholesale distribution has remained on the trailing edge of the information technology curve. It has been more important to focus on other priorities. For example, steel service centers have advanced quality and precision in processing and handling steel.
Like many sectors of wholesale distribution, SSC's have found a niche in the supply chain because they provided a way for smaller manufacturers to buy products when they could not effectively negotiate with large, powerful suppliers. In the case of steel service centers, these suppliers are the integrated steel mills.
Many SSC's started as brokers, buying low and selling higher. But that provided little barrier to entry, no competitive advantage, and margins that could not be sustained. In an effort to differentiate themselves, many SSC's have progressed up the value chain, adding steel processing to their product/service bundle. Other types of distributors have incorporated value-added services that are appropriate for their own customers.
Software Matures
Supply chain planning software applications emerged on the market about 15 years ago. The applications have improved, the technology on which they have been built has become more available, and the architecture has become more open. The first companies to appreciate the potential of such applications were the most sophisticated in terms of their supply chain planning. These also happened to be larger companies who had significant IT budgets and expected to invest in these areas.
Twelve years ago, I wrote forecasting and inventory models in spreadsheets for the steel service center where I worked. It required hours if not days to key in the required data, which only became available once each month. At that time, these tools challenged the old, familiar decision-making processes of some of my colleagues.
Such decision tools are now commercially available "off the shelf". The Internet provides "anywhere access" to applications that are so enabled. Advances in technology now ease the integration of these decision tools with back end transaction systems, even those used by many steel service centers. This means faster, more accurate results for managers who now know more about how to use them.
Industry Structure
While supply chain management applications have proven themselves in the real-world use of operations management theory, competitive pressures continue to grow even more intense, particularly in distribution and in other middle tiers of supply chains. Managers in all industries have become more knowledgeable about how to manage supply chain issues like service and inventory investment. They are learning that mathematics can help decision makers do their job by making recommendations and then allowing them to focus in areas where their judgment and experience are needed most.
OEM's are placing increasing pressure on their vendors to bear more of the risk of time and money in the total supply chain equation. Vendors, including steel service centers, are being asked to hold inventory, thereby assuming the lead time risk and the risk of investing working capital. They are being asked to do this while maintaining, or even lowering, the amount that they charge the OEM for the product/service bundle.
The extended supply chain - all of the organizations, resources and processes that are required to meet customer demand - is much like a balloon, with the air inside representing time and money (cost). On the one end, OEM's compress the "balloon" so that the burden of time and money is pushed toward the middle. In some industries, the first tier vendors can push some of this additional burden on to their own suppliers-in essence, compressing their part of the supply chain balloon, forcing the burden of cost and time on down the line.
However, in the case of steel service centers, not only can they not pass this burden of cost and time on to the steel mills, but the mills squeeze the "balloon" from the other end, compressing time and money out of their portion of the virtual supply chain onto the steel service center.
All of this squeezing of time and money from one part of the supply chain to another occurs without ever reducing the total supply chain cost. In order to survive, the member of the supply chain on the receiving end of the "squeeze" will eventually have to find an outlet for this increased pressure. Too often, for a wholesale distributor such as a steel service center, this time and cost pressure shows up in red ink or lower margins on the income statement. The supply chain equation is a zero-sum solution over time. Simply moving costs around will not make the value chain any more profitable or effective over time. Unless the total volume of cost and time in the "balloon" is reduced instead of merely shifted, it must eventually be passed on to the end customer or absorbed by one of the links in the supply chain.
Passing costs on to the end customer or delaying final shipments is often not possible. For example, automobile manufacturers mandate cost decreases from time to time and penalize suppliers for late shipments. The only other option is for one or more partners to lose out through decreasing margins. Over time, this will force the disadvantaged partner to reduce investment and become less competitive. In the end, that trading partner will be replaced by a competitor who may face the same fate.
Structural Challenges
The steel industry presents some structural challenges for service centers that illustrate those faced by other distributors. Customers and mills have more relative bargaining power than service centers. That structure is not likely to change soon. However, the path to increased bargaining power within that challenging structure, as well as the road to survival, lies through a better way to manage the burden of cost and time that is being pressed on the SSC by the other trading partners. The steel service center must manage this cost and time more effectively than either its trading partners did or its competitors can. Essentially, this is taking some of the total time and money out of the supply chain equation-like letting air out of the center of the "balloon" that is being squeezed from both sides, making the entire supply chain more competitive than alternative combinations of trading partners.
The exciting part of this challenge is that nearly all of time and money that the steel service center can release from the supply chain "balloon", will go directly to its own bottom line.
This concludes Part One of a three-part note. Part Two will discuss the critical objectives in meeting the challenges covered in Part One. Part Three will cover meeting the objectives with Supply Chain Management Software.
About the Author
MARK WELLS has worked for the past 20 years on many aspects supply chain management from within industry, as a supply chain consultant, and as part of a software development organization. For two years, he worked for a steel service center as an internal consultant. He holds an MBA from Drexel University where he has also taught operations management and operations research. He currently works for the applications development division of Oracle Corporation, focusing on supply chain planning.
SOURCE:
http://www.technologyevaluation.com/research/articles/does-supply-chain-management-software-make-sense-in-wholesale-distribution-16464/
This is Part One of a three-part note. This part defines the Challenge faced by wholesale distributors. Part Two discusses the Critical Objectives in meeting this challenge. Part Three covers meeting the objectives with Supply Chain Management Software.
Distribution Evolves
In many ways, steel service centers (SSC's) typify the evolution of wholesale distribution in general. Historically, wholesale distribution has remained on the trailing edge of the information technology curve. It has been more important to focus on other priorities. For example, steel service centers have advanced quality and precision in processing and handling steel.
Like many sectors of wholesale distribution, SSC's have found a niche in the supply chain because they provided a way for smaller manufacturers to buy products when they could not effectively negotiate with large, powerful suppliers. In the case of steel service centers, these suppliers are the integrated steel mills.
Many SSC's started as brokers, buying low and selling higher. But that provided little barrier to entry, no competitive advantage, and margins that could not be sustained. In an effort to differentiate themselves, many SSC's have progressed up the value chain, adding steel processing to their product/service bundle. Other types of distributors have incorporated value-added services that are appropriate for their own customers.
Software Matures
Supply chain planning software applications emerged on the market about 15 years ago. The applications have improved, the technology on which they have been built has become more available, and the architecture has become more open. The first companies to appreciate the potential of such applications were the most sophisticated in terms of their supply chain planning. These also happened to be larger companies who had significant IT budgets and expected to invest in these areas.
Twelve years ago, I wrote forecasting and inventory models in spreadsheets for the steel service center where I worked. It required hours if not days to key in the required data, which only became available once each month. At that time, these tools challenged the old, familiar decision-making processes of some of my colleagues.
Such decision tools are now commercially available "off the shelf". The Internet provides "anywhere access" to applications that are so enabled. Advances in technology now ease the integration of these decision tools with back end transaction systems, even those used by many steel service centers. This means faster, more accurate results for managers who now know more about how to use them.
Industry Structure
While supply chain management applications have proven themselves in the real-world use of operations management theory, competitive pressures continue to grow even more intense, particularly in distribution and in other middle tiers of supply chains. Managers in all industries have become more knowledgeable about how to manage supply chain issues like service and inventory investment. They are learning that mathematics can help decision makers do their job by making recommendations and then allowing them to focus in areas where their judgment and experience are needed most.
OEM's are placing increasing pressure on their vendors to bear more of the risk of time and money in the total supply chain equation. Vendors, including steel service centers, are being asked to hold inventory, thereby assuming the lead time risk and the risk of investing working capital. They are being asked to do this while maintaining, or even lowering, the amount that they charge the OEM for the product/service bundle.
The extended supply chain - all of the organizations, resources and processes that are required to meet customer demand - is much like a balloon, with the air inside representing time and money (cost). On the one end, OEM's compress the "balloon" so that the burden of time and money is pushed toward the middle. In some industries, the first tier vendors can push some of this additional burden on to their own suppliers-in essence, compressing their part of the supply chain balloon, forcing the burden of cost and time on down the line.
However, in the case of steel service centers, not only can they not pass this burden of cost and time on to the steel mills, but the mills squeeze the "balloon" from the other end, compressing time and money out of their portion of the virtual supply chain onto the steel service center.
All of this squeezing of time and money from one part of the supply chain to another occurs without ever reducing the total supply chain cost. In order to survive, the member of the supply chain on the receiving end of the "squeeze" will eventually have to find an outlet for this increased pressure. Too often, for a wholesale distributor such as a steel service center, this time and cost pressure shows up in red ink or lower margins on the income statement. The supply chain equation is a zero-sum solution over time. Simply moving costs around will not make the value chain any more profitable or effective over time. Unless the total volume of cost and time in the "balloon" is reduced instead of merely shifted, it must eventually be passed on to the end customer or absorbed by one of the links in the supply chain.
Passing costs on to the end customer or delaying final shipments is often not possible. For example, automobile manufacturers mandate cost decreases from time to time and penalize suppliers for late shipments. The only other option is for one or more partners to lose out through decreasing margins. Over time, this will force the disadvantaged partner to reduce investment and become less competitive. In the end, that trading partner will be replaced by a competitor who may face the same fate.
Structural Challenges
The steel industry presents some structural challenges for service centers that illustrate those faced by other distributors. Customers and mills have more relative bargaining power than service centers. That structure is not likely to change soon. However, the path to increased bargaining power within that challenging structure, as well as the road to survival, lies through a better way to manage the burden of cost and time that is being pressed on the SSC by the other trading partners. The steel service center must manage this cost and time more effectively than either its trading partners did or its competitors can. Essentially, this is taking some of the total time and money out of the supply chain equation-like letting air out of the center of the "balloon" that is being squeezed from both sides, making the entire supply chain more competitive than alternative combinations of trading partners.
The exciting part of this challenge is that nearly all of time and money that the steel service center can release from the supply chain "balloon", will go directly to its own bottom line.
This concludes Part One of a three-part note. Part Two will discuss the critical objectives in meeting the challenges covered in Part One. Part Three will cover meeting the objectives with Supply Chain Management Software.
About the Author
MARK WELLS has worked for the past 20 years on many aspects supply chain management from within industry, as a supply chain consultant, and as part of a software development organization. For two years, he worked for a steel service center as an internal consultant. He holds an MBA from Drexel University where he has also taught operations management and operations research. He currently works for the applications development division of Oracle Corporation, focusing on supply chain planning.
SOURCE:
http://www.technologyevaluation.com/research/articles/does-supply-chain-management-software-make-sense-in-wholesale-distribution-16464/
Growing competitive pressures compel strategies and tactics that yield efficiency and efficacy within virtual supply chains. This is especially true for middle tier suppliers. For example, distributors are finding that they need managers who are not only good expediters and know their products, but who also understand how to use decision support tools to make their work more effective. Advances in information technology now make it more feasible for distributors to adopt these tools such as supply chain management software. This paper examines the steel service center segment of the wholesale distribution industry as a case in point of the challenges facing distributors and the relief offered through supply chain software.
This is Part One of a three-part note. This part defines the Challenge faced by wholesale distributors. Part Two discusses the Critical Objectives in meeting this challenge. Part Three covers meeting the objectives with Supply Chain Management Software.
Distribution Evolves
In many ways, steel service centers (SSC's) typify the evolution of wholesale distribution in general. Historically, wholesale distribution has remained on the trailing edge of the information technology curve. It has been more important to focus on other priorities. For example, steel service centers have advanced quality and precision in processing and handling steel.
Like many sectors of wholesale distribution, SSC's have found a niche in the supply chain because they provided a way for smaller manufacturers to buy products when they could not effectively negotiate with large, powerful suppliers. In the case of steel service centers, these suppliers are the integrated steel mills.
Many SSC's started as brokers, buying low and selling higher. But that provided little barrier to entry, no competitive advantage, and margins that could not be sustained. In an effort to differentiate themselves, many SSC's have progressed up the value chain, adding steel processing to their product/service bundle. Other types of distributors have incorporated value-added services that are appropriate for their own customers.
Software Matures
Supply chain planning software applications emerged on the market about 15 years ago. The applications have improved, the technology on which they have been built has become more available, and the architecture has become more open. The first companies to appreciate the potential of such applications were the most sophisticated in terms of their supply chain planning. These also happened to be larger companies who had significant IT budgets and expected to invest in these areas.
Twelve years ago, I wrote forecasting and inventory models in spreadsheets for the steel service center where I worked. It required hours if not days to key in the required data, which only became available once each month. At that time, these tools challenged the old, familiar decision-making processes of some of my colleagues.
Such decision tools are now commercially available "off the shelf". The Internet provides "anywhere access" to applications that are so enabled. Advances in technology now ease the integration of these decision tools with back end transaction systems, even those used by many steel service centers. This means faster, more accurate results for managers who now know more about how to use them.
Industry Structure
While supply chain management applications have proven themselves in the real-world use of operations management theory, competitive pressures continue to grow even more intense, particularly in distribution and in other middle tiers of supply chains. Managers in all industries have become more knowledgeable about how to manage supply chain issues like service and inventory investment. They are learning that mathematics can help decision makers do their job by making recommendations and then allowing them to focus in areas where their judgment and experience are needed most.
OEM's are placing increasing pressure on their vendors to bear more of the risk of time and money in the total supply chain equation. Vendors, including steel service centers, are being asked to hold inventory, thereby assuming the lead time risk and the risk of investing working capital. They are being asked to do this while maintaining, or even lowering, the amount that they charge the OEM for the product/service bundle.
The extended supply chain - all of the organizations, resources and processes that are required to meet customer demand - is much like a balloon, with the air inside representing time and money (cost). On the one end, OEM's compress the "balloon" so that the burden of time and money is pushed toward the middle. In some industries, the first tier vendors can push some of this additional burden on to their own suppliers-in essence, compressing their part of the supply chain balloon, forcing the burden of cost and time on down the line.
However, in the case of steel service centers, not only can they not pass this burden of cost and time on to the steel mills, but the mills squeeze the "balloon" from the other end, compressing time and money out of their portion of the virtual supply chain onto the steel service center.
All of this squeezing of time and money from one part of the supply chain to another occurs without ever reducing the total supply chain cost. In order to survive, the member of the supply chain on the receiving end of the "squeeze" will eventually have to find an outlet for this increased pressure. Too often, for a wholesale distributor such as a steel service center, this time and cost pressure shows up in red ink or lower margins on the income statement. The supply chain equation is a zero-sum solution over time. Simply moving costs around will not make the value chain any more profitable or effective over time. Unless the total volume of cost and time in the "balloon" is reduced instead of merely shifted, it must eventually be passed on to the end customer or absorbed by one of the links in the supply chain.
Passing costs on to the end customer or delaying final shipments is often not possible. For example, automobile manufacturers mandate cost decreases from time to time and penalize suppliers for late shipments. The only other option is for one or more partners to lose out through decreasing margins. Over time, this will force the disadvantaged partner to reduce investment and become less competitive. In the end, that trading partner will be replaced by a competitor who may face the same fate.
Structural Challenges
The steel industry presents some structural challenges for service centers that illustrate those faced by other distributors. Customers and mills have more relative bargaining power than service centers. That structure is not likely to change soon. However, the path to increased bargaining power within that challenging structure, as well as the road to survival, lies through a better way to manage the burden of cost and time that is being pressed on the SSC by the other trading partners. The steel service center must manage this cost and time more effectively than either its trading partners did or its competitors can. Essentially, this is taking some of the total time and money out of the supply chain equation-like letting air out of the center of the "balloon" that is being squeezed from both sides, making the entire supply chain more competitive than alternative combinations of trading partners.
The exciting part of this challenge is that nearly all of time and money that the steel service center can release from the supply chain "balloon", will go directly to its own bottom line.
This concludes Part One of a three-part note. Part Two will discuss the critical objectives in meeting the challenges covered in Part One. Part Three will cover meeting the objectives with Supply Chain Management Software.
About the Author
MARK WELLS has worked for the past 20 years on many aspects supply chain management from within industry, as a supply chain consultant, and as part of a software development organization. For two years, he worked for a steel service center as an internal consultant. He holds an MBA from Drexel University where he has also taught operations management and operations research. He currently works for the applications development division of Oracle Corporation, focusing on supply chain planning.
SOURCE:
http://www.technologyevaluation.com/research/articles/does-supply-chain-management-software-make-sense-in-wholesale-distribution-16464/
This is Part One of a three-part note. This part defines the Challenge faced by wholesale distributors. Part Two discusses the Critical Objectives in meeting this challenge. Part Three covers meeting the objectives with Supply Chain Management Software.
Distribution Evolves
In many ways, steel service centers (SSC's) typify the evolution of wholesale distribution in general. Historically, wholesale distribution has remained on the trailing edge of the information technology curve. It has been more important to focus on other priorities. For example, steel service centers have advanced quality and precision in processing and handling steel.
Like many sectors of wholesale distribution, SSC's have found a niche in the supply chain because they provided a way for smaller manufacturers to buy products when they could not effectively negotiate with large, powerful suppliers. In the case of steel service centers, these suppliers are the integrated steel mills.
Many SSC's started as brokers, buying low and selling higher. But that provided little barrier to entry, no competitive advantage, and margins that could not be sustained. In an effort to differentiate themselves, many SSC's have progressed up the value chain, adding steel processing to their product/service bundle. Other types of distributors have incorporated value-added services that are appropriate for their own customers.
Software Matures
Supply chain planning software applications emerged on the market about 15 years ago. The applications have improved, the technology on which they have been built has become more available, and the architecture has become more open. The first companies to appreciate the potential of such applications were the most sophisticated in terms of their supply chain planning. These also happened to be larger companies who had significant IT budgets and expected to invest in these areas.
Twelve years ago, I wrote forecasting and inventory models in spreadsheets for the steel service center where I worked. It required hours if not days to key in the required data, which only became available once each month. At that time, these tools challenged the old, familiar decision-making processes of some of my colleagues.
Such decision tools are now commercially available "off the shelf". The Internet provides "anywhere access" to applications that are so enabled. Advances in technology now ease the integration of these decision tools with back end transaction systems, even those used by many steel service centers. This means faster, more accurate results for managers who now know more about how to use them.
Industry Structure
While supply chain management applications have proven themselves in the real-world use of operations management theory, competitive pressures continue to grow even more intense, particularly in distribution and in other middle tiers of supply chains. Managers in all industries have become more knowledgeable about how to manage supply chain issues like service and inventory investment. They are learning that mathematics can help decision makers do their job by making recommendations and then allowing them to focus in areas where their judgment and experience are needed most.
OEM's are placing increasing pressure on their vendors to bear more of the risk of time and money in the total supply chain equation. Vendors, including steel service centers, are being asked to hold inventory, thereby assuming the lead time risk and the risk of investing working capital. They are being asked to do this while maintaining, or even lowering, the amount that they charge the OEM for the product/service bundle.
The extended supply chain - all of the organizations, resources and processes that are required to meet customer demand - is much like a balloon, with the air inside representing time and money (cost). On the one end, OEM's compress the "balloon" so that the burden of time and money is pushed toward the middle. In some industries, the first tier vendors can push some of this additional burden on to their own suppliers-in essence, compressing their part of the supply chain balloon, forcing the burden of cost and time on down the line.
However, in the case of steel service centers, not only can they not pass this burden of cost and time on to the steel mills, but the mills squeeze the "balloon" from the other end, compressing time and money out of their portion of the virtual supply chain onto the steel service center.
All of this squeezing of time and money from one part of the supply chain to another occurs without ever reducing the total supply chain cost. In order to survive, the member of the supply chain on the receiving end of the "squeeze" will eventually have to find an outlet for this increased pressure. Too often, for a wholesale distributor such as a steel service center, this time and cost pressure shows up in red ink or lower margins on the income statement. The supply chain equation is a zero-sum solution over time. Simply moving costs around will not make the value chain any more profitable or effective over time. Unless the total volume of cost and time in the "balloon" is reduced instead of merely shifted, it must eventually be passed on to the end customer or absorbed by one of the links in the supply chain.
Passing costs on to the end customer or delaying final shipments is often not possible. For example, automobile manufacturers mandate cost decreases from time to time and penalize suppliers for late shipments. The only other option is for one or more partners to lose out through decreasing margins. Over time, this will force the disadvantaged partner to reduce investment and become less competitive. In the end, that trading partner will be replaced by a competitor who may face the same fate.
Structural Challenges
The steel industry presents some structural challenges for service centers that illustrate those faced by other distributors. Customers and mills have more relative bargaining power than service centers. That structure is not likely to change soon. However, the path to increased bargaining power within that challenging structure, as well as the road to survival, lies through a better way to manage the burden of cost and time that is being pressed on the SSC by the other trading partners. The steel service center must manage this cost and time more effectively than either its trading partners did or its competitors can. Essentially, this is taking some of the total time and money out of the supply chain equation-like letting air out of the center of the "balloon" that is being squeezed from both sides, making the entire supply chain more competitive than alternative combinations of trading partners.
The exciting part of this challenge is that nearly all of time and money that the steel service center can release from the supply chain "balloon", will go directly to its own bottom line.
This concludes Part One of a three-part note. Part Two will discuss the critical objectives in meeting the challenges covered in Part One. Part Three will cover meeting the objectives with Supply Chain Management Software.
About the Author
MARK WELLS has worked for the past 20 years on many aspects supply chain management from within industry, as a supply chain consultant, and as part of a software development organization. For two years, he worked for a steel service center as an internal consultant. He holds an MBA from Drexel University where he has also taught operations management and operations research. He currently works for the applications development division of Oracle Corporation, focusing on supply chain planning.
SOURCE:
http://www.technologyevaluation.com/research/articles/does-supply-chain-management-software-make-sense-in-wholesale-distribution-16464/
The Essential Supply Chain
0 comments 12:54 AM Posted by amma
Where SCM was once viewed as a way to obtain a competitive advantage, companies are now beginning to perceive it as a logical and necessary extension of ERP. It is also represents the best method of entry into the realm of business-to-business collaboration, which is simply an extension of the supply chain to include upstream and downstream trading partners (i.e., suppliers and customers).
There are several reasons why ERP vendors have been augmenting their transaction processing systems with supply chain management applications. First, traditional ERP systems simply lack the advanced planning tools necessary for companies to respond to an increasingly competitive business environment. There are three fundamental limitations of ERP systems in this regard:
Execution Focus
ERP systems were developed primarily for transaction processing, data collection, and data reporting. Quite predictably, users who accessed the ERP databases hoping for the insight needed to make good decisions were overwhelmed by the sheer volume of content. The true benefit of large amounts of historical transaction data cannot be leveraged for business insight without sophisticated analysis tools and data reporting techniques required to make sense of the data. As a result, traditional solutions lacked the capability to support critical business decisions in real-time.
Certainly, ERP systems have advanced since their introduction in the early 1980s, however, most remain true to their original purpose and are not well suited to enable customers to make rapid, highly complex business decisions.
Poor Flexibility
Clients mulling over a prospective IT or business process reengineering project usually find themselves faced with a tradeoff between the way they want to conduct business and the method supported by the particular application. More a trap than a tradeoff, this situation can sometimes be avoided if business strategy is made the first area of reengineering.
However, in cases where an implementation is already underway, project teams are often required to compromise on functionality in order to complete the project on time or within budget. This occurs because many systems do not offer the flexibility and functionality required to accurately model the desired business processes. Large ERP vendors historically are the biggest offenders in this regard. Though the mySAP.com initiative of SAP seeks to overcome this limitation, R/3 is a prime example. These systems often hard-code assumptions regarding operating constraints such as available manufacturing capacity and production lead times. Plans created under these assumptions can hardly be expected to produce optimal results for a given client's particular complexities.
One-Dimensional Planning
ERP systems normally employ some flavor of MRP (Material Requirements Planning) or MRP-II (Manufacturing Resources Planning) for internal supply chain planning. The problem with these traditional planning methodologies is their sequential nature, which makes them unable to consider multiple constraints simultaneously. For example, a plan that begins with a demand forecast can be used to generate product requirements for the manufacturing facilities, which can then be checked against available material and capacity. However, plans created by sequential techniques are rarely optimal on the first attempt. It becomes necessary to refresh the system with updated constraint information and start the process anew. Because businesses change around the clock, sequential planning can never produce a truly optimal plan for a useful period of time.
Supply chain management addresses these limitations more effectively and at (usually) lower cost than ERP. Where ERP systems focused on transactions, SCM was geared towards analysis and planning. A planning tool, in its nature, is expected to be flexible. Also, because the SCM market is newer than ERP, smaller SCM vendors have had the benefit of hindsight and have targeted their applications at the gaps in ERP systems. In addition, the advanced techniques developed for supply chain applications allow consideration of simultaneous constraints that enables companies to have real-time visibility to their businesses.
Rise of Information Technology
The second reason why SCM is on the hearts, minds, and lips of corporate IT organizations has nothing to do with ERP, but relates to the phenomenal growth of information technology. As advances in computing power and data transmission continue, enterprises once thought to be too isolated or dissimilar are rapidly becoming tractable members of the supply chain community.
(The supply chain community encompasses the network of suppliers, manufacturers, distribution centers, and customers that share materials and information via technological means.) The Internet, Electronic Data Interchange (EDI) initiatives, and internetworking (LAN/WAN) technologies are just a few examples of technologies that are fulfilling the vision of SCM.
Market Consolidation
Finally, vendors have observed the complementary nature of SCM and ERP and are engaged in consolidation of their product suites. Perhaps more importantly, they have observed that prospective customers appreciate the ability to obtain applications offering full functional breadth from a single vendor.
Table 1 contains just a few of the major SCM-Enterprise Application vendor pairings that have occurred over the last few years. In addition to mergers, most ERP companies have entered into joint marketing arrangements with SCM vendors, embed their solutions, and/or provide standard interface certification programs. In like manner, SCM companies often partner with specialty supply chain execution software vendors in an effort to fill gaps within their functionality and industry verticals.
SOURCE:
http://www.technologyevaluation.com/research/articles/the-essential-supply-chain-16844/
There are several reasons why ERP vendors have been augmenting their transaction processing systems with supply chain management applications. First, traditional ERP systems simply lack the advanced planning tools necessary for companies to respond to an increasingly competitive business environment. There are three fundamental limitations of ERP systems in this regard:
Execution Focus
ERP systems were developed primarily for transaction processing, data collection, and data reporting. Quite predictably, users who accessed the ERP databases hoping for the insight needed to make good decisions were overwhelmed by the sheer volume of content. The true benefit of large amounts of historical transaction data cannot be leveraged for business insight without sophisticated analysis tools and data reporting techniques required to make sense of the data. As a result, traditional solutions lacked the capability to support critical business decisions in real-time.
Certainly, ERP systems have advanced since their introduction in the early 1980s, however, most remain true to their original purpose and are not well suited to enable customers to make rapid, highly complex business decisions.
Poor Flexibility
Clients mulling over a prospective IT or business process reengineering project usually find themselves faced with a tradeoff between the way they want to conduct business and the method supported by the particular application. More a trap than a tradeoff, this situation can sometimes be avoided if business strategy is made the first area of reengineering.
