As supply chain efforts have matured around the world, a clear distinction has
appeared. Businesses that embrace the inherent concepts are opening a serious
gap over less able competitors. They do so by using advanced techniques �
primarily adopting external collaboration and the use of technology enablers
across linked organizations � to focus not only on cost improvement but
revenue enhancement. The distinction that can be developed has been used by
such leaders as Wal-Mart, Procter & Gamble, Toyota, Intel, Dell, Cisco Systems,
Tesco, and Nike, to open up commanding leads in their industries. These
organizations and others are moving rapidly toward what becomes a valuemanaged
enterprise and a dominant position in an industry, while many of their
competitors remain bogged down in the early levels of their supply chain
progression.
The leaders have nurtured the advantages offered by moving their supply
chains into a position of having superior capabilities, gained through greater
access to knowledge across what becomes an intelligent value chain network.
The difference for these businesses can be a doubling of earnings per share. The
laggards and followers tend to keep their focus on internal improvement only,
particularly the never-ending quest for lower costs of operations. While we
accept that this cost orientation will hardly cease to exist, the contemporary
view holds that there must be an equal and pervasive effort directed at distinguishing
the firm in the eyes of the most important customers and end consumers
so that new and profitable revenues are generated. Moreover, there must be a
methodology in place to track the claimed improvements to the profit and loss
statement, and there should be documented benefits for those members of the
network that assist in the improvement process.
To facilitate our presentation and to establish a framework for understanding
how a business can make progress toward the desired position with a supply chain
effort and within an industry, we will use a familiar maturity model as a guide for
the discussion. The purpose is to introduce the concept of supply chain optimization
and how companies can approach their desired status and to apply a five-level
progression model to explain the route to advanced business performance while
calibrating the results. From this beginning position, we will present the processenabled
matrix, to explain how a firm can add the most benefits from improving
the process steps in the intelligent value network. More importantly, we will
describe how to trace the improvements to financial advantage � for the firm
involved and its business allies. In later chapters, a simulation technique will also
be discussed, so the interested firm can experiment with the techniques described
without incurring undue risk. Throughout the text, actual case examples will be
used to give the concepts a flavor of reality.
Tuesday, December 1, 2009
CONCEPTS BEHIND SUPPLY CHAIN MATURITY
a supply chain maturity model is used to describe the typical
progression, through which a firm evolves on its way to the most desired
advanced level of implementation. Many firms in many countries have used this
model to understand the logical progression of a supply chain effort. The model
is also useful to calibrate a firm�s position as it moves forward and to determine
to what level of progress the company should aspire, especially when the model
is extended to the various business functions. Implicit in the use of the model
is the understanding that a firm must progress through the levels, none of which
can be skipped, although some firms might have business units with footprints
in various levels at the same time.
To begin, a firm typically launches its supply chain effort by bringing
whatever existing improvement effort is being pursued under an umbrella type
of orientation focused on the end-to-end processing that constitutes the
organization�s supply chain. In this first level of the progression, the firm begins
to focus on functional processes, particularly sourcing and logistics. In addition
to using these two areas of attention to gather early improvement and quick
profit gains, a secondary goal is to bring enterprise integration into focus as an
objective � within the organization. That means most companies find, as they
begin integrating their existing improvement efforts with the overall attention
to supply chain, that there is a substantial amount of internal resistance to any
type of information sharing or best practice integration inside the four walls of
the business. The so-called stovepipe or silo mentality is a serious reality for
companies starting into the supply chain evolution.
As will be documented, there generally are significant savings generated
during this first part of the evolution. Supply bases are reduced through techniques
designed to segregate suppliers, based on categories of purchase, amount
of purchase, quality, and factors of importance to the firm. With a lesser number
of sources providing larger volumes, prices are reduced and added features
introduced into the relationship. Typical benefits add one or two points of profit,
because the amount of total purchases is often as much as 40 to 50% or more
of the costs of goods or services sold.
Concurrently, most firms begin paying serious attention to how purchased
goods are brought into the supply chain processing, how material and supplies
are handled internally, and how finished products and goods are delivered to
the next company in the linked processing. That means a focus is brought to
inbound freight, internal material processing and manufacture, outbound freight,
and the warehousing and delivery mechanisms necessary to support the logistics
system. In the first level, the bulk of concern is brought to bear on internal
processing and outbound freight. Inbound freight is generally held for later
attention. There is a typical resistance to considering turning any part of the
freight handling over to other parties, but as a firm completes this level, there
is generally some form of outside help brought in to take responsibility for at
least a portion of the transportation function. Most firms find one-half to a full
percent of profit here, as they reduce the cost per mile for transportation, begin
reducing warehouse space to what is actually needed, and transfer ownership
of some or all of the assets involved to a third party adept at combining load
requirements over the accumulated asset base for more effective utilization.
There is not much more to the first level, other than the fact that many firms
begin looking for a model to guide the effort, with most selecting the SCOR�
model, endorsed by the Supply-Chain Council. From our experiences, most
businesses modify that model to suit their needs and introduce other features
of importance to their particular industry. Virtually all have used the model
described in Figure 1.1 to track their progress to higher levels of accomplishment.
Detailed discussions of the various levels we are considering can be found
in Advanced Supply Chain Management by Poirier (1999) and E-Supply Chain
by Poirier and Bauer (2000).
In level 2, the business continues on its intra-enterprise track, but now the
focus moves to attaining some degree of optimization across the internal processing
occurring within the four walls of the business. Sourcing and logistics
move to a higher level as the firm begins more intense work with the key
suppliers and transportation providers. Planning, as accented by the SCOR�
model, becomes an important effort. A supply chain infrastructure begins to
appear during this level, usually with a professional supply chain manager being
introduced to the organization.
Since planning now assumes importance, order management takes on relevance
as a key factor. Unfortunately, virtually every study we have conducted
in this area unearths a problem with the data. As orders, both with suppliers
for purchased goods and services and with customers for finished products and
services, are analyzed, we typically find that 30 to 40% contain one or more
errors. This range may seem high, but when the analysis is extended to determining
how the orders are placed or received, we find that most companies still
rely heavily on telephone, facsimile, and mail for order entry and order processing.
In spite of the amount of order management that has moved to electronic
data interchange and e-commerce, the overwhelming amount of order processing
is still done in a manual fashion, with many implicit errors. Establishing
an order system that eliminates these errors and mistakes is crucial to introducing
a planning system that has any degree of reliability and becomes a requisite
for level 2 progress.
As planning is pursued, some form of sales and operations planning (S&OP)
is generally introduced to require the firm to have a formal process for analyzing
the orders, the production process steps, and the final delivery to customers.
Forecast accuracy becomes an internal issue, as we find that most level 1 firms
operate in an area of about 40% or less forecast accuracy. With the application
of special algorithms or mathematical models, that figure might rise to about
50% in level 2. As S&OP matures, and key customers become involved in the
level 3 processing, the accuracy of the demand information improves and firms
do move as high as 60% accuracy. These general ranges are not absolute, but
are based on our experiences with numerous firms across many industries.
In the second level, companies also turn their attention to the matter of
inventory management. Much effort is expended to reduce the amount of cash
tied up in inventories, so a one-time improvement can be made to working
capital, and the annual carrying costs of excess inventories are reduced. Our
experience shows, however, that some of the improvements made are real, while
much of the effort results in a sort of shell-game maneuver. This means we find
that a large amount of the inventory is simply moved upstream � toward
obliging suppliers � rather than taken out of the supply chain. Results of many
studies have indicated that firms did, indeed, remove a significant amount of
inventory during their level 2 efforts, but much of it was absorbed by suppliers
willing to hold the inventory until needed or to retain ownership until the point
of actual use. Assuming the suppliers are smart enough to cover their carrying
costs in the total price for the delivered supplies, it becomes a game of moving
the assets and costs, rather than eliminating the need for extra inventory and
safety stock.
Toward the conclusion of level 2, a supply chain organization will be firmly
established, with a designated leader. Collaboration between this leader and the
information technology group, and particularly the chief information officer,
will be emerging. Internal resistance to cooperative effort will be subdued. The
firm will be leveraging its full buying, manufacturing, storage, and delivery
capacity across all business units, and there will be an intranet of information
sharing at work, to supply the various functions and parts of the business with
vital data on the processing taking place. Transportation management systems
and warehouse management systems will be appearing as the practitioners begin
to apply technology as an enabler to the desired process improvement. As
indicated in the figure, most firms are still working on level 2 improvements
in today�s markets.
A cultural barrier exists between levels 1 and 2, as indicated by the brick
wall in the figure. Most businesses are very comfortable continuing to work on
internal excellence, particularly the never-ending quest for cost reduction. They
resist outside help as an indictment that they do not have the internal expertise
to solve each and every supply chain issue or problem encountered. Many also
resist references to best practices that could be viewed and adopted outside of
their four walls, and they especially oppose sharing any information that is
considered proprietary with any external sources, even if it could lead to further
improvement. Overcoming this barrier takes a forceful hand at the top of the
organization and generally comes when one business unit leader takes a part
of the firm into level 3 and beyond, proving the value of working collaboratively.
A final requirement for completing this level is to form an alliance between the
supply chain organization and the information technology group, so there is a
joint effort to improve processing and to bring the necessary enabling
technology into play.
progression, through which a firm evolves on its way to the most desired
advanced level of implementation. Many firms in many countries have used this
model to understand the logical progression of a supply chain effort. The model
is also useful to calibrate a firm�s position as it moves forward and to determine
to what level of progress the company should aspire, especially when the model
is extended to the various business functions. Implicit in the use of the model
is the understanding that a firm must progress through the levels, none of which
can be skipped, although some firms might have business units with footprints
in various levels at the same time.
