Enterprise Service Computing From Concept to Deployment_13 docx

On the other hand, automating noncore competency processes can be done by either using out-of-the-box work flows provided by software companies by which such processes are changed ac-cor

or functions This means the automation should be done for the redesigned fied to-be process, and the software needs to be customized to follow and support the process to maintain the competitive advantage On the other hand, automating noncore competency processes can be done by either using out-of-the-box work flows provided by software companies by which such processes are changed ac-cordingly (no value in tailoring the software to fit the process), or by outsourcing the management of these processes to a third party.

modi-A good example of work-flow automation is the application of electronic exchange portals in the area of procurement, such as Covisint for the automobile industry, e2open for the electronics industry, and Transora for the grocery industry

Level 3: Integrated SC Planning

The integrated-SC-planning level allows companies to respond quickly and tively to unplanned supply and demand events that may disrupt information and material flow in the supply chain as one unit It allows a company to plan based on real-time execution data, and execute based on an up-to-date plan Integrated SC planning provides a process-centric view coordinating different business subprocesses like product introduction, forecasting, replenishment, manufacturing, fulfillment, and procurement with suppliers and customers, while enabling event manage-ment For example, it supports event-triggered planning and replanning This level blends information gathered from users using collaboration in Level 2 and multiple transactions and planning systems to allow the exchange of knowledge by the SC partners and create synchronized plans and one global view of the supply chain Each supply-chain member (buyer, supplier, carrier, third-party logistics, contract manufacturer, etc.) often operates independently and only responds to immediate requirements If the Internet is integrated with the SC planning process, SC members can share needed information on a real-time basis, and react quickly and efficiently

effec-to changes in demand, material shortages, transportation delays, and supplier inability to replenish One example is the collaborative planning, forecasting, and replenishment (CPFR) initiative

McDonald’s Japan is a good example of the successful use of CPFR McDonald’s Japan established a process around the Internet whereby stores, marketing, distribution centers, and suppliers would communicate and collaborate via the company’s Web

site to agree on order sizes and supply-replenishment delivery schedules (Ballou, 2004)

TaylorMade (a large golf supplier) leveraged integrated SC planning to improve the order-fulfillment process TaylorMade adopted Provia Software as the warehouse-management system and integrated it smoothly with i2’s planning and fulfillment systems to prioritize orders based on service level, order volume, promised delivery date, and transport mode (Bowman, 2002)

Level 4: New Innovative Processes

Once companies master e-business application levels, they start to think of adopting new strategies and models for conducting business, seeking not only incremental improvements, but drastic ones They might seek to reengineer (redesign) their processes to leverage the most out of e-business technologies Sometimes, companies start to define new processes, seeking new business opportunities or trying to penetrate new markets and customer segments that were neither apparent nor possible prior

to the e-business Companies seek the new-generation business models to achieve competitive advantage and significant benefits One example is what Dell Computer did when it adopted the build-to-order strategy and provided flexible configuration capability for customers online The following are examples that show the range

of possibilities for companies that pioneered in these areas

Example 1: Mass Customization

The Internet and e-business technologies facilitate mass customization and allow customers to configure specific order options tailored to their preferences

Mass customization is the centerpiece of a strategy that woke the big golf supplier TaylorMade and propelled it ahead of the competition in terms of agility and inno-vation Today, TaylorMade can customize virtually any aspect of a club The results

to date are impressive (Bowman, 2002)

Example 2: Public Marketplaces

The Internet and e-business technologies helped many companies do business online using a secured specialized Web site One example is World Chemical Exchange, providing a global market for chemical and plastic manufacturers and buyers More than 2,500 members can now conduct around-the-clock trading of chemicals and plastics of all types (Lee & Whang, 2001)

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Example 3: Supply-Chain Redesign

A good example is what many remote discount computer-hardware and -supply houses did to compete with local retail stores Many of them used the Internet technologies

as a strategy to compress the order cycle time and improve the order-fulfillment process: A customer enters the order through the company’s Web site, the inventory and payment are checked, and the order is filled from the warehouse and shipped using UPS, FedEx, or other carriers directly to the end customer