However, in cases where an implementation is already underway, project teams are often required to compromise on functionality in order to complete the project on time or within budget. This occurs because many systems do not offer the flexibility and functionality required to accurately model the desired business processes. Large ERP vendors historically are the biggest offenders in this regard. Though the mySAP.com initiative of SAP seeks to overcome this limitation, R/3 is a prime example. These systems often hard-code assumptions regarding operating constraints such as available manufacturing capacity and production lead times. Plans created under these assumptions can hardly be expected to produce optimal results for a given client's particular complexities.
One-Dimensional Planning
ERP systems normally employ some flavor of MRP (Material Requirements Planning) or MRP-II (Manufacturing Resources Planning) for internal supply chain planning. The problem with these traditional planning methodologies is their sequential nature, which makes them unable to consider multiple constraints simultaneously. For example, a plan that begins with a demand forecast can be used to generate product requirements for the manufacturing facilities, which can then be checked against available material and capacity. However, plans created by sequential techniques are rarely optimal on the first attempt. It becomes necessary to refresh the system with updated constraint information and start the process anew. Because businesses change around the clock, sequential planning can never produce a truly optimal plan for a useful period of time.
Supply chain management addresses these limitations more effectively and at (usually) lower cost than ERP. Where ERP systems focused on transactions, SCM was geared towards analysis and planning. A planning tool, in its nature, is expected to be flexible. Also, because the SCM market is newer than ERP, smaller SCM vendors have had the benefit of hindsight and have targeted their applications at the gaps in ERP systems. In addition, the advanced techniques developed for supply chain applications allow consideration of simultaneous constraints that enables companies to have real-time visibility to their businesses.
Rise of Information Technology
The second reason why SCM is on the hearts, minds, and lips of corporate IT organizations has nothing to do with ERP, but relates to the phenomenal growth of information technology. As advances in computing power and data transmission continue, enterprises once thought to be too isolated or dissimilar are rapidly becoming tractable members of the supply chain community.
(The supply chain community encompasses the network of suppliers, manufacturers, distribution centers, and customers that share materials and information via technological means.) The Internet, Electronic Data Interchange (EDI) initiatives, and internetworking (LAN/WAN) technologies are just a few examples of technologies that are fulfilling the vision of SCM.
Market Consolidation
Finally, vendors have observed the complementary nature of SCM and ERP and are engaged in consolidation of their product suites. Perhaps more importantly, they have observed that prospective customers appreciate the ability to obtain applications offering full functional breadth from a single vendor.
Table 1 contains just a few of the major SCM-Enterprise Application vendor pairings that have occurred over the last few years. In addition to mergers, most ERP companies have entered into joint marketing arrangements with SCM vendors, embed their solutions, and/or provide standard interface certification programs. In like manner, SCM companies often partner with specialty supply chain execution software vendors in an effort to fill gaps within their functionality and industry verticals.
SOURCE:
http://www.technologyevaluation.com/research/articles/the-essential-supply-chain-16844/
Where SCM was once viewed as a way to obtain a competitive advantage, companies are now beginning to perceive it as a logical and necessary extension of ERP. It is also represents the best method of entry into the realm of business-to-business collaboration, which is simply an extension of the supply chain to include upstream and downstream trading partners (i.e., suppliers and customers).
There are several reasons why ERP vendors have been augmenting their transaction processing systems with supply chain management applications. First, traditional ERP systems simply lack the advanced planning tools necessary for companies to respond to an increasingly competitive business environment. There are three fundamental limitations of ERP systems in this regard:
Execution Focus
ERP systems were developed primarily for transaction processing, data collection, and data reporting. Quite predictably, users who accessed the ERP databases hoping for the insight needed to make good decisions were overwhelmed by the sheer volume of content. The true benefit of large amounts of historical transaction data cannot be leveraged for business insight without sophisticated analysis tools and data reporting techniques required to make sense of the data. As a result, traditional solutions lacked the capability to support critical business decisions in real-time.
Certainly, ERP systems have advanced since their introduction in the early 1980s, however, most remain true to their original purpose and are not well suited to enable customers to make rapid, highly complex business decisions.
Poor Flexibility
Clients mulling over a prospective IT or business process reengineering project usually find themselves faced with a tradeoff between the way they want to conduct business and the method supported by the particular application. More a trap than a tradeoff, this situation can sometimes be avoided if business strategy is made the first area of reengineering.
However, in cases where an implementation is already underway, project teams are often required to compromise on functionality in order to complete the project on time or within budget. This occurs because many systems do not offer the flexibility and functionality required to accurately model the desired business processes. Large ERP vendors historically are the biggest offenders in this regard. Though the mySAP.com initiative of SAP seeks to overcome this limitation, R/3 is a prime example. These systems often hard-code assumptions regarding operating constraints such as available manufacturing capacity and production lead times. Plans created under these assumptions can hardly be expected to produce optimal results for a given client's particular complexities.
One-Dimensional Planning
ERP systems normally employ some flavor of MRP (Material Requirements Planning) or MRP-II (Manufacturing Resources Planning) for internal supply chain planning. The problem with these traditional planning methodologies is their sequential nature, which makes them unable to consider multiple constraints simultaneously. For example, a plan that begins with a demand forecast can be used to generate product requirements for the manufacturing facilities, which can then be checked against available material and capacity. However, plans created by sequential techniques are rarely optimal on the first attempt. It becomes necessary to refresh the system with updated constraint information and start the process anew. Because businesses change around the clock, sequential planning can never produce a truly optimal plan for a useful period of time.
Supply chain management addresses these limitations more effectively and at (usually) lower cost than ERP. Where ERP systems focused on transactions, SCM was geared towards analysis and planning. A planning tool, in its nature, is expected to be flexible. Also, because the SCM market is newer than ERP, smaller SCM vendors have had the benefit of hindsight and have targeted their applications at the gaps in ERP systems. In addition, the advanced techniques developed for supply chain applications allow consideration of simultaneous constraints that enables companies to have real-time visibility to their businesses.
Rise of Information Technology
The second reason why SCM is on the hearts, minds, and lips of corporate IT organizations has nothing to do with ERP, but relates to the phenomenal growth of information technology. As advances in computing power and data transmission continue, enterprises once thought to be too isolated or dissimilar are rapidly becoming tractable members of the supply chain community.
(The supply chain community encompasses the network of suppliers, manufacturers, distribution centers, and customers that share materials and information via technological means.) The Internet, Electronic Data Interchange (EDI) initiatives, and internetworking (LAN/WAN) technologies are just a few examples of technologies that are fulfilling the vision of SCM.
Market Consolidation
Finally, vendors have observed the complementary nature of SCM and ERP and are engaged in consolidation of their product suites. Perhaps more importantly, they have observed that prospective customers appreciate the ability to obtain applications offering full functional breadth from a single vendor.
Table 1 contains just a few of the major SCM-Enterprise Application vendor pairings that have occurred over the last few years. In addition to mergers, most ERP companies have entered into joint marketing arrangements with SCM vendors, embed their solutions, and/or provide standard interface certification programs. In like manner, SCM companies often partner with specialty supply chain execution software vendors in an effort to fill gaps within their functionality and industry verticals.
SOURCE:
http://www.technologyevaluation.com/research/articles/the-essential-supply-chain-16844/
There are several reasons why ERP vendors have been augmenting their transaction processing systems with supply chain management applications. First, traditional ERP systems simply lack the advanced planning tools necessary for companies to respond to an increasingly competitive business environment. There are three fundamental limitations of ERP systems in this regard:
Execution Focus
ERP systems were developed primarily for transaction processing, data collection, and data reporting. Quite predictably, users who accessed the ERP databases hoping for the insight needed to make good decisions were overwhelmed by the sheer volume of content. The true benefit of large amounts of historical transaction data cannot be leveraged for business insight without sophisticated analysis tools and data reporting techniques required to make sense of the data. As a result, traditional solutions lacked the capability to support critical business decisions in real-time.
Certainly, ERP systems have advanced since their introduction in the early 1980s, however, most remain true to their original purpose and are not well suited to enable customers to make rapid, highly complex business decisions.
Poor Flexibility
Clients mulling over a prospective IT or business process reengineering project usually find themselves faced with a tradeoff between the way they want to conduct business and the method supported by the particular application. More a trap than a tradeoff, this situation can sometimes be avoided if business strategy is made the first area of reengineering.
However, in cases where an implementation is already underway, project teams are often required to compromise on functionality in order to complete the project on time or within budget. This occurs because many systems do not offer the flexibility and functionality required to accurately model the desired business processes. Large ERP vendors historically are the biggest offenders in this regard. Though the mySAP.com initiative of SAP seeks to overcome this limitation, R/3 is a prime example. These systems often hard-code assumptions regarding operating constraints such as available manufacturing capacity and production lead times. Plans created under these assumptions can hardly be expected to produce optimal results for a given client's particular complexities.
One-Dimensional Planning
ERP systems normally employ some flavor of MRP (Material Requirements Planning) or MRP-II (Manufacturing Resources Planning) for internal supply chain planning. The problem with these traditional planning methodologies is their sequential nature, which makes them unable to consider multiple constraints simultaneously. For example, a plan that begins with a demand forecast can be used to generate product requirements for the manufacturing facilities, which can then be checked against available material and capacity. However, plans created by sequential techniques are rarely optimal on the first attempt. It becomes necessary to refresh the system with updated constraint information and start the process anew. Because businesses change around the clock, sequential planning can never produce a truly optimal plan for a useful period of time.
Supply chain management addresses these limitations more effectively and at (usually) lower cost than ERP. Where ERP systems focused on transactions, SCM was geared towards analysis and planning. A planning tool, in its nature, is expected to be flexible. Also, because the SCM market is newer than ERP, smaller SCM vendors have had the benefit of hindsight and have targeted their applications at the gaps in ERP systems. In addition, the advanced techniques developed for supply chain applications allow consideration of simultaneous constraints that enables companies to have real-time visibility to their businesses.
Rise of Information Technology
The second reason why SCM is on the hearts, minds, and lips of corporate IT organizations has nothing to do with ERP, but relates to the phenomenal growth of information technology. As advances in computing power and data transmission continue, enterprises once thought to be too isolated or dissimilar are rapidly becoming tractable members of the supply chain community.
(The supply chain community encompasses the network of suppliers, manufacturers, distribution centers, and customers that share materials and information via technological means.) The Internet, Electronic Data Interchange (EDI) initiatives, and internetworking (LAN/WAN) technologies are just a few examples of technologies that are fulfilling the vision of SCM.
Market Consolidation
Finally, vendors have observed the complementary nature of SCM and ERP and are engaged in consolidation of their product suites. Perhaps more importantly, they have observed that prospective customers appreciate the ability to obtain applications offering full functional breadth from a single vendor.
Table 1 contains just a few of the major SCM-Enterprise Application vendor pairings that have occurred over the last few years. In addition to mergers, most ERP companies have entered into joint marketing arrangements with SCM vendors, embed their solutions, and/or provide standard interface certification programs. In like manner, SCM companies often partner with specialty supply chain execution software vendors in an effort to fill gaps within their functionality and industry verticals.
SOURCE:
http://www.technologyevaluation.com/research/articles/the-essential-supply-chain-16844/
How Supply Chain Projects Morph Into Black Holes
0 comments 12:53 AM Posted by amma
A black hole is an object whose gravitational pull is so strong that nothing - not even light - can escape from it. Although predicted by Einstein's General Theory of Relativity, the existence of black holes in our galaxy and elsewhere has only recently been confirmed. A black hole forms when a massive star dies and collapses under its own mass.
For all but a few astronomers, black holes are unknown in the realm of ordinary experience. Analogs do exist, however, in the more terrestrial domain of business process reengineering and take the form of supply chain management implementations.
Similar to their gravitational counterparts, supply chain management implementations can grow to vast, unanticipated proportions, enveloping unbudgeted amounts of time, resources, and money. A crucial difference between the two is that supply chain projects can be kept to a manageable size by making careful preparations and setting realistic expectations at the outset. The following real-life examples offer insights that may help prevent your supply chain project from collapsing into oblivion, taking your enterprise with it.
Case 1:
Problem
Five months into the implementation of a factory scheduling system at a mid-sized PC assembly facility and one month before going live, planners were asked to help perform the system test of the application, during which daily workflow would be checked against requirements.
Planning involved making a survey of the next few days of PC orders, the required components indicated by the Bill of Materials, and the current inventory so that new components could be procured in time to meet the demand. Planners relied on a metric known as "days of inventory," calculated for each component SKU (stock keeping unit) by subtracting all components needed for each day of production successively from inventory until the inventory was exhausted. The number of days that would bring inventory to zero was that component's days of inventory.
Unfortunately, the new system had no capability for computing this value and planners found that to generate it, they had to page through hundreds of scheduled orders, sorted by finished SKU, use the software's capability for reverse BOM explosion to get the components, total the needed components by SKU in a spreadsheet and then manually subtract the totals one day at a time from the inventory, also provided by the system. The software selected for the new system had no capability to produce the required metric. Needless to state, the manual steps completely derailed the workflow and the planners revolted.
Resolution
Under pressure to finish the implementation, the project team resolved the system shortcomings by writing a custom report in Microsoft VBA (Visual Basic for Applications) and Excel. This required four additional weeks at roughly $60,000 per week:
* Three additional weeks of interviews with planners to understand the metrics and development work by a VBA programmer
* Followed by one additional week of testing by the frustrated and increasingly skeptical planners.
In spite of the efforts, the completed solution was an unsatisfactory compromise between mitigating budget overrun and delivering the required reporting capabilities.
Underlying problems
* Failure to appreciate the importance of existing reports and metrics to planner workflow
* Inadequate communication between planners and the project team in the early stages of the project
* Failure to adequately screen candidate software packages for advanced reporting capabilities
Best practices that might have prevented the problems
* First off, the project team needs to prepare a list of detailed requirements by involving end users and then conduct a careful evaluation of several packages to find the one that best fulfills them.
* End users, those who will be working with the new system on a daily basis, should be included in the project implementation phase early on. Managers need to give these key users time off from their normal duties to contribute their expertise to the project. This commitment requires the support of top management.
* Rapid prototyping provides a basic system to users who then have a tactile understanding of what the new system will look like and how it will behave.
Case 2:
Requirements
* Implementation of a demand/supply matching system for two separate PC assembly plants, one owned by the company and the other, a contract facility.
* The system was needed to support new channel programs designed to facilitate replenishment of reseller inventory by allowing resellers to share requirements via EDI (electronic data interchange). This was an ambitious departure from existing procedures that relied on telephone communication between resellers and demand planners.
Problem
The project schedule was based solely on the start of the new channel programs without regard to resource constraints. In addition, the supply chain software vendor gave optimistic release dates for the software to be used, which were taken as firm by client management.
Even working 65-70 hours per week, the undersized project team of 15 people had no hope of conducting a thorough design and test implementation. To make matters worse, less than three weeks were allotted for receiving the new server, installing the software on it, and configuring it to run the software in a live setting. The vendor consistently failed to meet its expected release dates due to other projects and clients. Resellers could not keep up with required milestones for the implementation of EDI capabilities.
Nearly three months into the project, almost at the proposed conversion date, the project team and management conceded defeat.
Resolution
The project timeline was redrawn by factoring in the number of skilled resources available, realistic software release dates, and firm delivery dates for the hardware server. Also, the new plan included the development of interfaces to allow resellers to input inventory and demand data independent of EDI. The system went live six months after the original conversion date. Estimated budget overrun: $2.5 million.
Underlying problems
* Implementation was squeezed into an overly aggressive three-month project schedule to support the inauguration of three new reseller channel programs.
* Failure to realize the barriers to be overcome in implementing new business processes, i.e., obtaining commitments from resellers to share inventory data with demand planners
Best practices that might have prevented the problems
* Timelines should always be constructed using a bottom-up approach, where project milestones are determined by the availability of people, software, and hardware.
* No supply chain management solution will work unless the business processes it is designed to support are agreed upon by the parties involved. Obtaining this agreement should be an ongoing process that starts before the technical aspects of the project begin and continues through the implementation phase by allowing all organizational entities, both internal and external, to understand the new changes.
Case 3:
Background and Requirements
* Large, multinational semiconductor manufacturer
* Supply chain planning software implementation at the headquarter planning division responsible for creating production requirements for seven wafer fabs and assembly/test facilities and allocating supply to customer orders
* The new system was to support four main activities:
1. facilitate development of consensus forecasts
2. allocate different categories of supply to forecasts and orders based on business rules
3. generate finite capacity plans and schedules to be passed to manufacturing sites
4. promise orders to customers based on supply allocated from inventory as well as planned and actual production
* Systems to support all four activities were implemented in parallel using a "Big Bang" approach
Problem
During the user test, in which headquarter planners were allowed to play around with the system tested version of the software and make suggestions, the project team was inundated with requests for additional functionality. The project team dictated each of these to the software vendor who was responsible for making customizations to the core software. Not only was the vendor unable to make all the requested modifications in time, it viewed the changes as well beyond the originally agreed upon scope. Deadlines slipped and the development environment became chaotic with all the requested changes, which caused more delays.
Resolution
Client top management finally intervened and put a freeze on modifications to the software. It also split the project into four phases based on each headquarter planning activity to allow the project team to focus on fewer requirements at one time. The last phase of the project was completed nearly one year after the originally scheduled "Big Bang" conversion date. Estimated budget overrun: $4 million.
Underlying problems
* The client failed to appreciate the size of the undertaking and tried implementing the four areas in parallel to save money.
* The client was unwilling to table new functionality requests for a later release, causing severe scope creep. Best practices that might have prevented the problems
* Where project scope spans multiple business functions, a phased implementation approach can be used to reduce the complexity of the project. Lessons learned in the early phases can often be applied to succeeding phases.
* Project scope should be decided at the outset and adhered to throughout the implementation. New requirements that arise during the implementation should be prioritized and only the "must-have" changes should be made. The rest should be saved for future releases.
Summary
From a broad perspective, many problems result because the complexity of supply chain management projects is underestimated by corporate management.
Often supply chain packages are installed on top of ERP or legacy systems requiring an array of interfaces to be developed. Linking different applications requires a profound level of understanding about the data that is passed back and forth between them.
Apart from technical complexities, managers fail to appreciate the bottom line impact that supply chain management tools can have on their businesses. Even with the expanding compass brought to supply chain by B2B collaboration, this perception will be slow to change.
Finally, it is important to remember that, even with good preparation, experienced resources, and an enthusiastic project team, all supply chain management projects are guaranteed to bring unanticipated problems and dead ends. Successful projects are not those that finish without a hitch, but those in which project managers adapt well to adversity and persevere in spite of the problems.
SOURCE:
http://www.technologyevaluation.com/research/articles/how-supply-chain-projects-morph-into-black-holes-16781/
For all but a few astronomers, black holes are unknown in the realm of ordinary experience. Analogs do exist, however, in the more terrestrial domain of business process reengineering and take the form of supply chain management implementations.
Similar to their gravitational counterparts, supply chain management implementations can grow to vast, unanticipated proportions, enveloping unbudgeted amounts of time, resources, and money. A crucial difference between the two is that supply chain projects can be kept to a manageable size by making careful preparations and setting realistic expectations at the outset. The following real-life examples offer insights that may help prevent your supply chain project from collapsing into oblivion, taking your enterprise with it.
Case 1:
Problem
Five months into the implementation of a factory scheduling system at a mid-sized PC assembly facility and one month before going live, planners were asked to help perform the system test of the application, during which daily workflow would be checked against requirements.
Planning involved making a survey of the next few days of PC orders, the required components indicated by the Bill of Materials, and the current inventory so that new components could be procured in time to meet the demand. Planners relied on a metric known as "days of inventory," calculated for each component SKU (stock keeping unit) by subtracting all components needed for each day of production successively from inventory until the inventory was exhausted. The number of days that would bring inventory to zero was that component's days of inventory.
Unfortunately, the new system had no capability for computing this value and planners found that to generate it, they had to page through hundreds of scheduled orders, sorted by finished SKU, use the software's capability for reverse BOM explosion to get the components, total the needed components by SKU in a spreadsheet and then manually subtract the totals one day at a time from the inventory, also provided by the system. The software selected for the new system had no capability to produce the required metric. Needless to state, the manual steps completely derailed the workflow and the planners revolted.
Resolution
Under pressure to finish the implementation, the project team resolved the system shortcomings by writing a custom report in Microsoft VBA (Visual Basic for Applications) and Excel. This required four additional weeks at roughly $60,000 per week:
* Three additional weeks of interviews with planners to understand the metrics and development work by a VBA programmer
* Followed by one additional week of testing by the frustrated and increasingly skeptical planners.
In spite of the efforts, the completed solution was an unsatisfactory compromise between mitigating budget overrun and delivering the required reporting capabilities.
Underlying problems
* Failure to appreciate the importance of existing reports and metrics to planner workflow
* Inadequate communication between planners and the project team in the early stages of the project
* Failure to adequately screen candidate software packages for advanced reporting capabilities
Best practices that might have prevented the problems
* First off, the project team needs to prepare a list of detailed requirements by involving end users and then conduct a careful evaluation of several packages to find the one that best fulfills them.
* End users, those who will be working with the new system on a daily basis, should be included in the project implementation phase early on. Managers need to give these key users time off from their normal duties to contribute their expertise to the project. This commitment requires the support of top management.
* Rapid prototyping provides a basic system to users who then have a tactile understanding of what the new system will look like and how it will behave.
Case 2:
Requirements
* Implementation of a demand/supply matching system for two separate PC assembly plants, one owned by the company and the other, a contract facility.
* The system was needed to support new channel programs designed to facilitate replenishment of reseller inventory by allowing resellers to share requirements via EDI (electronic data interchange). This was an ambitious departure from existing procedures that relied on telephone communication between resellers and demand planners.
Problem
The project schedule was based solely on the start of the new channel programs without regard to resource constraints. In addition, the supply chain software vendor gave optimistic release dates for the software to be used, which were taken as firm by client management.
Even working 65-70 hours per week, the undersized project team of 15 people had no hope of conducting a thorough design and test implementation. To make matters worse, less than three weeks were allotted for receiving the new server, installing the software on it, and configuring it to run the software in a live setting. The vendor consistently failed to meet its expected release dates due to other projects and clients. Resellers could not keep up with required milestones for the implementation of EDI capabilities.
Nearly three months into the project, almost at the proposed conversion date, the project team and management conceded defeat.
Resolution
The project timeline was redrawn by factoring in the number of skilled resources available, realistic software release dates, and firm delivery dates for the hardware server. Also, the new plan included the development of interfaces to allow resellers to input inventory and demand data independent of EDI. The system went live six months after the original conversion date. Estimated budget overrun: $2.5 million.
Underlying problems
* Implementation was squeezed into an overly aggressive three-month project schedule to support the inauguration of three new reseller channel programs.
* Failure to realize the barriers to be overcome in implementing new business processes, i.e., obtaining commitments from resellers to share inventory data with demand planners
Best practices that might have prevented the problems
* Timelines should always be constructed using a bottom-up approach, where project milestones are determined by the availability of people, software, and hardware.
* No supply chain management solution will work unless the business processes it is designed to support are agreed upon by the parties involved. Obtaining this agreement should be an ongoing process that starts before the technical aspects of the project begin and continues through the implementation phase by allowing all organizational entities, both internal and external, to understand the new changes.
Case 3:
Background and Requirements
* Large, multinational semiconductor manufacturer
* Supply chain planning software implementation at the headquarter planning division responsible for creating production requirements for seven wafer fabs and assembly/test facilities and allocating supply to customer orders
* The new system was to support four main activities:
1. facilitate development of consensus forecasts
2. allocate different categories of supply to forecasts and orders based on business rules
3. generate finite capacity plans and schedules to be passed to manufacturing sites
4. promise orders to customers based on supply allocated from inventory as well as planned and actual production
* Systems to support all four activities were implemented in parallel using a "Big Bang" approach
Problem
During the user test, in which headquarter planners were allowed to play around with the system tested version of the software and make suggestions, the project team was inundated with requests for additional functionality. The project team dictated each of these to the software vendor who was responsible for making customizations to the core software. Not only was the vendor unable to make all the requested modifications in time, it viewed the changes as well beyond the originally agreed upon scope. Deadlines slipped and the development environment became chaotic with all the requested changes, which caused more delays.
Resolution
Client top management finally intervened and put a freeze on modifications to the software. It also split the project into four phases based on each headquarter planning activity to allow the project team to focus on fewer requirements at one time. The last phase of the project was completed nearly one year after the originally scheduled "Big Bang" conversion date. Estimated budget overrun: $4 million.
Underlying problems
* The client failed to appreciate the size of the undertaking and tried implementing the four areas in parallel to save money.
* The client was unwilling to table new functionality requests for a later release, causing severe scope creep. Best practices that might have prevented the problems
* Where project scope spans multiple business functions, a phased implementation approach can be used to reduce the complexity of the project. Lessons learned in the early phases can often be applied to succeeding phases.
* Project scope should be decided at the outset and adhered to throughout the implementation. New requirements that arise during the implementation should be prioritized and only the "must-have" changes should be made. The rest should be saved for future releases.
Summary
From a broad perspective, many problems result because the complexity of supply chain management projects is underestimated by corporate management.
Often supply chain packages are installed on top of ERP or legacy systems requiring an array of interfaces to be developed. Linking different applications requires a profound level of understanding about the data that is passed back and forth between them.
Apart from technical complexities, managers fail to appreciate the bottom line impact that supply chain management tools can have on their businesses. Even with the expanding compass brought to supply chain by B2B collaboration, this perception will be slow to change.
Finally, it is important to remember that, even with good preparation, experienced resources, and an enthusiastic project team, all supply chain management projects are guaranteed to bring unanticipated problems and dead ends. Successful projects are not those that finish without a hitch, but those in which project managers adapt well to adversity and persevere in spite of the problems.
SOURCE:
http://www.technologyevaluation.com/research/articles/how-supply-chain-projects-morph-into-black-holes-16781/
A black hole is an object whose gravitational pull is so strong that nothing - not even light - can escape from it. Although predicted by Einstein's General Theory of Relativity, the existence of black holes in our galaxy and elsewhere has only recently been confirmed. A black hole forms when a massive star dies and collapses under its own mass.
For all but a few astronomers, black holes are unknown in the realm of ordinary experience. Analogs do exist, however, in the more terrestrial domain of business process reengineering and take the form of supply chain management implementations.
Similar to their gravitational counterparts, supply chain management implementations can grow to vast, unanticipated proportions, enveloping unbudgeted amounts of time, resources, and money. A crucial difference between the two is that supply chain projects can be kept to a manageable size by making careful preparations and setting realistic expectations at the outset. The following real-life examples offer insights that may help prevent your supply chain project from collapsing into oblivion, taking your enterprise with it.
Case 1:
Problem
Five months into the implementation of a factory scheduling system at a mid-sized PC assembly facility and one month before going live, planners were asked to help perform the system test of the application, during which daily workflow would be checked against requirements.
Planning involved making a survey of the next few days of PC orders, the required components indicated by the Bill of Materials, and the current inventory so that new components could be procured in time to meet the demand. Planners relied on a metric known as "days of inventory," calculated for each component SKU (stock keeping unit) by subtracting all components needed for each day of production successively from inventory until the inventory was exhausted. The number of days that would bring inventory to zero was that component's days of inventory.