To begin, a firm typically launches its supply chain effort by bringing
whatever existing improvement effort is being pursued under an umbrella type
of orientation focused on the end-to-end processing that constitutes the
organization�s supply chain. In this first level of the progression, the firm begins
to focus on functional processes, particularly sourcing and logistics. In addition
to using these two areas of attention to gather early improvement and quick
profit gains, a secondary goal is to bring enterprise integration into focus as an
objective � within the organization. That means most companies find, as they
begin integrating their existing improvement efforts with the overall attention
to supply chain, that there is a substantial amount of internal resistance to any
type of information sharing or best practice integration inside the four walls of
the business. The so-called stovepipe or silo mentality is a serious reality for
companies starting into the supply chain evolution.
As will be documented, there generally are significant savings generated
during this first part of the evolution. Supply bases are reduced through techniques
designed to segregate suppliers, based on categories of purchase, amount
of purchase, quality, and factors of importance to the firm. With a lesser number
of sources providing larger volumes, prices are reduced and added features
introduced into the relationship. Typical benefits add one or two points of profit,
because the amount of total purchases is often as much as 40 to 50% or more
of the costs of goods or services sold.
Concurrently, most firms begin paying serious attention to how purchased
goods are brought into the supply chain processing, how material and supplies
are handled internally, and how finished products and goods are delivered to
the next company in the linked processing. That means a focus is brought to
inbound freight, internal material processing and manufacture, outbound freight,
and the warehousing and delivery mechanisms necessary to support the logistics
system. In the first level, the bulk of concern is brought to bear on internal
processing and outbound freight. Inbound freight is generally held for later
attention. There is a typical resistance to considering turning any part of the
freight handling over to other parties, but as a firm completes this level, there
is generally some form of outside help brought in to take responsibility for at
least a portion of the transportation function. Most firms find one-half to a full
percent of profit here, as they reduce the cost per mile for transportation, begin
reducing warehouse space to what is actually needed, and transfer ownership
of some or all of the assets involved to a third party adept at combining load
requirements over the accumulated asset base for more effective utilization.
There is not much more to the first level, other than the fact that many firms
begin looking for a model to guide the effort, with most selecting the SCOR�
model, endorsed by the Supply-Chain Council. From our experiences, most
businesses modify that model to suit their needs and introduce other features
of importance to their particular industry. Virtually all have used the model
described in Figure 1.1 to track their progress to higher levels of accomplishment.
Detailed discussions of the various levels we are considering can be found
in Advanced Supply Chain Management by Poirier (1999) and E-Supply Chain
by Poirier and Bauer (2000).
In level 2, the business continues on its intra-enterprise track, but now the
focus moves to attaining some degree of optimization across the internal processing
occurring within the four walls of the business. Sourcing and logistics
move to a higher level as the firm begins more intense work with the key
suppliers and transportation providers. Planning, as accented by the SCOR�
model, becomes an important effort. A supply chain infrastructure begins to
appear during this level, usually with a professional supply chain manager being
introduced to the organization.
Since planning now assumes importance, order management takes on relevance
as a key factor. Unfortunately, virtually every study we have conducted
in this area unearths a problem with the data. As orders, both with suppliers
for purchased goods and services and with customers for finished products and
services, are analyzed, we typically find that 30 to 40% contain one or more
errors. This range may seem high, but when the analysis is extended to determining
how the orders are placed or received, we find that most companies still
rely heavily on telephone, facsimile, and mail for order entry and order processing.
In spite of the amount of order management that has moved to electronic
data interchange and e-commerce, the overwhelming amount of order processing
is still done in a manual fashion, with many implicit errors. Establishing
an order system that eliminates these errors and mistakes is crucial to introducing
a planning system that has any degree of reliability and becomes a requisite
for level 2 progress.
As planning is pursued, some form of sales and operations planning (S&OP)
is generally introduced to require the firm to have a formal process for analyzing
the orders, the production process steps, and the final delivery to customers.
Forecast accuracy becomes an internal issue, as we find that most level 1 firms
operate in an area of about 40% or less forecast accuracy. With the application
of special algorithms or mathematical models, that figure might rise to about
50% in level 2. As S&OP matures, and key customers become involved in the
level 3 processing, the accuracy of the demand information improves and firms
do move as high as 60% accuracy. These general ranges are not absolute, but
are based on our experiences with numerous firms across many industries.
In the second level, companies also turn their attention to the matter of
inventory management. Much effort is expended to reduce the amount of cash
tied up in inventories, so a one-time improvement can be made to working
capital, and the annual carrying costs of excess inventories are reduced. Our
experience shows, however, that some of the improvements made are real, while
much of the effort results in a sort of shell-game maneuver. This means we find
that a large amount of the inventory is simply moved upstream � toward
obliging suppliers � rather than taken out of the supply chain. Results of many
studies have indicated that firms did, indeed, remove a significant amount of
inventory during their level 2 efforts, but much of it was absorbed by suppliers
willing to hold the inventory until needed or to retain ownership until the point
of actual use. Assuming the suppliers are smart enough to cover their carrying
costs in the total price for the delivered supplies, it becomes a game of moving
the assets and costs, rather than eliminating the need for extra inventory and
safety stock.
Toward the conclusion of level 2, a supply chain organization will be firmly
established, with a designated leader. Collaboration between this leader and the
information technology group, and particularly the chief information officer,
will be emerging. Internal resistance to cooperative effort will be subdued. The
firm will be leveraging its full buying, manufacturing, storage, and delivery
capacity across all business units, and there will be an intranet of information
sharing at work, to supply the various functions and parts of the business with
vital data on the processing taking place. Transportation management systems
and warehouse management systems will be appearing as the practitioners begin
to apply technology as an enabler to the desired process improvement. As
indicated in the figure, most firms are still working on level 2 improvements
in today�s markets.
A cultural barrier exists between levels 1 and 2, as indicated by the brick
wall in the figure. Most businesses are very comfortable continuing to work on
internal excellence, particularly the never-ending quest for cost reduction. They
resist outside help as an indictment that they do not have the internal expertise
to solve each and every supply chain issue or problem encountered. Many also
resist references to best practices that could be viewed and adopted outside of
their four walls, and they especially oppose sharing any information that is
considered proprietary with any external sources, even if it could lead to further
improvement. Overcoming this barrier takes a forceful hand at the top of the
organization and generally comes when one business unit leader takes a part
of the firm into level 3 and beyond, proving the value of working collaboratively.
A final requirement for completing this level is to form an alliance between the
supply chain organization and the information technology group, so there is a
joint effort to improve processing and to bring the necessary enabling
technology into play.
CONFIRMED RESULTS VALIDATE THE OPPORTUNITY:
During the summer of 2004, Computer Sciences Corporation (CSC) and Supply
Chain Management Review conducted a survey among readers of the magazine
and selected business organizations known to have some form of ASCM effort
under way. The feedback came from 209 companies, of which 115 were corporations
or independent businesses; 58 were divisions, wholly owned subsidiaries,
or strategic business units; and 33 were group or multidivision organizations.
The industries represented in the survey included aerospace and defense,
automotive, chemicals, consumer goods, discrete manufacturing, food service,
government, healthcare, high technology, mining, oil and gas, process manufacturing,
professional services, publishing and printing, retail, telecommunications,
utilities, and wholesale distribution; 23 firms listed their business as
�other.�
The survey was intended to find answers to such questions as:
Where have supply chain efforts gone?
What are the documented results?
What are the leaders doing?
What variation exists across industries?
What is the link with technology?
In summary, the results provided the following answers:
Most businesses, regardless of industry, reported that their results positioned
them predominantly in levels 2 and 3, with evidence that most
companies tend to bog down somewhere in this area; 91% of the respondents
indicated they were no further along than level 3.
Most of the documented progress, as expected, was reported in the areas
of sourcing and logistics, followed by planning and inventory management.
Those responding rated progress with other areas of importance
much lower.
Collaboration with external business allies remains an elusive concept
for most companies, as there was clear evidence that this concept was
not generally being applied.
Reported cost savings ranged from 1 to 20% or more of identified supply
chain costs. There appeared to be a disparity in what is included in
supply chain costs, as the amount varied from a few percent to as much
as 50% of total revenues, indicating that there still is some confusion
concerning what should be included in supply chain costs.
High technology, telecommunications, and wholesale delivery were the
industries where those responding gave themselves the highest level of
progress ratings.
The link with technology was indelible, meaning higher levels of progress
could not be attained without enabling technology, but there was sufficient
information in the responses to indicate that there was far more
technology applied to finding solutions and improvements than there
were documented results as a result of those efforts. We interpret this
finding to mean that there has been a tendency to try to apply technology
solutions before the processing has been properly improved and
then enhanced with technology.
Revenue increases were also reported, ranging from 1 to 20% or more, but
there was less certainty of the results here, as a significant percentage of
those responding indicated they were not sure of revenue increases.
Our general conclusion was that supply chain efforts are alive and well, with
supply chain now accepted as a major business improvement technique.
Chain Management Review conducted a survey among readers of the magazine
and selected business organizations known to have some form of ASCM effort
under way. The feedback came from 209 companies, of which 115 were corporations
or independent businesses; 58 were divisions, wholly owned subsidiaries,
or strategic business units; and 33 were group or multidivision organizations.
The industries represented in the survey included aerospace and defense,
automotive, chemicals, consumer goods, discrete manufacturing, food service,
government, healthcare, high technology, mining, oil and gas, process manufacturing,
professional services, publishing and printing, retail, telecommunications,
utilities, and wholesale distribution; 23 firms listed their business as
�other.�
The survey was intended to find answers to such questions as:
Where have supply chain efforts gone?
What are the documented results?
What are the leaders doing?
What variation exists across industries?
What is the link with technology?
In summary, the results provided the following answers:
Most businesses, regardless of industry, reported that their results positioned
them predominantly in levels 2 and 3, with evidence that most
companies tend to bog down somewhere in this area; 91% of the respondents
indicated they were no further along than level 3.
Most of the documented progress, as expected, was reported in the areas
of sourcing and logistics, followed by planning and inventory management.
Those responding rated progress with other areas of importance
much lower.
Collaboration with external business allies remains an elusive concept
for most companies, as there was clear evidence that this concept was
not generally being applied.
Reported cost savings ranged from 1 to 20% or more of identified supply
chain costs. There appeared to be a disparity in what is included in
supply chain costs, as the amount varied from a few percent to as much
as 50% of total revenues, indicating that there still is some confusion
concerning what should be included in supply chain costs.
