15-2 15.1 Introduction Technology standards are important in supply chain management Review IT related standards New technology platforms Evolving technology standards
15-3 New Developments Radio Frequency Identification Devices (RFID) Consolidation of market to a few players New approaches to system design Service Oriented Architecture (SOA)
15-4 15.2 IT Standards High level of standards evolving due to following reasons: Market forces Standards reduce cost of system development and maintenance. Interconnectivity Connecting different systems and work across networks has pushed the development of standards New software models Internet has produced the need for software that has new development and deployment characteristics. Economies of scale Standards reduce the price of system components, development, integration, and maintenance.
15-5 Software Standards and the Next Inflection Point FIGURE 15-1: Software standards and the next inflection point
15-6 Four Phases Proprietary Until the early 80s Mostly mainframe computers accessed through key punches and dumb terminals Little communication between systems with few options such as private networks or physical media.
15-7 Four Phases Stand Alone IBM PC software and hardware introduced the first standard platform called Wintel Microsoft Windows and Intel standard Eventually created a large user base and a large market for applications Communication standards developed mostly for local networks Ethernet and IBM token ring For business networks private networks were mostly used for file transfers Electronic data interchange (EDI) Client/server was developed
15-8 Four Phases Connected Missing link in communications provided by the internet Expanded the connection across organizations and beyond the local network Forms of communication enabled: Electronic mail File and information transfer Electronic commerce from shopping, bidding, and exchanges Shipment tracking Extended collaboration between companies on joint forecasts, transportation and other activities. Year 2000 fears Legacy systems replaced by client/server-based enterprise resource planning (ERP) systems ERP Systems: 1 st generation systems: finance and human resource applications Subsequent: Manufacturing and distribution More recent: Adding supply chain capabilities
15-9 Four Phases Collaboration Next phase of standards Currently being developed Addresses collaboration Supporting technology built around SOA and BPM technologies Has further increased the importance of ERP systems
15-10 15.3 IT Infrastructure Critical in the success or failure of any system implementation Forms the base for data collection, transactions, system access, and communications. Infrastructure components: Interface/presentation devices Communications Databases System architecture
15-11 Interface Devices Common devices: Personal computers, voice mail, terminals, Internet devices, bar- code scanners, PDA Uniform access capability anytime and anywhere Standard way to track products in order to provide participants with the information they need to perform efficiently Uniform Code Council Created the bar code system, Universal Product Code (UPC), in 1973 Scanning and recording information about products Automatic data capture interfaces, bar-code readers and radio frequency (RF) tags RF tags used to locate items, particularly in large warehouses. Together with GPS capabilities, enables tracking of tagged cargo while in shipment. RFID tag a replacement for the RF tag
15-12 System Architecture Encompasses the way the components are configured Components imply: Databases, interface devices, communications Two main categories: Legacy system architecture Client/Server architecture
15-13 Legacy System Architecture Evolved as departmental solutions using mainframe or minicomputers that were accessed through dumb terminals Companys main systems for special applications such as word processing or spreadsheets. PCs Connecting PCs by means of local area networks (LANs) LANs extended across companies with wide area networks (WANs)
15-14 Legacy System Architecture FIGURE 15-2: Legacy system architecture
15-15 Client/Server Architecture Systems take advantage of the PCs computing power and friendly graphic interface. PC is typically called the client Main processor is the server. Client/server computing a form of distributed processing some processes are performed centrally for many users while others are performed locally on a users PC