Example 4: Value-Added Replenishment Programs

Companies as part of lean initiatives are trying to focus on value-added activities to cut waste in the supply chain and reduce overhead cost Therefore, manufacturers are moving away from making products to stock and sell them later They are moving away from procuring based only on forecast Vendor-managed inventory (VMI) is

a replenishment program that helps companies achieve their objectives VMI delays the ownership of goods until the last possible moment and delegates managing the stock to the supplier

Western Publishing is using a VMI program in its Golden Book lines It develops

a relationship with its retailers in which these retailers give Western point-of-sale data Ownership of the inventory shifts to the retailer once the product is shipped (Ballou, 2004)

Kanban replenishment is another program in which replenishing parts is based on part consumption It avoids the inaccuracy in forecasting and eliminates the need for inventory

Example 5: Online Retailing

Amazon.com understood e-business technologies very well It has based its business model around it Amazon.com depends on its efficient supply chain to satisfy cus-tomer needs worldwide It mastered the selling-management process by improving the Web shopping experience through providing quick and reliable promises, and suggesting product bundles, among many other features This makes Amazon.com one of the biggest and early adopters of e-business technologies

Sharing supplier and shipment information, real-time exception visibility, audit-trail notification, alerts, and tracking

• Reducing part-inventory obsoleteness

• Improving inventory turns

• Reducing safety stock

• Reducing expedition cost

Automated procurement subprocesses, bid analysis, and resolution work flow

• Reducing design rework

• Reducing process cycle time

• Improving productivity

Synchronized replenishment, supporting different replenishment types, and matching execution documents like purchase orders, ASN, and invoices

• Increasing reuse

of existing parts

in the design

• Improving time delivery

on-Table 3 The impact of e-business application levels on SRM processes

Benefits of Adopting E-Business Application Levels

Tables 3, 4, and 5 illustrate how the four application levels of e-business can address the challenges of SCM, SRM, and CRM business processes that were mentioned

in the beginning of this section These tables also show the potential benefits of adopting e-business strategies

Real-time SC visibility for the order-delivery life cycle including contract manufacturers, distribution centers, and logistic providers

• Reducing uncertainty and safety stock

• Early issue detection

Exception flow resolution for demand changes and fulfillment delays

work-• Increasing efficiency

• Customer satisfaction

Table 4 The impact of e-business application levels on SCM processes

• Reducing development cost

• Improving time

to market

• Reducing part/ raw-material cost

• Improving quality

Table 3 continued

Table 5 The impact of e-business application levels on CRM processes

of products and service offerings customized to customer needs

Providing sell and cross- sell product recommendations and product bundles, flexible pricing models for markdown and rebates

up-Providing service order status and highlighting exceptions

• Publicizing product information

• Increasing customer satisfaction

• Reduce Inv.

Work-Flow.

Automation

Capturing log records for every visit of a user in the Web servers’ log file, including pages visited, duration

of the visit, and whether there was a purchase, demand collaboration with customers

Product configuration, quotation processing

Service order logging, billing

of services

• Better prediction

of customer demand

• Improving response time

• Improving productivity

Integrated.SC.

Planning

Considering the supply-chain constraints while executing the marketing campaigns, providing customer profiling and segmentation

Supporting different channels for order capturing (Web based, call center, EDI, phone, e-mail, or personnel meeting)

Warranty check, service order processing, integrating the call center

• Increasing revenues and profit

• Creating new market/

distribution channels

• Accurate promising date

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Tables 3, 4, and 5 show the operational and financial benefits of adopting e-business application levels The operational benefits can be grouped under inventory reduc-tions, cycle-time reductions, productivity increase, supplier performance improve-ment, and customer-service-level increase The financial benefits are driven from the operational benefits and can be grouped as follows

• Cost reduction due to cost savings The tight integration of supply-chain cesses reduces the cost and time needed to exchange transactions and allows efficient procurement, which helps the purchasing staff to focus more on stra-tegic activities like building supplier relationships than managing day-to-day transactions

pro-• Revenue growth and profit increase due to increased customer satisfaction by delivering on every promise and responding quickly to customer needs, and the ability to penetrate new markets

• Better asset utilization by replacing inventory with real-time visibility

• Higher shareholder value due to growing profit

The next section will provide the needed guidelines to implement e-business nologies successfully Finally, a case study will be presented

tech-New.Innovative.