High technology, telecommunications, and wholesale delivery were the
industries where those responding gave themselves the highest level of
progress ratings.
The link with technology was indelible, meaning higher levels of progress
could not be attained without enabling technology, but there was sufficient
information in the responses to indicate that there was far more
technology applied to finding solutions and improvements than there
were documented results as a result of those efforts. We interpret this
finding to mean that there has been a tendency to try to apply technology
solutions before the processing has been properly improved and
then enhanced with technology.
Revenue increases were also reported, ranging from 1 to 20% or more, but
there was less certainty of the results here, as a significant percentage of
those responding indicated they were not sure of revenue increases.
Our general conclusion was that supply chain efforts are alive and well, with
supply chain now accepted as a major business improvement technique.
supply chain improvement effort on a network basis
That means an inter-enterprise view is brought to the end-to-end processing, and partner
collaboration is considered as an important business strategy. The idea is to have
the most competent constituent of the extended enterprise assume responsibility
for the process steps for which it is most capable of performing. Forecasting
and planning go through another improvement cycle as companies begin to
collaborate to match actual demand signals with production and delivery capacity.
A form of advanced planning and scheduling is typically introduced in this
level. The concepts are basic, but implementation is difficult, as many companies
resist turning over responsibility for any processing to external organizations,
even when the data verify the higher capability. They also want to hold
back the sharing of vital information, until there is a better understanding of
what can and should be shared for mutual advantage.
Most companies start their network formation by working closely with a few
suppliers. They begin sharing a bit of previously sacrosanct data, with the
intention of finding the hidden savings that have been eluding the firms, in spite
of years of purchasing and supply relationships. Now the process maps describing
the supply chain steps are viewed with an eye toward how the business allies
can find areas of mutual benefit. Partnering diagnostics come into play as the
allies seriously analyze what takes place within the process steps, particularly
at the points of handoff. Frequently using reengineering techniques, the allies
develop improved process steps, often applying enabling technology to improve
the transfer of critical knowledge. Results generally provide a higher level of
improvement for each of the participating parties. The key in this area is to make
certain that the discovered savings are shared in some way between the parties
to the effort.
Distributors can play a key role in this area, as they work more closely with
the manufacturers to get the products and services to the end customer in the
most effective manner, with the appropriate amount of inventory. The results
of the survey to be cited verified that some of these distributors have made
substantial progress with their supply chain efforts and have advanced solidly
into level 3 and beyond. As the internal house begins to get in order, and key
distributors are made a part of the network, most firms then turn to a few key
customers and the analysis of the linked process steps continues, with the focus
moving toward optimization across the total network, not just the internal
processing.
(ASCM) efforts. Now the supply chain constituents are working closely together,
sharing knowledge across a communication extranet and collaborating
on how to increase revenues and better utilize combined assets, as well as
finding further cost and service improvements. A new set of metrics is introduced
to measure performance, with most of the measures focused on customer
or consumer satisfaction. This is truly the realm of the intelligent value network
we will describe and where the savings can reach as high as five to eight points
of new profit.
The fifth and final level of the evolution is darkened in the figure, because
it is more theoretical than actual, with only a handful of firms achieving full
network connectivity. That term is used to describe a condition in which the
linked organizations are sharing virtually all of the important data electronically
and are working together through some form of cybercommunication system.
This is the domain of high-technology companies (Intel, Cisco, Hewlett-Packard,
IBM), a few leading-edge consumer goods providers (Colgate-Palmolive, Procter
& Gamble, Nike, Dell, GE, Toyota), and a select group of experimenters trying
to determine the actual value of direct knowledge sharing.
This framework will be used throughout the text, as we describe how a
business organization can move carefully and effectively across the five levels
and attain the highest position of importance to the firm, its market, and its
customers. For now, the maturity model should be applied to consider how
companies are making progress across the described evolution and to determine
the values for moving to higher levels of performance. As we progress together,
we will also show what the documented results by level have been.
collaboration is considered as an important business strategy. The idea is to have
the most competent constituent of the extended enterprise assume responsibility
for the process steps for which it is most capable of performing. Forecasting
and planning go through another improvement cycle as companies begin to
collaborate to match actual demand signals with production and delivery capacity.
A form of advanced planning and scheduling is typically introduced in this
level. The concepts are basic, but implementation is difficult, as many companies
resist turning over responsibility for any processing to external organizations,
even when the data verify the higher capability. They also want to hold
back the sharing of vital information, until there is a better understanding of
what can and should be shared for mutual advantage.
Most companies start their network formation by working closely with a few
suppliers. They begin sharing a bit of previously sacrosanct data, with the
intention of finding the hidden savings that have been eluding the firms, in spite
of years of purchasing and supply relationships. Now the process maps describing
the supply chain steps are viewed with an eye toward how the business allies
can find areas of mutual benefit. Partnering diagnostics come into play as the
allies seriously analyze what takes place within the process steps, particularly
at the points of handoff. Frequently using reengineering techniques, the allies
develop improved process steps, often applying enabling technology to improve
the transfer of critical knowledge. Results generally provide a higher level of
improvement for each of the participating parties. The key in this area is to make
certain that the discovered savings are shared in some way between the parties
to the effort.
Distributors can play a key role in this area, as they work more closely with
the manufacturers to get the products and services to the end customer in the
most effective manner, with the appropriate amount of inventory. The results
of the survey to be cited verified that some of these distributors have made
substantial progress with their supply chain efforts and have advanced solidly
into level 3 and beyond. As the internal house begins to get in order, and key
distributors are made a part of the network, most firms then turn to a few key
customers and the analysis of the linked process steps continues, with the focus
moving toward optimization across the total network, not just the internal
processing.
(ASCM) efforts. Now the supply chain constituents are working closely together,
sharing knowledge across a communication extranet and collaborating
on how to increase revenues and better utilize combined assets, as well as
finding further cost and service improvements. A new set of metrics is introduced
to measure performance, with most of the measures focused on customer
or consumer satisfaction. This is truly the realm of the intelligent value network
we will describe and where the savings can reach as high as five to eight points
of new profit.
The fifth and final level of the evolution is darkened in the figure, because
it is more theoretical than actual, with only a handful of firms achieving full
network connectivity. That term is used to describe a condition in which the
linked organizations are sharing virtually all of the important data electronically
and are working together through some form of cybercommunication system.
This is the domain of high-technology companies (Intel, Cisco, Hewlett-Packard,
IBM), a few leading-edge consumer goods providers (Colgate-Palmolive, Procter
& Gamble, Nike, Dell, GE, Toyota), and a select group of experimenters trying
to determine the actual value of direct knowledge sharing.
This framework will be used throughout the text, as we describe how a
business organization can move carefully and effectively across the five levels
and attain the highest position of importance to the firm, its market, and its
customers. For now, the maturity model should be applied to consider how
companies are making progress across the described evolution and to determine
the values for moving to higher levels of performance. As we progress together,
we will also show what the documented results by level have been.
supply chain efforts are alive and well,in business management:
There were several other important points that emerged from the survey.
When we asked if the CEO considers supply chain management to be a source
of competitive advantage, the replies were 75% positive, indicating the concept
is now accepted at the most senior level of the business for most organizations.
When we inquired as to what functions/costs were included in a supply chain
organization, there were two categories to the responses. The major functions
included, in ranked order:
_ Logistics, transportation, and warehousing
_ Purchasing procurement and sourcing
_ Inventory and materials management
_ Forecasting, planning, and scheduling
_ Supply chain software and technology
The secondary functions included:
_ Manufacturing
_ Supplier relationship management
_ Customer relationship management
_ Marketing, sales, and customer service
We interpret these findings to indicate that, once again, most business organizations
are hard at work on the basics, or level 1 through 3 efforts, while
postponing higher level efforts that would include a closer network type of
relationship with suppliers and customers. Virtually 90% of the firms responding
to the survey placed their companies or business units in levels 1 through
3, while there was evidence that the ASCM concepts were not fully understood
or applied. The only firms giving themselves multiple level 4 or 5 ratings were
in the discrete manufacturing, high-technology, telecommunications, and wholesale
distribution industries. The laggards formed a much larger group, with
defense, government, oil and gas, publishing and printing, and utilities contained
in that area. Best-in-class ratings were given to Dell, Wal-Mart, Procter
& Gamble, Toyota, Cisco Systems, IBM, General Electric, and Hewlett-Packard.
The most surprising result of the survey was the indication that a solid
supply chain strategy was generally missing in action. By that we mean most
responding firms indicated they did not have a specific strategy at work todefine the supply chain effort or, more importantly, to link the results with the
business plan.
When we asked if the CEO considers supply chain management to be a source
of competitive advantage, the replies were 75% positive, indicating the concept
is now accepted at the most senior level of the business for most organizations.
When we inquired as to what functions/costs were included in a supply chain
organization, there were two categories to the responses. The major functions
included, in ranked order:
_ Logistics, transportation, and warehousing
_ Purchasing procurement and sourcing
_ Inventory and materials management
_ Forecasting, planning, and scheduling
_ Supply chain software and technology
The secondary functions included:
_ Manufacturing
_ Supplier relationship management
_ Customer relationship management
_ Marketing, sales, and customer service
We interpret these findings to indicate that, once again, most business organizations
are hard at work on the basics, or level 1 through 3 efforts, while
postponing higher level efforts that would include a closer network type of
relationship with suppliers and customers. Virtually 90% of the firms responding
to the survey placed their companies or business units in levels 1 through
3, while there was evidence that the ASCM concepts were not fully understood
or applied. The only firms giving themselves multiple level 4 or 5 ratings were
in the discrete manufacturing, high-technology, telecommunications, and wholesale
distribution industries. The laggards formed a much larger group, with
defense, government, oil and gas, publishing and printing, and utilities contained
in that area. Best-in-class ratings were given to Dell, Wal-Mart, Procter
& Gamble, Toyota, Cisco Systems, IBM, General Electric, and Hewlett-Packard.
