Are your existing supply chain software applications and enterprise resource planning (ERP) systems inhibiting your ability to bring innovation to your supply chain processes? A shift in technology architecture toward Web services could help you gain the flexibility and agility you need to innovate—not just once but over and over again.
Web services are pieces of logic from different software applications that can be accessed, used, and combined to form new applications for solving business problems. For example, a Web service that provides material-receipt status based on information from a supplier-collaboration system could be fed to a Web service for an assembly-sequencing system, forming a closed-loop workflow between supply operations and assembly execution. This reflects a significant advance in computer systems and has far-reaching implications for driving breakthrough value in supply chain management.
Web services represents a continuation of a trend in computing that started with distributed systems in the 1980s and led to the client-server architecture of the 1990s. This trend incorporates the progressive unbundling of "monolithic" (stand-alone) systems into components that can be more flexibly deployed.
In the first generation of computer applications, software programs ran the entire sequence of commands as one code source on a massive computer, typically a mainframe. The distributedsystems phase in the 1980s spread this application code across a group of smaller mini-computers. At about the same time, there were improvements that separated the database from the application and ran the database and the application code on separate computing equipment.
The client-server architecture phase in the 1990s led to further unbundling of systems by separating user-specific interaction code from the actual application logic. A program at one site (the client) would send a request to a program at another site (the server). This added flexibility by dramatically improving user interfaces and by allowing them to run locally on personal computers. The new architecture essentially extended flexibility through Web browsers on personal computers, which enabled clients to be "zero-footprint interfaces"—meaning that they do not reside on the local PCs and therefore take up no local space or memory.
Web services represent perhaps the most revolutionary phase of all in this continued movement toward unbundling because they allow different applications to be linked together to manage a process. The ability to take a capability from one application and combine it with another could solve two of the biggest challenges facing companies seeking to drive breakthrough supply chain improvements. First, it would allow them to adapt existing technologies to support specific business processes. And second, it would allow them to change from functionally driven organizations to cross-functional, process-driven supply chains.
Overcoming resistance to change
As shown in Figure 1, organizations, software systems (applications), and business processes are highly intertwined, and each creates its own resistance to change. Changing any one of them in an attempt to drive value will not yield the desired results; they must all change together. It is therefore very difficult to create a process that cuts across these silos.
ERP systems—while offering improved standardization—actually have hindered the development of crossfunctional supply chains. That's because they include stand-alone, functionally oriented modules that drive companies to adapt their business processes to the technology, resulting in reinforced functional barriers within those organizations. Similarly, the success of packaged software of the past 15 years has largely depended on companies adapting their business processes to the standardized requirements of the software.
This approach fundamentally conflicts with a company's desire to use business-process differentiation to distinguish itself from its competitors. In fact, in the last 15 years most supply chain leaders have only achieved success through business-process differentiation that was made possible by software customizations.
Web services architecture, by contrast, gives companies the ability to develop and customize solutions to meet their business-process needs. It also enables them to adapt and extend those solutions as business processes change. Furthermore, Web services make it possible for computer systems to catalyze cross-functional changes in business processes.
As shown in Figure 2, software applications are no longer monolithic; their capabilities can be served up as unbundled Web services. Web services from applications that support different organizations and business processes can therefore be brought together to drive process innovation. For example, a Web service could access supplier-performance data from a supplier-collaboration system and link it to a Web service in a strategic sourcing system, forming a cross-functional workflow for sourcing decisions that take supply chain considerations into account.
Additionally, technologies that leverage Web services allow users to customize and extend solutions, thus giving companies a way to adapt technology solutions to business processes, rather than the other way around.
In the past few years, two additional developments have made it possible for companies to leverage Web services to support innovation in supply chain management:
In the next two sections, we'll examine these developments and their significance for supply chain management.
A platform for innovation
The mechanism by which Web services can be made visible and then configured together to form new applications is called a platform. Platforms can be generic, meaning they are essentially technologies without any business-process context. Or they can be domain-specific, which means they also contain capabilities that are specific to a domain, such as supply chain management (SCM).
The SCM domain-specific platform has embedded capabilities that are necessary for constructing any supply chain management solution: integration, master data management, collaboration, event management, analytics, and plan-to-plan comparison. The platform also contains business-process "starting points" that reduce the amount of time needed to create applications. For example, a planning workflow typically includes steps for data synchronization, datainput processing, manual adjustments, automatic optimization, publishing, monitoring, and analysis. A workflow that includes these steps is part of the SCM platform; it is a basic version—a starting point—that companies can use and modify to meet their needs.
Web services enabled by SCM platforms will spawn a new generation of solutions based on agility. Agility in this context means the ability to quickly understand a new business problem, and then solve it by repurposing existing assets in innovative ways.
As a technology engine for driving SCM businessprocess innovation, this platform will deliver key capabilities by leveraging and repurposing functional applications from a previous generation (such as transportation management systems, warehouse management systems, ERP, and order management systems) through Web services.
The structure of this innovation engine is shown in Figure 3. SCM innovation begins with business-process innovation, seen at the top of the diagram. Six Sigma or other methodologies are used to examine how processes are carried out today and how they could be done better in the future, and to devise the solution needed to move from the current state to the future state.
Through this process, companies can generate new ideas for improvement, and then use Web services to make those ideas a reality. For example, many companies struggle with propagating supply constraints to sales and marketing systems in order to improve customer service. The Web services approach makes it possible to build a simple workflow across the various systems that exist within the supply operations organization and the sales and marketing organization.