15-16 Most current system design use this architecture Variations in: Sophistication and price of the client Number and type of servers Other design parameters Internet a form of client/server Local PC browser processes the HTML (hypertext markup language) pages and Java applets (i.e., small applications) These are retrieved from servers Evolving towards a Web-centric model where the client is a Web browser connected to a Web server. Client/Server Architecture
15-17 Client/Server Architecture FIGURE 15-3: Client/server system architecture
15-18 Can distribute functions among specialist servers that perform them efficiently Easier to add new modules and functions Disadvantages: Complexity of navigating between servers Making sure that data are processed correctly and updated across the network. T Trend toward standardization Called interoperability Two systems capable of interacting in a sophisticated way that is a built-in feature of their design Client/Server Architecture Pros and Cons
15-19 Middleware Applications that reside between the server and the client Facilitate communication between different system architectures, communication protocols, hardware architectures Important in the implementation of supply chain systems Can collect the data from various databases and systems Format the data in a way that can be used by various planning tools Enterprise Application Integration (EAI) Above process applied between companies over the Internet
15-20 Electronic Commerce Replacement of physical processes with electronic ones Creation of new models for collaboration with customers and suppliers Facilitates interaction between different companies as well as the interaction of individuals within companies. Examples: Purchasing over the Internet/Exchanges/Order tracking/E-mail
15-21 Standards and e-commerce Has been in existence for many years Private networks for corporations (e.g., WANs) Public networks at universities and government agencies. Internet standards Intranets Extranets and Exchanges Differences in who is allowed access to the system
15-22 Portals Role-based entry into a companys systems Aggregates all the applications and sources of information employees need in order to perform their job into a single desktop environment, typically through the Web browser. Require integration technology for structured and unstructured data sources, including databases, Java classes, Web services, and XML.
15-23 E-commerce Several levels of sophistication One way communication such as web browsing Direct data base access for retrieving personal data or creating transactions such as on-line purchases or managing a bank account. Advanced applications use: Electronic Data Exchange (EDI) XML-based processes General standard that does not address the issue of terminology in a specific industry RosettaNet in High-Tech industry
15-24 Rosetta Net Views itself as an e-business equivalent of the Rosetta stone, Carried the same message in three different languages, enabling translation from hieroglyphics. Aimed at producing a flexible standard governing on-line business collaboration between manufacturers and suppliers. Defines dictionaries and Partner Interface Processes, which handle multiple data transactions among partners. Being used by some high-tech vendors Has been expensive to implement.
15-25 Cross-Company Application CPFR Web-based standard Enhances vendor-managed inventory and continuous replenishment Joint forecasting Electronic exchange a series of written comments and supporting data Past sales trends Scheduled promotions Forecasts Allows the participants to coordinate joint forecasts by concentrating on differences in forecast numbers Sharing of forecast information Tends to reduce bullwhip effect May lead to a significant decrease in inventory levels
15-26 CPFR Development Developed by Voluntary Interindustry Commerce Standards Association (VICS) committee Retailers, manufacturers, and solution providers. Mission to create collaborative relationships between buyers and sellers Improve efficiencies, increase sales, reduce fixed assets and working capital, and reduce inventory for the entire supply chain while satisfying consumer needs Created the CPFR Voluntary Guidelines in 1998 Published the CPFR Roadmap in November 1999 Roadmap explains how manufacturers and retailers can implement a CPFR partnership.
15-27 CPFR Roadmap Steps www.cpfr.org Develop guidelines for the relationships. Develop a joint business plan. Create a sales forecast. Identify exceptions for the sales forecast. Collaborate on exception items. Create an order forecast. Identify exceptions for the order forecast. Resolve/collaborate on exception items. Generate orders.
