2 15.1 IntroductionTechnology standards are important in supply chain managementReviewIT related standardsNew technology platformsEvolving technology standards
3 New Developments Radio Frequency Identification Devices (RFID) Consolidation of market to a few playersNew approaches to system designService Oriented Architecture (SOA)
4 15.2 IT StandardsHigh level of standards evolving due to following reasons:Market forcesStandards reduce cost of system development and maintenance.InterconnectivityConnecting different systems and work across networks has pushed the development of standardsNew software modelsInternet has produced the need for software that has new development and deployment characteristics.Economies of scaleStandards reduce the price of system components, development, integration, and maintenance.
5 Software Standards and the Next Inflection Point FIGURE 15-1: Software standards and the next inflection point
6 Four Phases Proprietary Until the early 80sMostly mainframe computers accessed through key punches and dumb terminalsLittle communication between systems with few options such as private networks or physical media.
7 Four Phases Stand Alone IBM PC software and hardware introduced the first standard platform called WintelMicrosoft Windows and Intel standardEventually created a large user base and a large market for applicationsCommunication standards developed mostly for local networksEthernet and IBM token ringFor business networks private networks were mostly used for file transfersElectronic data interchange (EDI)Client/server was developed
8 Four Phases ConnectedMissing link in communications provided by the internetExpanded the connection across organizations and beyond the local networkForms of communication enabled:Electronic mailFile and information transferElectronic commerce from shopping, bidding, and exchangesShipment trackingExtended collaboration between companies on joint forecasts, transportation and other activities.Year 2000 fearsLegacy systems replaced by client/server-based enterprise resource planning (ERP) systemsERP Systems:1st generation systems: finance and human resource applicationsSubsequent: Manufacturing and distributionMore recent: Adding supply chain capabilities
9 Four Phases Collaboration Next phase of standardsCurrently being developedAddresses collaborationSupporting technology built around SOA and BPM technologiesHas further increased the importance of ERP systems
10 15.3 IT InfrastructureCritical in the success or failure of any system implementationForms the base for data collection, transactions, system access, and communications.Infrastructure components:Interface/presentation devicesCommunicationsDatabasesSystem architecture
11 Interface Devices Common devices: Personal computers, voice mail, terminals, Internet devices, bar-code scanners, PDAUniform access capability anytime and anywhereStandard way to track products in order to provide participants with the information they need to perform efficientlyUniform Code CouncilCreated the bar code system, Universal Product Code (UPC), in 1973Scanning and recording information about productsAutomatic data capture interfaces, bar-code readers and radio frequency (RF) tagsRF 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
12 System Architecture Encompasses the way the components are configured Components imply:Databases, interface devices, communicationsTwo main categories:Legacy system architectureClient/Server architecture
13 Legacy System Architecture Evolved as departmental solutions using mainframe or minicomputers that were accessed through “dumb” terminalsCompany’s main systems for special applications such as word processing or spreadsheets.PCsConnecting PCs by means of local area networks (LANs)LANs extended across companies with wide area networks (WANs)
14 Legacy System Architecture FIGURE 15-2: Legacy system architecture
15 Client/Server Architecture Systems take advantage of the PC’s computing power and friendly graphic interface.PC is typically called the “client”Main processor is the “server.”Client/server computinga form of distributed processingsome processes are performed centrally for many userswhile others are performed locally on a user’s PC
16 Client/Server Architecture Most current system design use this architectureVariations in:Sophistication and price of the clientNumber and type of serversOther design parametersInternet a form of client/serverLocal PC browser processes the HTML (hypertext markup language) pages and Java applets (i.e., small applications)These are retrieved from serversEvolving towards a Web-centric model where the client is a Web browser connected to a Web server.