Unfortunately, the new system had no capability for computing this value and planners found that to generate it, they had to page through hundreds of scheduled orders, sorted by finished SKU, use the software's capability for reverse BOM explosion to get the components, total the needed components by SKU in a spreadsheet and then manually subtract the totals one day at a time from the inventory, also provided by the system. The software selected for the new system had no capability to produce the required metric. Needless to state, the manual steps completely derailed the workflow and the planners revolted.
Resolution
Under pressure to finish the implementation, the project team resolved the system shortcomings by writing a custom report in Microsoft VBA (Visual Basic for Applications) and Excel. This required four additional weeks at roughly $60,000 per week:
* Three additional weeks of interviews with planners to understand the metrics and development work by a VBA programmer
* Followed by one additional week of testing by the frustrated and increasingly skeptical planners.
In spite of the efforts, the completed solution was an unsatisfactory compromise between mitigating budget overrun and delivering the required reporting capabilities.
Underlying problems
* Failure to appreciate the importance of existing reports and metrics to planner workflow
* Inadequate communication between planners and the project team in the early stages of the project
* Failure to adequately screen candidate software packages for advanced reporting capabilities
Best practices that might have prevented the problems
* First off, the project team needs to prepare a list of detailed requirements by involving end users and then conduct a careful evaluation of several packages to find the one that best fulfills them.
* End users, those who will be working with the new system on a daily basis, should be included in the project implementation phase early on. Managers need to give these key users time off from their normal duties to contribute their expertise to the project. This commitment requires the support of top management.
* Rapid prototyping provides a basic system to users who then have a tactile understanding of what the new system will look like and how it will behave.
Case 2:
Requirements
* Implementation of a demand/supply matching system for two separate PC assembly plants, one owned by the company and the other, a contract facility.
* The system was needed to support new channel programs designed to facilitate replenishment of reseller inventory by allowing resellers to share requirements via EDI (electronic data interchange). This was an ambitious departure from existing procedures that relied on telephone communication between resellers and demand planners.
Problem
The project schedule was based solely on the start of the new channel programs without regard to resource constraints. In addition, the supply chain software vendor gave optimistic release dates for the software to be used, which were taken as firm by client management.
Even working 65-70 hours per week, the undersized project team of 15 people had no hope of conducting a thorough design and test implementation. To make matters worse, less than three weeks were allotted for receiving the new server, installing the software on it, and configuring it to run the software in a live setting. The vendor consistently failed to meet its expected release dates due to other projects and clients. Resellers could not keep up with required milestones for the implementation of EDI capabilities.
Nearly three months into the project, almost at the proposed conversion date, the project team and management conceded defeat.
Resolution
The project timeline was redrawn by factoring in the number of skilled resources available, realistic software release dates, and firm delivery dates for the hardware server. Also, the new plan included the development of interfaces to allow resellers to input inventory and demand data independent of EDI. The system went live six months after the original conversion date. Estimated budget overrun: $2.5 million.
Underlying problems
* Implementation was squeezed into an overly aggressive three-month project schedule to support the inauguration of three new reseller channel programs.
* Failure to realize the barriers to be overcome in implementing new business processes, i.e., obtaining commitments from resellers to share inventory data with demand planners
Best practices that might have prevented the problems
* Timelines should always be constructed using a bottom-up approach, where project milestones are determined by the availability of people, software, and hardware.
* No supply chain management solution will work unless the business processes it is designed to support are agreed upon by the parties involved. Obtaining this agreement should be an ongoing process that starts before the technical aspects of the project begin and continues through the implementation phase by allowing all organizational entities, both internal and external, to understand the new changes.
Case 3:
Background and Requirements
* Large, multinational semiconductor manufacturer
* Supply chain planning software implementation at the headquarter planning division responsible for creating production requirements for seven wafer fabs and assembly/test facilities and allocating supply to customer orders
* The new system was to support four main activities:
1. facilitate development of consensus forecasts
2. allocate different categories of supply to forecasts and orders based on business rules
3. generate finite capacity plans and schedules to be passed to manufacturing sites
4. promise orders to customers based on supply allocated from inventory as well as planned and actual production
* Systems to support all four activities were implemented in parallel using a "Big Bang" approach
Problem
During the user test, in which headquarter planners were allowed to play around with the system tested version of the software and make suggestions, the project team was inundated with requests for additional functionality. The project team dictated each of these to the software vendor who was responsible for making customizations to the core software. Not only was the vendor unable to make all the requested modifications in time, it viewed the changes as well beyond the originally agreed upon scope. Deadlines slipped and the development environment became chaotic with all the requested changes, which caused more delays.
Resolution
Client top management finally intervened and put a freeze on modifications to the software. It also split the project into four phases based on each headquarter planning activity to allow the project team to focus on fewer requirements at one time. The last phase of the project was completed nearly one year after the originally scheduled "Big Bang" conversion date. Estimated budget overrun: $4 million.
Underlying problems
* The client failed to appreciate the size of the undertaking and tried implementing the four areas in parallel to save money.
* The client was unwilling to table new functionality requests for a later release, causing severe scope creep. Best practices that might have prevented the problems
* Where project scope spans multiple business functions, a phased implementation approach can be used to reduce the complexity of the project. Lessons learned in the early phases can often be applied to succeeding phases.
* Project scope should be decided at the outset and adhered to throughout the implementation. New requirements that arise during the implementation should be prioritized and only the "must-have" changes should be made. The rest should be saved for future releases.
Summary
From a broad perspective, many problems result because the complexity of supply chain management projects is underestimated by corporate management.
Often supply chain packages are installed on top of ERP or legacy systems requiring an array of interfaces to be developed. Linking different applications requires a profound level of understanding about the data that is passed back and forth between them.
Apart from technical complexities, managers fail to appreciate the bottom line impact that supply chain management tools can have on their businesses. Even with the expanding compass brought to supply chain by B2B collaboration, this perception will be slow to change.
Finally, it is important to remember that, even with good preparation, experienced resources, and an enthusiastic project team, all supply chain management projects are guaranteed to bring unanticipated problems and dead ends. Successful projects are not those that finish without a hitch, but those in which project managers adapt well to adversity and persevere in spite of the problems.
SOURCE:
http://www.technologyevaluation.com/research/articles/how-supply-chain-projects-morph-into-black-holes-16781/
For all but a few astronomers, black holes are unknown in the realm of ordinary experience. Analogs do exist, however, in the more terrestrial domain of business process reengineering and take the form of supply chain management implementations.
Similar to their gravitational counterparts, supply chain management implementations can grow to vast, unanticipated proportions, enveloping unbudgeted amounts of time, resources, and money. A crucial difference between the two is that supply chain projects can be kept to a manageable size by making careful preparations and setting realistic expectations at the outset. The following real-life examples offer insights that may help prevent your supply chain project from collapsing into oblivion, taking your enterprise with it.
Case 1:
Problem
Five months into the implementation of a factory scheduling system at a mid-sized PC assembly facility and one month before going live, planners were asked to help perform the system test of the application, during which daily workflow would be checked against requirements.
Planning involved making a survey of the next few days of PC orders, the required components indicated by the Bill of Materials, and the current inventory so that new components could be procured in time to meet the demand. Planners relied on a metric known as "days of inventory," calculated for each component SKU (stock keeping unit) by subtracting all components needed for each day of production successively from inventory until the inventory was exhausted. The number of days that would bring inventory to zero was that component's days of inventory.
Unfortunately, the new system had no capability for computing this value and planners found that to generate it, they had to page through hundreds of scheduled orders, sorted by finished SKU, use the software's capability for reverse BOM explosion to get the components, total the needed components by SKU in a spreadsheet and then manually subtract the totals one day at a time from the inventory, also provided by the system. The software selected for the new system had no capability to produce the required metric. Needless to state, the manual steps completely derailed the workflow and the planners revolted.
Resolution
Under pressure to finish the implementation, the project team resolved the system shortcomings by writing a custom report in Microsoft VBA (Visual Basic for Applications) and Excel. This required four additional weeks at roughly $60,000 per week:
* Three additional weeks of interviews with planners to understand the metrics and development work by a VBA programmer
* Followed by one additional week of testing by the frustrated and increasingly skeptical planners.
In spite of the efforts, the completed solution was an unsatisfactory compromise between mitigating budget overrun and delivering the required reporting capabilities.
Underlying problems
* Failure to appreciate the importance of existing reports and metrics to planner workflow
* Inadequate communication between planners and the project team in the early stages of the project
* Failure to adequately screen candidate software packages for advanced reporting capabilities
Best practices that might have prevented the problems
* First off, the project team needs to prepare a list of detailed requirements by involving end users and then conduct a careful evaluation of several packages to find the one that best fulfills them.
* End users, those who will be working with the new system on a daily basis, should be included in the project implementation phase early on. Managers need to give these key users time off from their normal duties to contribute their expertise to the project. This commitment requires the support of top management.
* Rapid prototyping provides a basic system to users who then have a tactile understanding of what the new system will look like and how it will behave.
Case 2:
Requirements
* Implementation of a demand/supply matching system for two separate PC assembly plants, one owned by the company and the other, a contract facility.
* The system was needed to support new channel programs designed to facilitate replenishment of reseller inventory by allowing resellers to share requirements via EDI (electronic data interchange). This was an ambitious departure from existing procedures that relied on telephone communication between resellers and demand planners.
Problem
The project schedule was based solely on the start of the new channel programs without regard to resource constraints. In addition, the supply chain software vendor gave optimistic release dates for the software to be used, which were taken as firm by client management.
Even working 65-70 hours per week, the undersized project team of 15 people had no hope of conducting a thorough design and test implementation. To make matters worse, less than three weeks were allotted for receiving the new server, installing the software on it, and configuring it to run the software in a live setting. The vendor consistently failed to meet its expected release dates due to other projects and clients. Resellers could not keep up with required milestones for the implementation of EDI capabilities.
Nearly three months into the project, almost at the proposed conversion date, the project team and management conceded defeat.
Resolution
The project timeline was redrawn by factoring in the number of skilled resources available, realistic software release dates, and firm delivery dates for the hardware server. Also, the new plan included the development of interfaces to allow resellers to input inventory and demand data independent of EDI. The system went live six months after the original conversion date. Estimated budget overrun: $2.5 million.
Underlying problems
* Implementation was squeezed into an overly aggressive three-month project schedule to support the inauguration of three new reseller channel programs.
* Failure to realize the barriers to be overcome in implementing new business processes, i.e., obtaining commitments from resellers to share inventory data with demand planners
Best practices that might have prevented the problems
* Timelines should always be constructed using a bottom-up approach, where project milestones are determined by the availability of people, software, and hardware.
* No supply chain management solution will work unless the business processes it is designed to support are agreed upon by the parties involved. Obtaining this agreement should be an ongoing process that starts before the technical aspects of the project begin and continues through the implementation phase by allowing all organizational entities, both internal and external, to understand the new changes.
Case 3:
Background and Requirements
* Large, multinational semiconductor manufacturer
* Supply chain planning software implementation at the headquarter planning division responsible for creating production requirements for seven wafer fabs and assembly/test facilities and allocating supply to customer orders
* The new system was to support four main activities:
1. facilitate development of consensus forecasts
2. allocate different categories of supply to forecasts and orders based on business rules
3. generate finite capacity plans and schedules to be passed to manufacturing sites
4. promise orders to customers based on supply allocated from inventory as well as planned and actual production
* Systems to support all four activities were implemented in parallel using a "Big Bang" approach
Problem
During the user test, in which headquarter planners were allowed to play around with the system tested version of the software and make suggestions, the project team was inundated with requests for additional functionality. The project team dictated each of these to the software vendor who was responsible for making customizations to the core software. Not only was the vendor unable to make all the requested modifications in time, it viewed the changes as well beyond the originally agreed upon scope. Deadlines slipped and the development environment became chaotic with all the requested changes, which caused more delays.
Resolution
Client top management finally intervened and put a freeze on modifications to the software. It also split the project into four phases based on each headquarter planning activity to allow the project team to focus on fewer requirements at one time. The last phase of the project was completed nearly one year after the originally scheduled "Big Bang" conversion date. Estimated budget overrun: $4 million.
Underlying problems
* The client failed to appreciate the size of the undertaking and tried implementing the four areas in parallel to save money.
* The client was unwilling to table new functionality requests for a later release, causing severe scope creep. Best practices that might have prevented the problems
* Where project scope spans multiple business functions, a phased implementation approach can be used to reduce the complexity of the project. Lessons learned in the early phases can often be applied to succeeding phases.
* Project scope should be decided at the outset and adhered to throughout the implementation. New requirements that arise during the implementation should be prioritized and only the "must-have" changes should be made. The rest should be saved for future releases.
Summary
From a broad perspective, many problems result because the complexity of supply chain management projects is underestimated by corporate management.
Often supply chain packages are installed on top of ERP or legacy systems requiring an array of interfaces to be developed. Linking different applications requires a profound level of understanding about the data that is passed back and forth between them.
Apart from technical complexities, managers fail to appreciate the bottom line impact that supply chain management tools can have on their businesses. Even with the expanding compass brought to supply chain by B2B collaboration, this perception will be slow to change.
Finally, it is important to remember that, even with good preparation, experienced resources, and an enthusiastic project team, all supply chain management projects are guaranteed to bring unanticipated problems and dead ends. Successful projects are not those that finish without a hitch, but those in which project managers adapt well to adversity and persevere in spite of the problems.
SOURCE:
http://www.technologyevaluation.com/research/articles/how-supply-chain-projects-morph-into-black-holes-16781/
Identifying the ROI of a Software Application for Supply Chain Management Part 4: Just Give Us the Bottom Line
0 comments 12:53 AM Posted by amma
The competitive environment for every industry grows increasingly intense. Fast, reasonably accurate information about the impact of a software investment decision grows more critical. Many decision-makers look for an exact forecast of return on investment (ROI) from the purchase of a supply chain management application. At least four very real challenges make such perfect information elusive. Commonly, executives meet these challenges with responses that are not carefully considered. The challenges and the corresponding reactionary refrains are as follows:
1. Limited time exists to perform analysis - "We need to know now!"
2. Business analysis skills are lacking - "We are looking for the vendor to tell us!"
3. The data to perform the analysis are almost always not available in the corporate databases - "We have tons of data, but we don't have it broken down like that."
4. It is always difficult to predict the future … like forecasting, certain laws about a prediction of ROI will forever hold true…
* the prediction will always be wrong
* the prediction will always change for as long as the analysis continues
* someone is going to be held accountable for the prediction
- "Just give us the bottom line!"
After a quick look at these issues, one might question the effort to undertake the analysis to predict an ROI, as well as the validity of the outcome. Perfect, or even complete, information may not be feasible, but if a few basic principles are followed, some analytical work can provide an understanding of the potential for bottom line impact. It can also yield insight into the root causes of undesirable symptoms from which your business may be suffering.
The reactions of some decision-makers to each of the four challenges that are listed above provide a convenient outline for exploring a more thoughtful and strategic approach to evaluating a potential investment in supply chain management software.
About This Note: This is a four part note, each part addressing one of the four challenges.
Part One covered "We need to know now!"
Part Two covered "We are looking for the vendor to tell us!"
Part Three discusses the challenge of performing the data analysis.
Part 4. "Just give us the bottom line!"
This reaction to the need to understand the future impact of an investment decision is reminiscent of an individual who wants to know what stock they should buy. This person does not want to learn about industry performance. He or she is not interested in the relative competitive strengths of one company versus those of the other companies in the same industry. Nor is this person motivated to research financial statements in order to understand what might be driving a company's performance or whether that performance is getting better or worse. Such an individual simply wants to know if it will be a good investment and how much can be made at the end of 12 months if it is sold. So he or she scans a list of stock picks in one of the many financial publications, chooses the company ranked at the top, and then "places a bet" because at that point, the decision is little more than a bet based on an uninformed hunch. It is likely that this person will be sadly disappointed in the return. The investor will probably try to recover the loss with an equally unconsidered investment decision, leading to a cycle of poorly informed decisions. Obviously, this individual is putting the amount of money about to be invested at great risk because he or she has latched on to an answer without context.
In the same way, decision-makers in a company may rush to a "bottom-line" conclusion, only to have their efforts frustrated because they did not take the time, or do the work, necessary to gain some understanding of what is driving their pain and how their investment decision may affect those drivers. This will often lead to additional decisions that are made without adequate research and consideration in an effort to recover from the first one.
Where To Start
An investment in supply chain management software may accrue to your company benefits that manifest themselves through four strategic effects. They are top line revenue growth, reducing requirements for working capital, return on assets, and higher margins. The intermediate effects and the metrics (bulleted) that drive them are outlined below:
Top Line Revenue Growth
Product/service Innovation
* Reduced time from concept to production
* Less frequent engineering change orders after production release
* Increased rate of innovation
Customer Satisfaction
* Better on-time delivery (Less canceled orders; also few late penalties)
* Higher quality (fewer returns)
Reduced Requirements for Working Capital
* Finished goods inventory
* WIP inventory
* Raw materials inventory
* Inventory obsolescence
Higher Return on Fixed Assets (plant and equipment)
Higher Margins
* Lower shipping costs (to customers, premium and otherwise; internal distribution)
* Reduced late penalties
* Lower manufacturing costs (reduced setups, downtime and overtime, better resource allocation)
* Lower scrap
* Improved product mix
* Reduced inventory carrying cost
Improvements in the above metrics can be driven by the following capabilities in a supply chain management application:
* Collaborative Product Design
* Collaborative Planning and Forecasting
* Optimized Manufacturing Planning
* Inventory Planning and Optimization
* Synchronized Planning
* Powerful Detailed Scheduling
* Accurate Order Promising
* Optimized Transportation Routing
* Statistical Process Control
The Causal Metrics Matrix in Figure 3 summarizes how supply chain management software capabilities interact with opportunities for business improvement. It shows metrics across the top that lead to overall improvement in competitive position along the four dimensions previously outlined-top line revenue growth, more available working capital, higher return on assets, and a reduced overall cost structure. Down the left side are the capabilities of supply chain management software that drive improvement in the metrics across the top, and as a result, move the business toward the overall business objectives.
SOURCE:
http://www.technologyevaluation.com/research/articles/identifying-the-roi-of-a-software-application-for-supply-chain-management-part-4-just-give-us-the-bottom-line-16423/
1. Limited time exists to perform analysis - "We need to know now!"
2. Business analysis skills are lacking - "We are looking for the vendor to tell us!"
3. The data to perform the analysis are almost always not available in the corporate databases - "We have tons of data, but we don't have it broken down like that."
4. It is always difficult to predict the future … like forecasting, certain laws about a prediction of ROI will forever hold true…
* the prediction will always be wrong
* the prediction will always change for as long as the analysis continues
* someone is going to be held accountable for the prediction
- "Just give us the bottom line!"
After a quick look at these issues, one might question the effort to undertake the analysis to predict an ROI, as well as the validity of the outcome. Perfect, or even complete, information may not be feasible, but if a few basic principles are followed, some analytical work can provide an understanding of the potential for bottom line impact. It can also yield insight into the root causes of undesirable symptoms from which your business may be suffering.
The reactions of some decision-makers to each of the four challenges that are listed above provide a convenient outline for exploring a more thoughtful and strategic approach to evaluating a potential investment in supply chain management software.
About This Note: This is a four part note, each part addressing one of the four challenges.
Part One covered "We need to know now!"
Part Two covered "We are looking for the vendor to tell us!"
Part Three discusses the challenge of performing the data analysis.
Part 4. "Just give us the bottom line!"
This reaction to the need to understand the future impact of an investment decision is reminiscent of an individual who wants to know what stock they should buy. This person does not want to learn about industry performance. He or she is not interested in the relative competitive strengths of one company versus those of the other companies in the same industry. Nor is this person motivated to research financial statements in order to understand what might be driving a company's performance or whether that performance is getting better or worse. Such an individual simply wants to know if it will be a good investment and how much can be made at the end of 12 months if it is sold. So he or she scans a list of stock picks in one of the many financial publications, chooses the company ranked at the top, and then "places a bet" because at that point, the decision is little more than a bet based on an uninformed hunch. It is likely that this person will be sadly disappointed in the return. The investor will probably try to recover the loss with an equally unconsidered investment decision, leading to a cycle of poorly informed decisions. Obviously, this individual is putting the amount of money about to be invested at great risk because he or she has latched on to an answer without context.
In the same way, decision-makers in a company may rush to a "bottom-line" conclusion, only to have their efforts frustrated because they did not take the time, or do the work, necessary to gain some understanding of what is driving their pain and how their investment decision may affect those drivers. This will often lead to additional decisions that are made without adequate research and consideration in an effort to recover from the first one.
Where To Start
An investment in supply chain management software may accrue to your company benefits that manifest themselves through four strategic effects. They are top line revenue growth, reducing requirements for working capital, return on assets, and higher margins. The intermediate effects and the metrics (bulleted) that drive them are outlined below:
Top Line Revenue Growth
Product/service Innovation
* Reduced time from concept to production
* Less frequent engineering change orders after production release
* Increased rate of innovation
Customer Satisfaction
* Better on-time delivery (Less canceled orders; also few late penalties)
* Higher quality (fewer returns)
Reduced Requirements for Working Capital
* Finished goods inventory
* WIP inventory
* Raw materials inventory
* Inventory obsolescence
Higher Return on Fixed Assets (plant and equipment)
Higher Margins
* Lower shipping costs (to customers, premium and otherwise; internal distribution)
* Reduced late penalties
* Lower manufacturing costs (reduced setups, downtime and overtime, better resource allocation)
* Lower scrap
* Improved product mix
* Reduced inventory carrying cost
Improvements in the above metrics can be driven by the following capabilities in a supply chain management application:
* Collaborative Product Design
* Collaborative Planning and Forecasting
* Optimized Manufacturing Planning
* Inventory Planning and Optimization
* Synchronized Planning
* Powerful Detailed Scheduling
* Accurate Order Promising
* Optimized Transportation Routing
* Statistical Process Control
The Causal Metrics Matrix in Figure 3 summarizes how supply chain management software capabilities interact with opportunities for business improvement. It shows metrics across the top that lead to overall improvement in competitive position along the four dimensions previously outlined-top line revenue growth, more available working capital, higher return on assets, and a reduced overall cost structure. Down the left side are the capabilities of supply chain management software that drive improvement in the metrics across the top, and as a result, move the business toward the overall business objectives.
SOURCE:
http://www.technologyevaluation.com/research/articles/identifying-the-roi-of-a-software-application-for-supply-chain-management-part-4-just-give-us-the-bottom-line-16423/
The competitive environment for every industry grows increasingly intense. Fast, reasonably accurate information about the impact of a software investment decision grows more critical. Many decision-makers look for an exact forecast of return on investment (ROI) from the purchase of a supply chain management application. At least four very real challenges make such perfect information elusive. Commonly, executives meet these challenges with responses that are not carefully considered. The challenges and the corresponding reactionary refrains are as follows:
1. Limited time exists to perform analysis - "We need to know now!"
2. Business analysis skills are lacking - "We are looking for the vendor to tell us!"
3. The data to perform the analysis are almost always not available in the corporate databases - "We have tons of data, but we don't have it broken down like that."
4. It is always difficult to predict the future … like forecasting, certain laws about a prediction of ROI will forever hold true…
* the prediction will always be wrong
* the prediction will always change for as long as the analysis continues
* someone is going to be held accountable for the prediction
- "Just give us the bottom line!"
After a quick look at these issues, one might question the effort to undertake the analysis to predict an ROI, as well as the validity of the outcome. Perfect, or even complete, information may not be feasible, but if a few basic principles are followed, some analytical work can provide an understanding of the potential for bottom line impact. It can also yield insight into the root causes of undesirable symptoms from which your business may be suffering.
The reactions of some decision-makers to each of the four challenges that are listed above provide a convenient outline for exploring a more thoughtful and strategic approach to evaluating a potential investment in supply chain management software.
About This Note: This is a four part note, each part addressing one of the four challenges.
Part One covered "We need to know now!"
Part Two covered "We are looking for the vendor to tell us!"
Part Three discusses the challenge of performing the data analysis.
Part 4. "Just give us the bottom line!"
This reaction to the need to understand the future impact of an investment decision is reminiscent of an individual who wants to know what stock they should buy. This person does not want to learn about industry performance. He or she is not interested in the relative competitive strengths of one company versus those of the other companies in the same industry. Nor is this person motivated to research financial statements in order to understand what might be driving a company's performance or whether that performance is getting better or worse. Such an individual simply wants to know if it will be a good investment and how much can be made at the end of 12 months if it is sold. So he or she scans a list of stock picks in one of the many financial publications, chooses the company ranked at the top, and then "places a bet" because at that point, the decision is little more than a bet based on an uninformed hunch. It is likely that this person will be sadly disappointed in the return. The investor will probably try to recover the loss with an equally unconsidered investment decision, leading to a cycle of poorly informed decisions. Obviously, this individual is putting the amount of money about to be invested at great risk because he or she has latched on to an answer without context.
In the same way, decision-makers in a company may rush to a "bottom-line" conclusion, only to have their efforts frustrated because they did not take the time, or do the work, necessary to gain some understanding of what is driving their pain and how their investment decision may affect those drivers. This will often lead to additional decisions that are made without adequate research and consideration in an effort to recover from the first one.
Where To Start
An investment in supply chain management software may accrue to your company benefits that manifest themselves through four strategic effects. They are top line revenue growth, reducing requirements for working capital, return on assets, and higher margins. The intermediate effects and the metrics (bulleted) that drive them are outlined below:
Top Line Revenue Growth
Product/service Innovation
* Reduced time from concept to production
* Less frequent engineering change orders after production release
* Increased rate of innovation
Customer Satisfaction
* Better on-time delivery (Less canceled orders; also few late penalties)
* Higher quality (fewer returns)
Reduced Requirements for Working Capital
* Finished goods inventory
* WIP inventory
* Raw materials inventory
* Inventory obsolescence
Higher Return on Fixed Assets (plant and equipment)
Higher Margins
* Lower shipping costs (to customers, premium and otherwise; internal distribution)
* Reduced late penalties
* Lower manufacturing costs (reduced setups, downtime and overtime, better resource allocation)
* Lower scrap
* Improved product mix
* Reduced inventory carrying cost
Improvements in the above metrics can be driven by the following capabilities in a supply chain management application:
* Collaborative Product Design
* Collaborative Planning and Forecasting
* Optimized Manufacturing Planning
* Inventory Planning and Optimization
* Synchronized Planning
* Powerful Detailed Scheduling
* Accurate Order Promising
* Optimized Transportation Routing
* Statistical Process Control
The Causal Metrics Matrix in Figure 3 summarizes how supply chain management software capabilities interact with opportunities for business improvement. It shows metrics across the top that lead to overall improvement in competitive position along the four dimensions previously outlined-top line revenue growth, more available working capital, higher return on assets, and a reduced overall cost structure. Down the left side are the capabilities of supply chain management software that drive improvement in the metrics across the top, and as a result, move the business toward the overall business objectives.
SOURCE:
http://www.technologyevaluation.com/research/articles/identifying-the-roi-of-a-software-application-for-supply-chain-management-part-4-just-give-us-the-bottom-line-16423/
1. Limited time exists to perform analysis - "We need to know now!"
2. Business analysis skills are lacking - "We are looking for the vendor to tell us!"
3. The data to perform the analysis are almost always not available in the corporate databases - "We have tons of data, but we don't have it broken down like that."