The most surprising result of the survey was the indication that a solid
supply chain strategy was generally missing in action. By that we mean most
responding firms indicated they did not have a specific strategy at work todefine the supply chain effort or, more importantly, to link the results with the
business plan.
purposes of demonstrate and clear strategy:
One of the purposes of this text will be to demonstrate the
importance of such a clear strategy and how a link to the business plan can result
in substantiated improvements to sales and earnings, found directly on the profit
and loss statement prepared by the firm.
In conclusion, the survey did document savings as a result of supply chain
efforts. When asked what has been the overall impact of the supply chain effort
on costs, those responding indicated:
_ Reduced by 1 to 5% 27% of responses
_ Reduced by 6 to 10% 33% of responses
_ Reduced by 11 to 20% 8% of responses
_ Reduced by more than 20% 4% of responses
_ Initiative failed to meet objectives 6% of responses
_ Not sure 21% of responses
When asked what has been the overall impact of the supply chain efforts
on increased revenues, the answers were not as definitive. Responses indicated:
_ Increased by 1 to 5% 27% of responses
_ Increased by 6 to 10% 21% of responses
_ Increased by 11 to 20% 5% of responses
_ Increased by more than 20% 4% of responses
_ Failed to meet objectives 5% of responses
_ Not sure 38% of responses
We interpret the high percentage of responses indicating a failure or not sure
as an indication that the idea of using supply chain to differentiate a firm and
its network partners from competitors to create new sales is still not an integral
part of supply chain efforts in general. Building top line performance becomes
the future challenge, as companies discover how to use supply chain excellence
in both directions on the profit and loss statement.
By combining the survey results with CSC research from other firms indicating
a solid supply chain effort, Figure 1.2 can be used as a guide to just what
might be achieved from a continued and concerted effort to use supply chain
to improve both top (revenue) and bottom (cost) line results and how five to
eight points of new profits are possible.
To use this chart effectively, a company should consider the bottom, horizontal
axis as indicating the percent of profit made before paying taxes. The
improvements are then measured in additional points of new profit as a percent
of net revenues. Beginning on the left of the chart, there can be no doubt that
inventory reduction is a viable part of a supply chain effort and can result in
as much as a two-point improvement in profits. We indicate that a much smaller
amount is actually achieved, because, as mentioned, most inventories are simply
reallocated throughout the network, rather than eliminated. Inventory remains
a frontier to be fully conquered, as supply chain efforts mature, and demand
is more closely matched with supply, visibility into the supply chain network
is established, and the need for extra stocks is eliminated. A firm using the chart
is well advised to establish a realistic target for this part of the improvement
effort.
Next we see an improvement through reduced logistics costs, resulting in
a possible point of improvement in earnings. Once again, a range is used
because most firms neglect to work as diligently on improving inbound freight
as they do on internal handling and outbound freight. These companies also tend
to overlook the possibility of using supply chain partners for storing and moving
some of the goods or fail to apply some of the contemporary logistics concepts
that include virtual ownership of assets and shared use of equipment and facilities.
(For a more detailed consideration of the contemporary view of logistics,
see Poirier, 2004.)
The areas of direct and indirect spending merit the largest potential benefits,
as purchasing covers the largest portion of costs in most businesses. We find
that the earliest efforts (levels 1 and 2) typically bring in a reasonable return
and establish sufficient savings to validate the effort, as indicated by the large
range of possible improvement. Later progress by most companies will focus
. The Potential Savings and Revenue Enhancements: Projected Benefits
from Collaborative Initiative Implementations (Source: CSC projections based
on benchmarked performance of comparable solution offerings)
attention on the indirect spend, moving into areas such as office supplies,
furniture, travel, computers, office equipment, and so forth.
importance of such a clear strategy and how a link to the business plan can result
in substantiated improvements to sales and earnings, found directly on the profit
and loss statement prepared by the firm.
In conclusion, the survey did document savings as a result of supply chain
efforts. When asked what has been the overall impact of the supply chain effort
on costs, those responding indicated:
_ Reduced by 1 to 5% 27% of responses
_ Reduced by 6 to 10% 33% of responses
_ Reduced by 11 to 20% 8% of responses
_ Reduced by more than 20% 4% of responses
_ Initiative failed to meet objectives 6% of responses
_ Not sure 21% of responses
When asked what has been the overall impact of the supply chain efforts
on increased revenues, the answers were not as definitive. Responses indicated:
_ Increased by 1 to 5% 27% of responses
_ Increased by 6 to 10% 21% of responses
_ Increased by 11 to 20% 5% of responses
_ Increased by more than 20% 4% of responses
_ Failed to meet objectives 5% of responses
_ Not sure 38% of responses
We interpret the high percentage of responses indicating a failure or not sure
as an indication that the idea of using supply chain to differentiate a firm and
its network partners from competitors to create new sales is still not an integral
part of supply chain efforts in general. Building top line performance becomes
the future challenge, as companies discover how to use supply chain excellence
in both directions on the profit and loss statement.
By combining the survey results with CSC research from other firms indicating
a solid supply chain effort, Figure 1.2 can be used as a guide to just what
might be achieved from a continued and concerted effort to use supply chain
to improve both top (revenue) and bottom (cost) line results and how five to
eight points of new profits are possible.
To use this chart effectively, a company should consider the bottom, horizontal
axis as indicating the percent of profit made before paying taxes. The
improvements are then measured in additional points of new profit as a percent
of net revenues. Beginning on the left of the chart, there can be no doubt that
inventory reduction is a viable part of a supply chain effort and can result in
as much as a two-point improvement in profits. We indicate that a much smaller
amount is actually achieved, because, as mentioned, most inventories are simply
reallocated throughout the network, rather than eliminated. Inventory remains
a frontier to be fully conquered, as supply chain efforts mature, and demand
is more closely matched with supply, visibility into the supply chain network
is established, and the need for extra stocks is eliminated. A firm using the chart
is well advised to establish a realistic target for this part of the improvement
effort.
Next we see an improvement through reduced logistics costs, resulting in
a possible point of improvement in earnings. Once again, a range is used
because most firms neglect to work as diligently on improving inbound freight
as they do on internal handling and outbound freight. These companies also tend
to overlook the possibility of using supply chain partners for storing and moving
some of the goods or fail to apply some of the contemporary logistics concepts
that include virtual ownership of assets and shared use of equipment and facilities.
(For a more detailed consideration of the contemporary view of logistics,
see Poirier, 2004.)
The areas of direct and indirect spending merit the largest potential benefits,
as purchasing covers the largest portion of costs in most businesses. We find
that the earliest efforts (levels 1 and 2) typically bring in a reasonable return
and establish sufficient savings to validate the effort, as indicated by the large
range of possible improvement. Later progress by most companies will focus
. The Potential Savings and Revenue Enhancements: Projected Benefits
from Collaborative Initiative Implementations (Source: CSC projections based
on benchmarked performance of comparable solution offerings)
attention on the indirect spend, moving into areas such as office supplies,
furniture, travel, computers, office equipment, and so forth.
THE ROUTE TO ADVANCED BUSINESS PERFORMANCE
As mentioned, the SCOR� model and its engineering process counterparts provide
an excellent framework for analyzing how to improve an enterprise�s endto-
end processing. We will apply this model, in conjunction with the supply
chain maturity model and maturity matrices (to be introduced), to explain the
path to the highest appropriate level of supply chain progress, keeping in mind
that there are widely differing interpretations of these processes by companies
at different levels of supply chain sophistication. The simple silo-based planning
of a level 1 company, shared in an ad hoc way with neighboring internal
departments, for example, compares to the complex, reactive planning of a level
4 or 5 network, with collaborative, interactive comparisons of schedules up and
down key threads in the network. The na�ve �replace and scrap� policy for
returns in level 1 supply chains contrasts with the more sophisticated approaches
of higher level organizations, which are planning the cost-effective reentry of
refurbished products into the flow.
It is these different levels of application of the basic process models and the
value that can be generated that the authors have come to understand. For a firm
to generate value from the supply chain journey and become part of the processenabled
extended enterprise requires the creation of a guiding process maturity
roadmap.
is a matrix that is useful for establishing such a roadmap. The
matrix takes the top-level SCOR� processes � Plan, Source, Make, Deliver,
and Return � and sets out the attributes that can be expected for each process
as a company moves through the five levels of supply chain maturity.
The attributes are designed as a stretch for each level, and as our recent
surveys have shown, few companies have moved much beyond level 3. However,
there is merit in establishing an absolute framework against which progress
and value creation can be measured, to avoid the problems of traditional
benchmarking, where the top-level, best-in-class, attained performance may still
only be at level 3. In subsequent chapters, we will lay out the results of extensive
research in a number of case histories, to demonstrate the value that companies
have actually achieved in moving through the levels.
To support the growing process maturity, tools and technology are often
deployed. Again, we have developed a guiding matrix that indicates the types
of approach that typically support the processes in. This technology
matrix is shown in With these two matrices as our guide, we can describe the way in which
the supply chain processes and their supporting technologies develop � the
roadmap to greater supply chain value. Companies that want to follow this
roadmap are well advised to customize the matrices and the SCOR� map to fit
the actual circumstances of their industry and market conditions.
an excellent framework for analyzing how to improve an enterprise�s endto-
end processing. We will apply this model, in conjunction with the supply
chain maturity model and maturity matrices (to be introduced), to explain the
path to the highest appropriate level of supply chain progress, keeping in mind
that there are widely differing interpretations of these processes by companies
at different levels of supply chain sophistication. The simple silo-based planning
of a level 1 company, shared in an ad hoc way with neighboring internal
departments, for example, compares to the complex, reactive planning of a level
4 or 5 network, with collaborative, interactive comparisons of schedules up and
down key threads in the network. The na�ve �replace and scrap� policy for
returns in level 1 supply chains contrasts with the more sophisticated approaches
of higher level organizations, which are planning the cost-effective reentry of
refurbished products into the flow.