Processes

Real-time profiling that tracks the user click stream, allows the analysis

of customer behavior, and makes instantaneous adjustments

to the site’s promotional offers and Web pages

Online flexible configuration and real-time promise date

Dealing with products and services as one package during selling

• Long-term relationship and trust with the customer

• Gaining competitive advantage

Table 5 continued

of.E-Business.Technologies

Many companies are struggling with implementing e-business technologies and achieving the promised value or ROI In addition, companies are looking for guidelines and strategies for ongoing operational management and support after the go-live, which includes rolling more customers, suppliers, and new business units when implementing e-business solutions to improve SRM, SCM, and CRM superprocesses

According to a survey of 451 senior executives, one in every five users reported that their CRM initiatives not only had failed to deliver profitable growth, but also had damaged long-standing customer relationships (Rigby et al., 2002)

Currently, there is uncertainty and doubt among organizations regarding the new Internet technologies, and although the appeal for best practice and the benefits of implementing e-business technologies are clear, enterprises struggle in integrating them into supply-chain operations because they are encountered by many challenges like the inability to master change management, the need for new skills to support processes that span across suppliers and partners, the need for e-business strategy and continuous upper management support, the lack of comprehensive metrics and continuous monitoring, and the inability to select the right software-providing partner

Figure 2 Framework for implementing e-business transformation programs

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Figure 2 is proposed to address these challenges and provide best-practice guidelines

to implement e-business program transformation successfully

E-Business.Strategy.and.Goals

A clear strategy is the first step for a successful transformation Executives need

to understand the big picture, the interactions between all the processes, and the e-business applications to help them in creating an e-business strategy

Benchmarking

Benchmarking is the process of comparing and evaluating a firm or a supply chain against others in the industry to help in identifying the gaps and areas of improve-ment Benchmarking is used to validate the potential benefit and gain in performance measures from implementing e-business applications

Process.Analysis

The purpose of process analysis.(also called design and requirements) is to use

modeling (process mapping) methods to analyze “as-is” business processes, capture the existing challenges and pain points in the current process and the supply chain, design and validate the to-be process improvements against best-practice benchmarks, determine the extent of process and technology changes possible in the currently existing systems, and identify the additional software (application) capabilities that are required to support the to-be process that cannot be supported by the existing systems This requirements list will be the base for selecting the new software

Select the Right E-Business Software

As a best practice, organizations need to identify the best-of-breed solution that is most suitable for the required functionality for their business, taking into consider-ation software-technology maturity and sustainability Supporting leading industry standards for e-business technology like Java, XML, Linux, and Web services is crucial during the selection process

is to continue measuring the benefits and ROI, which should start during and after the implementation

Since the performance-management system depends mainly on monitoring the metrics (KPIs), it is critical to spend enough time on defining these metrics The performance-management system should manage and coordinate the development

of these metrics Melnyk, Stewart, and Swink (2004) mentioned that metrics provide the following three basic functions

of the resources

stakeholders

ex-pectation) that ideally point the way for intervention and improvement

Sabri and Rehman (2004) provided guidelines for identifying and maintaining rics based on best practice, recommended to capture all operational metrics because improvement in one area could be at the expense of another, and suggested to sum-

establish a benefit-sharing and incentives mechanism .