4. It is always difficult to predict the future … like forecasting, certain laws about a prediction of ROI will forever hold true…
* the prediction will always be wrong
* the prediction will always change for as long as the analysis continues
* someone is going to be held accountable for the prediction
- "Just give us the bottom line!"
After a quick look at these issues, one might question the effort to undertake the analysis to predict an ROI, as well as the validity of the outcome. Perfect, or even complete, information may not be feasible, but if a few basic principles are followed, some analytical work can provide an understanding of the potential for bottom line impact. It can also yield insight into the root causes of undesirable symptoms from which your business may be suffering.
The reactions of some decision-makers to each of the four challenges that are listed above provide a convenient outline for exploring a more thoughtful and strategic approach to evaluating a potential investment in supply chain management software.
About This Note: This is a four part note, each part addressing one of the four challenges.
Part One covered "We need to know now!"
Part Two covered "We are looking for the vendor to tell us!"
Part Three discusses the challenge of performing the data analysis.
Part 4. "Just give us the bottom line!"
This reaction to the need to understand the future impact of an investment decision is reminiscent of an individual who wants to know what stock they should buy. This person does not want to learn about industry performance. He or she is not interested in the relative competitive strengths of one company versus those of the other companies in the same industry. Nor is this person motivated to research financial statements in order to understand what might be driving a company's performance or whether that performance is getting better or worse. Such an individual simply wants to know if it will be a good investment and how much can be made at the end of 12 months if it is sold. So he or she scans a list of stock picks in one of the many financial publications, chooses the company ranked at the top, and then "places a bet" because at that point, the decision is little more than a bet based on an uninformed hunch. It is likely that this person will be sadly disappointed in the return. The investor will probably try to recover the loss with an equally unconsidered investment decision, leading to a cycle of poorly informed decisions. Obviously, this individual is putting the amount of money about to be invested at great risk because he or she has latched on to an answer without context.
In the same way, decision-makers in a company may rush to a "bottom-line" conclusion, only to have their efforts frustrated because they did not take the time, or do the work, necessary to gain some understanding of what is driving their pain and how their investment decision may affect those drivers. This will often lead to additional decisions that are made without adequate research and consideration in an effort to recover from the first one.
Where To Start
An investment in supply chain management software may accrue to your company benefits that manifest themselves through four strategic effects. They are top line revenue growth, reducing requirements for working capital, return on assets, and higher margins. The intermediate effects and the metrics (bulleted) that drive them are outlined below:
Top Line Revenue Growth
Product/service Innovation
* Reduced time from concept to production
* Less frequent engineering change orders after production release
* Increased rate of innovation
Customer Satisfaction
* Better on-time delivery (Less canceled orders; also few late penalties)
* Higher quality (fewer returns)
Reduced Requirements for Working Capital
* Finished goods inventory
* WIP inventory
* Raw materials inventory
* Inventory obsolescence
Higher Return on Fixed Assets (plant and equipment)
Higher Margins
* Lower shipping costs (to customers, premium and otherwise; internal distribution)
* Reduced late penalties
* Lower manufacturing costs (reduced setups, downtime and overtime, better resource allocation)
* Lower scrap
* Improved product mix
* Reduced inventory carrying cost
Improvements in the above metrics can be driven by the following capabilities in a supply chain management application:
* Collaborative Product Design
* Collaborative Planning and Forecasting
* Optimized Manufacturing Planning
* Inventory Planning and Optimization
* Synchronized Planning
* Powerful Detailed Scheduling
* Accurate Order Promising
* Optimized Transportation Routing
* Statistical Process Control
The Causal Metrics Matrix in Figure 3 summarizes how supply chain management software capabilities interact with opportunities for business improvement. It shows metrics across the top that lead to overall improvement in competitive position along the four dimensions previously outlined-top line revenue growth, more available working capital, higher return on assets, and a reduced overall cost structure. Down the left side are the capabilities of supply chain management software that drive improvement in the metrics across the top, and as a result, move the business toward the overall business objectives.
SOURCE:
http://www.technologyevaluation.com/research/articles/identifying-the-roi-of-a-software-application-for-supply-chain-management-part-4-just-give-us-the-bottom-line-16423/
Does Supply Chain Management Software Make Sense in Wholesale Distribution? Part 2: The Critical Objectives
0 comments 12:52 AM Posted by amma
Growing competitive pressures compel strategies and tactics that yield efficiency and efficacy within virtual supply chains. This is especially true for middle tier suppliers. For example, distributors are finding that they need managers who are not only good expediters and know their products, but who also understand how to use decision support tools to make their work more effective. Advances in information technology now make it more feasible for distributors to adopt these tools such as supply chain management software. This paper examines the steel service center segment of the wholesale distribution industry as a case in point of the challenges facing distributors and the relief offered through supply chain software.
This is Part Two of a three-part note. Part One defined the Challenge faced by wholesale distributors. This part discusses the Critical Objectives in meeting this challenge. Part Three covers meeting the objectives with Supply Chain Management Software.
The Critical Objectives
As anyone in the wholesale distribution business knows, there are some objectives that are critical to removing time and money from operations and enhancing competitive advantage. They include:
* Optimizing inventory investment
* Ensuring service
* Sourcing effectively
* Maximizing return on assets
The structure of the steel industry provides a detailed perspective for examining the special attention that distributors must pay to these objectives. While steel service centers face some specific concerns, many of the challenges pervade the distribution business in general.
Optimizing Inventory Investment
A small proportion of the inventory will have some consistency in demand, but for the bulk of the SKU's, demand will often be lumpy or intermittent. Not all steel of a given dimension will have the same quality or properties. For example, hardness, tensile strength, and surface quality may all vary. Inventory supplies for various end uses must have the appropriate properties associated with quality. The inventory is heavy and expensive to transport, so movement should be minimized. Not only must steel service centers manage unprocessed steel (plate, coil, bar, etc.), but OEM's are increasingly asking their steel service centers to hold processed materials (slit coil, cut-to-length, plasma cut patterns, etc.) for just-in-time delivery as well, increasing pressure on margins and taxing their ability to manage inventory.
Ensuring Service
Achieving the key milestone of quality service remains a non-trivial problem. Simply increasing overall inventory levels is not only unprofitable, but also ineffectual. The right inventory of the appropriate quality needs to move to the right place, at the right time, and at the right cost. This means that raw material purchases must be carefully timed and allocated to the service center locations. Processing schedules must be reliable and flexible. Finished goods inventories must be managed for extremely short delivery lead times and for exacting quality standards. Outbound trucks have to be scheduled precisely, loaded efficiently and routed optimally. Naturally, all shipments should be closely tracked.
Sourcing Effectively
Careful planning must coordinate purchases with mill rolling schedules while synchronizing supplies with projected demand. Challenges exist here because mill schedules are inflexible and result in relatively infrequent delivery opportunities. As a result, service centers will often need to hold significant levels of inventory. Mill purchases may need to be supplemented with opportunistic purchases from other service centers. Achieving the right blend of procurement opportunities is crucial to profitability and a very significant challenge.
Achieving Return on Assets
Very expensive, precision equipment is required to handle and process steel. While machines often have some overlapping capabilities, different machines that perform the same function cannot necessarily process the same order. Machinery with more exact tolerances must be used for certain end applications. Also, similar machines often have different processing rates. These factors must be considered when planning long term capacity. If too little capacity exists, then the service center may not be able to respond quickly to changes in demand. If too much exists, then the investment is not producing sufficient return.
Equipment considerations must be carefully, but quickly, evaluated when scheduling operations. Setups should be considered. While separate setup stations are sometimes used to build the setup for the next run, setup time may still be reduced through sequencing jobs in a manner that simultaneously considers tradeoffs among total setup time, demand priority, order due date, penalties for being late, and inventory risk.
This concludes Part Two of a three-part note. Part One discussed the Challenges faced by wholesale distribution. Part Three will cover meeting the objectives with Supply Chain Management Software.
About the Author
MARK WELLS has worked for the past 20 years on many aspects supply chain management from within industry, as a supply chain consultant, and as part of a software development organization. For two years, he worked for a steel service center as an internal consultant. He holds an MBA from Drexel University where he has also taught operations management and operations research. He currently works for the applications development division of Oracle Corporation, focusing on supply chain planning.
SOURCE:
http://www.technologyevaluation.com/research/articles/does-supply-chain-management-software-make-sense-in-wholesale-distribution-part-2-the-critical-objectives-16468/
This is Part Two of a three-part note. Part One defined the Challenge faced by wholesale distributors. This part discusses the Critical Objectives in meeting this challenge. Part Three covers meeting the objectives with Supply Chain Management Software.
The Critical Objectives
As anyone in the wholesale distribution business knows, there are some objectives that are critical to removing time and money from operations and enhancing competitive advantage. They include:
* Optimizing inventory investment
* Ensuring service
* Sourcing effectively
* Maximizing return on assets
The structure of the steel industry provides a detailed perspective for examining the special attention that distributors must pay to these objectives. While steel service centers face some specific concerns, many of the challenges pervade the distribution business in general.
Optimizing Inventory Investment
A small proportion of the inventory will have some consistency in demand, but for the bulk of the SKU's, demand will often be lumpy or intermittent. Not all steel of a given dimension will have the same quality or properties. For example, hardness, tensile strength, and surface quality may all vary. Inventory supplies for various end uses must have the appropriate properties associated with quality. The inventory is heavy and expensive to transport, so movement should be minimized. Not only must steel service centers manage unprocessed steel (plate, coil, bar, etc.), but OEM's are increasingly asking their steel service centers to hold processed materials (slit coil, cut-to-length, plasma cut patterns, etc.) for just-in-time delivery as well, increasing pressure on margins and taxing their ability to manage inventory.
Ensuring Service
Achieving the key milestone of quality service remains a non-trivial problem. Simply increasing overall inventory levels is not only unprofitable, but also ineffectual. The right inventory of the appropriate quality needs to move to the right place, at the right time, and at the right cost. This means that raw material purchases must be carefully timed and allocated to the service center locations. Processing schedules must be reliable and flexible. Finished goods inventories must be managed for extremely short delivery lead times and for exacting quality standards. Outbound trucks have to be scheduled precisely, loaded efficiently and routed optimally. Naturally, all shipments should be closely tracked.
Sourcing Effectively
Careful planning must coordinate purchases with mill rolling schedules while synchronizing supplies with projected demand. Challenges exist here because mill schedules are inflexible and result in relatively infrequent delivery opportunities. As a result, service centers will often need to hold significant levels of inventory. Mill purchases may need to be supplemented with opportunistic purchases from other service centers. Achieving the right blend of procurement opportunities is crucial to profitability and a very significant challenge.
Achieving Return on Assets
Very expensive, precision equipment is required to handle and process steel. While machines often have some overlapping capabilities, different machines that perform the same function cannot necessarily process the same order. Machinery with more exact tolerances must be used for certain end applications. Also, similar machines often have different processing rates. These factors must be considered when planning long term capacity. If too little capacity exists, then the service center may not be able to respond quickly to changes in demand. If too much exists, then the investment is not producing sufficient return.
Equipment considerations must be carefully, but quickly, evaluated when scheduling operations. Setups should be considered. While separate setup stations are sometimes used to build the setup for the next run, setup time may still be reduced through sequencing jobs in a manner that simultaneously considers tradeoffs among total setup time, demand priority, order due date, penalties for being late, and inventory risk.
This concludes Part Two of a three-part note. Part One discussed the Challenges faced by wholesale distribution. Part Three will cover meeting the objectives with Supply Chain Management Software.
About the Author
MARK WELLS has worked for the past 20 years on many aspects supply chain management from within industry, as a supply chain consultant, and as part of a software development organization. For two years, he worked for a steel service center as an internal consultant. He holds an MBA from Drexel University where he has also taught operations management and operations research. He currently works for the applications development division of Oracle Corporation, focusing on supply chain planning.
SOURCE:
http://www.technologyevaluation.com/research/articles/does-supply-chain-management-software-make-sense-in-wholesale-distribution-part-2-the-critical-objectives-16468/
Growing competitive pressures compel strategies and tactics that yield efficiency and efficacy within virtual supply chains. This is especially true for middle tier suppliers. For example, distributors are finding that they need managers who are not only good expediters and know their products, but who also understand how to use decision support tools to make their work more effective. Advances in information technology now make it more feasible for distributors to adopt these tools such as supply chain management software. This paper examines the steel service center segment of the wholesale distribution industry as a case in point of the challenges facing distributors and the relief offered through supply chain software.
This is Part Two of a three-part note. Part One defined the Challenge faced by wholesale distributors. This part discusses the Critical Objectives in meeting this challenge. Part Three covers meeting the objectives with Supply Chain Management Software.
The Critical Objectives
As anyone in the wholesale distribution business knows, there are some objectives that are critical to removing time and money from operations and enhancing competitive advantage. They include:
* Optimizing inventory investment
* Ensuring service
* Sourcing effectively
* Maximizing return on assets
The structure of the steel industry provides a detailed perspective for examining the special attention that distributors must pay to these objectives. While steel service centers face some specific concerns, many of the challenges pervade the distribution business in general.
Optimizing Inventory Investment
A small proportion of the inventory will have some consistency in demand, but for the bulk of the SKU's, demand will often be lumpy or intermittent. Not all steel of a given dimension will have the same quality or properties. For example, hardness, tensile strength, and surface quality may all vary. Inventory supplies for various end uses must have the appropriate properties associated with quality. The inventory is heavy and expensive to transport, so movement should be minimized. Not only must steel service centers manage unprocessed steel (plate, coil, bar, etc.), but OEM's are increasingly asking their steel service centers to hold processed materials (slit coil, cut-to-length, plasma cut patterns, etc.) for just-in-time delivery as well, increasing pressure on margins and taxing their ability to manage inventory.
Ensuring Service
Achieving the key milestone of quality service remains a non-trivial problem. Simply increasing overall inventory levels is not only unprofitable, but also ineffectual. The right inventory of the appropriate quality needs to move to the right place, at the right time, and at the right cost. This means that raw material purchases must be carefully timed and allocated to the service center locations. Processing schedules must be reliable and flexible. Finished goods inventories must be managed for extremely short delivery lead times and for exacting quality standards. Outbound trucks have to be scheduled precisely, loaded efficiently and routed optimally. Naturally, all shipments should be closely tracked.
Sourcing Effectively
Careful planning must coordinate purchases with mill rolling schedules while synchronizing supplies with projected demand. Challenges exist here because mill schedules are inflexible and result in relatively infrequent delivery opportunities. As a result, service centers will often need to hold significant levels of inventory. Mill purchases may need to be supplemented with opportunistic purchases from other service centers. Achieving the right blend of procurement opportunities is crucial to profitability and a very significant challenge.
Achieving Return on Assets
Very expensive, precision equipment is required to handle and process steel. While machines often have some overlapping capabilities, different machines that perform the same function cannot necessarily process the same order. Machinery with more exact tolerances must be used for certain end applications. Also, similar machines often have different processing rates. These factors must be considered when planning long term capacity. If too little capacity exists, then the service center may not be able to respond quickly to changes in demand. If too much exists, then the investment is not producing sufficient return.
Equipment considerations must be carefully, but quickly, evaluated when scheduling operations. Setups should be considered. While separate setup stations are sometimes used to build the setup for the next run, setup time may still be reduced through sequencing jobs in a manner that simultaneously considers tradeoffs among total setup time, demand priority, order due date, penalties for being late, and inventory risk.
This concludes Part Two of a three-part note. Part One discussed the Challenges faced by wholesale distribution. Part Three will cover meeting the objectives with Supply Chain Management Software.
About the Author
MARK WELLS has worked for the past 20 years on many aspects supply chain management from within industry, as a supply chain consultant, and as part of a software development organization. For two years, he worked for a steel service center as an internal consultant. He holds an MBA from Drexel University where he has also taught operations management and operations research. He currently works for the applications development division of Oracle Corporation, focusing on supply chain planning.
SOURCE:
http://www.technologyevaluation.com/research/articles/does-supply-chain-management-software-make-sense-in-wholesale-distribution-part-2-the-critical-objectives-16468/
This is Part Two of a three-part note. Part One defined the Challenge faced by wholesale distributors. This part discusses the Critical Objectives in meeting this challenge. Part Three covers meeting the objectives with Supply Chain Management Software.
The Critical Objectives
As anyone in the wholesale distribution business knows, there are some objectives that are critical to removing time and money from operations and enhancing competitive advantage. They include:
* Optimizing inventory investment
* Ensuring service
* Sourcing effectively
* Maximizing return on assets
The structure of the steel industry provides a detailed perspective for examining the special attention that distributors must pay to these objectives. While steel service centers face some specific concerns, many of the challenges pervade the distribution business in general.
Optimizing Inventory Investment
A small proportion of the inventory will have some consistency in demand, but for the bulk of the SKU's, demand will often be lumpy or intermittent. Not all steel of a given dimension will have the same quality or properties. For example, hardness, tensile strength, and surface quality may all vary. Inventory supplies for various end uses must have the appropriate properties associated with quality. The inventory is heavy and expensive to transport, so movement should be minimized. Not only must steel service centers manage unprocessed steel (plate, coil, bar, etc.), but OEM's are increasingly asking their steel service centers to hold processed materials (slit coil, cut-to-length, plasma cut patterns, etc.) for just-in-time delivery as well, increasing pressure on margins and taxing their ability to manage inventory.
Ensuring Service
Achieving the key milestone of quality service remains a non-trivial problem. Simply increasing overall inventory levels is not only unprofitable, but also ineffectual. The right inventory of the appropriate quality needs to move to the right place, at the right time, and at the right cost. This means that raw material purchases must be carefully timed and allocated to the service center locations. Processing schedules must be reliable and flexible. Finished goods inventories must be managed for extremely short delivery lead times and for exacting quality standards. Outbound trucks have to be scheduled precisely, loaded efficiently and routed optimally. Naturally, all shipments should be closely tracked.
Sourcing Effectively
Careful planning must coordinate purchases with mill rolling schedules while synchronizing supplies with projected demand. Challenges exist here because mill schedules are inflexible and result in relatively infrequent delivery opportunities. As a result, service centers will often need to hold significant levels of inventory. Mill purchases may need to be supplemented with opportunistic purchases from other service centers. Achieving the right blend of procurement opportunities is crucial to profitability and a very significant challenge.
Achieving Return on Assets
Very expensive, precision equipment is required to handle and process steel. While machines often have some overlapping capabilities, different machines that perform the same function cannot necessarily process the same order. Machinery with more exact tolerances must be used for certain end applications. Also, similar machines often have different processing rates. These factors must be considered when planning long term capacity. If too little capacity exists, then the service center may not be able to respond quickly to changes in demand. If too much exists, then the investment is not producing sufficient return.
Equipment considerations must be carefully, but quickly, evaluated when scheduling operations. Setups should be considered. While separate setup stations are sometimes used to build the setup for the next run, setup time may still be reduced through sequencing jobs in a manner that simultaneously considers tradeoffs among total setup time, demand priority, order due date, penalties for being late, and inventory risk.
This concludes Part Two of a three-part note. Part One discussed the Challenges faced by wholesale distribution. Part Three will cover meeting the objectives with Supply Chain Management Software.
About the Author
MARK WELLS has worked for the past 20 years on many aspects supply chain management from within industry, as a supply chain consultant, and as part of a software development organization. For two years, he worked for a steel service center as an internal consultant. He holds an MBA from Drexel University where he has also taught operations management and operations research. He currently works for the applications development division of Oracle Corporation, focusing on supply chain planning.
SOURCE:
http://www.technologyevaluation.com/research/articles/does-supply-chain-management-software-make-sense-in-wholesale-distribution-part-2-the-critical-objectives-16468/
PeopleSoft Delivers Oxymoron In 'Supply Chain in a Box'
0 comments 12:52 AM Posted by amma
At its annual user conference in late October, PeopleSoft trumpeted the availability of its revamped supply chain management solution ambitiously titled, PeopleSoft Supply Chain in a Box. The new solution combines applications for customer management, e-commerce, order fulfillment, planning, and supply chain analytics and delivers them via multiple channels including an Internet portal and handheld devices. PeopleSoft claims the "Box" automates a large variety of business functions from managing sales leads to planning, filling orders, and collecting cash. Customers will be able to check the status of orders, account balances and payment histories, and place orders on-line.
According to Mike Frandsen, Vice President and General Manager of PeopleSoft's Supply Chain Division, "PeopleSoft Supply Chain in a Box is a completely new way of implementing an end-to-end supply chain solution. This pre-assembled solution can begin paying back a customer's investment immediately." Though the software may enable the stated functions, the proposition that it can deliver them in a pre-assembled, pre-packaged and pre-configured manner stretches the limits of imagination.
Market Impact
PeopleSoft Supply Chain in a Box is hardly the first supply chain software product promising pre-packaged functionality and rapid deployment. Pure play supply chain management vendors like i2 Technologies and Logility have offered configurable pieces of the overall supply chain puzzle for many years, but have never offered a complete solution "in a box". One reason is that these solutions, like the supply chains they support, are enormously complex.
The possibility of shrink-wrapping software to represent and support a supply chain, really a network linking a company's internal operations with external suppliers and customers, is not easy to believe. To us, a package that comes "in a box" is ready to install and run, with at most an hour or so spent choosing parameters from a predefined list or using a simple configuration wizard. Can a product that claims to automate business processes across enterprises really arrive in a box? Such a packaged suite of applications would have to seamlessly touch critical points within the systems of all of a company's trading partners and produce immediate benefits. Would that this was so, but we fear that the claim is incredible even in the era of XML and wireless communication.
Brash announcements by ERP vendors aimed at cutting a way into the supply chain management market are common, of course, and PeopleSoft's claims are no less extravagant than others are. The announcement may serve to attract attention in the short term, but only proven application of its supply chain solutions will enable the vendor to contend on an equal footing with SAP, J.D. Edwards, and Oracle.
User Recommendations
We are sure that there are small organizations with simple supply chains for which the product might well run "out of the box." But in general, users would do well to take PeopleSoft's claims with a vein of salt and maintain realistic expectations regarding the challenges they will face in integrating their supply chains. Don't buy this or any other system on the basis of such over worn vendor hype as "immediate return on investment," "rapid deployment," and "seamless integration out of the box." Do a careful selection process and ask each bidder to provide a realistic estimate of the time and cost of installation; give preference to those vendors who will back up their estimates with rebates or free services.
SOURCE:
http://www.technologyevaluation.com/research/articles/peoplesoft-delivers-oxymoron-in-supply-chain-in-a-box-16211/
According to Mike Frandsen, Vice President and General Manager of PeopleSoft's Supply Chain Division, "PeopleSoft Supply Chain in a Box is a completely new way of implementing an end-to-end supply chain solution. This pre-assembled solution can begin paying back a customer's investment immediately." Though the software may enable the stated functions, the proposition that it can deliver them in a pre-assembled, pre-packaged and pre-configured manner stretches the limits of imagination.
Market Impact
PeopleSoft Supply Chain in a Box is hardly the first supply chain software product promising pre-packaged functionality and rapid deployment. Pure play supply chain management vendors like i2 Technologies and Logility have offered configurable pieces of the overall supply chain puzzle for many years, but have never offered a complete solution "in a box". One reason is that these solutions, like the supply chains they support, are enormously complex.
The possibility of shrink-wrapping software to represent and support a supply chain, really a network linking a company's internal operations with external suppliers and customers, is not easy to believe. To us, a package that comes "in a box" is ready to install and run, with at most an hour or so spent choosing parameters from a predefined list or using a simple configuration wizard. Can a product that claims to automate business processes across enterprises really arrive in a box? Such a packaged suite of applications would have to seamlessly touch critical points within the systems of all of a company's trading partners and produce immediate benefits. Would that this was so, but we fear that the claim is incredible even in the era of XML and wireless communication.
Brash announcements by ERP vendors aimed at cutting a way into the supply chain management market are common, of course, and PeopleSoft's claims are no less extravagant than others are. The announcement may serve to attract attention in the short term, but only proven application of its supply chain solutions will enable the vendor to contend on an equal footing with SAP, J.D. Edwards, and Oracle.
User Recommendations
We are sure that there are small organizations with simple supply chains for which the product might well run "out of the box." But in general, users would do well to take PeopleSoft's claims with a vein of salt and maintain realistic expectations regarding the challenges they will face in integrating their supply chains. Don't buy this or any other system on the basis of such over worn vendor hype as "immediate return on investment," "rapid deployment," and "seamless integration out of the box." Do a careful selection process and ask each bidder to provide a realistic estimate of the time and cost of installation; give preference to those vendors who will back up their estimates with rebates or free services.
SOURCE:
http://www.technologyevaluation.com/research/articles/peoplesoft-delivers-oxymoron-in-supply-chain-in-a-box-16211/
At its annual user conference in late October, PeopleSoft trumpeted the availability of its revamped supply chain management solution ambitiously titled, PeopleSoft Supply Chain in a Box. The new solution combines applications for customer management, e-commerce, order fulfillment, planning, and supply chain analytics and delivers them via multiple channels including an Internet portal and handheld devices. PeopleSoft claims the "Box" automates a large variety of business functions from managing sales leads to planning, filling orders, and collecting cash. Customers will be able to check the status of orders, account balances and payment histories, and place orders on-line.
According to Mike Frandsen, Vice President and General Manager of PeopleSoft's Supply Chain Division, "PeopleSoft Supply Chain in a Box is a completely new way of implementing an end-to-end supply chain solution. This pre-assembled solution can begin paying back a customer's investment immediately." Though the software may enable the stated functions, the proposition that it can deliver them in a pre-assembled, pre-packaged and pre-configured manner stretches the limits of imagination.
Market Impact
PeopleSoft Supply Chain in a Box is hardly the first supply chain software product promising pre-packaged functionality and rapid deployment. Pure play supply chain management vendors like i2 Technologies and Logility have offered configurable pieces of the overall supply chain puzzle for many years, but have never offered a complete solution "in a box". One reason is that these solutions, like the supply chains they support, are enormously complex.
The possibility of shrink-wrapping software to represent and support a supply chain, really a network linking a company's internal operations with external suppliers and customers, is not easy to believe. To us, a package that comes "in a box" is ready to install and run, with at most an hour or so spent choosing parameters from a predefined list or using a simple configuration wizard. Can a product that claims to automate business processes across enterprises really arrive in a box? Such a packaged suite of applications would have to seamlessly touch critical points within the systems of all of a company's trading partners and produce immediate benefits. Would that this was so, but we fear that the claim is incredible even in the era of XML and wireless communication.
Brash announcements by ERP vendors aimed at cutting a way into the supply chain management market are common, of course, and PeopleSoft's claims are no less extravagant than others are. The announcement may serve to attract attention in the short term, but only proven application of its supply chain solutions will enable the vendor to contend on an equal footing with SAP, J.D. Edwards, and Oracle.
User Recommendations
We are sure that there are small organizations with simple supply chains for which the product might well run "out of the box." But in general, users would do well to take PeopleSoft's claims with a vein of salt and maintain realistic expectations regarding the challenges they will face in integrating their supply chains. Don't buy this or any other system on the basis of such over worn vendor hype as "immediate return on investment," "rapid deployment," and "seamless integration out of the box." Do a careful selection process and ask each bidder to provide a realistic estimate of the time and cost of installation; give preference to those vendors who will back up their estimates with rebates or free services.
