Supply Chain Synchronization

SOA transformation in the mobile industry

My partners and I are in the final stages of implementing our Supply Chain Synchronization suite at a global leader in logistics services and distribution for the wireless / mobile industry. Our solution is based on a service-oriented architecture, so this article by Kevin Wei Wang, an associate principal in McKinsey’s Shanghai office, caught my eye because it explains how Shanghai Mobile transformed its IT architecture with SOA “to create a smarter, more efficient system.” That concept is one that resonates with my partners and me.

Here is the introduction to Creating competitive advantage with IT architecture: An interview with Shanghai Mobile’s CIO

“In early 2008, Shanghai Mobile’s general manager of information technology, Xie Qin, knew that his company's "complex legacy architecture presented competitive problems that would create even greater stumbling blocks in the new era. First, the company’s IT systems were largely siloed by customer channels—local branch stores, call centers, and online stores—which had inconsistent business policies for common processes, such as approving a subscriber’s eligibility for new prices or services. That translated into costly duplication for writing and maintaining software applications and increased spending on IT infrastructure. Second, the complex IT systems were very challenging to maintain. Under the existing IT architecture, for example, it was difficult to monitor system performance issues and to diagnose root causes. IT normally took a long time to resolve service breaks.

“By the spring of 2008, Xie launched what would turn out to be a ten-month overhaul of Shanghai Mobile’s IT systems to improve its sales and service capabilities and to make the system easier to maintain. The transformation required Shanghai Mobile to dismantle the existing architecture and to replace it with a new IT blueprint based on service-oriented architecture (SOA), which created a unified business-service layer for different front-end channel systems and allowed the channels to share customer information. The result: improved sales and service capabilities for the channel systems; an optimal use of program developers, data centers, and other resources of the IT infrastructure; and a more maintainable system.

“Although Xie’s goals were straightforward, implementing SOA within a business in flux can be risky. In this interview with McKinsey’s Kevin Wei Wang, Xie explains how he executed the strategy and how it has changed the carrier.”

Following are some of the key insights shared by Xie:

Two main reasons change was required

1. Market was becoming increasingly competitive
2. More and more difficult to differentiate product offering

Three key management lessons involved with process transformation

1. Clearly articulate business value
2. Realign roles to ensure people stick with new approach
3. Implement risk mitigation to minimize disruption to the business

Four results of moving to SOA

1. Reduced time to market by 30%
2. Reduced development effort by at least 50 %
3. Improved customer experience
4. Reduced system performance diagnosis from an average of 2 hours to 2 minutes

Three key IT problems addressed

1. Inconsistent business logic
2. Lack of information sharing across channels
3. Disconnected system monitoring

Most importantly, Xie clearly understood that while the IT benefits of switching to SOA were substantial, a project of this size and importance would only be funded and achieve success if it had the full backing of the entire business. Xie answered the question “An SOA transformation often means change and uncertainty in the business units. How did you convince them to go along?” this way:

Xie Qin: “We had to present the business case in a tangible way. We got the buy-in by addressing the real business issue—inconsistent business logic and lack of information sharing across channel systems—which is a real concern for the customer experience across our channels. While an SOA transformation also reduces IT costs and improves system performance, I don’t think we would have gotten our business team as excited by addressing these two factors alone.”

He is right. For those CIOs and IT execs working to fund and launch projects of similar scale, these are words of wisdom.

The complete article at McKinsey is available here.

Experimentation with customers and partners

Michael Chui, Pär Edin, and James Manyika of McKinsey have posted a new article making the case that "In the 'new normal' successful CIOs will search for value through experimentation with customers and partners."

The restructuring of the economic order now taking place is called by some the "new normal." According to the authors, key characteristics include: "persistent uncertainty, tighter credit, lower consumer spending, and greater government involvement in business."

In this environment, executives running large IT organizations will have to "make the IT function dramatically more productive, use IT more effectively to meet larger company goals, and embrace disruptive technologies that will shape the new economic terrain."

"First and foremost, CIOs will have to overcome hurdles that have limited IT’s performance in recent years:

• They must promote a much closer alignment between IT and the business units by embracing new organizational models that call for joint decision making. IT leaders will need better business skills, not just technical know-how.
• IT productivity efforts must leap beyond cost cutting at the margins. CIOs will have to make fundamental changes in the way IT operates and campaign for technological improvements that will transform cost structures and operating models throughout the enterprise.
• IT leaders must join with their business counterparts to seek out and implement technology-based innovations that will give companies long-term competitive advantages in a tougher economic climate.

In the past, IT performed satisfactorily if it made marginal progress in these areas. In the new normal, it must truly excel in all of them—the performance bar is higher, and the expectation that IT should contribute to corporate success is more insistent."