15-28 15.4 Service Oriented Architecture (SOA) Standards based approach to managing services Different software packages Business process orchestration Delivers flexible use and configuration Adopted by all the major business software vendors basis of their development tools and platforms widely by systems integrators to develop custom applications
15-29 SOA Contributions SOA-based integration Uses standards and the business process execution language Makes maintenance much simpler and is easier to learn. Improvement over traditional integration Point to point using Enterprise Application Integration (EAI). Hard to maintain Uses proprietary technology with a separate infrastructure
15-30 SOA-based integration Composite application development Top down approach to application development Composition of ready made components which are reusable Built in integration (services) make them easy to use and maintain SOA Contributions
15-31 Modernizing Legacy applications Many IT departments spend 70% to 80% of their budget maintaining mainframe or other legacy applications. Using SOA, companies can define the business processes and start separating the business logic from the application. SOA Contributions
15-32 SOA and BPM Strongly linked SOA drives a layered approach Business process tools use business services or composites to design the application Lower levels provide orchestration, implementation services and the actual applications
15-33 SOA Layered Architecture FIGURE 15-4: SOA layers
15-34 SOA Strategies of Major Software Companies VendorSOA StrategyComposite PlatformRepositoryEcosystem IBMFocus on platform for applications custom and ISVs IBM SOA FrameworkWebsphere registryPartnerWorld Industry Networks MicrosoftFocus on platform and some Service interfaces for current applications.NET Framework + WinFX + Biztalk server None.NET Partner program OracleFusion platformOracle Fusion middleware Part of fusion architecture Generic partner program SAPEnterprise service applications on the Netweaver platform Netweaver composite applications Part of Netweaver architecture.NET Partner program
15-35 Technology Base: IBM and Microsoft Microsoft Focused on development platforms for SOA software development. Major platforms: Java 2 Enterprise Edition (J2EE) Microsoft.NET IBM Focused on the technology platform Less on the applications. Middleware technology called Websphere Positioned as a supplier of components and services for the creation of custom applications.
15-36 J2EE and.Net Platforms eXtensible markup language (XML) Facilitates direct communication among computers on the Internet XML tags give instructions to a Web browser about the category of information Universal description, discovery, and integration (UDDI) Web-based distributed directory Enables businesses to list themselves on the Internet
15-37 Web services description language (WDSL) XML-formatted language that UDDI uses Developed jointly by Microsoft and IBM Describea a Web service's capabilities as collections of communication endpoints capable of exchanging messages Simple object access protocol (SOAP) XML-based messaging protocol Used to encode the information in Web service request and response messages before sending them over a network. Business Process Execution Language (BPEL) specification that defines how Web services can be combined to orchestrate long-lasting business processes Has been submitted for standardization by a group led by IBM and Microsoft. J2EE and.Net Platforms
15-38 ERP Vendor Platform: SAP & Oracle Both competing on their own SOA platforms SAP strategy Tie developers to its platform Create innovation around it that will drive adoption. Oracle strategy Focused on integrating the many software vendor packages it has acquired in the last few years under one platform.
15-39 SAP Enterprise-services architecture (ESA) Blueprint for services-based, enterprise-scale business solutions that offer increased levels of adaptability, flexibility, and openness. Based on SAP Netweaver
15-40 NetWeaver Collection of infrastructure and integration technologies Basis for SAP's applications like mySAP ERP, SRM, CRM, etc., Flexibly interoperate with one another and with pieces of applications from other software vendors. Elements of NetWeaver Application server Integration server Web portal Business intelligence software Master data management system Plan to replace the three-tier client/server architecture used by the current ERP suite.
15-41 Oracle Traditional application development vendor Several acquisitions from 2005 Peoplesoft (which already included JD Edwards) CRM vendor Siebel SCM vendors such as Demantra for demand planning and G-log for transportation. Platform called Oracle Fusion around which all applications will eventually standardize. Middleware applications include JDeveloper, BPEL Process Manager, Enterprise Service Bus, Oracle Web Services Manager, Business Rules and Oracle Business Activity Monitoring. Impact beyond installed base not strong Strength with traditional technology-based developers Supporting developers/Does not fully address the business users needs
15-42 SOA Summary SOA changes the method and possibilities of designing application software An application architecture with standard ways to integrate services. Services defined using a standard description language and have evocable interfaces Services can be part of business processes Processes, transactions, and special functional components all have to be exposed as services allowing composite, diverse applications to be exposed as well. Each interaction should be independent of each and every other interaction and the interconnect protocols of the communicating devices.
15-43 15.5 RFID Technology that deploys tags emitting radio signals and devices, called readers, which pick up the signal. Tags: Active (broadcast information) Passive (respond when queried by a reader) Read-only or read/write and one-time or reusable. Can be used to read an Electronic Product Code (EPC) EPC: unique ID number for a specific item in the supply chain EPCglobal network allow password protected access to the internet of RFID data anywhere in the supply chain.