SOURCE:
http://www.technologyevaluation.com/research/articles/peoplesoft-delivers-oxymoron-in-supply-chain-in-a-box-16211/
According to Mike Frandsen, Vice President and General Manager of PeopleSoft's Supply Chain Division, "PeopleSoft Supply Chain in a Box is a completely new way of implementing an end-to-end supply chain solution. This pre-assembled solution can begin paying back a customer's investment immediately." Though the software may enable the stated functions, the proposition that it can deliver them in a pre-assembled, pre-packaged and pre-configured manner stretches the limits of imagination.
Market Impact
PeopleSoft Supply Chain in a Box is hardly the first supply chain software product promising pre-packaged functionality and rapid deployment. Pure play supply chain management vendors like i2 Technologies and Logility have offered configurable pieces of the overall supply chain puzzle for many years, but have never offered a complete solution "in a box". One reason is that these solutions, like the supply chains they support, are enormously complex.
The possibility of shrink-wrapping software to represent and support a supply chain, really a network linking a company's internal operations with external suppliers and customers, is not easy to believe. To us, a package that comes "in a box" is ready to install and run, with at most an hour or so spent choosing parameters from a predefined list or using a simple configuration wizard. Can a product that claims to automate business processes across enterprises really arrive in a box? Such a packaged suite of applications would have to seamlessly touch critical points within the systems of all of a company's trading partners and produce immediate benefits. Would that this was so, but we fear that the claim is incredible even in the era of XML and wireless communication.
Brash announcements by ERP vendors aimed at cutting a way into the supply chain management market are common, of course, and PeopleSoft's claims are no less extravagant than others are. The announcement may serve to attract attention in the short term, but only proven application of its supply chain solutions will enable the vendor to contend on an equal footing with SAP, J.D. Edwards, and Oracle.
User Recommendations
We are sure that there are small organizations with simple supply chains for which the product might well run "out of the box." But in general, users would do well to take PeopleSoft's claims with a vein of salt and maintain realistic expectations regarding the challenges they will face in integrating their supply chains. Don't buy this or any other system on the basis of such over worn vendor hype as "immediate return on investment," "rapid deployment," and "seamless integration out of the box." Do a careful selection process and ask each bidder to provide a realistic estimate of the time and cost of installation; give preference to those vendors who will back up their estimates with rebates or free services.
SOURCE:
http://www.technologyevaluation.com/research/articles/peoplesoft-delivers-oxymoron-in-supply-chain-in-a-box-16211/
Supply Chain Management Audio Conference Transcript
0 comments 12:49 AM Posted by amma
This is a transcript of an audio conference on Supply Chain Management conducted on May 24, 2000.
Introduction
Good morning everyone, my name is Steve McVey and I head-up the supply chain management research areas for TechnologyEvaluation.Com. This morning we're going to discuss a proven, best of breed methodology for evaluating and selecting a supply chain management solution. During the presentation, we will use TechnologyEvaluation.Com's patented online selection engine, WebTESS, to guide you through a live, real time evaluation and selection. We will then review the critical differentiating supply chain management criteria, as well as detailed comparisons between i2 Technologies, Manugistics, Aspen Technology, Logility, and Adexa.
Overview
I'm going to begin with an overview of problems and solutions relating to technology selection, starting first with the problem:
According to our research, over 80% of enterprise technology evaluations run over time and budget, and once completed, over 50% of the implementations fail to meet functional and total cost expectations. There are three main reasons that project teams run into trouble.
1. They have no effective way to identify the critical vendor and product questions necessary to successfully initiate the evaluation process.
2. They have no ability to prioritize the different criteria, once identified, relative to one another. As a result, final priorities are often more the result of internal political agendas than true needs and requirements.
3. And finally, project teams have no ability to gather objective, validated, updated data on the vendor alternatives. As you may well know, vendors have a tendency to exaggerate product, service, and corporate capabilities if it enables them to move to the next phase of the deal.
So, what's the solution?
The solution is to create a structured, repeatable process for evaluating technology solutions and the vendors that provide them. Best practices drawn from our clients that have completed internal technology selections suggest that project teams should examine five key categories of criteria. The first two categories examine product specific capabilities, while the remaining three investigate the software vendor's overall corporate capabilities.
So let's review these criteria categories.
Number 1: Product Functionality - Product functionality is the most obvious evaluation criterion and plays a dominant role in supply chain management software selections. Simply put, this evaluates the features and functions delivered by the product as it currently exists. Together with technology and architecture, product functionality often makes up over 90 percent of the overall importance within IT selections, but this is probably too high. Other criteria such as service/support, corporate viability, and strategy should make a stronger contribution.
Number 2: Product Technology - Product technology defines the technical architecture of the product, and the technological environment in which the product can run successfully. Sub criteria include things like application architecture, software usability and administration, and platform and database support. Relative to the other evaluation criteria, best practice selections place a lower relative importance on the product technology criterion. However, this apparently lower importance is deceptive, because the product technology criterion usually houses the majority of an organization's mandatory criteria, which usually include server, client, protocol and database support, application scalability and other architectural capabilities. The definition of mandatory criteria within this set often allows the client to quickly narrow the long list of potential vendors to a short list of applicable solutions that pass muster relative to the most basic mandatory selection criteria.
Number 3: Corporate Service and Support - This criterion defines the capability of the vendor to provide implementation services and ongoing support. Repeated industry surveys have identified this category as the single largest differentiating factor among potential selection options, as well as the greatest indicator of ultimate user implementation success and long term vendor viability. A proper professional services and support evaluation should include both subjective, qualitative measures validated by current product users, and objective, quantitative criteria within both the professional services and product support categories. Service and support includes categories such as consulting, systems integration, project management skills, geographic coverage, language and time coverage of the vendor help desk, and delivery mediums.
Number 4: Corporate Viability - Corporate viability is a critical, yet often overlooked category that examines the financial and management strength of the vendor. Given the huge number of dollars spent on IT procurements, not to mention their strategic importance, the financial stability of the vendor simply can't be stressed too much. The vendor viability category in WebTESS combines quantitative Wall Street ratio and metric analysis with qualitative management and corporate evaluations. Only by combining the two components can IT executives accurately assess the risk and benefit of corporate investment in a specific product and vendor option.
Number 5: Corporate Strategy - Corporate strategy evaluates the corporate road map and strategy of the software vendor with regard to specific timelines of how the product will be developed, sold, and supported within the supply chain management market. This is the most strategic and long term set of evaluation criteria, and rates how effectively the stated vendor's three to five year product, support and sales strategy maps to the overall market direction. Any dissonance between the stated vendor direction and market direction is a cause for concern, and should be rectified by the vendor through either a shift in corporate policy or a detailed and market validated explanation for the discord.
Now that we have given an overview of the requirements of a technology selection, I would like to move on to an overview of the Supply Chain Management Software Marketplace and as it exists today.
Trend Note
The Internet is reshaping the enterprise applications market by making possible unprecedented visibility and information sharing between enterprises. Nowhere is this transformation more evident than in the supply chain management software market. The fact is, prior to the Internet, much of what supply chain management promised was never realized beyond a conceptual level. Supply chains that seamlessly joined customers and suppliers were easy to draw on paper, but building the link without Internet technology was practically impossible. The trends that have emerged in recent years capitalize on the possibilities for collaboration, information sharing, and instantaneous communication that the Internet provides.
These trends are:
* Collaborative Planning / CPFR
* Internet Procurement
* Portals
* New Pricing Models
Collaborative Planning / CPFR
The first of these is Collaborative Planning and specifically, a subset of this called Continuous Planning, Forecasting and Replenishment or CPFR. CPFR is a set of processes for trading partners, manufacturers and retailers, to share forecast and replenishment information. It is a superb example of collaborative planning and embodies all of the attributes and purposes of collaboration. CPFR succeeds earlier initiatives such as Efficient Consumer Response, Quick Response, and Vendor Managed Inventory and benefits from strong support from standards organizations like VICS (Voluntary Interindustry Commerce Standards), primarily geared toward the retail industry and to a lesser extent, RosettaNet which focuses on developing many other business-to-business standards.
CPFR is emerging from its pilot phase with the help of proponents like retailers Kmart, Wal-Mart, and Sports Authority as well as consulting firms like Andersen Consulting. Several supply chain management and ERP vendors have recognized the potential for CPFR and are building standard protocols and features into their collaboration products to support it. A good example is Logility, which was an early champion of collaborative planning. Its Voyager XPS and XES products are the culmination of several years of CPFR-compliant architecture development.
According to a 1999 study by Consumer Goods Magazine, more than half of the 224 executives surveyed from consumer goods manufacturers representing apparel/accessories, food and beverage, packaged goods, and home furnishing/appliance companies said they expected to implement "Internet Order Handling" in the next three years. Forty-four percent said they would implement CPFR specifically. Although it demands a high level of organizational commitment to succeed, CPFR can bring bottom line benefits to companies that sign onto the challenge. We expect CPFR to gain broader acceptance as the novelty of online trading exchanges supporting indirect material procurement wears off and users seek more structured methods to control relationships between customers and suppliers.
User Impact
For all its potential and the extensive blueprints developed by VICS and others, CPFR is relatively new to the vendor world. Apart from Logility and SAP, few supply enterprise application vendors offer products that directly support CPFR processes according to VICS standards. We expect CPFR to gain broader acceptance as the novelty of online trading exchanges wears off and users seek more structured methods to control relationships between customers and suppliers. Though CPFR can be applied in any industry segment, the retail consumer goods market has been the primary adopter to date. Retail users should find out more about CPFR if accurate forecasts are a priority with external and internal customers.
Internet Procurement
The second major trend impacting supply chain management is Internet procurement. Online communities where companies can buy and sell products have become very popular in the past year. Companies look to these communities to reduce administrative costs, improve turnaround, and to help control inventory and spending. In response, supply chain management vendors are developing tools and applications targeted at this segment of the Internet procurement market. Some industry observers have expressed concern over the impact that such exchanges have on profit margins by driving prices down and predict that "e-markets" will be used exclusively for "spot purchasing" of commodity-level goods and services.
E-markets fall into different categories depending on where the software resides, who controls or sponsors the market, and whether direct or indirect goods procurement is available. Though current exchanges predominantly involve only spot purchases, there is a move towards making e-markets responsible for the full trading lifecycle, which spans procurement, supply chain management, and customer relationship management.
Because so many vendors offer e-procurement capabilities, it is becoming increasingly important for them to distinguish their portals from competitors. We believe that supply chain management vendors are uniquely capable of doing this by providing value-added services that relate to procurement in fundamental ways. i2 Technologies is an excellent example of a supply chain management vendor that is successfully bringing its domain expertise in advanced planning and scheduling to provide the backend capabilities for procurement over the Internet.
User Impact
Users who want to cut their indirect material costs should not delay in selecting an appropriate vendor that offers online procurement, either a package vendor or Internet-based portal. For direct material purchases, where on-time deliveries are an imperative, users should partner with an SCP package vendor or a portal backed by supply chain planning that can bring the intelligent backend planning capabilities to fulfill online material purchases. A good choice to consider is i2, which has begun to offer advanced planning services such as logistics and transportation planning along with its growing cadre of vertical marketplace portals.
Portals
Less exciting than Internet marketplaces perhaps, but nonetheless important are portals. Vertical portals open a window of communication between supply chain planning vendors and communities of customers, partners, content providers, advertisers, and, in most cases, the general public. A good example of a basic portal (detached from hosted services and procurement) is Aspen Technology's ProcessCity.com, a collaborative web site for the process industries. The portal offers process industry-specific news and event information, discussion forums, career guidance and employment information, and access to consultant expertise among other information.
Portals are a natural result of competition, the need for better customer support, and the Internet. In addition to benefits for participating users, the forums allow vendors to foster more dynamic relationships with customers and prospects than would be possible through corporate websites, annual user conferences, or helpdesks.
Apart from advertising revenues and content sales, the future dollar impact of portals on supply chain management market growth is difficult to quantify. Portals will drive partnerships and even consolidations among supply chain management vendors and Internet enablers such as, in Aspen's case, Extricity and Syntra Technologies. If nothing else, portals also afford more backward vendors a low cost, low risk entry into the Internet marketplace.
User Impact
Users should view portals in the same way as vendors: as a place to share and receive information. Privacy issues exist, of course, and users should be careful to avoid sharing potentially sensitive information such as implementation success/failure stories unless the portal provider agrees to keep it confidential.
New Pricing Models
The fourth trend that is on the rise concerns new pricing models. Unfortunately for vendors, customer expectations tend to grow faster than their ability to furnish competent, easy-to-use products to satisfy the expectations. High client hopes usually fall to the ground sometime during implementation and leave a lasting and often bitter impression.
Since fewer than one in four projects deliver workable solutions that survive six years or more, clients are increasingly wary of committing huge sums of money before they have obtained measurable return on their investment. In response, the licensing of supply chain management software products is undergoing a fundamental shift from traditional up-front fees to incremental or success-based pricing. Success-based pricing is a popular alternative especially for small businesses and startups that lack the IT budgets of larger, established companies. It allows these companies to acquire software for a lower entry cost and pay more only as their business expands.
Vendors who embark on the transition to the new model are sure to experience growing pains, however. As traditional license revenues decline, recurring revenue generates comparable figures only after time. This can quickly lead to negative earnings and eventual success is by no means assured. Organizationally, vendors have to make fundamental changes to sales and support processes for transaction-based pricing.
User Impact
For users, success-based pricing models offer a "pay-as-you-grow" alternative to up-front license fees. Though often sold as cheap and convenient, these models can bring unexpected IT costs down the road. As with any long-term contract, prospective clients should carefully review the fine print to understand the implications that transactional revenues will have on future expenses. A transaction may appear cheap at, say $10 per, but detailed growth projections that factor in per-transaction increases, milestone increases, as well as other contract attributes are a must for companies to understand the magnitude of future payments.
Conclusion
In conclusion, with the Internet making access to supply chain planning tools both cheaper and easier, it is difficult to imagine why a manufacturing company would remain without them. Success-based pricing is probably the most compelling financial incentive for small to midsize companies to consider a supply chain software application acquisition. Actual charges vary widely depending on the type of application, but typically range from $5 to 15 per transaction (where transactions may be purchases, orders, shipments, truck lanes, etc.).
Large and small companies can benefit immediately from e-market portals. By signing on to an e-market, whether a public exchange or a private network hosted by the vendor or a large "anchor tenant" supplier, a corporation can effectively outsource its entire tactical procurement operation, at least for commodity items.
CPFR will be the collaborative paradigm of choice for direct goods procurement and non-commodities over the next five years as it allows large companies with several key suppliers and/or resellers to individualize their relationships while at the same time exploiting the speed and efficiency of the Internet. For the longer term, CPFR will provide the framework for end-to-end collaboration across the entire supply chain.
We believe these trends and others will play a large role in shaping the enterprise applications market over the next several years.
WEBTESS DEMO
Now, I think it's time we moved to the demonstration. Although everyone has been given instructions on getting to the WebTESS Supply Chain Management Selection Model on our site, I'll go through it again, briefly just in case some of you may have had difficulty.
First, go to our website, www.technologyevaluation.com. From the front page, select the tab marked "Vendor Selection Tool." Then, within the blue-bordered box titled "Current Category: All Categories", select the "GO" button beside "Supply Chain Management." This should spawn another browser window in which you should see the WebTESS application. You will want to maximize this window for best viewing. The great beauty of WebTESS is its ability to provide project teams with a statistically valid framework for comparing vendor options. In it, we have scored each vendor according to its ability to meet the criteria. WebTESS aggregates the scores upward through the hierarchy, while simultaneously taking into account the effect of local and global weights.
Now, I would like everyone to click on the Select Choices option on the menu bar at the top part of the browser window. I'll be referring to the top menu bar several times during the demonstration. It is located in the top frame of the WebTESS browser window to the right of the spinning globe logo. In the "Select Choices" window, you should see a list of vendors on the left hand portion of the window and a description on the right hand side.
Clicking on a vendor in the left-hand side panel brings up a detailed description of the vendor option in the right-hand side panel. By clicking the check boxes next to the vendor, you can include or exclude it from your selection.
We'll touch briefly on these vendors in order, starting with Aspen Technology.
Aspen Technology
Aspen Technology made its mark selling software applications for process simulation and control, though its supply chain management applications form a large percentage of its total revenues. Aspen appears as a strong supply chain management challenger for giving its supply chain applications a prominent position among its product offerings and its leadership in the process manufacturing industries.
Aspen Technology Strengths
* Aspen's supply chain management suite offers a high degree of functional flexibility: Aspen's MIMI application provides a feature-rich modeling language that enables users to address a large variety of industrial problems.
* Established customer base in the chemical process industries (CPI): Aspen's customers include 44 of the 50 largest chemical companies, 17 of the 20 largest petroleum refiners, and 16 of the 20 largest pharmaceutical companies.
* Experienced implementation and customer support personnel: Chesapeake has received high praise from consultants and clients for their staff of bright, experienced process engineers and modelers.
Aspen Technology Challenges
* Poor financial showing in FY1999: Aspen's FY1999 revenues of $219.6 million represent a 13% drop over the same period on year ago ($252.6 million). Net losses for the same period in 1999 were $26 million. Part of the drop can be attributed to the reduced IT spending by the petroleum and petrochemicals companies - key markets for Aspen - due to economic factors and obviously Y2K.
* Shortage of trained implementation resources: Implementing much of Aspen's eSupply Chain suite requires highly trained resources to do detailed modeling. Although some templates exist and more are being developed, MIMI, the core of eSupply Chain, is essentially a toolkit that typically involves extensive training of resources when experienced modelers cannot be found.
* Dealing effectively with multiple competitors due to Aspen's broad product offering: The Plantelligence suite is almost ungainly in its variety of applications, including everything from operator training programs to process simulators to supply chain planning. Judicious pruning of non-core applications is needed to better focus corporate resources. Some of this has taken place, but we feel that more is needed.
i2 Technologies
i2 was the dominant supply chain management vendor in 1999 and maintains a significant lead over its competitors in terms of market share. Though its total revenue growth has begun to slow in recent years, the 55% increase it recorded between 1998 and 1999 is still enviable by market standards.
i2 Technologies Strengths
* Strong financial position and commanding market presence: More than any other aspect, i2 is known for its rapid growth rate. In contrast to its competitors' claims, this growth remains unaffected by Y2K remediation spending and general economic downturn.
* Aggressive sales and marketing organization: i2's direct sales force headcount stood at around 700 at the end of 1999, more than twice that of its nearest competitor. At 34%, investment in sales and marketing as a percentage of revenues is the highest of their competitors.
* Innovative approach to marketing and alliances: i2 has successfully remade itself into an e-commerce software company with its Intelligent e-business suite of applications that include the online trading network, TradeMatrix (10/99), its vertical offshoots such as HightechMatrix and Fasturn.com, acquisition of Aspect Development, and partnerships with IBM, Ariba, and others. i2's ability to reinvent itself to capitalize on market trends is evidenced by its consistently high percentage of license revenues.
* Product flexibility: Rhythm provides the capability to satisfy a wide variety of functional requirements and business rules through its custom modeling language, OIL (Object Integration Language). Also, i2 offers a series of vertical industry templates, which allow customers to jump-start their modeling effort.
i2 Technologies Challenges
* Delivering on vision: While able to conceive and articulate architectural visions, i2 has been less successful at delivering fully developed, bug-free applications to support them. Clients and third-party integrators often discover the gap only after the implementation is well underway.
* Business consultants know application, not industry: Business consultants, though skilled in Rhythm applications, often lack industry-specific knowledge. This is in part due to the rapid growth of the company and the inevitable learning curve faced by new staff. i2 relies heavily on implementation partners such as Andersen Consulting and PricewaterhouseCoopers but jurisdiction problems can arise during implementations.
* Reporting capabilities inadequate for many core applications: It is frequently necessary to integrate with a third party reporting tool that provides the flexibility to fulfill customer requirements. The additional and sometimes unplanned for development can be costly and delay project timelines.
* Product Technology: i2 must win the race between transaction volume size and static memory size allowed by existing platforms - a consequence of Rhythm's memory-resident nature. Results of i2's proprietary heuristics and algorithms can be compromised when extensive modeling flexibility is utilized.
Logility
Logility has made significant progress since it was spun off from American Software in 1997. The company grew by a respectable average annual rate of 38% from 1994 to 1998, but slid 22% in fiscal 1999 due to Y2K market malaise, weakness in the global economy, and increased competition from ERP vendors.
Logility Strengths
* Comprehensive supply chain planning product offering: Logility's Voyager supply chain management solutions cover a wide area within supply chain management. Its distribution planning is especially strong in consumer packaged goods.
* Out-of-the-box product: A chief advantage of Voyager over competitive offerings, most notably i2's Rhythm and Chesapeake's MIMI, is the ability to provide a competent solution with little or no customization. It also offers many standard interfaces with major ERP and legacy systems to enable faster implementations. Logility's pre-packaged functionality can also give it an edge over other candidates when demonstrating for prospective clients.
* Headstart in collaborative planning: Logility has a headstart over other supply chain management vendors in terms of collaborative planning. Its Voyager XPS was one of the first applications to embody Collaborative Planning, Forecasting and Replenishment (CPFR) as devised by VICS and Resource Chain Voyager, a precursor to the current applications was installed at client sites as early as 1996.
Logility Challenges
* Building the foundations under its castles: Logility has invested heavily in its move toward application hosting, a market that can have considerable impact on its future livelihood. Though its applications possess attributes that make them well-suited to Internet deployment (e.g., configurable product, mid market focus, CPFR), Logility will need to make considerable investments in product development, marketing, and alliances to make its ASP model successful.
* Dependence on American Software: By our estimates, American Software represents 83% of Logility's indirect channel. While Logility benefits in many ways from its parent company, American's tepid performance calls into question its ability to provide a safety net.
* Poor visibility at highest levels: Although Logility has achieved small-scale success with its marketing approach, it admits to having difficulties selling at the highest levels of management. To effectively compete and grow its business, Logility's sales execution needs to break into senior management, a goal that can be attained through a shift in marketing strategy.
Manugistics
1999 proved to be a very challenging year for Manugistics. Its license revenues dropped by 47% and services revenues dipped slightly below 1998 levels. Manugistics lost market position as it focused on internal reorganization, making wholesale changes to its executive management team, streamlining its operations, and reassessing its corporate strategy.
Manugistics Strengths
* An experienced management team with new ideas and the ability to execute on them. We have to give credit to Greg Owens and his team for generating a great deal of excitement around Manugistics recently and we are seeing this translate to new license deals.
* Manugistics also offers very mature functionality, especially for transportation management and optimization, perhaps the only suite vendor to offer comprehensive and flexible VMI and replenishment modules.
* Manugistics also benefits from probably the largest supply chain customer base of its competitors including i2 and SAP (for supply chain). This gives it a great advantage, if properly utilized, in generating new license and web hosting revenues.
Manugistics Challenges
* Among its challenges, Manugistics' inability to effectively incorporate acquired sales forces into its existing organization contributed to a 30% decline in license revenues in calendar 1999 over the previous year. Also, its fourth quarter 1998 loss was $71.2 million, including $33.1 million for restructuring. These financial difficulties lead to a complete revamping of its executive management team and significantly impaired Manugistics' perception in the marketplace. Business has been picking up, but the company still has ground to cover and lags significantly behind i2.
* Manugistics will also find challenges in making its Internet B2B trading exchanges and application service provider (ASP) model successful. Not the least of its difficulties arise from its late entry into these markets where competition is already fierce. Application service providers face a different set of priorities than traditional software vendors, such as maintaining an ongoing relationship to clients through intermediaries such as application hosting providers, and many changes need to be accomplished within the organization to achieve the transition.
* Traditionally, one of its advantages over newer supply chain management entrants, the implementation expertise and industry knowledge of Manugistics' support staff has shown some signs of loss due to attrition. This is especially true for its transportation group. Though periodic housecleaning can be healthy, high turnover can make potential hires think twice about jumping on board.
Adexa
Adexa, Inc., which is the vendor formerly known as Paragon Management Systems, was incorporated in 1994. Adexa has perennially spent more effort on product development that it has on sales and marketing, a fact that has not helped its profile in the marketplace.
Vendor Strengths
* Broad product suite with advanced features: In iCollaboration, Adexa has built significantly on its original Pacemaker suite, adding product lifecycle management, extended enterprise planning, and collaboration. Other vendors offer broad suites, but Adexa's is the only one that was built from the ground up on a single data model. A host of third party software alliances further extend its applications into electronic procurement, order management, warehouse management, transportation management, and data warehousing.
* Strong vision for expanding supply chain management to multi-enterprise collaboration: Adexa has no plans to peddle Internet trading marketplaces and focuses instead on providing the collaborative decision support capabilities that marketplaces need to fulfill orders effectively. Adexa's vision involves not merely giving customers and suppliers access to iCollaboration via a web browser, but more importantly delivering advanced planning features geared specifically for business-to-business collaboration. The company is also working on intelligent agent technology to automate B2B transactions to improve speed and reduce the level of human intervention.
* Excellent growth: Some of Adexa's growth comes in many cases as a result of being the second choice, acquired by clients who are unsatisfied with their first selection. In instances where Adexa does compete head-to-head with other supply chain management vendors, it often comes out on top due to its ability to demonstrate a working solution.
Vendor Challenges
* Poor visibility in the supply chain management marketplace: As Paragon Management Systems, Adexa failed to capture significant mind share among top level corporate IT professionals, those vested with the power to make buying decisions. As Adexa, the company hopes to shed this anonymity and take part in more software evaluations.
* Reliance on small direct sales force: Adexa's direct sales channel is grossly undersized compared to its competition, especially i2. Adexa had 32 quota-carrying salespersons, which made up 14% of its total employees. This compared poorly to the industry average of 22%, not to mention the fact that its competitors have significantly more salespersons in absolute numbers. Adexa has recently made additions to its sales force, but will require more time and training prior to executing to full potential.
* Lack of capital a barrier to growth: As a private company, Adexa's growth is limited to some extent by the supply of venture capital funding. With the recent decline in software company valuations, private funding will be harder to come by, even for established firms. Although it has accomplished much in terms of product development and alliances, continued growth as a private company may be difficult without significantly diluting its equity base.
Now that we've discussed each of the vendors in our model, let's take a look at some of the other parts of WebTESS.
First, we'll go to the Weigh Criteria section. Do this by clicking on the "weigh criteria" option on the top menu bar.
Weigh Criteria
The weigh criteria screen is used to assign your own customized weights to the selection criteria. Weights represent relative levels of importance for the criteria. Within the decision tree in the left panel, click on any one of the criteria, and its sub criteria will be displayed in the right panel with their respective weights. You can create customized weights by clicking on the colored bars to the right of the criteria.
For the supply chain management model, the weights chosen are based on settings we obtained from past clients and represent a broadly defined standard. Product functionality remains the most important criterion, but is followed closely by service and support. Corporate viability comes next, then product technology and corporate strategy have roughly the same level of importance.
Next, we'll take a look at the vendor ratings. Do this by clicking on the "view ratings" option on the top menu bar.