It is these different levels of application of the basic process models and the
value that can be generated that the authors have come to understand. For a firm
to generate value from the supply chain journey and become part of the processenabled
extended enterprise requires the creation of a guiding process maturity
roadmap.
is a matrix that is useful for establishing such a roadmap. The
matrix takes the top-level SCOR� processes � Plan, Source, Make, Deliver,
and Return � and sets out the attributes that can be expected for each process
as a company moves through the five levels of supply chain maturity.
The attributes are designed as a stretch for each level, and as our recent
surveys have shown, few companies have moved much beyond level 3. However,
there is merit in establishing an absolute framework against which progress
and value creation can be measured, to avoid the problems of traditional
benchmarking, where the top-level, best-in-class, attained performance may still
only be at level 3. In subsequent chapters, we will lay out the results of extensive
research in a number of case histories, to demonstrate the value that companies
have actually achieved in moving through the levels.
To support the growing process maturity, tools and technology are often
deployed. Again, we have developed a guiding matrix that indicates the types
of approach that typically support the processes in. This technology
matrix is shown in With these two matrices as our guide, we can describe the way in which
the supply chain processes and their supporting technologies develop � the
roadmap to greater supply chain value. Companies that want to follow this
roadmap are well advised to customize the matrices and the SCOR� map to fit
the actual circumstances of their industry and market conditions.
A GENERIC ENTERPRISE BUSINESS PROCESS MODEL:
The key question at this point becomes: How do supply chain processes create
more value as the enterprise matures and expands? With determining how to
improve business process at the forefront of management thinking,
Along the way, the firm moving toward the intelligent value network
wants to quantify the potential value of the transformation. That effort requires
the creation of a process maturity roadmap, which follows the maturity model
and leads the firm to becoming part of the best process-enabled extended
enterprise and eventually an intelligent value network.
To create such a map, we need a process model of the extended enterprise,
one that in particular illustrates the key supply chain processes that the enterprise
executes. A process model that has become a standard in many industries
over the last few years is the Supply-Chain Operations Reference (SCOR�)
model, developed by the Supply-Chain Council, an independent, not-for-profit,
global corporation with membership open to all companies and organizations
interested in applying and advancing the state-of-the-art in supply chain management
systems and practices. The SCOR� model captures the council�s consensus
view of supply chain management.
For the supply chain practitioner, SCOR� provides an excellent starting
point for developing supply chain thinking, and we have adopted it to guide our
thinking about process maturity. SCOR� covers the processes associated directly
with the supply chain � its design, planning, and execution. In the
authors� experience, the way in which a product is designed for manufacture
has a marked effect on the subsequent effectiveness of the supply chain. The
time to get a new product to market is often critical in maximizing the return
from the product, and the way in which changes are managed can make or break
a product�s long-term profitability.
We have augmented SCOR� with a set of processes that impact the Make
portion of the model and cover the engineering steps � processes that determine
the product design, how it is to be manufactured, and how the design will
be modified over time. These processes are illustrated in Figure 1.3, between
the need to manage the supply chain and the need to manage the products
manufactured. They are indicated as the linked arrows impacting the Make
phase and include (a) the design phase that is impacted by manage product
portfolio, design product, configure product (concurrently), and change product
and (b) the production engineering phase that is affected by design process and
tooling and maintain process. Getting these processes done correctly is as
important as any of the other major processes contained in the SCOR� model.
Deliver completes the traditional supply chain, getting the goods to the
customer. It encompasses many of the �order-to-cash� processes, from inquiry
and order processing through final product configuration, warehousing, order
picking, and logistics planning (load building, routing, dispatch planning) to
collecting proof of delivery or installation and invoicing. A version of Deliver
deals with the delivery of retail products to the back room of the store, onto
the shelves, and through the cash registers via the shopping cart.
Recent additions to the SCOR� model are the Return processes � a need
driven by new legislation on recycling and packaging, along with the need to
provide ever-higher levels of after-care service to customers, at an affordable
cost. The process elements deal with authorizing the return of a product (warranty
claim, replace or refund), organizing the receipt of the product back into
the supply chain, and planning the most cost-effective way of dealing with the
defective product (whether to repair or scrap). Of course, repaired products need
to reenter the supply chain, to flow back in the customer direction, so the Return
process ultimately links back to Plan, where this additional source of product
can be taken into account.
The engineering processes that complete our enterprise model are comprised
of:
_ Manage product portfolio
_ Design product
_ Configure product
_ Design (manufacturing) process and tooling
_ Change product design
_ Maintain (manufacturing) process
The Manage product portfolio process encompasses all the activities associated
with deciding what products to provide through the supply chain. It
includes the generation and testing of research ideas, proof of concept, and the
management of linked groups of products through options and features.
The Design product process takes a chosen product idea through to a viable
product design ready for release to manufacturing. The process covers not only
a complete finished product, but also the parts and assemblies that go to make
the finished product. The process includes concept design, the development of
the design (including testing of materials, piece parts, and assemblies), through
to a production design, released to manufacturing. Product designs are first
conceived as ideas in the concept stage. The process model for concept design
must be highly flexible and nondeterministic in nature, with design ideas moving
between suppliers and team members in a free-flowing, synchronous manner.
Once the design ideas and concepts have converged, design intent then moves
to the design/redesign stage. Here, the number of unknowns has lessened to the
point where a controlled work flow model can be implemented with more
formal approval and release control.
Configure product governs the way in which products are configured to
ensure maximum value of common and standardized components and the reuse
of previous design ideas. Configuration management controls the content of the
product from design through manufacture and throughout its service life. It
includes the creation of bills of material, support for revision and version control,
support for �where used� searches, and multiple bill of material views. The
product data integrate with enterprise resource planning systems, and more
advanced companies will have support for rules-driven configurations. Product
configuration management does not stop once the product is released from
manufacture � it continues as an essential part of the management of the
product�s entire life cycle.
The Design process and tooling processes take us from a design to a set of
manufacturing instructions and the necessary tooling to support the manufacture.
Traditionally, this was a �one-hit� process or at best a two-hit! For example,
British automotive manufacturers could take up to six months to produce
a new set of tooling to iron out production problems. A the same time, Japanese
manufacturers had cut the time to six weeks, so prototyping became the accepted
way of developing the production process. Thus, for more mature companies,
this process interacts with the Design and Configure processes. Finally,
the completed product design is ready for production release, where the production
process model takes over.
Finally, we have two processes that deal with the changing product design:
Change product design and Maintain (manufacturing) process. Change management
is critical to both the longevity of the product�s profitability and the
continued effectiveness of the supply chain to deliver the product. While we
have shown the Change process starting after the product is released for manufacture,
in fact best practice dictates that change control is applied from the
beginning of the design process. Version control and change effectivity dates
are crucial to managing the evolution of the design both pre- and post-production.
In parallel with changes to the product�s design, manufacturing processes
must be kept up to date, both in terms of their own effectiveness and to keep
in line with changes to the design. Our final process � Maintain process �
deals with this requirement by establishing processes that make certain the
designs and products are still viable years into their life cycle.
more value as the enterprise matures and expands? With determining how to
improve business process at the forefront of management thinking,
Along the way, the firm moving toward the intelligent value network
wants to quantify the potential value of the transformation. That effort requires
the creation of a process maturity roadmap, which follows the maturity model
and leads the firm to becoming part of the best process-enabled extended
enterprise and eventually an intelligent value network.
To create such a map, we need a process model of the extended enterprise,
one that in particular illustrates the key supply chain processes that the enterprise
executes. A process model that has become a standard in many industries
over the last few years is the Supply-Chain Operations Reference (SCOR�)
model, developed by the Supply-Chain Council, an independent, not-for-profit,
global corporation with membership open to all companies and organizations
interested in applying and advancing the state-of-the-art in supply chain management
systems and practices. The SCOR� model captures the council�s consensus
view of supply chain management.
For the supply chain practitioner, SCOR� provides an excellent starting
point for developing supply chain thinking, and we have adopted it to guide our
thinking about process maturity. SCOR� covers the processes associated directly
with the supply chain � its design, planning, and execution. In the
authors� experience, the way in which a product is designed for manufacture
has a marked effect on the subsequent effectiveness of the supply chain. The
time to get a new product to market is often critical in maximizing the return
from the product, and the way in which changes are managed can make or break
a product�s long-term profitability.
We have augmented SCOR� with a set of processes that impact the Make
portion of the model and cover the engineering steps � processes that determine
the product design, how it is to be manufactured, and how the design will
be modified over time. These processes are illustrated in Figure 1.3, between
the need to manage the supply chain and the need to manage the products
manufactured. They are indicated as the linked arrows impacting the Make
phase and include (a) the design phase that is impacted by manage product
portfolio, design product, configure product (concurrently), and change product
and (b) the production engineering phase that is affected by design process and
tooling and maintain process. Getting these processes done correctly is as
important as any of the other major processes contained in the SCOR� model.
Deliver completes the traditional supply chain, getting the goods to the
customer. It encompasses many of the �order-to-cash� processes, from inquiry
and order processing through final product configuration, warehousing, order
picking, and logistics planning (load building, routing, dispatch planning) to
collecting proof of delivery or installation and invoicing. A version of Deliver
deals with the delivery of retail products to the back room of the store, onto
the shelves, and through the cash registers via the shopping cart.
Recent additions to the SCOR� model are the Return processes � a need
driven by new legislation on recycling and packaging, along with the need to
provide ever-higher levels of after-care service to customers, at an affordable
cost. The process elements deal with authorizing the return of a product (warranty
claim, replace or refund), organizing the receipt of the product back into
the supply chain, and planning the most cost-effective way of dealing with the
defective product (whether to repair or scrap). Of course, repaired products need
to reenter the supply chain, to flow back in the customer direction, so the Return
process ultimately links back to Plan, where this additional source of product
can be taken into account.
The engineering processes that complete our enterprise model are comprised
of:
_ Manage product portfolio
_ Design product
_ Configure product
_ Design (manufacturing) process and tooling
_ Change product design
_ Maintain (manufacturing) process
The Manage product portfolio process encompasses all the activities associated
with deciding what products to provide through the supply chain. It
includes the generation and testing of research ideas, proof of concept, and the
management of linked groups of products through options and features.