As CIOs adapt to the "new normal", my partners and I believe that supply chain synchronization will continue to gain in strategic importance. Supply chain synchronization goes beyond traditional supply chain management to break down data and process barriers between and across organizations. As this is accomplished, data flows in real time to those who need it and is presented in actionable formats. A key result is that organizations and their trading networks reduce costs while increasing customer service levels.

The transformation of a supply chain -- including both business processes and enabling technologies -- opens doors to support new business models and innovative services that were previously locked behind rigid and disconnected data and processes. When a supply chain has been synchronized, it often creates the best information available in a trading hub and has processes that can rapidly adapt to meet new requirements. As the McKinsey authors point out, disruptive technologies (often from smaller, innovative software firms) can help organizations experiment with customers and partners to achieve these types of results.

Silos and forecasts

In their McKinsey Quarterly article, Building better links in high-tech supply chains, Gautam Grover, Eileen Lau, and Vivek Sharma take a look at how silos negatively impact forecasts. This is a problem that our clients are regularly working to address, and that must be transformed in order to improve forecast accuracy and inventory planning. The solution to this challenge has more to do with the structure of an enterprise than with the enabling technology. Of course, the technology (such as Evavi's Synchronized Supply and Demand solution) must support properly aligned business processes, but the processes themselves must be designed into the structure of the enterprise. 

The McKinsey authors had this to say about silos and forecasts:

"OEMs in many industries organize themselves around functional units. But in high technology (and other assembly industries), units such as manufacturing, sales and marketing, and product development often send conflicting forecasts of demand and production to their partners. Not surprising, supply chain responses are often based on guesswork, and forward planning is difficult. In one variation of this problem, OEM sales reps provide "lowball" estimates of demand rather than a truer picture, so they can more easily beat internal goals. Alternatively, when components are in short supply, forecasts by manufacturing functions often are overly optimistic in a play to maximize the allocation of scarce products from suppliers."

The importance of supply chain agility and transformation

In an interview with Wharton@Knowledge, information and technology professor Hau L. Lee of Stanford University's Graduate School of Business shared ideas about supply chain agility and transformation. His comments about agility are especially relevant today because, as he points out, agile supply chains are the ones that win when "there is an external disturbance and companies respond accordingly -- when their competitors cannot do so...." Today we are in just such an economic environment, and tomorrows winners are locking in market share today.

Lee also points out the need to move beyond pure agility to offer transformed solutions that substantially change the nature of your supply chain value proposition with your trading partners. For those companies operating throughout Asia, Lee believes that the importance of transformed solutions "is even more important because the needs for customisation and solutions are even higher due to the diversity in needs and capabilities."

Here is an excerpt from this insightful interview:

"The first thing companies should do is to ensure that the supply chain is done well. That means eliminating waste, removing inefficiencies, and not having any value-added activities. However, all this is purely a margin improvement exercise. Often times, what we have found is that once a good process is in place, it will enable companies to respond to the different needs of their customers. And these are where the opportunities lie. Any time there is an external disturbance and companies respond accordingly -- when their competitors cannot do so -- they will be able to grab that market share. Once they gain market share, it is very hard for competitors to grab it back. Essentially, companies should try and be responsive, through using the supply chain process, to take advantage of unexpected events. This is what agility is about.

"It is not just a question of unexpected events, however. In being agile, companies which have many customers with different needs and geographies, will realise they can serve more customers with more customised solutions. Those solutions will allow them to reach out to markets that they have not been able to reach out to before. The next stage is to think about what the customer needs. Is it just the product or is there a way that they want certain things done? For instance, let’s say I am a cement company and my customers buy cement from me. The customers need cement not because they want to store it at home but because they are constructing something. So, can I do something that would make their construction easier? Can I help them buy other things and put these together for them? That is what 'transformed solutions' are about.

"I think the more mature companies will go down the path of providing more complete solutions. As start-ups, most companies have a single product and they will want to make that well and efficiently. But mature companies must evolve for that is the way to create intimacy and stickiness with the customer, making it harder for them to switch loyalties. Once companies provide complete solutions, for example by helping customers design and manage projects, it is harder for customers to make that switch."

The complete interview can be read here.

Business flexibility constrained by legacy software

A client of mine sent the following video to me thinking that this was Evavi's. As companies work to free themselves from rigid, inflexible legacy systems, solutions such as Evavi's Supply Chain Synchronization offer new levels of flexibility and extensibility. If this video represents some of the challenges you are facing with your supply chain, we'd be glad to talk about how we are delivering the enterprise software of the future -- today.