17 Client/Server Architecture FIGURE 15-3: Client/server system architecture
18 Client/Server Architecture Pros and Cons Can distribute functions among specialist servers that perform them efficientlyEasier to add new modules and functionsDisadvantages:Complexity of navigating between serversMaking sure that data are processed correctly and updated across the network. TTrend toward standardizationCalled interoperabilityTwo systems capable of interacting in a sophisticated way that is a built-in feature of their design
19 Middleware Applications that reside between the server and the client Facilitate communication between different system architectures, communication protocols, hardware architecturesImportant in the implementation of supply chain systemsCan collect the data from various databases and systemsFormat the data in a way that can be used by various planning toolsEnterprise Application Integration (EAI)Above process applied between companies over the Internet
20 Electronic CommerceReplacement of physical processes with electronic onesCreation of new models for collaboration with customers and suppliersFacilitates interaction between different companies as well as the interaction of individuals within companies.Examples:Purchasing over the Internet/Exchanges/Order tracking/
21 Standards and e-commerce Has been in existence for many yearsPrivate networks for corporations (e.g., WANs)Public networks at universities and government agencies.Internet standardsIntranetsExtranets and ExchangesDifferences in who is allowed access to the system
22 Portals Role-based entry into a company’s 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.
23 E-commerce Several levels of sophistication Advanced applications use: One way communication such as web browsingDirect 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 processesGeneral standard that does not address the issue of terminology in a specific industryRosettaNet in High-Tech industry
24 Rosetta NetViews 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 vendorsHas been expensive to implement.
25 Cross-Company Application CPFR Web-based standardEnhances vendor-managed inventory and continuous replenishmentJoint forecastingElectronic exchange a series of written comments and supporting dataPast sales trendsScheduled promotionsForecastsAllows the participants to coordinate joint forecasts by concentrating on differences in forecast numbersSharing of forecast informationTends to reduce bullwhip effectMay lead to a significant decrease in inventory levels
26 CPFR DevelopmentDeveloped by Voluntary Interindustry Commerce Standards Association (VICS) committeeRetailers, manufacturers, and solution providers.Mission to create collaborative relationships between buyers and sellersImprove efficiencies, increase sales, reduce fixed assets and working capital, and reduce inventory for the entire supply chain while satisfying consumer needsCreated the CPFR Voluntary Guidelines in 1998Published the CPFR Roadmap in November 1999Roadmap explains how manufacturers and retailers can implement a CPFR partnership.
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.
28 15.4 Service Oriented Architecture (SOA) Standards based approach to managing servicesDifferent software packagesBusiness process orchestrationDelivers flexible use and configurationAdopted by all the major business software vendorsbasis of their development tools and platformswidely by systems integrators to develop custom applications
29 SOA Contributions SOA-based integration Uses standards and the business process execution languageMakes maintenance much simpler and is easier to learn.Improvement over traditional integrationPoint to point using Enterprise Application Integration (EAI).Hard to maintainUses proprietary technology with a separate infrastructure
30 SOA ContributionsSOA-based integration Composite application developmentTop down approach to application developmentComposition of ready made components which are reusableBuilt in integration (services) make them easy to use and maintain
31 SOA Contributions 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.
32 SOA and BPM Strongly linked SOA drives a layered approach Business process tools use business services or composites to design the applicationLower levels provide orchestration, implementation services and the actual applications
33 SOA Layered Architecture FIGURE 15-4: SOA layers
34 SOA Strategies of Major Software Companies VendorSOA StrategyComposite PlatformRepositoryEcosystemIBMFocus on platform for applications custom and ISVsIBM SOA FrameworkWebsphere registryPartnerWorld Industry NetworksMicrosoftFocus on platform and some Service interfaces for current applications.NET Framework + WinFX + Biztalk serverNone.NET Partner programOracleFusion platformOracle Fusion middlewarePart of fusion architectureGeneric partner programSAPEnterprise service applications on the Netweaver platformNetweaver composite applicationsPart of Netweaver architecture
35 Technology Base: IBM and Microsoft Focused on development platforms for SOA software development.Major platforms:Java 2 Enterprise Edition (J2EE)Microsoft .NETIBMFocused on the technology platformLess on the applications.Middleware technology called WebspherePositioned as a supplier of components and services for the creation of custom applications.
36 J2EE and .Net Platforms eXtensible markup language (XML) Facilitates direct communication among computers on the InternetXML tags give instructions to a Web browser about the category of informationUniversal description, discovery, and integration (UDDI)Web-based distributed directoryEnables businesses to list themselves on the Internet
37 J2EE and .Net Platforms Web services description language (WDSL) XML-formatted language that UDDI usesDeveloped jointly by Microsoft and IBMDescribea a Web service's capabilities as collections of communication endpoints capable of exchanging messagesSimple object access protocol (SOAP)XML-based messaging protocolUsed 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 processesHas been submitted for standardization by a group led by IBM and Microsoft.