View Ratings
The view ratings screen displays how the vendors perform across all the criteria defined in the model. You can display comparative ratings by one choice (all the criteria ratings for one vendor are displayed) or by one criterion (all included vendors are rated across the criteria highlighted in the tree in the left panel). To see how one vendor option rates against the criteria, go to the 'view ratings' option on the top menu bar and select the 'one choice for all criteria' option. This brings up a list of all the criteria and shows how the vendor displayed in the 'Option' text box scores. Now - to see a comparison, go again to the 'view ratings' option on the top menu bar and select 'all choices for one criterion.' This lists all vendor options taking part in this selection with their accompanying ratings.
Next, let's see the overall results by bringing up the score card. This is done by clicking on the "score card" option on the top menu bar.
Score Card
The Score Card screen shows both the overall and detailed scores of the selection model choices. The individual choice can be selected from the drop down box below, and its strengths and weaknesses will be displayed on the left. The bottom scoreboard provides detailed comparisons of selected criterion from the left panel. A criterion shows up as a strength if it passes a threshold of 90% percent match and a weakness if it falls below 50%. By expanding the criteria hierarchy to the left, you can drill down into lower levels of the model to do comparisons. The hierarchy can be navigated in exactly the same way as Windows Explorer.
Well, that's a very brief overview of WebTESS and only begins to cover all of its capabilities. It also allows you to create charts and reports and contains a full on-line Help feature. To wrap up, I'll just take a few moments to give you some general pointers on how to use our technology.
Both WebTESS and TESS, the desktop version, offer major advantages if you want to use them for adding to the quality of your own research. Each model is fully documented with comments on the factors and models.
If you want to create a shortlist of vendors because there are some criteria that are really critical to you, look through the model and click on those criteria. You can shortlist the vendors quickly that way, and then run through the rest of the model with those selected vendors.
I should add that our desktop product TESS is also available and you can contact our sales department concerning TESS and model licensing.
Thank you all for participating and please e-mail any additional questions you have to supplychain@technologyevaluation.com and we will get back to you as soon as possible.
SOURCE:
http://www.technologyevaluation.com/research/articles/supply-chain-management-audio-conference-transcript-15893/
Introduction
Good morning everyone, my name is Steve McVey and I head-up the supply chain management research areas for TechnologyEvaluation.Com. This morning we're going to discuss a proven, best of breed methodology for evaluating and selecting a supply chain management solution. During the presentation, we will use TechnologyEvaluation.Com's patented online selection engine, WebTESS, to guide you through a live, real time evaluation and selection. We will then review the critical differentiating supply chain management criteria, as well as detailed comparisons between i2 Technologies, Manugistics, Aspen Technology, Logility, and Adexa.
Overview
I'm going to begin with an overview of problems and solutions relating to technology selection, starting first with the problem:
According to our research, over 80% of enterprise technology evaluations run over time and budget, and once completed, over 50% of the implementations fail to meet functional and total cost expectations. There are three main reasons that project teams run into trouble.
1. They have no effective way to identify the critical vendor and product questions necessary to successfully initiate the evaluation process.
2. They have no ability to prioritize the different criteria, once identified, relative to one another. As a result, final priorities are often more the result of internal political agendas than true needs and requirements.
3. And finally, project teams have no ability to gather objective, validated, updated data on the vendor alternatives. As you may well know, vendors have a tendency to exaggerate product, service, and corporate capabilities if it enables them to move to the next phase of the deal.
So, what's the solution?
The solution is to create a structured, repeatable process for evaluating technology solutions and the vendors that provide them. Best practices drawn from our clients that have completed internal technology selections suggest that project teams should examine five key categories of criteria. The first two categories examine product specific capabilities, while the remaining three investigate the software vendor's overall corporate capabilities.
So let's review these criteria categories.
Number 1: Product Functionality - Product functionality is the most obvious evaluation criterion and plays a dominant role in supply chain management software selections. Simply put, this evaluates the features and functions delivered by the product as it currently exists. Together with technology and architecture, product functionality often makes up over 90 percent of the overall importance within IT selections, but this is probably too high. Other criteria such as service/support, corporate viability, and strategy should make a stronger contribution.
Number 2: Product Technology - Product technology defines the technical architecture of the product, and the technological environment in which the product can run successfully. Sub criteria include things like application architecture, software usability and administration, and platform and database support. Relative to the other evaluation criteria, best practice selections place a lower relative importance on the product technology criterion. However, this apparently lower importance is deceptive, because the product technology criterion usually houses the majority of an organization's mandatory criteria, which usually include server, client, protocol and database support, application scalability and other architectural capabilities. The definition of mandatory criteria within this set often allows the client to quickly narrow the long list of potential vendors to a short list of applicable solutions that pass muster relative to the most basic mandatory selection criteria.
Number 3: Corporate Service and Support - This criterion defines the capability of the vendor to provide implementation services and ongoing support. Repeated industry surveys have identified this category as the single largest differentiating factor among potential selection options, as well as the greatest indicator of ultimate user implementation success and long term vendor viability. A proper professional services and support evaluation should include both subjective, qualitative measures validated by current product users, and objective, quantitative criteria within both the professional services and product support categories. Service and support includes categories such as consulting, systems integration, project management skills, geographic coverage, language and time coverage of the vendor help desk, and delivery mediums.
Number 4: Corporate Viability - Corporate viability is a critical, yet often overlooked category that examines the financial and management strength of the vendor. Given the huge number of dollars spent on IT procurements, not to mention their strategic importance, the financial stability of the vendor simply can't be stressed too much. The vendor viability category in WebTESS combines quantitative Wall Street ratio and metric analysis with qualitative management and corporate evaluations. Only by combining the two components can IT executives accurately assess the risk and benefit of corporate investment in a specific product and vendor option.
Number 5: Corporate Strategy - Corporate strategy evaluates the corporate road map and strategy of the software vendor with regard to specific timelines of how the product will be developed, sold, and supported within the supply chain management market. This is the most strategic and long term set of evaluation criteria, and rates how effectively the stated vendor's three to five year product, support and sales strategy maps to the overall market direction. Any dissonance between the stated vendor direction and market direction is a cause for concern, and should be rectified by the vendor through either a shift in corporate policy or a detailed and market validated explanation for the discord.
Now that we have given an overview of the requirements of a technology selection, I would like to move on to an overview of the Supply Chain Management Software Marketplace and as it exists today.
Trend Note
The Internet is reshaping the enterprise applications market by making possible unprecedented visibility and information sharing between enterprises. Nowhere is this transformation more evident than in the supply chain management software market. The fact is, prior to the Internet, much of what supply chain management promised was never realized beyond a conceptual level. Supply chains that seamlessly joined customers and suppliers were easy to draw on paper, but building the link without Internet technology was practically impossible. The trends that have emerged in recent years capitalize on the possibilities for collaboration, information sharing, and instantaneous communication that the Internet provides.
These trends are:
* Collaborative Planning / CPFR
* Internet Procurement
* Portals
* New Pricing Models
Collaborative Planning / CPFR
The first of these is Collaborative Planning and specifically, a subset of this called Continuous Planning, Forecasting and Replenishment or CPFR. CPFR is a set of processes for trading partners, manufacturers and retailers, to share forecast and replenishment information. It is a superb example of collaborative planning and embodies all of the attributes and purposes of collaboration. CPFR succeeds earlier initiatives such as Efficient Consumer Response, Quick Response, and Vendor Managed Inventory and benefits from strong support from standards organizations like VICS (Voluntary Interindustry Commerce Standards), primarily geared toward the retail industry and to a lesser extent, RosettaNet which focuses on developing many other business-to-business standards.
CPFR is emerging from its pilot phase with the help of proponents like retailers Kmart, Wal-Mart, and Sports Authority as well as consulting firms like Andersen Consulting. Several supply chain management and ERP vendors have recognized the potential for CPFR and are building standard protocols and features into their collaboration products to support it. A good example is Logility, which was an early champion of collaborative planning. Its Voyager XPS and XES products are the culmination of several years of CPFR-compliant architecture development.
According to a 1999 study by Consumer Goods Magazine, more than half of the 224 executives surveyed from consumer goods manufacturers representing apparel/accessories, food and beverage, packaged goods, and home furnishing/appliance companies said they expected to implement "Internet Order Handling" in the next three years. Forty-four percent said they would implement CPFR specifically. Although it demands a high level of organizational commitment to succeed, CPFR can bring bottom line benefits to companies that sign onto the challenge. We expect CPFR to gain broader acceptance as the novelty of online trading exchanges supporting indirect material procurement wears off and users seek more structured methods to control relationships between customers and suppliers.
User Impact
For all its potential and the extensive blueprints developed by VICS and others, CPFR is relatively new to the vendor world. Apart from Logility and SAP, few supply enterprise application vendors offer products that directly support CPFR processes according to VICS standards. We expect CPFR to gain broader acceptance as the novelty of online trading exchanges wears off and users seek more structured methods to control relationships between customers and suppliers. Though CPFR can be applied in any industry segment, the retail consumer goods market has been the primary adopter to date. Retail users should find out more about CPFR if accurate forecasts are a priority with external and internal customers.
Internet Procurement
The second major trend impacting supply chain management is Internet procurement. Online communities where companies can buy and sell products have become very popular in the past year. Companies look to these communities to reduce administrative costs, improve turnaround, and to help control inventory and spending. In response, supply chain management vendors are developing tools and applications targeted at this segment of the Internet procurement market. Some industry observers have expressed concern over the impact that such exchanges have on profit margins by driving prices down and predict that "e-markets" will be used exclusively for "spot purchasing" of commodity-level goods and services.
E-markets fall into different categories depending on where the software resides, who controls or sponsors the market, and whether direct or indirect goods procurement is available. Though current exchanges predominantly involve only spot purchases, there is a move towards making e-markets responsible for the full trading lifecycle, which spans procurement, supply chain management, and customer relationship management.
Because so many vendors offer e-procurement capabilities, it is becoming increasingly important for them to distinguish their portals from competitors. We believe that supply chain management vendors are uniquely capable of doing this by providing value-added services that relate to procurement in fundamental ways. i2 Technologies is an excellent example of a supply chain management vendor that is successfully bringing its domain expertise in advanced planning and scheduling to provide the backend capabilities for procurement over the Internet.
User Impact
Users who want to cut their indirect material costs should not delay in selecting an appropriate vendor that offers online procurement, either a package vendor or Internet-based portal. For direct material purchases, where on-time deliveries are an imperative, users should partner with an SCP package vendor or a portal backed by supply chain planning that can bring the intelligent backend planning capabilities to fulfill online material purchases. A good choice to consider is i2, which has begun to offer advanced planning services such as logistics and transportation planning along with its growing cadre of vertical marketplace portals.
Portals
Less exciting than Internet marketplaces perhaps, but nonetheless important are portals. Vertical portals open a window of communication between supply chain planning vendors and communities of customers, partners, content providers, advertisers, and, in most cases, the general public. A good example of a basic portal (detached from hosted services and procurement) is Aspen Technology's ProcessCity.com, a collaborative web site for the process industries. The portal offers process industry-specific news and event information, discussion forums, career guidance and employment information, and access to consultant expertise among other information.
Portals are a natural result of competition, the need for better customer support, and the Internet. In addition to benefits for participating users, the forums allow vendors to foster more dynamic relationships with customers and prospects than would be possible through corporate websites, annual user conferences, or helpdesks.
Apart from advertising revenues and content sales, the future dollar impact of portals on supply chain management market growth is difficult to quantify. Portals will drive partnerships and even consolidations among supply chain management vendors and Internet enablers such as, in Aspen's case, Extricity and Syntra Technologies. If nothing else, portals also afford more backward vendors a low cost, low risk entry into the Internet marketplace.
User Impact
Users should view portals in the same way as vendors: as a place to share and receive information. Privacy issues exist, of course, and users should be careful to avoid sharing potentially sensitive information such as implementation success/failure stories unless the portal provider agrees to keep it confidential.
New Pricing Models
The fourth trend that is on the rise concerns new pricing models. Unfortunately for vendors, customer expectations tend to grow faster than their ability to furnish competent, easy-to-use products to satisfy the expectations. High client hopes usually fall to the ground sometime during implementation and leave a lasting and often bitter impression.
Since fewer than one in four projects deliver workable solutions that survive six years or more, clients are increasingly wary of committing huge sums of money before they have obtained measurable return on their investment. In response, the licensing of supply chain management software products is undergoing a fundamental shift from traditional up-front fees to incremental or success-based pricing. Success-based pricing is a popular alternative especially for small businesses and startups that lack the IT budgets of larger, established companies. It allows these companies to acquire software for a lower entry cost and pay more only as their business expands.
Vendors who embark on the transition to the new model are sure to experience growing pains, however. As traditional license revenues decline, recurring revenue generates comparable figures only after time. This can quickly lead to negative earnings and eventual success is by no means assured. Organizationally, vendors have to make fundamental changes to sales and support processes for transaction-based pricing.
User Impact
For users, success-based pricing models offer a "pay-as-you-grow" alternative to up-front license fees. Though often sold as cheap and convenient, these models can bring unexpected IT costs down the road. As with any long-term contract, prospective clients should carefully review the fine print to understand the implications that transactional revenues will have on future expenses. A transaction may appear cheap at, say $10 per, but detailed growth projections that factor in per-transaction increases, milestone increases, as well as other contract attributes are a must for companies to understand the magnitude of future payments.
Conclusion
In conclusion, with the Internet making access to supply chain planning tools both cheaper and easier, it is difficult to imagine why a manufacturing company would remain without them. Success-based pricing is probably the most compelling financial incentive for small to midsize companies to consider a supply chain software application acquisition. Actual charges vary widely depending on the type of application, but typically range from $5 to 15 per transaction (where transactions may be purchases, orders, shipments, truck lanes, etc.).
Large and small companies can benefit immediately from e-market portals. By signing on to an e-market, whether a public exchange or a private network hosted by the vendor or a large "anchor tenant" supplier, a corporation can effectively outsource its entire tactical procurement operation, at least for commodity items.
CPFR will be the collaborative paradigm of choice for direct goods procurement and non-commodities over the next five years as it allows large companies with several key suppliers and/or resellers to individualize their relationships while at the same time exploiting the speed and efficiency of the Internet. For the longer term, CPFR will provide the framework for end-to-end collaboration across the entire supply chain.
We believe these trends and others will play a large role in shaping the enterprise applications market over the next several years.
WEBTESS DEMO
Now, I think it's time we moved to the demonstration. Although everyone has been given instructions on getting to the WebTESS Supply Chain Management Selection Model on our site, I'll go through it again, briefly just in case some of you may have had difficulty.
First, go to our website, www.technologyevaluation.com. From the front page, select the tab marked "Vendor Selection Tool." Then, within the blue-bordered box titled "Current Category: All Categories", select the "GO" button beside "Supply Chain Management." This should spawn another browser window in which you should see the WebTESS application. You will want to maximize this window for best viewing. The great beauty of WebTESS is its ability to provide project teams with a statistically valid framework for comparing vendor options. In it, we have scored each vendor according to its ability to meet the criteria. WebTESS aggregates the scores upward through the hierarchy, while simultaneously taking into account the effect of local and global weights.
Now, I would like everyone to click on the Select Choices option on the menu bar at the top part of the browser window. I'll be referring to the top menu bar several times during the demonstration. It is located in the top frame of the WebTESS browser window to the right of the spinning globe logo. In the "Select Choices" window, you should see a list of vendors on the left hand portion of the window and a description on the right hand side.
Clicking on a vendor in the left-hand side panel brings up a detailed description of the vendor option in the right-hand side panel. By clicking the check boxes next to the vendor, you can include or exclude it from your selection.
We'll touch briefly on these vendors in order, starting with Aspen Technology.
Aspen Technology
Aspen Technology made its mark selling software applications for process simulation and control, though its supply chain management applications form a large percentage of its total revenues. Aspen appears as a strong supply chain management challenger for giving its supply chain applications a prominent position among its product offerings and its leadership in the process manufacturing industries.
Aspen Technology Strengths
* Aspen's supply chain management suite offers a high degree of functional flexibility: Aspen's MIMI application provides a feature-rich modeling language that enables users to address a large variety of industrial problems.
* Established customer base in the chemical process industries (CPI): Aspen's customers include 44 of the 50 largest chemical companies, 17 of the 20 largest petroleum refiners, and 16 of the 20 largest pharmaceutical companies.
* Experienced implementation and customer support personnel: Chesapeake has received high praise from consultants and clients for their staff of bright, experienced process engineers and modelers.
Aspen Technology Challenges
* Poor financial showing in FY1999: Aspen's FY1999 revenues of $219.6 million represent a 13% drop over the same period on year ago ($252.6 million). Net losses for the same period in 1999 were $26 million. Part of the drop can be attributed to the reduced IT spending by the petroleum and petrochemicals companies - key markets for Aspen - due to economic factors and obviously Y2K.
* Shortage of trained implementation resources: Implementing much of Aspen's eSupply Chain suite requires highly trained resources to do detailed modeling. Although some templates exist and more are being developed, MIMI, the core of eSupply Chain, is essentially a toolkit that typically involves extensive training of resources when experienced modelers cannot be found.
* Dealing effectively with multiple competitors due to Aspen's broad product offering: The Plantelligence suite is almost ungainly in its variety of applications, including everything from operator training programs to process simulators to supply chain planning. Judicious pruning of non-core applications is needed to better focus corporate resources. Some of this has taken place, but we feel that more is needed.
i2 Technologies
i2 was the dominant supply chain management vendor in 1999 and maintains a significant lead over its competitors in terms of market share. Though its total revenue growth has begun to slow in recent years, the 55% increase it recorded between 1998 and 1999 is still enviable by market standards.
i2 Technologies Strengths
* Strong financial position and commanding market presence: More than any other aspect, i2 is known for its rapid growth rate. In contrast to its competitors' claims, this growth remains unaffected by Y2K remediation spending and general economic downturn.
* Aggressive sales and marketing organization: i2's direct sales force headcount stood at around 700 at the end of 1999, more than twice that of its nearest competitor. At 34%, investment in sales and marketing as a percentage of revenues is the highest of their competitors.
* Innovative approach to marketing and alliances: i2 has successfully remade itself into an e-commerce software company with its Intelligent e-business suite of applications that include the online trading network, TradeMatrix (10/99), its vertical offshoots such as HightechMatrix and Fasturn.com, acquisition of Aspect Development, and partnerships with IBM, Ariba, and others. i2's ability to reinvent itself to capitalize on market trends is evidenced by its consistently high percentage of license revenues.
* Product flexibility: Rhythm provides the capability to satisfy a wide variety of functional requirements and business rules through its custom modeling language, OIL (Object Integration Language). Also, i2 offers a series of vertical industry templates, which allow customers to jump-start their modeling effort.
i2 Technologies Challenges
* Delivering on vision: While able to conceive and articulate architectural visions, i2 has been less successful at delivering fully developed, bug-free applications to support them. Clients and third-party integrators often discover the gap only after the implementation is well underway.
* Business consultants know application, not industry: Business consultants, though skilled in Rhythm applications, often lack industry-specific knowledge. This is in part due to the rapid growth of the company and the inevitable learning curve faced by new staff. i2 relies heavily on implementation partners such as Andersen Consulting and PricewaterhouseCoopers but jurisdiction problems can arise during implementations.
* Reporting capabilities inadequate for many core applications: It is frequently necessary to integrate with a third party reporting tool that provides the flexibility to fulfill customer requirements. The additional and sometimes unplanned for development can be costly and delay project timelines.
* Product Technology: i2 must win the race between transaction volume size and static memory size allowed by existing platforms - a consequence of Rhythm's memory-resident nature. Results of i2's proprietary heuristics and algorithms can be compromised when extensive modeling flexibility is utilized.
Logility
Logility has made significant progress since it was spun off from American Software in 1997. The company grew by a respectable average annual rate of 38% from 1994 to 1998, but slid 22% in fiscal 1999 due to Y2K market malaise, weakness in the global economy, and increased competition from ERP vendors.
Logility Strengths
* Comprehensive supply chain planning product offering: Logility's Voyager supply chain management solutions cover a wide area within supply chain management. Its distribution planning is especially strong in consumer packaged goods.
* Out-of-the-box product: A chief advantage of Voyager over competitive offerings, most notably i2's Rhythm and Chesapeake's MIMI, is the ability to provide a competent solution with little or no customization. It also offers many standard interfaces with major ERP and legacy systems to enable faster implementations. Logility's pre-packaged functionality can also give it an edge over other candidates when demonstrating for prospective clients.
* Headstart in collaborative planning: Logility has a headstart over other supply chain management vendors in terms of collaborative planning. Its Voyager XPS was one of the first applications to embody Collaborative Planning, Forecasting and Replenishment (CPFR) as devised by VICS and Resource Chain Voyager, a precursor to the current applications was installed at client sites as early as 1996.
Logility Challenges
* Building the foundations under its castles: Logility has invested heavily in its move toward application hosting, a market that can have considerable impact on its future livelihood. Though its applications possess attributes that make them well-suited to Internet deployment (e.g., configurable product, mid market focus, CPFR), Logility will need to make considerable investments in product development, marketing, and alliances to make its ASP model successful.
* Dependence on American Software: By our estimates, American Software represents 83% of Logility's indirect channel. While Logility benefits in many ways from its parent company, American's tepid performance calls into question its ability to provide a safety net.
* Poor visibility at highest levels: Although Logility has achieved small-scale success with its marketing approach, it admits to having difficulties selling at the highest levels of management. To effectively compete and grow its business, Logility's sales execution needs to break into senior management, a goal that can be attained through a shift in marketing strategy.
Manugistics
1999 proved to be a very challenging year for Manugistics. Its license revenues dropped by 47% and services revenues dipped slightly below 1998 levels. Manugistics lost market position as it focused on internal reorganization, making wholesale changes to its executive management team, streamlining its operations, and reassessing its corporate strategy.
Manugistics Strengths
* An experienced management team with new ideas and the ability to execute on them. We have to give credit to Greg Owens and his team for generating a great deal of excitement around Manugistics recently and we are seeing this translate to new license deals.
* Manugistics also offers very mature functionality, especially for transportation management and optimization, perhaps the only suite vendor to offer comprehensive and flexible VMI and replenishment modules.
* Manugistics also benefits from probably the largest supply chain customer base of its competitors including i2 and SAP (for supply chain). This gives it a great advantage, if properly utilized, in generating new license and web hosting revenues.
Manugistics Challenges
* Among its challenges, Manugistics' inability to effectively incorporate acquired sales forces into its existing organization contributed to a 30% decline in license revenues in calendar 1999 over the previous year. Also, its fourth quarter 1998 loss was $71.2 million, including $33.1 million for restructuring. These financial difficulties lead to a complete revamping of its executive management team and significantly impaired Manugistics' perception in the marketplace. Business has been picking up, but the company still has ground to cover and lags significantly behind i2.
* Manugistics will also find challenges in making its Internet B2B trading exchanges and application service provider (ASP) model successful. Not the least of its difficulties arise from its late entry into these markets where competition is already fierce. Application service providers face a different set of priorities than traditional software vendors, such as maintaining an ongoing relationship to clients through intermediaries such as application hosting providers, and many changes need to be accomplished within the organization to achieve the transition.
* Traditionally, one of its advantages over newer supply chain management entrants, the implementation expertise and industry knowledge of Manugistics' support staff has shown some signs of loss due to attrition. This is especially true for its transportation group. Though periodic housecleaning can be healthy, high turnover can make potential hires think twice about jumping on board.
Adexa
Adexa, Inc., which is the vendor formerly known as Paragon Management Systems, was incorporated in 1994. Adexa has perennially spent more effort on product development that it has on sales and marketing, a fact that has not helped its profile in the marketplace.
Vendor Strengths
* Broad product suite with advanced features: In iCollaboration, Adexa has built significantly on its original Pacemaker suite, adding product lifecycle management, extended enterprise planning, and collaboration. Other vendors offer broad suites, but Adexa's is the only one that was built from the ground up on a single data model. A host of third party software alliances further extend its applications into electronic procurement, order management, warehouse management, transportation management, and data warehousing.
* Strong vision for expanding supply chain management to multi-enterprise collaboration: Adexa has no plans to peddle Internet trading marketplaces and focuses instead on providing the collaborative decision support capabilities that marketplaces need to fulfill orders effectively. Adexa's vision involves not merely giving customers and suppliers access to iCollaboration via a web browser, but more importantly delivering advanced planning features geared specifically for business-to-business collaboration. The company is also working on intelligent agent technology to automate B2B transactions to improve speed and reduce the level of human intervention.
* Excellent growth: Some of Adexa's growth comes in many cases as a result of being the second choice, acquired by clients who are unsatisfied with their first selection. In instances where Adexa does compete head-to-head with other supply chain management vendors, it often comes out on top due to its ability to demonstrate a working solution.
Vendor Challenges
* Poor visibility in the supply chain management marketplace: As Paragon Management Systems, Adexa failed to capture significant mind share among top level corporate IT professionals, those vested with the power to make buying decisions. As Adexa, the company hopes to shed this anonymity and take part in more software evaluations.
* Reliance on small direct sales force: Adexa's direct sales channel is grossly undersized compared to its competition, especially i2. Adexa had 32 quota-carrying salespersons, which made up 14% of its total employees. This compared poorly to the industry average of 22%, not to mention the fact that its competitors have significantly more salespersons in absolute numbers. Adexa has recently made additions to its sales force, but will require more time and training prior to executing to full potential.
* Lack of capital a barrier to growth: As a private company, Adexa's growth is limited to some extent by the supply of venture capital funding. With the recent decline in software company valuations, private funding will be harder to come by, even for established firms. Although it has accomplished much in terms of product development and alliances, continued growth as a private company may be difficult without significantly diluting its equity base.
Now that we've discussed each of the vendors in our model, let's take a look at some of the other parts of WebTESS.
First, we'll go to the Weigh Criteria section. Do this by clicking on the "weigh criteria" option on the top menu bar.
Weigh Criteria
The weigh criteria screen is used to assign your own customized weights to the selection criteria. Weights represent relative levels of importance for the criteria. Within the decision tree in the left panel, click on any one of the criteria, and its sub criteria will be displayed in the right panel with their respective weights. You can create customized weights by clicking on the colored bars to the right of the criteria.
For the supply chain management model, the weights chosen are based on settings we obtained from past clients and represent a broadly defined standard. Product functionality remains the most important criterion, but is followed closely by service and support. Corporate viability comes next, then product technology and corporate strategy have roughly the same level of importance.
Next, we'll take a look at the vendor ratings. Do this by clicking on the "view ratings" option on the top menu bar.
View Ratings
The view ratings screen displays how the vendors perform across all the criteria defined in the model. You can display comparative ratings by one choice (all the criteria ratings for one vendor are displayed) or by one criterion (all included vendors are rated across the criteria highlighted in the tree in the left panel). To see how one vendor option rates against the criteria, go to the 'view ratings' option on the top menu bar and select the 'one choice for all criteria' option. This brings up a list of all the criteria and shows how the vendor displayed in the 'Option' text box scores. Now - to see a comparison, go again to the 'view ratings' option on the top menu bar and select 'all choices for one criterion.' This lists all vendor options taking part in this selection with their accompanying ratings.
Next, let's see the overall results by bringing up the score card. This is done by clicking on the "score card" option on the top menu bar.