Maintenance,.Support,.and.Rollout

Although companies acknowledge the importance of ongoing operational ment and support, few of them think ahead of time and allocate the right resources for it Once the e-business application links are in place, companies find themselves with an urgent need to manage the ongoing maintenance and rollout Ongoing monitoring and maintenance are necessary to ensure 100% uptime and compliance The lack of a defined and clear plan for maintenance and rollout might impact the whole transformation program negatively The ongoing maintenance and rollout process should include adding new SC organizations and removing existing ones

manage-as necessary It includes training programs and process compliance by monitoring related metrics It also includes the identification and description of all user groups, and the process of adding new users, making changes to user authorization levels, maintaining profiles, and deleting users Finally, contingency plans should be reviewed periodically to make sure its readiness Contingency plans represent predefined courses of actions to be followed in case of the occurrence of a drastic event like when the sources for inbound information go down

Case.Study

This case study is based on an article published in October 2004 by Reuben Slone

in Harvard Business Review (HBR), which is about the supply-chain turnaround

by Whirlpool in the last 4 years Whirlpool makes a diverse line of products like washers, dryers, refrigerators, dishwashers, and ovens, with manufacturing facilities

in 13 countries This case study is a real-life example of a company that adopted many of the best-practice guidelines of implementing e-business applications that were highlighted previously in this section

Whirlpool needed a strategy that not only addresses the current needs, but also ticipates the challenges of the future Whirlpool wanted a strategy that can optimize supply-chain performance at minimum cost, and include new e-business technology, processes, roles, and talents to achieve competitive advantage Its strategy was to focus on customer requirements first and proceed backward Therefore, Whirlpool and Sears as a customer studied consumers’ desires with regard to appliance delivery They found that consumers are asking for accurate promises as a first requirement:

an-“Give a date, hit a date.”

Benchmarking and Process Analysis

Whirlpool benchmarked its competitors and obtained cross-industry information and competitive intelligence from AMR, Gartner, and Forrester Research Then it mapped out what is considered best-practice performance along 27 different SC-capability dimensions This exercise helped identify areas of improvement

Cost and Benefit Analysis

The program transformation team had to build a compelling business case to get the buy-in from upper management They had to justify their program wholly on expense reductions and working capital improvements

Effective Transformation Plans

Effective transformation plans include a value-driven implementation methodology (Six Sigma), performance-management system, change management, and rollout plans

Whirlpool started with improving the S&OP process Its current process was equate with Excel spreadsheet feeds Now, Whirlpool is able to generate synchronized long and short plans that consider marketing, sales, finance, and manufacturing constraints or requirements Then, it launched a CPFR pilot to share forecasts us-ing a Web-based application and to collaborate on the exceptions, which enabled

inad-it to cut forecast accuracy error in half winad-ithin 30 days of launch In January 2002, Whirlpool implemented a suite of software products from i2 to reduce inventories while sustaining high service level By May 2002, a blind Internet survey showed Whirlpool to be “most improved,” “easiest to do business with,” and “most progres-sive” in the eyes of their trade partners

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It segmented its products and followed a different strategy for each product group For high-volume SKU like dishwashers, refrigerators, and washing machines, it used the build-to-stock replenishment technique with its customers For smallest volume SKUs, they followed the pull replenishment technique with the more flexible build-to-order process The inventory savings on the small-volume SKUs can bal-ance out the costs of stocking up on the high-volume SKUs Whirlpool also started

to move away from having one service level across all products, recognizing that some products are more important or more profitable than others and should have higher service levels

Recently, there has been a focus on system-to-system transactions, in which the Whirlpool system talks directly to a customer’s system for purposes of transmitting purchase orders, exchanging sales data, and submitting invoices and payments At the same time, customers can check availability and place orders via the Internet Whirlpool is also looking to implement an event-management capability that pro-vides a notification whenever an action in the process has taken place

A couple things were absolutely critical to keep the transformation program ule on track: a highly disciplined transformation program office and an effective management system The key was to think big but focus relentlessly on near-term deadlines Whirlpool organized the change effort into 30-day chunks, with three new capabilities or business releases rolling out monthly, some on the supply side and some on the demand side The main job of the program transformation office, which adopted Six Sigma methodology, was to ensure the completion of projects

sched-on time, sched-on budget, and sched-on benefit

The transformation program office contracted Michigan State University and the American Production and Inventory Control Society to develop a competency model that can outline the skills and roles required in a top-tier organization Whirlpool also expanded the compensation system to allow employees to be rewarded for increasing their expertise even if they are not being promoted into supervisory roles It also put a huge emphasis on developing employees’ management skills and used a model developed by Project Management Institute (PMI) as a standard for evaluating and enhancing the organization’s project-management capabilities Finally, it assembled a supply-chain advisory board to provide guidance and assess the transformation program results and direction