38 ERP Vendor Platform: SAP & Oracle Both competing on their own SOA platformsSAP strategyTie developers to its platformCreate innovation around it that will drive adoption.Oracle strategyFocused on integrating the many software vendor packages it has acquired in the last few years under one platform.
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
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 NetWeaverApplication serverIntegration serverWeb portalBusiness intelligence softwareMaster data management systemPlan to replace the three-tier client/server architecture used by the current ERP suite.
41 Oracle Traditional application development vendor Several acquisitions from 2005Peoplesoft (which already included JD Edwards)CRM vendor SiebelSCM 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 strongStrength with traditional technology-based developersSupporting developers/Does not fully address the business user’s needs
42 SOA SummarySOA changes the method and possibilities of designing application softwareAn application architecture with standard ways to integrate services.Services defined using a standard description language and have evocable interfacesServices can be part of business processesProcesses, 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.
43 15.5 RFIDTechnology 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 chainEPCglobal networkallow password protected access to the internet of RFID data anywhere in the supply chain.
44 RFID DevelopmentProliferation and full implementation of the technology will take many yearsEPCglobal 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 tagsProblems reading tags through metal or liquids and interference from nylon conveyor belts.Policy issues related to privacy concerns.
45 RFID Applications Two important drivers Mandate by some major channel masters and procurement agenciesImmediate benefits that can be gained from implementing the technology.
46 Level of Implementation Pallet/case or Individual Item Item level taggingRequired to achieve many of the benefits of RFID such as preventing counterfeiting and theft.Cost of the tags prevents widespread useNew IT systems would be required to track individual items
47 RFID Mandated Applications Wal-MartDepartment of DefenseFood and Drug AdministrationIn-Use ApplicationsPackage TrackingProduct TrackingStoringManufacturingWarehouse ManagementProduct Launch
48 RFID and POSPOS 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 itemsConservative estimate of 7% of salesNo one knows real value
49 Current Store and DC Execution Problems Scanning errorsItems not moved from storage to shelfWrong item picked at the DCItems from the DC not verified in the store.Maintaining accuracy and replenishing shelves difficult due to:Large product varietyCramped storageHigh inventoryResults:Misplaced SKUsSignificant discrepancies between physical inventory levels and information system inventory records
50 RFID Provides More Detailed Information Much beyond POS:Received at Wal-Mart DCDeparted DCReceived at storeDeparted store stock room (arrived on shelf)Case (or tag) destroyedImmediate benefits:Better control over Overage, Shortage and Damage claimsManagement and ability to better assign responsibility to the supplier, the carrier or Wal-MartBetter control over product recall;Use the data to improve processes through collaboration
51 True Advantage For the first time lost sales can be quantified. Retailer knows:what is soldwhat is in inventorywhen the shelves are not stockedIt will be possible to determine realized demand based on actual sales plus lost salesAnalysis will require new statistical and forecasting techniques that will take advantage of the new information.
52 RFID Benefits to Retailers Reduced inventoryone time cash savings of about 5% of total system inventoryStore and warehouse labor reductionannual reduction of store and warehouse labor expenses of 7.5%Reduction in out of stockyearly recurring gain of 7 cents per dollar sales
53 RFID Benefits to Manufacturers Inventory VisibilityBetter tracking of inventory throughout its facilities.Labor efficiencyReduced cycle counting, bar code scanning and manual recordingImproved fulfillmentReduced shrinkage, improved dock and truck utilization and improved product traceability.
54 RFID Implementation Costs TaggingRecurring cost incurred by manufacturersMost 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 tagReadersFixed cost that retailers and manufacturers will incur.Large retailers: $400,000 for a distribution center and $100,000 per storeInformation SystemsHandle the type of real-time, item-level information that RFID provides.
55 Differential Benefits High benefits for manufacturing companies selling a low volume of expensive goods, such as drugs and general merchandiseBenefits 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.
56 Supply Chain BenefitsConceptually RFID implies perfect information through the supply chainMovement of goods can be triggered by a sale of a single itemNot practical for many supply chains because of costs/scale economies/other managerial issuesNeeds a balance between pull chains and push chains built on lead times and economies of scale
57 SUMMARY1990s 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.