Score Card
The Score Card screen shows both the overall and detailed scores of the selection model choices. The individual choice can be selected from the drop down box below, and its strengths and weaknesses will be displayed on the left. The bottom scoreboard provides detailed comparisons of selected criterion from the left panel. A criterion shows up as a strength if it passes a threshold of 90% percent match and a weakness if it falls below 50%. By expanding the criteria hierarchy to the left, you can drill down into lower levels of the model to do comparisons. The hierarchy can be navigated in exactly the same way as Windows Explorer.
Well, that's a very brief overview of WebTESS and only begins to cover all of its capabilities. It also allows you to create charts and reports and contains a full on-line Help feature. To wrap up, I'll just take a few moments to give you some general pointers on how to use our technology.
Both WebTESS and TESS, the desktop version, offer major advantages if you want to use them for adding to the quality of your own research. Each model is fully documented with comments on the factors and models.
If you want to create a shortlist of vendors because there are some criteria that are really critical to you, look through the model and click on those criteria. You can shortlist the vendors quickly that way, and then run through the rest of the model with those selected vendors.
I should add that our desktop product TESS is also available and you can contact our sales department concerning TESS and model licensing.
Thank you all for participating and please e-mail any additional questions you have to supplychain@technologyevaluation.com and we will get back to you as soon as possible.
SOURCE:
http://www.technologyevaluation.com/research/articles/supply-chain-management-audio-conference-transcript-15893/
This is a transcript of an audio conference on Supply Chain Management conducted on May 24, 2000.
Introduction
Good morning everyone, my name is Steve McVey and I head-up the supply chain management research areas for TechnologyEvaluation.Com. This morning we're going to discuss a proven, best of breed methodology for evaluating and selecting a supply chain management solution. During the presentation, we will use TechnologyEvaluation.Com's patented online selection engine, WebTESS, to guide you through a live, real time evaluation and selection. We will then review the critical differentiating supply chain management criteria, as well as detailed comparisons between i2 Technologies, Manugistics, Aspen Technology, Logility, and Adexa.
Overview
I'm going to begin with an overview of problems and solutions relating to technology selection, starting first with the problem:
According to our research, over 80% of enterprise technology evaluations run over time and budget, and once completed, over 50% of the implementations fail to meet functional and total cost expectations. There are three main reasons that project teams run into trouble.
1. They have no effective way to identify the critical vendor and product questions necessary to successfully initiate the evaluation process.
2. They have no ability to prioritize the different criteria, once identified, relative to one another. As a result, final priorities are often more the result of internal political agendas than true needs and requirements.
3. And finally, project teams have no ability to gather objective, validated, updated data on the vendor alternatives. As you may well know, vendors have a tendency to exaggerate product, service, and corporate capabilities if it enables them to move to the next phase of the deal.
So, what's the solution?
The solution is to create a structured, repeatable process for evaluating technology solutions and the vendors that provide them. Best practices drawn from our clients that have completed internal technology selections suggest that project teams should examine five key categories of criteria. The first two categories examine product specific capabilities, while the remaining three investigate the software vendor's overall corporate capabilities.
So let's review these criteria categories.
Number 1: Product Functionality - Product functionality is the most obvious evaluation criterion and plays a dominant role in supply chain management software selections. Simply put, this evaluates the features and functions delivered by the product as it currently exists. Together with technology and architecture, product functionality often makes up over 90 percent of the overall importance within IT selections, but this is probably too high. Other criteria such as service/support, corporate viability, and strategy should make a stronger contribution.
Number 2: Product Technology - Product technology defines the technical architecture of the product, and the technological environment in which the product can run successfully. Sub criteria include things like application architecture, software usability and administration, and platform and database support. Relative to the other evaluation criteria, best practice selections place a lower relative importance on the product technology criterion. However, this apparently lower importance is deceptive, because the product technology criterion usually houses the majority of an organization's mandatory criteria, which usually include server, client, protocol and database support, application scalability and other architectural capabilities. The definition of mandatory criteria within this set often allows the client to quickly narrow the long list of potential vendors to a short list of applicable solutions that pass muster relative to the most basic mandatory selection criteria.
Number 3: Corporate Service and Support - This criterion defines the capability of the vendor to provide implementation services and ongoing support. Repeated industry surveys have identified this category as the single largest differentiating factor among potential selection options, as well as the greatest indicator of ultimate user implementation success and long term vendor viability. A proper professional services and support evaluation should include both subjective, qualitative measures validated by current product users, and objective, quantitative criteria within both the professional services and product support categories. Service and support includes categories such as consulting, systems integration, project management skills, geographic coverage, language and time coverage of the vendor help desk, and delivery mediums.
Number 4: Corporate Viability - Corporate viability is a critical, yet often overlooked category that examines the financial and management strength of the vendor. Given the huge number of dollars spent on IT procurements, not to mention their strategic importance, the financial stability of the vendor simply can't be stressed too much. The vendor viability category in WebTESS combines quantitative Wall Street ratio and metric analysis with qualitative management and corporate evaluations. Only by combining the two components can IT executives accurately assess the risk and benefit of corporate investment in a specific product and vendor option.
Number 5: Corporate Strategy - Corporate strategy evaluates the corporate road map and strategy of the software vendor with regard to specific timelines of how the product will be developed, sold, and supported within the supply chain management market. This is the most strategic and long term set of evaluation criteria, and rates how effectively the stated vendor's three to five year product, support and sales strategy maps to the overall market direction. Any dissonance between the stated vendor direction and market direction is a cause for concern, and should be rectified by the vendor through either a shift in corporate policy or a detailed and market validated explanation for the discord.
Now that we have given an overview of the requirements of a technology selection, I would like to move on to an overview of the Supply Chain Management Software Marketplace and as it exists today.
Trend Note
The Internet is reshaping the enterprise applications market by making possible unprecedented visibility and information sharing between enterprises. Nowhere is this transformation more evident than in the supply chain management software market. The fact is, prior to the Internet, much of what supply chain management promised was never realized beyond a conceptual level. Supply chains that seamlessly joined customers and suppliers were easy to draw on paper, but building the link without Internet technology was practically impossible. The trends that have emerged in recent years capitalize on the possibilities for collaboration, information sharing, and instantaneous communication that the Internet provides.
These trends are:
* Collaborative Planning / CPFR
* Internet Procurement
* Portals
* New Pricing Models
Collaborative Planning / CPFR
The first of these is Collaborative Planning and specifically, a subset of this called Continuous Planning, Forecasting and Replenishment or CPFR. CPFR is a set of processes for trading partners, manufacturers and retailers, to share forecast and replenishment information. It is a superb example of collaborative planning and embodies all of the attributes and purposes of collaboration. CPFR succeeds earlier initiatives such as Efficient Consumer Response, Quick Response, and Vendor Managed Inventory and benefits from strong support from standards organizations like VICS (Voluntary Interindustry Commerce Standards), primarily geared toward the retail industry and to a lesser extent, RosettaNet which focuses on developing many other business-to-business standards.
CPFR is emerging from its pilot phase with the help of proponents like retailers Kmart, Wal-Mart, and Sports Authority as well as consulting firms like Andersen Consulting. Several supply chain management and ERP vendors have recognized the potential for CPFR and are building standard protocols and features into their collaboration products to support it. A good example is Logility, which was an early champion of collaborative planning. Its Voyager XPS and XES products are the culmination of several years of CPFR-compliant architecture development.
According to a 1999 study by Consumer Goods Magazine, more than half of the 224 executives surveyed from consumer goods manufacturers representing apparel/accessories, food and beverage, packaged goods, and home furnishing/appliance companies said they expected to implement "Internet Order Handling" in the next three years. Forty-four percent said they would implement CPFR specifically. Although it demands a high level of organizational commitment to succeed, CPFR can bring bottom line benefits to companies that sign onto the challenge. We expect CPFR to gain broader acceptance as the novelty of online trading exchanges supporting indirect material procurement wears off and users seek more structured methods to control relationships between customers and suppliers.
User Impact
For all its potential and the extensive blueprints developed by VICS and others, CPFR is relatively new to the vendor world. Apart from Logility and SAP, few supply enterprise application vendors offer products that directly support CPFR processes according to VICS standards. We expect CPFR to gain broader acceptance as the novelty of online trading exchanges wears off and users seek more structured methods to control relationships between customers and suppliers. Though CPFR can be applied in any industry segment, the retail consumer goods market has been the primary adopter to date. Retail users should find out more about CPFR if accurate forecasts are a priority with external and internal customers.
Internet Procurement
The second major trend impacting supply chain management is Internet procurement. Online communities where companies can buy and sell products have become very popular in the past year. Companies look to these communities to reduce administrative costs, improve turnaround, and to help control inventory and spending. In response, supply chain management vendors are developing tools and applications targeted at this segment of the Internet procurement market. Some industry observers have expressed concern over the impact that such exchanges have on profit margins by driving prices down and predict that "e-markets" will be used exclusively for "spot purchasing" of commodity-level goods and services.
E-markets fall into different categories depending on where the software resides, who controls or sponsors the market, and whether direct or indirect goods procurement is available. Though current exchanges predominantly involve only spot purchases, there is a move towards making e-markets responsible for the full trading lifecycle, which spans procurement, supply chain management, and customer relationship management.
Because so many vendors offer e-procurement capabilities, it is becoming increasingly important for them to distinguish their portals from competitors. We believe that supply chain management vendors are uniquely capable of doing this by providing value-added services that relate to procurement in fundamental ways. i2 Technologies is an excellent example of a supply chain management vendor that is successfully bringing its domain expertise in advanced planning and scheduling to provide the backend capabilities for procurement over the Internet.
User Impact
Users who want to cut their indirect material costs should not delay in selecting an appropriate vendor that offers online procurement, either a package vendor or Internet-based portal. For direct material purchases, where on-time deliveries are an imperative, users should partner with an SCP package vendor or a portal backed by supply chain planning that can bring the intelligent backend planning capabilities to fulfill online material purchases. A good choice to consider is i2, which has begun to offer advanced planning services such as logistics and transportation planning along with its growing cadre of vertical marketplace portals.
Portals
Less exciting than Internet marketplaces perhaps, but nonetheless important are portals. Vertical portals open a window of communication between supply chain planning vendors and communities of customers, partners, content providers, advertisers, and, in most cases, the general public. A good example of a basic portal (detached from hosted services and procurement) is Aspen Technology's ProcessCity.com, a collaborative web site for the process industries. The portal offers process industry-specific news and event information, discussion forums, career guidance and employment information, and access to consultant expertise among other information.
Portals are a natural result of competition, the need for better customer support, and the Internet. In addition to benefits for participating users, the forums allow vendors to foster more dynamic relationships with customers and prospects than would be possible through corporate websites, annual user conferences, or helpdesks.
Apart from advertising revenues and content sales, the future dollar impact of portals on supply chain management market growth is difficult to quantify. Portals will drive partnerships and even consolidations among supply chain management vendors and Internet enablers such as, in Aspen's case, Extricity and Syntra Technologies. If nothing else, portals also afford more backward vendors a low cost, low risk entry into the Internet marketplace.
User Impact
Users should view portals in the same way as vendors: as a place to share and receive information. Privacy issues exist, of course, and users should be careful to avoid sharing potentially sensitive information such as implementation success/failure stories unless the portal provider agrees to keep it confidential.
New Pricing Models
The fourth trend that is on the rise concerns new pricing models. Unfortunately for vendors, customer expectations tend to grow faster than their ability to furnish competent, easy-to-use products to satisfy the expectations. High client hopes usually fall to the ground sometime during implementation and leave a lasting and often bitter impression.
Since fewer than one in four projects deliver workable solutions that survive six years or more, clients are increasingly wary of committing huge sums of money before they have obtained measurable return on their investment. In response, the licensing of supply chain management software products is undergoing a fundamental shift from traditional up-front fees to incremental or success-based pricing. Success-based pricing is a popular alternative especially for small businesses and startups that lack the IT budgets of larger, established companies. It allows these companies to acquire software for a lower entry cost and pay more only as their business expands.
Vendors who embark on the transition to the new model are sure to experience growing pains, however. As traditional license revenues decline, recurring revenue generates comparable figures only after time. This can quickly lead to negative earnings and eventual success is by no means assured. Organizationally, vendors have to make fundamental changes to sales and support processes for transaction-based pricing.
User Impact
For users, success-based pricing models offer a "pay-as-you-grow" alternative to up-front license fees. Though often sold as cheap and convenient, these models can bring unexpected IT costs down the road. As with any long-term contract, prospective clients should carefully review the fine print to understand the implications that transactional revenues will have on future expenses. A transaction may appear cheap at, say $10 per, but detailed growth projections that factor in per-transaction increases, milestone increases, as well as other contract attributes are a must for companies to understand the magnitude of future payments.
Conclusion
In conclusion, with the Internet making access to supply chain planning tools both cheaper and easier, it is difficult to imagine why a manufacturing company would remain without them. Success-based pricing is probably the most compelling financial incentive for small to midsize companies to consider a supply chain software application acquisition. Actual charges vary widely depending on the type of application, but typically range from $5 to 15 per transaction (where transactions may be purchases, orders, shipments, truck lanes, etc.).
Large and small companies can benefit immediately from e-market portals. By signing on to an e-market, whether a public exchange or a private network hosted by the vendor or a large "anchor tenant" supplier, a corporation can effectively outsource its entire tactical procurement operation, at least for commodity items.
CPFR will be the collaborative paradigm of choice for direct goods procurement and non-commodities over the next five years as it allows large companies with several key suppliers and/or resellers to individualize their relationships while at the same time exploiting the speed and efficiency of the Internet. For the longer term, CPFR will provide the framework for end-to-end collaboration across the entire supply chain.
We believe these trends and others will play a large role in shaping the enterprise applications market over the next several years.
WEBTESS DEMO
Now, I think it's time we moved to the demonstration. Although everyone has been given instructions on getting to the WebTESS Supply Chain Management Selection Model on our site, I'll go through it again, briefly just in case some of you may have had difficulty.
First, go to our website, www.technologyevaluation.com. From the front page, select the tab marked "Vendor Selection Tool." Then, within the blue-bordered box titled "Current Category: All Categories", select the "GO" button beside "Supply Chain Management." This should spawn another browser window in which you should see the WebTESS application. You will want to maximize this window for best viewing. The great beauty of WebTESS is its ability to provide project teams with a statistically valid framework for comparing vendor options. In it, we have scored each vendor according to its ability to meet the criteria. WebTESS aggregates the scores upward through the hierarchy, while simultaneously taking into account the effect of local and global weights.
Now, I would like everyone to click on the Select Choices option on the menu bar at the top part of the browser window. I'll be referring to the top menu bar several times during the demonstration. It is located in the top frame of the WebTESS browser window to the right of the spinning globe logo. In the "Select Choices" window, you should see a list of vendors on the left hand portion of the window and a description on the right hand side.
Clicking on a vendor in the left-hand side panel brings up a detailed description of the vendor option in the right-hand side panel. By clicking the check boxes next to the vendor, you can include or exclude it from your selection.
We'll touch briefly on these vendors in order, starting with Aspen Technology.
Aspen Technology
Aspen Technology made its mark selling software applications for process simulation and control, though its supply chain management applications form a large percentage of its total revenues. Aspen appears as a strong supply chain management challenger for giving its supply chain applications a prominent position among its product offerings and its leadership in the process manufacturing industries.
Aspen Technology Strengths
* Aspen's supply chain management suite offers a high degree of functional flexibility: Aspen's MIMI application provides a feature-rich modeling language that enables users to address a large variety of industrial problems.
* Established customer base in the chemical process industries (CPI): Aspen's customers include 44 of the 50 largest chemical companies, 17 of the 20 largest petroleum refiners, and 16 of the 20 largest pharmaceutical companies.
* Experienced implementation and customer support personnel: Chesapeake has received high praise from consultants and clients for their staff of bright, experienced process engineers and modelers.
Aspen Technology Challenges
* Poor financial showing in FY1999: Aspen's FY1999 revenues of $219.6 million represent a 13% drop over the same period on year ago ($252.6 million). Net losses for the same period in 1999 were $26 million. Part of the drop can be attributed to the reduced IT spending by the petroleum and petrochemicals companies - key markets for Aspen - due to economic factors and obviously Y2K.
* Shortage of trained implementation resources: Implementing much of Aspen's eSupply Chain suite requires highly trained resources to do detailed modeling. Although some templates exist and more are being developed, MIMI, the core of eSupply Chain, is essentially a toolkit that typically involves extensive training of resources when experienced modelers cannot be found.
* Dealing effectively with multiple competitors due to Aspen's broad product offering: The Plantelligence suite is almost ungainly in its variety of applications, including everything from operator training programs to process simulators to supply chain planning. Judicious pruning of non-core applications is needed to better focus corporate resources. Some of this has taken place, but we feel that more is needed.
i2 Technologies
i2 was the dominant supply chain management vendor in 1999 and maintains a significant lead over its competitors in terms of market share. Though its total revenue growth has begun to slow in recent years, the 55% increase it recorded between 1998 and 1999 is still enviable by market standards.
i2 Technologies Strengths
* Strong financial position and commanding market presence: More than any other aspect, i2 is known for its rapid growth rate. In contrast to its competitors' claims, this growth remains unaffected by Y2K remediation spending and general economic downturn.
* Aggressive sales and marketing organization: i2's direct sales force headcount stood at around 700 at the end of 1999, more than twice that of its nearest competitor. At 34%, investment in sales and marketing as a percentage of revenues is the highest of their competitors.
* Innovative approach to marketing and alliances: i2 has successfully remade itself into an e-commerce software company with its Intelligent e-business suite of applications that include the online trading network, TradeMatrix (10/99), its vertical offshoots such as HightechMatrix and Fasturn.com, acquisition of Aspect Development, and partnerships with IBM, Ariba, and others. i2's ability to reinvent itself to capitalize on market trends is evidenced by its consistently high percentage of license revenues.
* Product flexibility: Rhythm provides the capability to satisfy a wide variety of functional requirements and business rules through its custom modeling language, OIL (Object Integration Language). Also, i2 offers a series of vertical industry templates, which allow customers to jump-start their modeling effort.
i2 Technologies Challenges
* Delivering on vision: While able to conceive and articulate architectural visions, i2 has been less successful at delivering fully developed, bug-free applications to support them. Clients and third-party integrators often discover the gap only after the implementation is well underway.
* Business consultants know application, not industry: Business consultants, though skilled in Rhythm applications, often lack industry-specific knowledge. This is in part due to the rapid growth of the company and the inevitable learning curve faced by new staff. i2 relies heavily on implementation partners such as Andersen Consulting and PricewaterhouseCoopers but jurisdiction problems can arise during implementations.
* Reporting capabilities inadequate for many core applications: It is frequently necessary to integrate with a third party reporting tool that provides the flexibility to fulfill customer requirements. The additional and sometimes unplanned for development can be costly and delay project timelines.
* Product Technology: i2 must win the race between transaction volume size and static memory size allowed by existing platforms - a consequence of Rhythm's memory-resident nature. Results of i2's proprietary heuristics and algorithms can be compromised when extensive modeling flexibility is utilized.
Logility
Logility has made significant progress since it was spun off from American Software in 1997. The company grew by a respectable average annual rate of 38% from 1994 to 1998, but slid 22% in fiscal 1999 due to Y2K market malaise, weakness in the global economy, and increased competition from ERP vendors.
Logility Strengths
* Comprehensive supply chain planning product offering: Logility's Voyager supply chain management solutions cover a wide area within supply chain management. Its distribution planning is especially strong in consumer packaged goods.
* Out-of-the-box product: A chief advantage of Voyager over competitive offerings, most notably i2's Rhythm and Chesapeake's MIMI, is the ability to provide a competent solution with little or no customization. It also offers many standard interfaces with major ERP and legacy systems to enable faster implementations. Logility's pre-packaged functionality can also give it an edge over other candidates when demonstrating for prospective clients.
* Headstart in collaborative planning: Logility has a headstart over other supply chain management vendors in terms of collaborative planning. Its Voyager XPS was one of the first applications to embody Collaborative Planning, Forecasting and Replenishment (CPFR) as devised by VICS and Resource Chain Voyager, a precursor to the current applications was installed at client sites as early as 1996.
Logility Challenges
* Building the foundations under its castles: Logility has invested heavily in its move toward application hosting, a market that can have considerable impact on its future livelihood. Though its applications possess attributes that make them well-suited to Internet deployment (e.g., configurable product, mid market focus, CPFR), Logility will need to make considerable investments in product development, marketing, and alliances to make its ASP model successful.
* Dependence on American Software: By our estimates, American Software represents 83% of Logility's indirect channel. While Logility benefits in many ways from its parent company, American's tepid performance calls into question its ability to provide a safety net.
* Poor visibility at highest levels: Although Logility has achieved small-scale success with its marketing approach, it admits to having difficulties selling at the highest levels of management. To effectively compete and grow its business, Logility's sales execution needs to break into senior management, a goal that can be attained through a shift in marketing strategy.
Manugistics
1999 proved to be a very challenging year for Manugistics. Its license revenues dropped by 47% and services revenues dipped slightly below 1998 levels. Manugistics lost market position as it focused on internal reorganization, making wholesale changes to its executive management team, streamlining its operations, and reassessing its corporate strategy.
Manugistics Strengths
* An experienced management team with new ideas and the ability to execute on them. We have to give credit to Greg Owens and his team for generating a great deal of excitement around Manugistics recently and we are seeing this translate to new license deals.
* Manugistics also offers very mature functionality, especially for transportation management and optimization, perhaps the only suite vendor to offer comprehensive and flexible VMI and replenishment modules.
* Manugistics also benefits from probably the largest supply chain customer base of its competitors including i2 and SAP (for supply chain). This gives it a great advantage, if properly utilized, in generating new license and web hosting revenues.
Manugistics Challenges
* Among its challenges, Manugistics' inability to effectively incorporate acquired sales forces into its existing organization contributed to a 30% decline in license revenues in calendar 1999 over the previous year. Also, its fourth quarter 1998 loss was $71.2 million, including $33.1 million for restructuring. These financial difficulties lead to a complete revamping of its executive management team and significantly impaired Manugistics' perception in the marketplace. Business has been picking up, but the company still has ground to cover and lags significantly behind i2.
* Manugistics will also find challenges in making its Internet B2B trading exchanges and application service provider (ASP) model successful. Not the least of its difficulties arise from its late entry into these markets where competition is already fierce. Application service providers face a different set of priorities than traditional software vendors, such as maintaining an ongoing relationship to clients through intermediaries such as application hosting providers, and many changes need to be accomplished within the organization to achieve the transition.
* Traditionally, one of its advantages over newer supply chain management entrants, the implementation expertise and industry knowledge of Manugistics' support staff has shown some signs of loss due to attrition. This is especially true for its transportation group. Though periodic housecleaning can be healthy, high turnover can make potential hires think twice about jumping on board.
Adexa
Adexa, Inc., which is the vendor formerly known as Paragon Management Systems, was incorporated in 1994. Adexa has perennially spent more effort on product development that it has on sales and marketing, a fact that has not helped its profile in the marketplace.
Vendor Strengths
* Broad product suite with advanced features: In iCollaboration, Adexa has built significantly on its original Pacemaker suite, adding product lifecycle management, extended enterprise planning, and collaboration. Other vendors offer broad suites, but Adexa's is the only one that was built from the ground up on a single data model. A host of third party software alliances further extend its applications into electronic procurement, order management, warehouse management, transportation management, and data warehousing.
* Strong vision for expanding supply chain management to multi-enterprise collaboration: Adexa has no plans to peddle Internet trading marketplaces and focuses instead on providing the collaborative decision support capabilities that marketplaces need to fulfill orders effectively. Adexa's vision involves not merely giving customers and suppliers access to iCollaboration via a web browser, but more importantly delivering advanced planning features geared specifically for business-to-business collaboration. The company is also working on intelligent agent technology to automate B2B transactions to improve speed and reduce the level of human intervention.
* Excellent growth: Some of Adexa's growth comes in many cases as a result of being the second choice, acquired by clients who are unsatisfied with their first selection. In instances where Adexa does compete head-to-head with other supply chain management vendors, it often comes out on top due to its ability to demonstrate a working solution.
Vendor Challenges
* Poor visibility in the supply chain management marketplace: As Paragon Management Systems, Adexa failed to capture significant mind share among top level corporate IT professionals, those vested with the power to make buying decisions. As Adexa, the company hopes to shed this anonymity and take part in more software evaluations.
* Reliance on small direct sales force: Adexa's direct sales channel is grossly undersized compared to its competition, especially i2. Adexa had 32 quota-carrying salespersons, which made up 14% of its total employees. This compared poorly to the industry average of 22%, not to mention the fact that its competitors have significantly more salespersons in absolute numbers. Adexa has recently made additions to its sales force, but will require more time and training prior to executing to full potential.
* Lack of capital a barrier to growth: As a private company, Adexa's growth is limited to some extent by the supply of venture capital funding. With the recent decline in software company valuations, private funding will be harder to come by, even for established firms. Although it has accomplished much in terms of product development and alliances, continued growth as a private company may be difficult without significantly diluting its equity base.
Now that we've discussed each of the vendors in our model, let's take a look at some of the other parts of WebTESS.
First, we'll go to the Weigh Criteria section. Do this by clicking on the "weigh criteria" option on the top menu bar.
Weigh Criteria
The weigh criteria screen is used to assign your own customized weights to the selection criteria. Weights represent relative levels of importance for the criteria. Within the decision tree in the left panel, click on any one of the criteria, and its sub criteria will be displayed in the right panel with their respective weights. You can create customized weights by clicking on the colored bars to the right of the criteria.
For the supply chain management model, the weights chosen are based on settings we obtained from past clients and represent a broadly defined standard. Product functionality remains the most important criterion, but is followed closely by service and support. Corporate viability comes next, then product technology and corporate strategy have roughly the same level of importance.
Next, we'll take a look at the vendor ratings. Do this by clicking on the "view ratings" option on the top menu bar.
View Ratings
The view ratings screen displays how the vendors perform across all the criteria defined in the model. You can display comparative ratings by one choice (all the criteria ratings for one vendor are displayed) or by one criterion (all included vendors are rated across the criteria highlighted in the tree in the left panel). To see how one vendor option rates against the criteria, go to the 'view ratings' option on the top menu bar and select the 'one choice for all criteria' option. This brings up a list of all the criteria and shows how the vendor displayed in the 'Option' text box scores. Now - to see a comparison, go again to the 'view ratings' option on the top menu bar and select 'all choices for one criterion.' This lists all vendor options taking part in this selection with their accompanying ratings.
Next, let's see the overall results by bringing up the score card. This is done by clicking on the "score card" option on the top menu bar.
Score Card
The Score Card screen shows both the overall and detailed scores of the selection model choices. The individual choice can be selected from the drop down box below, and its strengths and weaknesses will be displayed on the left. The bottom scoreboard provides detailed comparisons of selected criterion from the left panel. A criterion shows up as a strength if it passes a threshold of 90% percent match and a weakness if it falls below 50%. By expanding the criteria hierarchy to the left, you can drill down into lower levels of the model to do comparisons. The hierarchy can be navigated in exactly the same way as Windows Explorer.
Well, that's a very brief overview of WebTESS and only begins to cover all of its capabilities. It also allows you to create charts and reports and contains a full on-line Help feature. To wrap up, I'll just take a few moments to give you some general pointers on how to use our technology.
