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.

Cutting IT costs and complexity by aligning enterprise-wide requirements

CIOs are in a difficult position. As a recent article by Janaki Akella, Helge Buckow, and Stéphane Rey points out, "IT represents an important part of total spending—5 percent or more in some industries—and its direct contribution to revenues and profits is often difficult to assess."

The authors recommend IT leaders find significant additional reductions and efficiencies by "taking a broader look at the way they manage the IT architecture as a whole. The key to these economies is bringing business and IT leaders together in a combined effort to rationalize not only business applications and processes but also the core IT infrastructure and operations."

As anyone who has been intimately involved in IT understands, the reality is that short-term business wants and needs of individuals, divisions, and units are often addressed without full consideration to the larger requirements of the organization. While IT may design a long-term blueprint, the operational reality is that decisions often get made by divisions and business units with "relatively little regard for the impact on a company’s overall IT architecture" or the business processes than move beyond their division or unit.

The authors write: "CIOs at the corporate or division level generally do have substantial control over the core IT infrastructure components: servers, storage systems, and the associated infrastructure software. But the business applications, processes, and business model sitting atop the IT infrastructure often reflect the wants of the leaders of business units and functions, who understandably focus more on their own needs than on overall IT efficiency. Across a global company, the result is often an unwieldy, heterogeneous IT environment where incompatible (and often duplicative) hardware, applications, and processes sprout year by year, in every corner of the organization, in response to specific near-term needs....

"These patchwork systems require substantially more time and money for development, support, and maintenance—at the expense of budgets, new IT capabilities, and business innovation. At large companies, eliminating these duplications and inefficiencies can reduce IT spending by tens or hundreds of millions of dollars while improving the quality of the IT operation and the satisfaction of those who rely on it. The CIO alone, however, cannot reduce these costs; business leaders too must sponsor and participate in the transformation."

In their discussion about reducing costs and complextity, the authors mention two areas that my partners and I have also found to be of particular importance. The first is the need to develop an integrated data model (in our case, we have a common data model since our entire Supply Chain Synchronization suite is built on one data model rather than several that have been disconnected and then, later, integrated -- there are many benefits to the common data model approach). "[N]onintegrated databases greatly raise costs and result in inefficient processes, duplicative development efforts, longer times to market, business errors, and missed opportunities."

The other area of particular importance is the need to reduce interface complexity. "An IT staff can spend as much as 30 percent of its development time on applications making all of their interfaces work, largely because customized applications have so many point-to-point interfaces. Standardized interfaces, such as the enterprise service bus (ESB), can greatly ease the burden of system integration and minimize the chore of dealing with local changes." (Again, in our case we've developed our solution using SOA architecture and web services to the highest levels of cost savings while maintaining the flexibility to handle rapid change in the supply chain.)

When we talk with consultants and clients, they are often focused on the issue of customizations. My partners and I share the view articulated by Akella, Buckow, and Rey. They recommend that the focus on software customization should be in those areas that provide meaningful competitive advantage. They point out that rarely do functions like HR, finance, and accounting provide a competitive advantage in direct competition with other companies. Functions such as sales, product development, and supply chain are much better candidates for tailoring solutions that will create differentiation in the market. It should be noted that while it is very costly and time-consuming to customize most legacy ERP applications, some newer software in the supply chain and sales domains are specifically designed to overcome this limitation. Software such as our Evavi Supply Chain Synchronization Suite is designed for rapid tailoring and configuration, and enables companies to achieve market differentiation in the areas that matter.

Emerging technologies support new ways of gathering, managing, processing, and sharing information. In order to obtain the greatest benefits across the enterprise, legacy IT barriers must be removed and replaced with technologies that share common data models, provide easy data integration, and seamlessly enable planning and execution across business processes.  With an architecture in place that supports these capabilities, companies can then shape their future.

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 is the impact of globalization on the Supply Chain?

Ben Worthen, at CIO Magazine, has compiled ABC: An Introduction to Supply Chain Management. This compilation provides a good introduction to the basics of supply chain management.

One of the questions he examines is: What is the impact of globalization on the Supply Chain?

As Worthen illustrates, “… foreign manufacturing brings with it another set of challenges. It isn't as easy to set up real-time data sharing with a factory in, say, China as it is with a factory you own in the United States. And the sheer distance that overseas goods need to travel – not to mention the number of vessels they need to travel on – in order to reach the U.S. increases the chance that they will get delayed. The bottom line is that foreign manufacturing brings back a lot of the uncertainty that supply chain systems were designed to eliminate.”

