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.

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.

A shift in the enterprise software upgrade cycle

The current turmoil in financial markets and the growing challenges in the real economy are causing many companies to look closely at how they manage their enterprise software upgrade cycle.

In a Gartner report, Joanne Correia, managing vice president at Gartner, says: “Most companies updated their software systems during the period 1997 through 2001, so we are in the middle of an upgrade cycle that should extend past the end of this decade. However, the replacement of systems does not automatically equate to new software market growth. Software as a Service (SaaS)/cloud computing, service oriented architecture (SOA)/Web 2.0, and open source software are causing huge changes to the software market. Many of these factors are impacting market growth as enterprises replace assets with per-use services.”

In the same report Jim Tully, vice president at Gartner points out that:
“Organisations are switching from company-owned hardware and software assets to per-use service-based models. This will impact the industry in various ways. The projected shift to cloud computing, for example, will result in dramatic growth in IT products in some areas and in significant reductions in other areas. In general, assets will be utilized with greater efficiency, and we are assuming that the overall effect on market growth will be neutral. We also recognize that there is considerable upside potential for higher growth.”

My partners and I remain confident that during economic downturns, companies with strong leadership will make strategic IT investments to rapidly drive costs out of their supply chains and to accelerate adoption of software platforms that further reduce the total cost of ownership. SaaS, SOA, and open source are all critical components of this paradigm shift, and are central to the Evavi Supply Chain Synchronization suite.

ABC: An Introduction to Supply Chain Management - What are some emerging technologies that will affect the Supply Chain?

I often recommend the introduction that Ben Worthen at CIO Magazine has compiled -- ABC: An Introduction to Supply Chain Management -- as a good place to get a very quick, high-level introduction to some basic supply chain management concepts.

For those wanting some insight into what is coming next, Worthen asks and answers this question: What are some emerging technologies that will affect the Supply Chain?

Worthen identifies Radio Frequency Identification, or RFID, as an important emerging technology that will affect the supply chain. “RFID tags are essentially barcodes on steroids. Whereas barcodes only identify the product, RFID tags can tell what the product is, where it has been, when it expires, whatever information someone wishes to program it with. RFID technology is going to generate mountains of data about the location of pallets, cases, cartons, totes and individual products in the supply chain. It's going to produce oceans of information about when and where merchandise is manufactured, picked, packed and shipped. It's going to create rivers of numbers telling retailers about the expiration dates of their perishable items—numbers that will have to be stored, transmitted in real-time and shared with warehouse management, inventory management, financial and other enterprise systems. In other words, it is going to have a really big impact.”

There is little question that RFID will have an huge impact on supply chains, but there is still a long way to go before it becomes a driving force in most supply chains. There are several obstacles including cost, lack of standards, and simple reliability. One client that I work with uses RFID for a very small amount of their products. The read rate is unacceptably low and the value created is questionable. Ultimately these problems will be overcome, but for now this is still an evolving technology. What is important is that the supply chain software you implement today needs to be capable of handling the enormous amounts of granular data that will ultimately need to be handled when RFID does hit the mainstream.

The emerging technology that is having the greatest impact on supply chains today is the Internet. For about eight years the providers of legacy supply chain software have been web-enabling their solutions. However, the transformative change is coming from a new breed of innovative software firms that are developing Internet-native supply chain applications that are fundamentally changing the game. These firms are building their solutions from the ground up to eliminate latencies, enable real-time transactions, and to couple planning with execution across the extended supply chain. Legacy solutions that are web-enabled are inherently hobbled in their attempt to participate in the supply chains driving real-time commerce. The supply chain industry has never been more dynamic and filled with opportunity. For those willing to innovate with new supply chain technologies, big opportunities for unlocking value exist.

Companies on the Frontier

Steve Matthesen, vice president and global leader for supply chain at BCG is right on when he talks about “the bulk of the benefit [in supply chains] comes when you break down the functional silos and better coordinate across the entire business, and your suppliers and customers." This is what Supply Chain Synchronization is all about.

In the article, 'You Can't Manage What You Can't Measure': Maximizing Supply Chain Value, Matthesen lists the key priorities to transform a supply chain as:

1) aligning the supply chain with company strategy
2) aligning incentives across functions and with external parties
3) arming people with the right data ‘so they can make holistic decisions’
4) building flexibility to quickly respond to demand, rather than relying on forecasts.

"CEOs need to engage with their management teams to understand how their supply chain works today -- how it supports the business and how it prevents success.  Together, they need to evolve the strategy and supply chain to move the business to a position where the supply chain supports and enables a winning strategy. This cannot be accomplished by the head of supply chain alone," Matthesen says.