Both WebTESS and TESS, the desktop version, offer major advantages if you want to use them for adding to the quality of your own research. Each model is fully documented with comments on the factors and models.
If you want to create a shortlist of vendors because there are some criteria that are really critical to you, look through the model and click on those criteria. You can shortlist the vendors quickly that way, and then run through the rest of the model with those selected vendors.
I should add that our desktop product TESS is also available and you can contact our sales department concerning TESS and model licensing.
Thank you all for participating and please e-mail any additional questions you have to supplychain@technologyevaluation.com and we will get back to you as soon as possible.
SOURCE:
http://www.technologyevaluation.com/research/articles/supply-chain-management-audio-conference-transcript-15893/
Introduction
Good morning everyone, my name is Steve McVey and I head-up the supply chain management research areas for TechnologyEvaluation.Com. This morning we're going to discuss a proven, best of breed methodology for evaluating and selecting a supply chain management solution. During the presentation, we will use TechnologyEvaluation.Com's patented online selection engine, WebTESS, to guide you through a live, real time evaluation and selection. We will then review the critical differentiating supply chain management criteria, as well as detailed comparisons between i2 Technologies, Manugistics, Aspen Technology, Logility, and Adexa.
Overview
I'm going to begin with an overview of problems and solutions relating to technology selection, starting first with the problem:
According to our research, over 80% of enterprise technology evaluations run over time and budget, and once completed, over 50% of the implementations fail to meet functional and total cost expectations. There are three main reasons that project teams run into trouble.
1. They have no effective way to identify the critical vendor and product questions necessary to successfully initiate the evaluation process.
2. They have no ability to prioritize the different criteria, once identified, relative to one another. As a result, final priorities are often more the result of internal political agendas than true needs and requirements.
3. And finally, project teams have no ability to gather objective, validated, updated data on the vendor alternatives. As you may well know, vendors have a tendency to exaggerate product, service, and corporate capabilities if it enables them to move to the next phase of the deal.
So, what's the solution?
The solution is to create a structured, repeatable process for evaluating technology solutions and the vendors that provide them. Best practices drawn from our clients that have completed internal technology selections suggest that project teams should examine five key categories of criteria. The first two categories examine product specific capabilities, while the remaining three investigate the software vendor's overall corporate capabilities.
So let's review these criteria categories.
Number 1: Product Functionality - Product functionality is the most obvious evaluation criterion and plays a dominant role in supply chain management software selections. Simply put, this evaluates the features and functions delivered by the product as it currently exists. Together with technology and architecture, product functionality often makes up over 90 percent of the overall importance within IT selections, but this is probably too high. Other criteria such as service/support, corporate viability, and strategy should make a stronger contribution.
Number 2: Product Technology - Product technology defines the technical architecture of the product, and the technological environment in which the product can run successfully. Sub criteria include things like application architecture, software usability and administration, and platform and database support. Relative to the other evaluation criteria, best practice selections place a lower relative importance on the product technology criterion. However, this apparently lower importance is deceptive, because the product technology criterion usually houses the majority of an organization's mandatory criteria, which usually include server, client, protocol and database support, application scalability and other architectural capabilities. The definition of mandatory criteria within this set often allows the client to quickly narrow the long list of potential vendors to a short list of applicable solutions that pass muster relative to the most basic mandatory selection criteria.
Number 3: Corporate Service and Support - This criterion defines the capability of the vendor to provide implementation services and ongoing support. Repeated industry surveys have identified this category as the single largest differentiating factor among potential selection options, as well as the greatest indicator of ultimate user implementation success and long term vendor viability. A proper professional services and support evaluation should include both subjective, qualitative measures validated by current product users, and objective, quantitative criteria within both the professional services and product support categories. Service and support includes categories such as consulting, systems integration, project management skills, geographic coverage, language and time coverage of the vendor help desk, and delivery mediums.
Number 4: Corporate Viability - Corporate viability is a critical, yet often overlooked category that examines the financial and management strength of the vendor. Given the huge number of dollars spent on IT procurements, not to mention their strategic importance, the financial stability of the vendor simply can't be stressed too much. The vendor viability category in WebTESS combines quantitative Wall Street ratio and metric analysis with qualitative management and corporate evaluations. Only by combining the two components can IT executives accurately assess the risk and benefit of corporate investment in a specific product and vendor option.
Number 5: Corporate Strategy - Corporate strategy evaluates the corporate road map and strategy of the software vendor with regard to specific timelines of how the product will be developed, sold, and supported within the supply chain management market. This is the most strategic and long term set of evaluation criteria, and rates how effectively the stated vendor's three to five year product, support and sales strategy maps to the overall market direction. Any dissonance between the stated vendor direction and market direction is a cause for concern, and should be rectified by the vendor through either a shift in corporate policy or a detailed and market validated explanation for the discord.
Now that we have given an overview of the requirements of a technology selection, I would like to move on to an overview of the Supply Chain Management Software Marketplace and as it exists today.
Trend Note
The Internet is reshaping the enterprise applications market by making possible unprecedented visibility and information sharing between enterprises. Nowhere is this transformation more evident than in the supply chain management software market. The fact is, prior to the Internet, much of what supply chain management promised was never realized beyond a conceptual level. Supply chains that seamlessly joined customers and suppliers were easy to draw on paper, but building the link without Internet technology was practically impossible. The trends that have emerged in recent years capitalize on the possibilities for collaboration, information sharing, and instantaneous communication that the Internet provides.
These trends are:
* Collaborative Planning / CPFR
* Internet Procurement
* Portals
* New Pricing Models
Collaborative Planning / CPFR
The first of these is Collaborative Planning and specifically, a subset of this called Continuous Planning, Forecasting and Replenishment or CPFR. CPFR is a set of processes for trading partners, manufacturers and retailers, to share forecast and replenishment information. It is a superb example of collaborative planning and embodies all of the attributes and purposes of collaboration. CPFR succeeds earlier initiatives such as Efficient Consumer Response, Quick Response, and Vendor Managed Inventory and benefits from strong support from standards organizations like VICS (Voluntary Interindustry Commerce Standards), primarily geared toward the retail industry and to a lesser extent, RosettaNet which focuses on developing many other business-to-business standards.
CPFR is emerging from its pilot phase with the help of proponents like retailers Kmart, Wal-Mart, and Sports Authority as well as consulting firms like Andersen Consulting. Several supply chain management and ERP vendors have recognized the potential for CPFR and are building standard protocols and features into their collaboration products to support it. A good example is Logility, which was an early champion of collaborative planning. Its Voyager XPS and XES products are the culmination of several years of CPFR-compliant architecture development.
According to a 1999 study by Consumer Goods Magazine, more than half of the 224 executives surveyed from consumer goods manufacturers representing apparel/accessories, food and beverage, packaged goods, and home furnishing/appliance companies said they expected to implement "Internet Order Handling" in the next three years. Forty-four percent said they would implement CPFR specifically. Although it demands a high level of organizational commitment to succeed, CPFR can bring bottom line benefits to companies that sign onto the challenge. We expect CPFR to gain broader acceptance as the novelty of online trading exchanges supporting indirect material procurement wears off and users seek more structured methods to control relationships between customers and suppliers.
User Impact
For all its potential and the extensive blueprints developed by VICS and others, CPFR is relatively new to the vendor world. Apart from Logility and SAP, few supply enterprise application vendors offer products that directly support CPFR processes according to VICS standards. We expect CPFR to gain broader acceptance as the novelty of online trading exchanges wears off and users seek more structured methods to control relationships between customers and suppliers. Though CPFR can be applied in any industry segment, the retail consumer goods market has been the primary adopter to date. Retail users should find out more about CPFR if accurate forecasts are a priority with external and internal customers.
Internet Procurement
The second major trend impacting supply chain management is Internet procurement. Online communities where companies can buy and sell products have become very popular in the past year. Companies look to these communities to reduce administrative costs, improve turnaround, and to help control inventory and spending. In response, supply chain management vendors are developing tools and applications targeted at this segment of the Internet procurement market. Some industry observers have expressed concern over the impact that such exchanges have on profit margins by driving prices down and predict that "e-markets" will be used exclusively for "spot purchasing" of commodity-level goods and services.
E-markets fall into different categories depending on where the software resides, who controls or sponsors the market, and whether direct or indirect goods procurement is available. Though current exchanges predominantly involve only spot purchases, there is a move towards making e-markets responsible for the full trading lifecycle, which spans procurement, supply chain management, and customer relationship management.
Because so many vendors offer e-procurement capabilities, it is becoming increasingly important for them to distinguish their portals from competitors. We believe that supply chain management vendors are uniquely capable of doing this by providing value-added services that relate to procurement in fundamental ways. i2 Technologies is an excellent example of a supply chain management vendor that is successfully bringing its domain expertise in advanced planning and scheduling to provide the backend capabilities for procurement over the Internet.
User Impact
Users who want to cut their indirect material costs should not delay in selecting an appropriate vendor that offers online procurement, either a package vendor or Internet-based portal. For direct material purchases, where on-time deliveries are an imperative, users should partner with an SCP package vendor or a portal backed by supply chain planning that can bring the intelligent backend planning capabilities to fulfill online material purchases. A good choice to consider is i2, which has begun to offer advanced planning services such as logistics and transportation planning along with its growing cadre of vertical marketplace portals.
Portals
Less exciting than Internet marketplaces perhaps, but nonetheless important are portals. Vertical portals open a window of communication between supply chain planning vendors and communities of customers, partners, content providers, advertisers, and, in most cases, the general public. A good example of a basic portal (detached from hosted services and procurement) is Aspen Technology's ProcessCity.com, a collaborative web site for the process industries. The portal offers process industry-specific news and event information, discussion forums, career guidance and employment information, and access to consultant expertise among other information.
Portals are a natural result of competition, the need for better customer support, and the Internet. In addition to benefits for participating users, the forums allow vendors to foster more dynamic relationships with customers and prospects than would be possible through corporate websites, annual user conferences, or helpdesks.
Apart from advertising revenues and content sales, the future dollar impact of portals on supply chain management market growth is difficult to quantify. Portals will drive partnerships and even consolidations among supply chain management vendors and Internet enablers such as, in Aspen's case, Extricity and Syntra Technologies. If nothing else, portals also afford more backward vendors a low cost, low risk entry into the Internet marketplace.
User Impact
Users should view portals in the same way as vendors: as a place to share and receive information. Privacy issues exist, of course, and users should be careful to avoid sharing potentially sensitive information such as implementation success/failure stories unless the portal provider agrees to keep it confidential.
New Pricing Models
The fourth trend that is on the rise concerns new pricing models. Unfortunately for vendors, customer expectations tend to grow faster than their ability to furnish competent, easy-to-use products to satisfy the expectations. High client hopes usually fall to the ground sometime during implementation and leave a lasting and often bitter impression.
Since fewer than one in four projects deliver workable solutions that survive six years or more, clients are increasingly wary of committing huge sums of money before they have obtained measurable return on their investment. In response, the licensing of supply chain management software products is undergoing a fundamental shift from traditional up-front fees to incremental or success-based pricing. Success-based pricing is a popular alternative especially for small businesses and startups that lack the IT budgets of larger, established companies. It allows these companies to acquire software for a lower entry cost and pay more only as their business expands.
Vendors who embark on the transition to the new model are sure to experience growing pains, however. As traditional license revenues decline, recurring revenue generates comparable figures only after time. This can quickly lead to negative earnings and eventual success is by no means assured. Organizationally, vendors have to make fundamental changes to sales and support processes for transaction-based pricing.
User Impact
For users, success-based pricing models offer a "pay-as-you-grow" alternative to up-front license fees. Though often sold as cheap and convenient, these models can bring unexpected IT costs down the road. As with any long-term contract, prospective clients should carefully review the fine print to understand the implications that transactional revenues will have on future expenses. A transaction may appear cheap at, say $10 per, but detailed growth projections that factor in per-transaction increases, milestone increases, as well as other contract attributes are a must for companies to understand the magnitude of future payments.
Conclusion
In conclusion, with the Internet making access to supply chain planning tools both cheaper and easier, it is difficult to imagine why a manufacturing company would remain without them. Success-based pricing is probably the most compelling financial incentive for small to midsize companies to consider a supply chain software application acquisition. Actual charges vary widely depending on the type of application, but typically range from $5 to 15 per transaction (where transactions may be purchases, orders, shipments, truck lanes, etc.).
Large and small companies can benefit immediately from e-market portals. By signing on to an e-market, whether a public exchange or a private network hosted by the vendor or a large "anchor tenant" supplier, a corporation can effectively outsource its entire tactical procurement operation, at least for commodity items.
CPFR will be the collaborative paradigm of choice for direct goods procurement and non-commodities over the next five years as it allows large companies with several key suppliers and/or resellers to individualize their relationships while at the same time exploiting the speed and efficiency of the Internet. For the longer term, CPFR will provide the framework for end-to-end collaboration across the entire supply chain.
We believe these trends and others will play a large role in shaping the enterprise applications market over the next several years.
WEBTESS DEMO
Now, I think it's time we moved to the demonstration. Although everyone has been given instructions on getting to the WebTESS Supply Chain Management Selection Model on our site, I'll go through it again, briefly just in case some of you may have had difficulty.
First, go to our website, www.technologyevaluation.com. From the front page, select the tab marked "Vendor Selection Tool." Then, within the blue-bordered box titled "Current Category: All Categories", select the "GO" button beside "Supply Chain Management." This should spawn another browser window in which you should see the WebTESS application. You will want to maximize this window for best viewing. The great beauty of WebTESS is its ability to provide project teams with a statistically valid framework for comparing vendor options. In it, we have scored each vendor according to its ability to meet the criteria. WebTESS aggregates the scores upward through the hierarchy, while simultaneously taking into account the effect of local and global weights.
Now, I would like everyone to click on the Select Choices option on the menu bar at the top part of the browser window. I'll be referring to the top menu bar several times during the demonstration. It is located in the top frame of the WebTESS browser window to the right of the spinning globe logo. In the "Select Choices" window, you should see a list of vendors on the left hand portion of the window and a description on the right hand side.
Clicking on a vendor in the left-hand side panel brings up a detailed description of the vendor option in the right-hand side panel. By clicking the check boxes next to the vendor, you can include or exclude it from your selection.
We'll touch briefly on these vendors in order, starting with Aspen Technology.
Aspen Technology
Aspen Technology made its mark selling software applications for process simulation and control, though its supply chain management applications form a large percentage of its total revenues. Aspen appears as a strong supply chain management challenger for giving its supply chain applications a prominent position among its product offerings and its leadership in the process manufacturing industries.
Aspen Technology Strengths
* Aspen's supply chain management suite offers a high degree of functional flexibility: Aspen's MIMI application provides a feature-rich modeling language that enables users to address a large variety of industrial problems.
* Established customer base in the chemical process industries (CPI): Aspen's customers include 44 of the 50 largest chemical companies, 17 of the 20 largest petroleum refiners, and 16 of the 20 largest pharmaceutical companies.
* Experienced implementation and customer support personnel: Chesapeake has received high praise from consultants and clients for their staff of bright, experienced process engineers and modelers.
Aspen Technology Challenges
* Poor financial showing in FY1999: Aspen's FY1999 revenues of $219.6 million represent a 13% drop over the same period on year ago ($252.6 million). Net losses for the same period in 1999 were $26 million. Part of the drop can be attributed to the reduced IT spending by the petroleum and petrochemicals companies - key markets for Aspen - due to economic factors and obviously Y2K.
* Shortage of trained implementation resources: Implementing much of Aspen's eSupply Chain suite requires highly trained resources to do detailed modeling. Although some templates exist and more are being developed, MIMI, the core of eSupply Chain, is essentially a toolkit that typically involves extensive training of resources when experienced modelers cannot be found.
* Dealing effectively with multiple competitors due to Aspen's broad product offering: The Plantelligence suite is almost ungainly in its variety of applications, including everything from operator training programs to process simulators to supply chain planning. Judicious pruning of non-core applications is needed to better focus corporate resources. Some of this has taken place, but we feel that more is needed.
i2 Technologies
i2 was the dominant supply chain management vendor in 1999 and maintains a significant lead over its competitors in terms of market share. Though its total revenue growth has begun to slow in recent years, the 55% increase it recorded between 1998 and 1999 is still enviable by market standards.
i2 Technologies Strengths
* Strong financial position and commanding market presence: More than any other aspect, i2 is known for its rapid growth rate. In contrast to its competitors' claims, this growth remains unaffected by Y2K remediation spending and general economic downturn.
* Aggressive sales and marketing organization: i2's direct sales force headcount stood at around 700 at the end of 1999, more than twice that of its nearest competitor. At 34%, investment in sales and marketing as a percentage of revenues is the highest of their competitors.
* Innovative approach to marketing and alliances: i2 has successfully remade itself into an e-commerce software company with its Intelligent e-business suite of applications that include the online trading network, TradeMatrix (10/99), its vertical offshoots such as HightechMatrix and Fasturn.com, acquisition of Aspect Development, and partnerships with IBM, Ariba, and others. i2's ability to reinvent itself to capitalize on market trends is evidenced by its consistently high percentage of license revenues.
* Product flexibility: Rhythm provides the capability to satisfy a wide variety of functional requirements and business rules through its custom modeling language, OIL (Object Integration Language). Also, i2 offers a series of vertical industry templates, which allow customers to jump-start their modeling effort.
i2 Technologies Challenges
* Delivering on vision: While able to conceive and articulate architectural visions, i2 has been less successful at delivering fully developed, bug-free applications to support them. Clients and third-party integrators often discover the gap only after the implementation is well underway.
* Business consultants know application, not industry: Business consultants, though skilled in Rhythm applications, often lack industry-specific knowledge. This is in part due to the rapid growth of the company and the inevitable learning curve faced by new staff. i2 relies heavily on implementation partners such as Andersen Consulting and PricewaterhouseCoopers but jurisdiction problems can arise during implementations.
* Reporting capabilities inadequate for many core applications: It is frequently necessary to integrate with a third party reporting tool that provides the flexibility to fulfill customer requirements. The additional and sometimes unplanned for development can be costly and delay project timelines.
* Product Technology: i2 must win the race between transaction volume size and static memory size allowed by existing platforms - a consequence of Rhythm's memory-resident nature. Results of i2's proprietary heuristics and algorithms can be compromised when extensive modeling flexibility is utilized.
Logility
Logility has made significant progress since it was spun off from American Software in 1997. The company grew by a respectable average annual rate of 38% from 1994 to 1998, but slid 22% in fiscal 1999 due to Y2K market malaise, weakness in the global economy, and increased competition from ERP vendors.
Logility Strengths
* Comprehensive supply chain planning product offering: Logility's Voyager supply chain management solutions cover a wide area within supply chain management. Its distribution planning is especially strong in consumer packaged goods.
* Out-of-the-box product: A chief advantage of Voyager over competitive offerings, most notably i2's Rhythm and Chesapeake's MIMI, is the ability to provide a competent solution with little or no customization. It also offers many standard interfaces with major ERP and legacy systems to enable faster implementations. Logility's pre-packaged functionality can also give it an edge over other candidates when demonstrating for prospective clients.
* Headstart in collaborative planning: Logility has a headstart over other supply chain management vendors in terms of collaborative planning. Its Voyager XPS was one of the first applications to embody Collaborative Planning, Forecasting and Replenishment (CPFR) as devised by VICS and Resource Chain Voyager, a precursor to the current applications was installed at client sites as early as 1996.
Logility Challenges
* Building the foundations under its castles: Logility has invested heavily in its move toward application hosting, a market that can have considerable impact on its future livelihood. Though its applications possess attributes that make them well-suited to Internet deployment (e.g., configurable product, mid market focus, CPFR), Logility will need to make considerable investments in product development, marketing, and alliances to make its ASP model successful.
* Dependence on American Software: By our estimates, American Software represents 83% of Logility's indirect channel. While Logility benefits in many ways from its parent company, American's tepid performance calls into question its ability to provide a safety net.
* Poor visibility at highest levels: Although Logility has achieved small-scale success with its marketing approach, it admits to having difficulties selling at the highest levels of management. To effectively compete and grow its business, Logility's sales execution needs to break into senior management, a goal that can be attained through a shift in marketing strategy.
Manugistics
1999 proved to be a very challenging year for Manugistics. Its license revenues dropped by 47% and services revenues dipped slightly below 1998 levels. Manugistics lost market position as it focused on internal reorganization, making wholesale changes to its executive management team, streamlining its operations, and reassessing its corporate strategy.
Manugistics Strengths
* An experienced management team with new ideas and the ability to execute on them. We have to give credit to Greg Owens and his team for generating a great deal of excitement around Manugistics recently and we are seeing this translate to new license deals.
* Manugistics also offers very mature functionality, especially for transportation management and optimization, perhaps the only suite vendor to offer comprehensive and flexible VMI and replenishment modules.
* Manugistics also benefits from probably the largest supply chain customer base of its competitors including i2 and SAP (for supply chain). This gives it a great advantage, if properly utilized, in generating new license and web hosting revenues.
Manugistics Challenges
* Among its challenges, Manugistics' inability to effectively incorporate acquired sales forces into its existing organization contributed to a 30% decline in license revenues in calendar 1999 over the previous year. Also, its fourth quarter 1998 loss was $71.2 million, including $33.1 million for restructuring. These financial difficulties lead to a complete revamping of its executive management team and significantly impaired Manugistics' perception in the marketplace. Business has been picking up, but the company still has ground to cover and lags significantly behind i2.
* Manugistics will also find challenges in making its Internet B2B trading exchanges and application service provider (ASP) model successful. Not the least of its difficulties arise from its late entry into these markets where competition is already fierce. Application service providers face a different set of priorities than traditional software vendors, such as maintaining an ongoing relationship to clients through intermediaries such as application hosting providers, and many changes need to be accomplished within the organization to achieve the transition.
* Traditionally, one of its advantages over newer supply chain management entrants, the implementation expertise and industry knowledge of Manugistics' support staff has shown some signs of loss due to attrition. This is especially true for its transportation group. Though periodic housecleaning can be healthy, high turnover can make potential hires think twice about jumping on board.
Adexa
Adexa, Inc., which is the vendor formerly known as Paragon Management Systems, was incorporated in 1994. Adexa has perennially spent more effort on product development that it has on sales and marketing, a fact that has not helped its profile in the marketplace.
Vendor Strengths
* Broad product suite with advanced features: In iCollaboration, Adexa has built significantly on its original Pacemaker suite, adding product lifecycle management, extended enterprise planning, and collaboration. Other vendors offer broad suites, but Adexa's is the only one that was built from the ground up on a single data model. A host of third party software alliances further extend its applications into electronic procurement, order management, warehouse management, transportation management, and data warehousing.
* Strong vision for expanding supply chain management to multi-enterprise collaboration: Adexa has no plans to peddle Internet trading marketplaces and focuses instead on providing the collaborative decision support capabilities that marketplaces need to fulfill orders effectively. Adexa's vision involves not merely giving customers and suppliers access to iCollaboration via a web browser, but more importantly delivering advanced planning features geared specifically for business-to-business collaboration. The company is also working on intelligent agent technology to automate B2B transactions to improve speed and reduce the level of human intervention.
* Excellent growth: Some of Adexa's growth comes in many cases as a result of being the second choice, acquired by clients who are unsatisfied with their first selection. In instances where Adexa does compete head-to-head with other supply chain management vendors, it often comes out on top due to its ability to demonstrate a working solution.
Vendor Challenges
* Poor visibility in the supply chain management marketplace: As Paragon Management Systems, Adexa failed to capture significant mind share among top level corporate IT professionals, those vested with the power to make buying decisions. As Adexa, the company hopes to shed this anonymity and take part in more software evaluations.
* Reliance on small direct sales force: Adexa's direct sales channel is grossly undersized compared to its competition, especially i2. Adexa had 32 quota-carrying salespersons, which made up 14% of its total employees. This compared poorly to the industry average of 22%, not to mention the fact that its competitors have significantly more salespersons in absolute numbers. Adexa has recently made additions to its sales force, but will require more time and training prior to executing to full potential.
* Lack of capital a barrier to growth: As a private company, Adexa's growth is limited to some extent by the supply of venture capital funding. With the recent decline in software company valuations, private funding will be harder to come by, even for established firms. Although it has accomplished much in terms of product development and alliances, continued growth as a private company may be difficult without significantly diluting its equity base.
Now that we've discussed each of the vendors in our model, let's take a look at some of the other parts of WebTESS.
First, we'll go to the Weigh Criteria section. Do this by clicking on the "weigh criteria" option on the top menu bar.
Weigh Criteria
The weigh criteria screen is used to assign your own customized weights to the selection criteria. Weights represent relative levels of importance for the criteria. Within the decision tree in the left panel, click on any one of the criteria, and its sub criteria will be displayed in the right panel with their respective weights. You can create customized weights by clicking on the colored bars to the right of the criteria.
For the supply chain management model, the weights chosen are based on settings we obtained from past clients and represent a broadly defined standard. Product functionality remains the most important criterion, but is followed closely by service and support. Corporate viability comes next, then product technology and corporate strategy have roughly the same level of importance.
Next, we'll take a look at the vendor ratings. Do this by clicking on the "view ratings" option on the top menu bar.
View Ratings
The view ratings screen displays how the vendors perform across all the criteria defined in the model. You can display comparative ratings by one choice (all the criteria ratings for one vendor are displayed) or by one criterion (all included vendors are rated across the criteria highlighted in the tree in the left panel). To see how one vendor option rates against the criteria, go to the 'view ratings' option on the top menu bar and select the 'one choice for all criteria' option. This brings up a list of all the criteria and shows how the vendor displayed in the 'Option' text box scores. Now - to see a comparison, go again to the 'view ratings' option on the top menu bar and select 'all choices for one criterion.' This lists all vendor options taking part in this selection with their accompanying ratings.
Next, let's see the overall results by bringing up the score card. This is done by clicking on the "score card" option on the top menu bar.
Score Card
The Score Card screen shows both the overall and detailed scores of the selection model choices. The individual choice can be selected from the drop down box below, and its strengths and weaknesses will be displayed on the left. The bottom scoreboard provides detailed comparisons of selected criterion from the left panel. A criterion shows up as a strength if it passes a threshold of 90% percent match and a weakness if it falls below 50%. By expanding the criteria hierarchy to the left, you can drill down into lower levels of the model to do comparisons. The hierarchy can be navigated in exactly the same way as Windows Explorer.
Well, that's a very brief overview of WebTESS and only begins to cover all of its capabilities. It also allows you to create charts and reports and contains a full on-line Help feature. To wrap up, I'll just take a few moments to give you some general pointers on how to use our technology.
Both WebTESS and TESS, the desktop version, offer major advantages if you want to use them for adding to the quality of your own research. Each model is fully documented with comments on the factors and models.
If you want to create a shortlist of vendors because there are some criteria that are really critical to you, look through the model and click on those criteria. You can shortlist the vendors quickly that way, and then run through the rest of the model with those selected vendors.
I should add that our desktop product TESS is also available and you can contact our sales department concerning TESS and model licensing.
Thank you all for participating and please e-mail any additional questions you have to supplychain@technologyevaluation.com and we will get back to you as soon as possible.
SOURCE:
http://www.technologyevaluation.com/research/articles/supply-chain-management-audio-conference-transcript-15893/
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