Evavi Fabric delivers the flexibility required for dynamic supply chains

During the past several weeks I've had the opportunity to take a deep dive with one of our clients into Evavi Fabric™. This client has been evaluating the difference between rigid packaged applications and custom software development to meet some supply chain needs.

Fabric is the planning and execution platform that the technology team at Evavi developed to power every Evavi solution. It includes common data models to enable the highest levels of synchronization and optimization across an extended supply chain.

Supply chain-centric businesses often need to support customer-specific processes that can not be supported by cookie-cutter ‘standard’ software applications. The attempts to customize one-size-fits-all solutions often result in ballooning IT spend, long implementation cycles, and costly maintenance.

Evavi Fabric™ is at the leading edge of a new approach to solve these problems, and the ideal platform for building synchronized supply chain applications. Fabric™ is a multi-company, multi-tenant SOA-based platform that leverages extensible business models and is packaged with proven reusable patterns and software components essential for today’s supply chain applications. Core components include: configurable business process engine, dynamic rules engine, personalization-ready portal, framework for user-level and data-level security, meta-tags, bookmarks, pro-active alerts, data synchronization components, and more.

Fabric™ enables Evavi to help clients realize measurable value and implement solutions the right way – collaboratively define requirements that precisely meet the clients’ needs; translate and render these requirements using Evavi Fabric™ solution patterns; and use a spiral tailoring approach to
configure the required functionality. This ensures that the production solution precisely meets the needs of the client, while the underlying technology helps protect their ongoing investment and reduces the total cost of ownership.

ABC: An Introduction to Supply Chain Management - What are the roadblocks to installing supply chain software?

Ben Worthen, at CIO Magazine, has compiled ABC: An Introduction to Supply Chain Management. This compilation provides a good starting place for those wanting to learn about the basics of supply chain management.

One of the questions he looks into is: What are the roadblocks to installing supply chain software? His answer looks at three typical roadblocks that can be anticipated and should be preempted:

1) Gaining trust from your suppliers and partners.

“Supply chain automation is uniquely difficult because its complexity extends beyond your company's walls. Your people will need to change the way they work and so will the people from each supplier that you add to your network. … To get your supply chain partners to agree to collaborate with you, you have to be willing to compromise and help them achieve their own goals.”

The degree to which your people will need to change the way they work will be dictated by what business processes you are changing, and how flexible the software is to accommodate the elements that are unique to your business. Ideally you will transform business processes because they will improve your business, and not because the software dictates that you do things in a circuitous way. Supply chain solutions should only be considered that are flexible enough to model what is unique about your business, rather than forcing you to change those things that your customers already value. You should be able to tailor role-based workflows that perfectly fit the needs of the business, and that support adoption by end-users. This is a foundational concept of Supply Chain Synchronization that distinguishes it from simple Supply Chain Management.

2) Internal resistance to change.

“If selling supply chain systems is difficult on the outside, it isn't much easier inside. Operations people are accustomed to dealing with phone calls, faxes and hunches scrawled on paper, and will most likely want to keep it that way. If you can't convince people that using the software will be worth their time, they will easily find ways to work around it. You cannot disconnect the telephones and fax machines just because you have supply chain software in place.”

Without successful change management, most supply chain initiatives will flounder and may ultimately fail. Some clients I have worked with have forced supply chain solutions in without gaining the necessary consensus from the end-users. This normally results in additional time and money to cycle back after the implementation to train, cajole, and encourage the end-users to get on board -- much more effective to get this done at the beginning of the project.

3) Many mistakes at first.

“There is a diabolical twist to the quest for supply chain software acceptance among your employees. New supply chain systems process data as they are programmed to do, but the technology cannot absorb a company's history and processes in the first few months after an implementation. Forecasters and planners need to understand that the first bits of information they get from a system might need some tweaking. If they are not warned about the system's initial naiveté, they will think it is useless. … Once employees [understand] that they [are] merging their expertise with the system's increasing accuracy, they [will begin] to accept and use the new technology.”

The best supply chain software has the ability to be programmed in advance with as much of a company’s historical data as can be obtained. However, even when this is done, the system will take a while to reach equilibrium. Supply chain solutions are designed to be intelligent – they learn as they go. At the same time, most supply chain functions (such as forecasting and inventory planning) are not designed to run on autopilot. These solutions require regular monitoring and adjusting (though the best ones will automatically direct the end-user to the places that need the most attention). End-users need to understand that they are indeed merging their expertise with the system’s intelligence. Working in concert, the results can be spectacular.

ABC: An Introduction to Supply Chain Management - What does supply chain management software do?