The pay-off is substantial. "A fully aligned supply chain and strategy delivers a superior business model," Matthesen adds. "Given the difficulties of achieving this, the benefits are often sustainable and create real advantage. Your competitors are likely to want to copy pieces of your strategy without realizing how the entire strategy and supply chain work together -- and they will not be able to match your performance."

Getting the right supply chain alignment, and enabling and supporting this alignment with the right technology, can be a challenging task. It requires the leadership and support of the CEO and other senior executives. It is not a task that can be accomplished by only the supply chain team or the technology team. The supply chain touches every element of a business, and supply chain transformation requires the sustained support of a broad coalition of senior executives in order to succeed. When it does succeed, it unlocks hidden value and helps to propel the company forward.

The 'Right' Supply Chain

When people ask us why we started Evavi, one of the things my partners and I point to is the increasing complexity of supply chains and the inability of legacy software solutions to keep up with the pace of change. One of the main stumbling blocks to effective supply chain management has been the historic disconnect between planning and execution. When these functions are disconnected, as they are in legacy solutions, the supply chain is exposed to unnecessary risks caused by lack of visibility, lack of synchronization, and lack of optimization.

In regard to the difficulty of integrating processes and aligning incentives, the article Avoiding the Cost of Inefficiency: Coordination and Collaboration in Supply Chain Management quotes Marin Gjaja of BCG: "My suspicion is that the complexity of product-based companies where supply chain is relevant is expanding at a faster rate than information technology can keep up with. By that, I mean that the number of products and different options and customers is expanding -- say it's 100 products times 100 customers times 100 different ways of getting there. You can see that you get this multiplied effect of complexity. The tools you have to deal with it can only evolve so quickly. It will always be a very difficult challenge -- it's one of those perennial issues in management, one of those evergreen topics that you just have to stay one step ahead of."

My partners, who include the founding technologists at i2, started Evavi for this very reason. They were frustrated by the requirement to pull legacy code forward while the pace at which Internet-native technologies were maturing was exploding. They realized that these new technologies would fundamentally change the way supply chain processes would be modeled, and that the best way to influence the future was to help create it from a fresh code base capable of operating in real-time across the extended enterprise.

Our Supply Chain Synchronization suite is helping to deliver on what BCG’s Matthesen believes is the optimum answer solution: "to design a supply chain that is based on a sound strategy, ensure all parts of your supply chain -- both internally and externally -- have access to good and consistent data, and empower people to make decisions quickly. Build a supply chain that is comfortable with uncertainty and quick to react by taking down the barriers that prevent success." 

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.

Information Technology shouldn't be as complex as it is

My friends at ZOOM Marketing wrapped up a big ZOOMing (their proprietary process for driving value with clients) for Dell last spring. "After dozens of interviews and meetings, and focus groups on three continents, 'IT Simplification' emerged as The Point That Matters for Dell. Shortly after ZOOM presented their findings, Michael Dell put himself on the record, saying Dell's strategic intent is to 'simplify information technology for our customer...empowering them to implement simpler and smarter IT solutions. Also getting much press was a memo released by Dell, naming IT Simplification as Dell's new focus."

The memo from Michael Dell was released this past spring. In this memo he articulated that Dell is "embarking on a bold, long term initiative to radically simplify IT for our commercial customers. Simply put, the philosophy comes down to a set of core beliefs:

• Information Technology shouldn't be as complex as it is.

• You should spend less on maintaining I/T and more on innovation.

• Every IT project should not require an army of consultants.

• Computing should have minimal environmental impact.

• Superior information drives efficiency in your IT environment."

While Dell has a big ship to turn around, the core beliefs articulated are right on track. Complexity is the enemy of progress, and the trend towards technologies that are less complex to deploy, run, and maintain will ultimately enable corporations to operate more efficiently and effectively. These changes will unleash value that is currently locked up in legacy systems and transform business processes. Supply Chain Synchronization -- which aligns business processes across the extended supply chain -- is one example of how business processes are being transformed throughout the enterprise to get rid of complexity.

Evavi Synchronized Demand Fulfillment

Fulfilling demand is essential to ensuring a great customer experience. Your customers depend on you to deliver products flawlessly, but when you have hundreds or even thousands of customers and products, that can be an ongoing challenge. To keep pace with rapidly changing customer needs, the demand fulfillment process must be flexible, extensible, and scalable.

By building from the core a fully synchronized solution on internet-native technologies that have been architected for the enterprise, Evavi now makes it possible to seamlessly capture, validate, and broker an order through the enterprise, while giving users complete visibility and control of the order at every stage.

Evavi Synchronized Demand Fulfillment transforms the demand fulfillment process to keep pace with the needs of your customers and to keep you ahead of your competitors.