In the past, these solutions would have been delivered through one or more monolithic applications. In many cases, that required cobbling together off-theshelf software and legacy systems into a new standalone application. In the previous constraint-propagation example, for instance, changes and point-topoint integrations may have been required for material flow, production, planning, and order-fulfillment systems. But these types of solutions only added to the complexity of information technology. Ultimately, each functional area ended up with its own optimization engine and data model as well as many customizations. Although these first-generation projects drove value, they were often painful to implement, and they created resistance to further innovation.
The concept of an SCM innovation platform that has emerged in the past several years addresses many of the shortcomings of first-generation solutions. Because it allows companies to leverage, reuse, and repurpose these first-generation solutions, it overcomes the inertia that prevents future innovation.
In this approach, common integration services, data services, and functional services are combined into a single environment, which is then used to deliver new-generation SCM solutions. An integration service provides data movement between two applications; a data service provides mapping between different data sources; and functional services are SCM-specific capabilities such as event management. When companies use this approach, they can take advantage of lessons learned from successful first-generation software implementations.
How would a company use this method to support a business-process innovation? They must first look for available technology components, whether off-theshelf, first-generation applications (optimization engines), or their own legacy applications, shown at the bottom of Figure 3. Workflows are then constructed using a graphical configuration environment that accesses component Web services available in first-generation optimization engines and in legacy applications. These Web services, along with the platform's embedded data model and supply chain functional services, create the new-generation solution.
This method offers tremendous advantages over firstgeneration solutions. For one thing, it avoids the need to create stand-alone applications. For another, these workflows can be extended and modified (using Microsoft's Visual Studio programming environment), and they can be reused to drive further innovation.
Once these new-generation workflows have been assembled into complete solutions, they are housed in a business-content library (BCL). A BCL is the construct for managing and administering this newfound flexibility. It also provides the foundation for faster innovation cycles in the future by allowing innovators to reuse workflows.
The BCL becomes the enterprise's technology hub for business-process management by storing best-practice workflow designs in visual graphic and codebased forms. For example, the BCL maintains a bestpractice workflow in a graphical form that is similar to PowerPoint. Embedded within the graphic is the logic that allows an organization to execute that workflow.
The advent of the business-content library will help overcome many of the software-development problems that have hindered innovation. Take the example of enterprise software that has been deployed in the past 10 years. As these monolithic applications have become more complicated, the complexity, cost, and lead time for releasing new versions have also increased. The time between releases for the most popular applications has lengthened considerably.
Furthermore, most companies' appetite for digesting such releases has diminished. All of this has led to a slowdown in the technology-innovation cycle.
But the shift to Web services, in conjunction with BCL management, provides the opportunity to release a new wave of innovation. In most companies today, much of the business-process information either is not explicitly managed or it is managed through PowerPoint, Word, and other documents that may be scattered across the enterprise. The best practice for a specific process, therefore, may not be immediately evident; it may also be challenging for companies to determine how a technology could support a best practice.
On the World Wide Web, though, individuals can access vast sources of information while contributing to the body of knowledge themselves. The intent of the business-content library is similar; it provides a repository of ideas and methodologies within the context of enterprise supply chain management processes and technologies.
Workflows typically published in a BCL include business-process content (best practices) embedded in a visual process diagram that is linked directly to Web services. These services perform the work that enables the processes. The BCL offers both public access (capabilities that can be leveraged across multiple enterprises) and private access (capabilities that can be leveraged within individual enterprises).
As supply chain professionals seek to drive innovation in various areas of the enterprise, they can use the BCL to learn what has been done elsewhere in the company. That information can provide the impetus for additional innovation. As new capabilities are added and documented they can be published in the library, where they will remain available for future use.
The Web services advantage
Web services allow companies to use software in a new way to gain a better understanding of their supply chains. Take the example of determining total landed cost, which requires systematically analyzing scenarios and weighing tradeoffs.
Total landed cost incorporates piece price as well as transportation costs, lead times, inventory buffering, and an understanding of risk factors associated with port strikes, natural disasters, geopolitical instability, and fluctuations in exchange rates and fuel prices. To determine total landed cost, companies must maintain data and workflows that span engineering, procurement, and supply operations, including inventory management and transportation planning and management systems. First-generation solutions for this problem would have included:
Each of these options offers advantages and disadvantages. But the major disadvantage for all of them is that they create a stand-alone solution that has little flexibility for further innovation.
The Web services approach leverages optimization and legacy-system components that have already been deployed, and it potentially incorporates additional offthe- shelf components. This means tying price information from a company's procurement solution to route, lead time, and other information from its transportation solution as well as with inventory information from its supply chain planning system. The SCM innovation platform brings together and makes visible the Web services from these components, and then cross-functional workflows are created to support decisions about total landed costs. These workflows are assembled into a complete solution that is stored in the business-content library. The workflows can be customized, extended, and reused to support further innovation in the future.
Innovation powers improvement
Trailblazing companies that view technology and process improvements as a means of achieving competitive advantage have largely driven the supply chain advancements of the past dozen years. There's no question that the first-generation, monolithic solutions they deployed did a great deal to bring about innovation.
But those solutions are too rigid to spur further innovation. Continued innovation, therefore, requires a fundamentally different approach.
Web services' flexibility allows companies to experiment. It lets them devise solutions that reuse, repurpose, and extend already-deployed solutions. It also lets them pick and choose the best capabilities from offthe-shelf software. When users have the tools to create new combinations of software components, they will be able to quickly construct the solution they need to achieve the next supply chain breakthrough.