ABC: An Introduction to Supply Chain Management is a compilation by Ben Worthen at CIO Magazine. It provides a good starting place for those wanting to learn about the basics of supply chain management.

One of the questions he provides insights to is: What does supply chain management software do?  In answer to that question, Worthen points out that “Supply chain management software is possibly the most fractured group of software applications on the planet. Each of the five major supply chain steps … composes dozens of specific tasks, many of which have their own specific software. Some vendors have assembled many of these different chunks of software together under a single roof, but no one has a complete package that is right for every company. For example, most companies need to track demand, supply, manufacturing status, logistics (i.e. where things are in the supply chain), and distribution. They also need to share data with supply chain partners at an ever increasing rate.”

When you are evaluating supply chain solutions, be sure to understand how Supply Chain Synchronization differs from the fractured environment of traditional Supply Chain Management software. One of the main areas of differentiation is that Supply Chain Synchronization uses a common platform and common data models to enable business processes across the enterprise. This, combined with native personalization, exception and alert management, performance measurement, and role-based workflows enables companies to let their strategy drive their supply chain solution, instead of being constrained by it.

Worthen goes on to note a hugely important point for those working on supply chain strategies. He writes: “It’s worth mentioning that the old adage about systems only being as good as the information that they contain applies doubly to SCM. If the information entered into a demand forecasting application is not accurate then you will get an inaccurate forecast. Similarly, if employees bypass the supply chain systems and try to manage things manually, then even the most expensive systems will provide an incomplete picture of what is happening in a company’s supply chain.”

So, as you work on your supply chain strategy, be sure to spend time working on the change management that will be needed to successfully deploy, run, and maintain your supply chain solution. My experience has been that in their eagerness to get started, this is the area that most companies are prone to overlook.

Supply Chain Excellence Is All About Providing "Transformed Solutions"

I've been working with my partners on a global supply chain solution for a company that is going through significant changes in its business. A recent interview with professor Hau L. Lee in Knowledge@Singapore Management University captured many of the ideas that we've been discussing with this client. The article helps to illustrate the importance of developing and delivering customized solutions that are responsive to the different needs of their clients. The focus is to be agile enough to rapidly meet new or unforeseen needs, and then to transform these solutions to reach out to markets that could not previously be served with legacy applications.

In the interview Lee correctly points out that "Emerging economies tend to have more inefficiencies. ... You can start building a business simply because you are able to do things faster and on a less costly basis. Down the road, the best way to defend the business is to transform it into a company that sources for and provides customised solutions." Therefore, "the more mature companies will go down the path of providing more complete solutions. As start-ups, most companies have a single product and they will want to make that well and efficiently. But mature companies must evolve for that is the way to create intimacy and stickiness with the customer, making it harder for them to switch loyalties. Once companies provide complete solutions, for example by helping customers design and manage projects, it is harder for customers to make that switch."

Lee concludes the interview by emphasizing the need to have knowledge workers who are able to use information smartly. When asked to name a future trend in the supply chain business, Lee responds, "It is not definitive but I think it needs more knowledge workers. If I can predict the trend, the knowledge worker will be important, particularly knowledge workers who are able to use information smartly. It is not just about passing information quickly. It is not just differentiation. Supply chain professionals will be knowledge workers. They will know how to design the supply chain, adapt it and see to changing needs. We need that additional layer of professionals to coordinate the process and have a macro view of things."

Supply chains require continuous transformation. To meaningfully engage in this continuous transformation requires knowledge workers, supply chain architects, agile solutions, and scalable technologies. While some legacy supply chain solutions helped to provide efficiency gains, the transformative change that Lee articulates requires a new breed of technologies that can enable entirely new business processes across the extended enterprise in real-time. This is exactly the vision that caused us to start Evavi and develop our Supply Chain Synchronization suite.

Computer complexity creates costs that don't add value

Computer complexity creates costs that the average customer doesn't see. According to Al Nugent, the chief technology officer for CA, "about 60% to 80% of what businesses spend on information technology goes toward 'keeping the lights on,' while only the remainder can be spent on future innovation or, equally important, proactive measures that enhance reliability and security."

This is a central challenge for large and mid-size companies. The opportunity is to change this equation completely around by moving from closed technologies and legacy software platforms to open technologies and Internet-native platforms that provide scalability and flexibility without punitive ongoing costs to run and maintain. SaaS and SOA are both examples of technologies that enable companies to focus more on creating value than on maintaining systems. As companies begin their technology transformation, they should also be transforming their business processes to fully realize the new levels of value available to them as a result of these next-generation technologies. The opportunity now exists to reduce information technology costs while fully synchronizing business processes across traditionally disconnected departments  and throughout the extended enterprise.