To summarize, Whirlpool followed the best practice in leveraging e-business nologies, and in return, it has much to show for its transformation efforts Today, its product-availability service level is more than 95% The inventory of finished goods has dropped from 32.8 to 26 days In one year, it lowered its working capital

tech-by almost $100 million and supply-chain costs tech-by $20 million with an ROI equal

to 2

More companies will start to realize that gaining competitive advantage is no longer feasible only by managing their own organizations They need to get involved in the management of all upstream organizations that are responsible for the supply, as well as the downstream network that is responsible for delivery and the after-sales market The challenge for companies for the rest of this decade is synchronization across supply-chain processes, from product design and procurement to marketing and customer-service management, in order to be more responsive to customer needs The new trend of mergers and acquisitions will continue to rise, and big companies that are buying out smaller ones will grow even bigger in the complexity of their supply chains This will increase the need for e-business technologies to streamline the process of collaboration between the different entities.

Therefore, in the next few years, we will see the explosion of tions use as companies utilize e-business to redefine supply-chain processes that span across suppliers and customers, which will result in a significant improvement

e-business-applica-in efficiency and will help companies achieve competitive advantage Companies that do not come on board will realize that they are losing ground and customers soon

The widespread use of e-business will lead to new options for improving to-business and business-to-consumer collaborations like multitier collaborations and root-cause analysis for exceptions in the supply-chain performance In addition,

business-it will open new ways of integration between supply-chain partners like to-system integration using Web services (e.g., integrating one firm’s inventory-control system and another’s logistics-scheduling environment), the use of wireless devices, and the tight integration of the Web site with the back-end systems of supply-chain partners Eventually, e-business technologies will replace electronic data interchange, the benefits of which never materialized for midsized companies because of its high cost

system-We also expect SMEs (small and medium-sized enterprises) to realize the importance

of e-business and to follow one of the following arrangements in adopting e-business technologies depending on the business requirements and cost factors

product and its selling process through partners, cheap license, cheap tenance, and tight integration with other Microsoft products like Excel

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ap-plications provider at a fixed monthly cost, no need for software to be present

on the company’s internal network, no maintenance fees, and lower risk due

to almost zero-down investment

Intelligent performance-management systems that can capture negative performance trends and select the correct resolutions are expected to come into widespread use

in the next few years

To summarize, we will witness, for the rest of this decade, what is called a tightly

integrated environment in which supply-chain interactions involve tightly integrated databases and applications; processes are significantly redesigned and streamlined

to eliminate redundancies and non-value activities

References

Anderson, D M (2003) Build-to-order & mass customization Cambria, CA: CIM

Press

Ballou, R H (2004) Business logistics/supply chain management (5th ed.) Upper

Saddle River, NJ: Prentice Hall

Bowman, R J (2002) TaylorMade drives supply-chain efficiency with 24 hour

club SupplyChainBrain.com Retrieved December 10, 2004, from http://www.

supplychainbrain.com/archives/10.02.TaylorMade.htm?adcode=5

Curran, T A., & Ladd, A (2000) SAP R3 business blueprint: Understanding

en-terprise supply chain management (2nd ed.) Upper Saddle River, NJ: Prentice

Hall

Devaraj, S., & Kohli, R (2002) The IT payoff: Measuring the business value of

information technology investment Upper Saddle River, NJ: Prentice Hall.

Handfield, R B., & Nichols, E R (2002) Supply chain redesign: Transforming

supply chains into integrated value systems Upper Saddle River, NJ: Prentice

Hall

Harmon, P (2003) Business process chain: A manager’s guide to improving,

redesigning, and automating processes San Francisco: Morgan Kaufmann

Publishers

Lee, H., & Whang, S (2001) E-business and supply chain integration Stanford

Global Supply Chain Management Forum, 1-20.