The Design product process takes a chosen product idea through to a viable
product design ready for release to manufacturing. The process covers not only
a complete finished product, but also the parts and assemblies that go to make
the finished product. The process includes concept design, the development of
the design (including testing of materials, piece parts, and assemblies), through
to a production design, released to manufacturing. Product designs are first
conceived as ideas in the concept stage. The process model for concept design
must be highly flexible and nondeterministic in nature, with design ideas moving
between suppliers and team members in a free-flowing, synchronous manner.
Once the design ideas and concepts have converged, design intent then moves
to the design/redesign stage. Here, the number of unknowns has lessened to the
point where a controlled work flow model can be implemented with more
formal approval and release control.
Configure product governs the way in which products are configured to
ensure maximum value of common and standardized components and the reuse
of previous design ideas. Configuration management controls the content of the
product from design through manufacture and throughout its service life. It
includes the creation of bills of material, support for revision and version control,
support for �where used� searches, and multiple bill of material views. The
product data integrate with enterprise resource planning systems, and more
advanced companies will have support for rules-driven configurations. Product
configuration management does not stop once the product is released from
manufacture � it continues as an essential part of the management of the
product�s entire life cycle.
The Design process and tooling processes take us from a design to a set of
manufacturing instructions and the necessary tooling to support the manufacture.
Traditionally, this was a �one-hit� process or at best a two-hit! For example,
British automotive manufacturers could take up to six months to produce
a new set of tooling to iron out production problems. A the same time, Japanese
manufacturers had cut the time to six weeks, so prototyping became the accepted
way of developing the production process. Thus, for more mature companies,
this process interacts with the Design and Configure processes. Finally,
the completed product design is ready for production release, where the production
process model takes over.
Finally, we have two processes that deal with the changing product design:
Change product design and Maintain (manufacturing) process. Change management
is critical to both the longevity of the product�s profitability and the
continued effectiveness of the supply chain to deliver the product. While we
have shown the Change process starting after the product is released for manufacture,
in fact best practice dictates that change control is applied from the
beginning of the design process. Version control and change effectivity dates
are crucial to managing the evolution of the design both pre- and post-production.
In parallel with changes to the product�s design, manufacturing processes
must be kept up to date, both in terms of their own effectiveness and to keep
in line with changes to the design. Our final process � Maintain process �
deals with this requirement by establishing processes that make certain the
designs and products are still viable years into their life cycle.
THE PLAN PROCESSES IN BUSINESS PROCESS
Plan processes at their simplest, level 1, are point solutions. Plans are created
internally, with no integrated processes between different functions or plants
within the company. Basic tools � spreadsheets and simple material requirements
planning (MRP) or inventory control tools � support the process.
At level 2, the planning processes pick up and aggregate demand across the
firm. Simple MRP planning tools are augmented with finite capacity planning
capability � S&OP and later advanced planning and scheduling systems �
which allows the firm to create reliable plans that can be adapted to ensure that
more focused performance goals can be met. The planning now takes place
across functional boundaries, so the firm moves toward internal supply chain
excellence.
Between level 2 and level 3 is the wall � between my company and your
company. This wall acts as a psychological barrier to improvement, but the
more innovative firms break through, extending their processes into their suppliers
and customers. Now they can pick up advanced demand forecasts from
customers and give their suppliers early warning of changes in market conditions
and cancelation or reduction of supply rates. This condition increasingly
takes place collaboratively, with direct, electronic interchange of data between
planning systems, governed by strict rules of engagement, such as service level
agreements between collaborating partners in the extended value chain.
Level 4 planning takes in more steps in the extended chain. Some firms can
travel back four or five levels in the chains supplying key components. Dell,
for example, can reschedule its supply base for key commodities across five
levels of suppliers in 30 to 45 minutes. Now the whole process is enabled by
technology. The various players in the extended value chain are linked together,
across the Internet, with common data standards and linked process flows.
Critical events are monitored by real-time software and alerts sent to control
points in the chain if plans are not achieved.
No company or network, to the authors� knowledge, has yet fully achieved
the aspiration of level 5. The logical conclusion of the integration of Planning
across a supply network is to manage the network as though it were a single
entity, with no barriers caused by the artificial accident of share ownership.
Moving between level 4 and level 5 is similar to the internal supply chain,
moving between level 1 and level 2.
Between level 1 and level 2, performance improvements come from moving
out of functional silos to internal supply chains, where performance is measured
across the whole chain from inbound dock to dispatch. All the local functional
targets � for purchasing, manufacturing, and sales � are subservient to achieving
the best overall performance. The companies in the level 4 supply chain are
the equivalent of the functional silos at level 1. Local performance measures
are represented by local shareholder interests. To move to level 5, and realize
the major value opportunities, the linked firms must work on optimizing the
whole network, not individual shareholder funds
internally, with no integrated processes between different functions or plants
within the company. Basic tools � spreadsheets and simple material requirements
planning (MRP) or inventory control tools � support the process.
At level 2, the planning processes pick up and aggregate demand across the
firm. Simple MRP planning tools are augmented with finite capacity planning
capability � S&OP and later advanced planning and scheduling systems �
which allows the firm to create reliable plans that can be adapted to ensure that
more focused performance goals can be met. The planning now takes place
across functional boundaries, so the firm moves toward internal supply chain
excellence.
Between level 2 and level 3 is the wall � between my company and your
company. This wall acts as a psychological barrier to improvement, but the
more innovative firms break through, extending their processes into their suppliers
and customers. Now they can pick up advanced demand forecasts from
customers and give their suppliers early warning of changes in market conditions
and cancelation or reduction of supply rates. This condition increasingly
takes place collaboratively, with direct, electronic interchange of data between
planning systems, governed by strict rules of engagement, such as service level
agreements between collaborating partners in the extended value chain.
Level 4 planning takes in more steps in the extended chain. Some firms can
travel back four or five levels in the chains supplying key components. Dell,
for example, can reschedule its supply base for key commodities across five
levels of suppliers in 30 to 45 minutes. Now the whole process is enabled by
technology. The various players in the extended value chain are linked together,
across the Internet, with common data standards and linked process flows.
Critical events are monitored by real-time software and alerts sent to control
points in the chain if plans are not achieved.
No company or network, to the authors� knowledge, has yet fully achieved
the aspiration of level 5. The logical conclusion of the integration of Planning
across a supply network is to manage the network as though it were a single
entity, with no barriers caused by the artificial accident of share ownership.
Moving between level 4 and level 5 is similar to the internal supply chain,
moving between level 1 and level 2.
Between level 1 and level 2, performance improvements come from moving
out of functional silos to internal supply chains, where performance is measured
across the whole chain from inbound dock to dispatch. All the local functional
targets � for purchasing, manufacturing, and sales � are subservient to achieving
the best overall performance. The companies in the level 4 supply chain are
the equivalent of the functional silos at level 1. Local performance measures
are represented by local shareholder interests. To move to level 5, and realize
the major value opportunities, the linked firms must work on optimizing the
whole network, not individual shareholder funds
SOURCE, MAKE, DELIVER, AND RETURN
Source processes follow a similar path to Plan. At level 1, there are few formal
processes and relationships with suppliers are ad hoc. There is little ability to
aggregate data across the firm, so sourcing decisions are suboptimal. At level
2, we find tools that allow the firm to build up a consolidated view of total
demand � the best deals can be made, but from a traditional buyer-seller
relationship. Across the wall to level 3, we see the development of well-defined
supplier partnerships, with shared goals for driving and sharing extra value.
Suppliers are integrated into the planning process and are probably involved
much earlier in the design process, for noncommodity items. By level 4, firms
will have adopted e-sourcing tools for commodity items, allowing them to
search a much wider Internet community for the best supply opportunities. More
and more of the procurement processes will be automated and linked into the
scheduling systems on both sides and to back-office reconciliation and payment
systems. The level 5 aspiration is for the whole network to co-manage sourcing
strategy to maximize the value to all the players in the chain.
The Make processes at level 1 are often as rudimentary as the planning
processes that feed them their instructions. Paper-based or simple MRP-based
tools track the manufacture of products, relying on progress chasing to maintain
due date performance. At level 2, tracking is electronic, and linked into the
scheduling system, so that the whole internal enterprise has a view of the state
of play. Customer delivery performance is greatly enhanced, and lead times and
shop floor inventories are reduced. The level 3 firm takes its pace from direct
customer information � real-time progress information can be shared with
customers, so that problems are highlighted before they become critical. Simplified
shop floor control through demand-pull, kanban-type systems is prevalent.
When level 4 is reached, the collaboration with immediate supply chain
partners is complete. By level 5, we are looking to make long-term, strategic
capacity and technology investment decisions in the best interests of the whole
value network � the activity of the whole chain is scheduled as part of a single
model.
Deliver completes the customer-focused processes. At level 1, we again see
manual planning, often with only ad hoc links to the preceding functions in the
internal supply chain. The level 2 firm uses effective warehouse and fleet
management systems to underpin good outbound logistics. By level 3, we see
the start of information flowing directly from the customer to the supplier.
Vendor-managed inventory reduces the assets on the customer�s balance sheet
and allows the supplier to use superior knowledge to reduce the total cost of
supply. Better information facilitates the choice of the best service logistics
provider. The level 4 company plays in an extended value chain, so there are
more opportunities to collaborate in multitier logistics systems, to optimize
warehousing and transportation costs. Network companies recognize that distribution
is a noncore activity and collaborate to reduce their combined logistics
bill. Aspirations of the level 5 company, in its total value network, encompass
Web-based virtual logistics operations, where the service provider can track
goods in real time using GPS technology, to maximize customer service, while
minimizing the total cost.