In addition to figuring out how to integrate foreign suppliers and partners into your supply chain, globalization also impacts the supply chain by the sheer size of the market opportunities and the growing number of competitors that can spring up seemingly overnight and out of nowhere. As your customers reach globally, you will need to rapidly adjust your supply chain to support these customers or risk losing them to a local vendor. Globalization offers the possibility to significantly scale your supply chain to take advantage of the burgeoning opportunities, or to be beaten to the punch by a more nimble and aggressive competitor that has intelligently designed their supply chain to accommodate the global market. Global supply chains require supply chain software that is flexible, rapidly extensible, and scalable.

Getting smart about supply chain management

McKinsey consultants Mani K. Agrawal and Minsok H. Pak wrote a feature article for The McKinsey Quarterly back in 2001. Their article, Getting Smart About Supply Chain Management, is focused on B2B marketplaces.

In their article they point out that: “The promise of real benefits rests on the potential for seamlessly integrating data flows and work processes across entire enterprises and even industries.”

Agrawal and Pak also acknowledge that: “Although B2B exchanges (otherwise known as e-marketplaces) can help companies realize certain purchasing and transaction-processing benefits in the short term, broader improvements—particularly reductions in inventory, improved service levels, faster time to market—are harder to achieve.”

So, where do we stand 6 years later?

To achieve the gains that Agrawal, Pak and many others envisioned, the underlying technologies needed to become more mature and sophisticated. Not only did EAI tools for integrating data flows need to become more robust and prevelant, but the supply chain software necessary to flexibly model business processes across the extended enterprise, and to unite planning with exectution, had to be developed. Many of the supply chain software platforms remain locked in their legacy code base, and this has impeded this transformation. At the same time, a new generation of supply chain solutions has begun to emerge that provides these capabilities out-of-the-box. The most innovative of these new solutions couple planning with execution, provide common data models that are flexible and extensible, and have native performance measurement, personalization, and alerts. Supply Chain Synchronization is an example of the new class of supply chain software that has emerged to fulfill the vision that so many have articulated for so long.

If you are interested in revisiting the McKinsey article, here is the abstract:

"Although business-to-business (B2B) e-marketplaces can help companies realize certain purchasing and transaction-processing benefits in the short term, broader improvements—particularly reductions in inventory, improved service levels, and faster time to market—are proving more elusive. What will it take to succeed? Seamless integration of data flows and work processes across entire enterprises and even industries holds the key. The power of B2B exchanges would have to be combined with the enterprise-resource-planning and decision-support systems that many companies have adopted in recent years."

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.

Evavi Technology Innovations

Planning and Execution Platform
The solution unifies planning and execution business processes that traverse traditional functional boundaries, and provides real-time information by eliminating legacy data silos.

Common Data Models
Comprehensive set of meta-data models that enable real-time sharing of information between business processes.

Flexible & Extensible Models
The solution is built on models that are flexible enough to capture those elements that differentiate your business and can accommodate rapidly changing business needs.

Configurable Business Processes
Integral business process engine to configure your business workflows requirements without requiring changes to the code.

Rapid Extensibility
You can rapidly configure and extend the solution to fit your unique requirements without incurring punitive costs or risks.

Open Integration
The solution easily connects to legacy and other disparate data sources within your four walls and throughout the extended enterprise.

Evavi Innovation

Overview
We set out with an audacious vision – to reinvent enterprise supply chain management. We have built from scratch a synchronized enterprise supply chain suite that uses only the best internet-native technologies and leverages the knowledge gained from the evolution of supply chain management since the late ‘80s.

The solutions we are delivering are based on more than six years of development by some of the most creative minds in the supply chain business. Members of this team helped define the supply chain software industry in the late ‘80s and early ’90s with their pioneering work in the areas of in-memory optimization and planning. The supply chain software they architected during that time generated over $800 million in sales, generated billions in supply chain value, and launched the industry.

Supply Chain Software Reinvented
Evavi’s Supply Chain Synchronization solutions are the first to be entirely developed and delivered with Internet-native technologies. Built into the entire solution suite from the core are a planning and execution platform, flexible models, rapid extensibility, open integration, performance measurement, exception and alert management, role-based workflows, and consumer-Web usability with personalization at the fingertips of each end-user.