15-44 RFID Development Proliferation and full implementation of the technology will take many years EPCglobal network has not yet even been accepted as the standard. Other Challenges: Lack of common international standards for tags, technical problems with tag scanning accuracy, and reduction in the cost of tags. Reliability of tags Problems reading tags through metal or liquids and interference from nylon conveyor belts. Policy issues related to privacy concerns.
15-45 RFID Applications Two important drivers Mandate by some major channel masters and procurement agencies Immediate benefits that can be gained from implementing the technology.
15-46 Level of Implementation Pallet/case or Individual Item Item level tagging Required to achieve many of the benefits of RFID such as preventing counterfeiting and theft. Cost of the tags prevents widespread use New IT systems would be required to track individual items
15-47 RFID Mandated Applications Wal-Mart Department of Defense Food and Drug Administration In-Use Applications Package Tracking Product Tracking Storing Manufacturing Warehouse Management Product Launch
15-48 RFID and POS POS as historical data used by many demand planning tools to forecast demand. Does not measure real demand because of lost sales due to out-of-stock items Conservative estimate of 7% of sales No one knows real value
15-49 Current Store and DC Execution Problems Scanning errors Items not moved from storage to shelf Wrong item picked at the DC Items from the DC not verified in the store. Maintaining accuracy and replenishing shelves difficult due to: Large product variety Cramped storage High inventory Results: Misplaced SKUs Significant discrepancies between physical inventory levels and information system inventory records
15-50 RFID Provides More Detailed Information Much beyond POS: Received at Wal-Mart DC Departed DC Received at store Departed store stock room (arrived on shelf) Case (or tag) destroyed Immediate benefits: Better control over Overage, Shortage and Damage claims Management and ability to better assign responsibility to the supplier, the carrier or Wal-Mart Better control over product recall; Use the data to improve processes through collaboration
15-51 True Advantage For the first time lost sales can be quantified. Retailer knows: what is sold what is in inventory when the shelves are not stocked It will be possible to determine realized demand based on actual sales plus lost sales Analysis will require new statistical and forecasting techniques that will take advantage of the new information.
15-52 RFID Benefits to Retailers Reduced inventory one time cash savings of about 5% of total system inventory Store and warehouse labor reduction annual reduction of store and warehouse labor expenses of 7.5% Reduction in out of stock yearly recurring gain of 7 cents per dollar sales
15-53 RFID Benefits to Manufacturers Inventory Visibility Better tracking of inventory throughout its facilities. Labor efficiency Reduced cycle counting, bar code scanning and manual recording Improved fulfillment Reduced shrinkage, improved dock and truck utilization and improved product traceability.
15-54 RFID Implementation Costs Tagging Recurring cost incurred by manufacturers Most companies that sell RFID tags do not quote prices because pricing is based on volume, the amount of memory on the tag and the packaging of the tag Readers Fixed cost that retailers and manufacturers will incur. Large retailers: $400,000 for a distribution center and $100,000 per store Information Systems Handle the type of real-time, item-level information that RFID provides.
15-55 Differential Benefits High benefits for manufacturing companies selling a low volume of expensive goods, such as drugs and general merchandise Benefits not clear for manufacturers of high volume-low cost products, such as food and grocery, the benefits from RFID are not as clear. These industries already have efficient supply chains through the implementation of a variety of technologies and processes; Uncertainty in these industries is relatively small and hence demand is highly predictable.
15-56 Supply Chain Benefits Conceptually RFID implies perfect information through the supply chain Movement of goods can be triggered by a sale of a single item Not practical for many supply chains because of costs/scale economies/other managerial issues Needs a balance between pull chains and push chains built on lead times and economies of scale
15-57 SUMMARY 1990s evolution of the internet has been a major factor in supply chain changes. SOA provides the backbone for building more adaptable systems that can operate across different technology infrastructures. RFID is a revolutionary technology that will significantly impact the way supply chains are managed and lead to greater efficiency.