The last set of processes covers Return of goods, faulty or in need of
refurbishment. This is a fairly recent development. Historically, returns have
been handled in an ad hoc manner. The firm�s response depends on who takes
the call. Many level 1 firms still adopt this approach. By level 3, firms have
visibility of returning goods, so that effective response can be preplanned and
possibly handed off to a supplier. A level 5 firm would expect to have access
to full visibility of the return flow of goods in the whole network � and, of
course, the number of returns would be minimized!
processes and relationships with suppliers are ad hoc. There is little ability to
aggregate data across the firm, so sourcing decisions are suboptimal. At level
2, we find tools that allow the firm to build up a consolidated view of total
demand � the best deals can be made, but from a traditional buyer-seller
relationship. Across the wall to level 3, we see the development of well-defined
supplier partnerships, with shared goals for driving and sharing extra value.
Suppliers are integrated into the planning process and are probably involved
much earlier in the design process, for noncommodity items. By level 4, firms
will have adopted e-sourcing tools for commodity items, allowing them to
search a much wider Internet community for the best supply opportunities. More
and more of the procurement processes will be automated and linked into the
scheduling systems on both sides and to back-office reconciliation and payment
systems. The level 5 aspiration is for the whole network to co-manage sourcing
strategy to maximize the value to all the players in the chain.
The Make processes at level 1 are often as rudimentary as the planning
processes that feed them their instructions. Paper-based or simple MRP-based
tools track the manufacture of products, relying on progress chasing to maintain
due date performance. At level 2, tracking is electronic, and linked into the
scheduling system, so that the whole internal enterprise has a view of the state
of play. Customer delivery performance is greatly enhanced, and lead times and
shop floor inventories are reduced. The level 3 firm takes its pace from direct
customer information � real-time progress information can be shared with
customers, so that problems are highlighted before they become critical. Simplified
shop floor control through demand-pull, kanban-type systems is prevalent.
When level 4 is reached, the collaboration with immediate supply chain
partners is complete. By level 5, we are looking to make long-term, strategic
capacity and technology investment decisions in the best interests of the whole
value network � the activity of the whole chain is scheduled as part of a single
model.
Deliver completes the customer-focused processes. At level 1, we again see
manual planning, often with only ad hoc links to the preceding functions in the
internal supply chain. The level 2 firm uses effective warehouse and fleet
management systems to underpin good outbound logistics. By level 3, we see
the start of information flowing directly from the customer to the supplier.
Vendor-managed inventory reduces the assets on the customer�s balance sheet
and allows the supplier to use superior knowledge to reduce the total cost of
supply. Better information facilitates the choice of the best service logistics
provider. The level 4 company plays in an extended value chain, so there are
more opportunities to collaborate in multitier logistics systems, to optimize
warehousing and transportation costs. Network companies recognize that distribution
is a noncore activity and collaborate to reduce their combined logistics
bill. Aspirations of the level 5 company, in its total value network, encompass
Web-based virtual logistics operations, where the service provider can track
goods in real time using GPS technology, to maximize customer service, while
minimizing the total cost.
The last set of processes covers Return of goods, faulty or in need of
refurbishment. This is a fairly recent development. Historically, returns have
been handled in an ad hoc manner. The firm�s response depends on who takes
the call. Many level 1 firms still adopt this approach. By level 3, firms have
visibility of returning goods, so that effective response can be preplanned and
possibly handed off to a supplier. A level 5 firm would expect to have access
to full visibility of the return flow of goods in the whole network � and, of
course, the number of returns would be minimized!
BUSINESS PROCESS MANAGEMENT AS THE ENABLING INGREDIENT
To transition a business into the higher levels of the supply chain evolution, and
into the realm of advanced supply chain management (ASCM), firms must
accept two necessities as they overcome the typical barriers created between
levels 2 and 3 of the maturity model. First, there is the general unwillingness
to share valuable information outside of the four walls representing the internal
organization. This unwillingness is first seen in level 1 companies, between
departments and business units, and becomes one of the first barriers to overcome.
Most companies welcome useful insights from external constituents, but
stalwartly resist sharing information they believe gives them an edge in an
industry or market. The solution here is to establish what can or cannot be
shared through collaborative efforts early in the discussion and then to demonstrate
the value of the sharing in terms of increased, documented benefits for
both parties. Typically, some form of pilot operation or sharing effort is necessary
with a particular business unit and selected external allies, to establish
those parameters.
Second, there is the need to link many legacy systems and disparate software
together in a manner that facilitates rapid exchange of the knowledge
considered pertinent to the extended enterprise processing. That means the
parties to the collaboration effort must decide exactly how to connect the
constituents into a meaningful communication network without being stopped
by difficulties with the age or type of database system holding the needed
information. In this case, the secret is to establish a simple methodology for
accessing portions or components of the different databases and extracting
information that facilitates the creation of a better network response to actual
market or customer needs. Business process management (BPM) becomes the
key to success in both areas, as it introduces the possibility of easily sharing
pertinent knowledge that helps all supply chain constituents and overcoming
the problem of dealing with many different systems. This sharing can be done
while protecting the security of the vital information, on a real-time basis
across organizations of virtually any size in any business, building future viability
in a collaborative manner.
Before we continue with our discussion of how a company and its business
allies can make the most progress with the supply chain maturity model in
conjunction with the SCOR� format, we need to establish the value of BPM
in facilitating the required reengineering of the process steps that makes viable
progress feasible. In this chapter, we consider the growing complexity of business
networks and the value opportunities presented through the ability to easily
enter into disparate information systems and extract the vital knowledge so
necessary for higher level business interactions and attainment of level 3 and
above positions. The basic concepts surrounding BPM were presented in an
earlier book, The Networked Supply Chain (Poirier et al., 2004), and we offer
that text as reference. In this book, we will summarize the important tenets and
go further to cover the new technologies that form the backbone of BPM
systems and explain how they open up opportunities for business users to take
back ownership of supply chain processing and reap the greatest benefits from
ASCM.
We will explain that the impediment to business progress in this area is not
people but technology, and the ability to continuously reengineer critical processes
in real time, without major information technology (IT) rework, gives
the users a significant advantage. These new approaches have an entry fee,
however. They require a fundamental rethinking of the role of the supporting
IT architecture and driving systems. The good news is that the changes bring
business benefits in the form of reduced costs and greater flexibility in the
delivery systems � a real win-win condition. To begin this explanation, we
must understand the complexity being faced in today�s business environment.
into the realm of advanced supply chain management (ASCM), firms must
accept two necessities as they overcome the typical barriers created between
levels 2 and 3 of the maturity model. First, there is the general unwillingness
to share valuable information outside of the four walls representing the internal
organization. This unwillingness is first seen in level 1 companies, between
departments and business units, and becomes one of the first barriers to overcome.
Most companies welcome useful insights from external constituents, but
stalwartly resist sharing information they believe gives them an edge in an
industry or market. The solution here is to establish what can or cannot be
shared through collaborative efforts early in the discussion and then to demonstrate
the value of the sharing in terms of increased, documented benefits for
both parties. Typically, some form of pilot operation or sharing effort is necessary
with a particular business unit and selected external allies, to establish
those parameters.
Second, there is the need to link many legacy systems and disparate software
together in a manner that facilitates rapid exchange of the knowledge
considered pertinent to the extended enterprise processing. That means the
parties to the collaboration effort must decide exactly how to connect the
constituents into a meaningful communication network without being stopped
by difficulties with the age or type of database system holding the needed
information. In this case, the secret is to establish a simple methodology for
accessing portions or components of the different databases and extracting
information that facilitates the creation of a better network response to actual
market or customer needs. Business process management (BPM) becomes the
key to success in both areas, as it introduces the possibility of easily sharing
pertinent knowledge that helps all supply chain constituents and overcoming
the problem of dealing with many different systems. This sharing can be done
while protecting the security of the vital information, on a real-time basis
across organizations of virtually any size in any business, building future viability
in a collaborative manner.
Before we continue with our discussion of how a company and its business
allies can make the most progress with the supply chain maturity model in
conjunction with the SCOR� format, we need to establish the value of BPM
in facilitating the required reengineering of the process steps that makes viable
progress feasible. In this chapter, we consider the growing complexity of business
networks and the value opportunities presented through the ability to easily
enter into disparate information systems and extract the vital knowledge so
necessary for higher level business interactions and attainment of level 3 and
above positions. The basic concepts surrounding BPM were presented in an
earlier book, The Networked Supply Chain (Poirier et al., 2004), and we offer
that text as reference. In this book, we will summarize the important tenets and
go further to cover the new technologies that form the backbone of BPM
systems and explain how they open up opportunities for business users to take
back ownership of supply chain processing and reap the greatest benefits from
ASCM.
We will explain that the impediment to business progress in this area is not
people but technology, and the ability to continuously reengineer critical processes
in real time, without major information technology (IT) rework, gives
the users a significant advantage. These new approaches have an entry fee,
however. They require a fundamental rethinking of the role of the supporting
IT architecture and driving systems. The good news is that the changes bring
business benefits in the form of reduced costs and greater flexibility in the
delivery systems � a real win-win condition. To begin this explanation, we
must understand the complexity being faced in today�s business environment.
AUGMENTED SCORE: THE ENGINEERING PROCESSES
Design and production engineering go hand in hand with supply chain improvements
efforts. Ineffective product design or design for manufacture and supply
inhibit profitability just as much as poor supply chain design and execution. In
fact, the two sets of processes are complementary, and we see the same five
levels of maturity � firms at level 1 in their supply chain thinking tend to be
level 1 in their design and production engineering thinking.
The maturity matrices for the design and production engineering processes
are shown in Tables 1.3 and 1.4. The matching technology maturity matrix is
provided in Table 1.5.
At level 1, the Manage product portfolio process is often the preserve of
just the engineering department. As maturity increases to level 2, other departments
become actively involved in the process � sharing ideas and decisions
in a way that enhances the whole enterprise. Suppliers and partners get in on
the act at level 3. By level 4, there is evidence of shared thinking about product
development up and down the extended value chain.
A level 1 company executes the Design product process in silos, just as it
runs its internal supply chain. Products are invented by marketing, designed by
engineering, and made by manufacturing. By level 2, there is integration across
the whole internal process � an organized set of interactions to ensure that a
product is designed in a way that maximizes the company�s total profitability.
In level 3, the suppliers of key components and assemblies are also becoming
involved in the design process, which extends, in levels 4 and 5, to ever-greater
collaboration, supported by Web-based tools for product data management and
computer-aided design.
The Configure product process can create great problems at level 1, as it
is, by its nature, an integrating process. With the design process fragmented,
configuration management is difficult. The problem is solved within the company
at level 2, using product data management applications to manage the
product structure, record new versions/revisions, and plan effectivity. As suppliers
become involved, at level 3, the process often causes the number of
suppliers to be reduced, as both sides invest in the growing relationships. By
level 4 and 5, the collaboration reaches a stage at which configuration is managed
across the extended chain and can be coordinated from anywhere.
At level 1, tooling and manufacturing processes are established after the
product design is complete. By level 2, the Design (manufacturing) process and
tooling process works in tandem with Design product. A level 3 company has
integrated the processing to the stage where the manufacturing process can
support more rapid changes � configure or build to order, incorporating customer
order requirements directly into the manufacturing and assembly processes.
By level 5, the network has a full mass-customization capability, with
postponement of final work right into the logistics chain.
The final two processes � Change product design and Maintain (manufacturing)
process � both follow similar paths. The level 1 company lives within
its functions. The level 5 company plays in networks, collaborating with its
partners to maximize the value they can jointly create.
These grids should all be customized to meet the needs of the individual firm
and its business network allies. They should accompany any analysis and
development plans as the firm moves to its highest level of appropriate maturity
in the SCOR� and supply chain model. They will guide our own consideration
of how a company and its trusted allies move toward supply chain management,
and use ASCM in conjunction with business process management tools, to be
described to attain a significant advantage over less capable
networks.
efforts. Ineffective product design or design for manufacture and supply
inhibit profitability just as much as poor supply chain design and execution. In
fact, the two sets of processes are complementary, and we see the same five
levels of maturity � firms at level 1 in their supply chain thinking tend to be
level 1 in their design and production engineering thinking.
The maturity matrices for the design and production engineering processes
are shown in Tables 1.3 and 1.4. The matching technology maturity matrix is
provided in Table 1.5.
At level 1, the Manage product portfolio process is often the preserve of
just the engineering department. As maturity increases to level 2, other departments
become actively involved in the process � sharing ideas and decisions
in a way that enhances the whole enterprise. Suppliers and partners get in on
the act at level 3. By level 4, there is evidence of shared thinking about product
development up and down the extended value chain.
A level 1 company executes the Design product process in silos, just as it
runs its internal supply chain. Products are invented by marketing, designed by
engineering, and made by manufacturing. By level 2, there is integration across
the whole internal process � an organized set of interactions to ensure that a
product is designed in a way that maximizes the company�s total profitability.
In level 3, the suppliers of key components and assemblies are also becoming
involved in the design process, which extends, in levels 4 and 5, to ever-greater
collaboration, supported by Web-based tools for product data management and
computer-aided design.
The Configure product process can create great problems at level 1, as it
is, by its nature, an integrating process. With the design process fragmented,
configuration management is difficult. The problem is solved within the company
at level 2, using product data management applications to manage the
product structure, record new versions/revisions, and plan effectivity. As suppliers
become involved, at level 3, the process often causes the number of
suppliers to be reduced, as both sides invest in the growing relationships. By
level 4 and 5, the collaboration reaches a stage at which configuration is managed
across the extended chain and can be coordinated from anywhere.
At level 1, tooling and manufacturing processes are established after the
product design is complete. By level 2, the Design (manufacturing) process and
tooling process works in tandem with Design product. A level 3 company has
integrated the processing to the stage where the manufacturing process can
support more rapid changes � configure or build to order, incorporating customer
order requirements directly into the manufacturing and assembly processes.
By level 5, the network has a full mass-customization capability, with
postponement of final work right into the logistics chain.
The final two processes � Change product design and Maintain (manufacturing)
process � both follow similar paths. The level 1 company lives within
its functions. The level 5 company plays in networks, collaborating with its
partners to maximize the value they can jointly create.
These grids should all be customized to meet the needs of the individual firm
and its business network allies. They should accompany any analysis and
development plans as the firm moves to its highest level of appropriate maturity
in the SCOR� and supply chain model. They will guide our own consideration
of how a company and its trusted allies move toward supply chain management,
and use ASCM in conjunction with business process management tools, to be
described to attain a significant advantage over less capable
networks.
KNOWLEDGE TRANSFER IS EXTENDED ACROSS COMPLEX BUSINESS NETWORKS
A central theme that has begun to pervade the supply chain agenda, virtually
on a global basis and across nearly all industries and business environments,
is that ASCM efforts eventually result in a demand-driven supply network and
finally in what we term the intelligent value network. With that progression
comes some very specific needs. To satisfy the inputs from a demand-driven
business system, the linked enterprise businesses must have the ability within
their network to accept reliable demand information, from a variety of sources,
and share it quickly and accurately. Further, the resulting actions and work
flows created by analysis and response to that knowledge must be synchronized
and visible, so the parties involved have a common view of what is taking place.
The result is an accurate and effective linking of the supply responses to the
actual customer or consumer demands, without the necessity for excessive
safety stocks and inventories.
As we develop our position on how the best ASCM efforts work diligently
to create the best response system and thereby better satisfy customers and
consumers, we will describe how the processing can be developed to meet these
requirements. We must emphasize before that discussion, however, the need for
timely and accurate knowledge transfer across what is becoming a very complex
business environment. John Fontanella and others from AMR Research framed
the situation well, when they stated: �Regardless of whether demand signals are
forecasts, actual consumption data, or the result of collaborative planning between
supplier and customer, mobilizing the supply chain to respond quickly
and efficiently is the major challenge that companies face over the next five
years� (Fontanella et al., 2004, p. 1).
One central purpose of any advanced supply chain effort is to create the kind
of connectivity across the extended enterprise that results in end-to-end visibility
into what is happening. Another is to establish a system that uses the latest
technology to transfer data and ultimately valuable knowledge from the processing,
so the network can mobilize and respond better than any competing system
to the actual needs of the marketplace and key customers. A third is to be in
a position of either introducing or always being near the front of the inevitable
product or service designs and innovations that will enter the market. Satisfying
these purposes occurs when the firm and its business allies meet the opportunity
by linking together five topics of importance: ASCM, customer relationship
management, supplier relationship management, appropriate technology applications,
and customer intelligence, all factors that can be positively affected by
BPM. The last topic is our terminology for the acquisition, management, and
integration of customer knowledge in order to create a differentiating customer
value proposition. As we move forward with our considerations, we will elaborate
on the role of each factor.
To begin, if a firm looks holistically at the five, usually disparate, factors
mentioned and determines how a leading position can be gained through supply
chain excellence, it can develop integrated strategies and solutions for delivering
products and services to key customers better than any competitors. When
the effort is extended through BPM techniques, to include willing and trusted
business allies, working across an extended enterprise for the same purposes,
the advantages are unmatched. In theory at least, the collaboration that will
occur across such a holistic effort will move the linked business network toward
conditions of total enterprise optimization. In such an environment, the involved
firms will be making the greatest use of assets, will be at or near lowest cost
position, and will be generating the most new revenues by virtue of greater
overall satisfaction to the intended customer or consumer groups at the end of
the intelligent value network. In other words, they will have created a competitive
advantage.
Any discussion on the possibilities of achieving such advanced supply chain
management conditions and something like total enterprise optimization must
begin with an understanding of just how complex an extended enterprise has
become and why there is such a strong need for cross-organizational communication.
The original supply chain efforts were directed toward achieving
optimum operating conditions across a linear set of tightly linked, internal
process steps � from beginning raw materials to final delivery of products and
services
on a global basis and across nearly all industries and business environments,
is that ASCM efforts eventually result in a demand-driven supply network and
finally in what we term the intelligent value network. With that progression
comes some very specific needs. To satisfy the inputs from a demand-driven
business system, the linked enterprise businesses must have the ability within
their network to accept reliable demand information, from a variety of sources,
and share it quickly and accurately. Further, the resulting actions and work
flows created by analysis and response to that knowledge must be synchronized
and visible, so the parties involved have a common view of what is taking place.
The result is an accurate and effective linking of the supply responses to the
actual customer or consumer demands, without the necessity for excessive
safety stocks and inventories.
As we develop our position on how the best ASCM efforts work diligently
to create the best response system and thereby better satisfy customers and
consumers, we will describe how the processing can be developed to meet these
requirements. We must emphasize before that discussion, however, the need for
timely and accurate knowledge transfer across what is becoming a very complex
business environment. John Fontanella and others from AMR Research framed
the situation well, when they stated: �Regardless of whether demand signals are
forecasts, actual consumption data, or the result of collaborative planning between
supplier and customer, mobilizing the supply chain to respond quickly
and efficiently is the major challenge that companies face over the next five
years� (Fontanella et al., 2004, p. 1).
One central purpose of any advanced supply chain effort is to create the kind
of connectivity across the extended enterprise that results in end-to-end visibility
into what is happening. Another is to establish a system that uses the latest
technology to transfer data and ultimately valuable knowledge from the processing,
so the network can mobilize and respond better than any competing system
to the actual needs of the marketplace and key customers. A third is to be in
a position of either introducing or always being near the front of the inevitable
product or service designs and innovations that will enter the market. Satisfying
these purposes occurs when the firm and its business allies meet the opportunity
by linking together five topics of importance: ASCM, customer relationship
management, supplier relationship management, appropriate technology applications,
and customer intelligence, all factors that can be positively affected by
BPM. The last topic is our terminology for the acquisition, management, and
integration of customer knowledge in order to create a differentiating customer
value proposition. As we move forward with our considerations, we will elaborate
on the role of each factor.
To begin, if a firm looks holistically at the five, usually disparate, factors
mentioned and determines how a leading position can be gained through supply
chain excellence, it can develop integrated strategies and solutions for delivering
products and services to key customers better than any competitors. When
the effort is extended through BPM techniques, to include willing and trusted
business allies, working across an extended enterprise for the same purposes,
the advantages are unmatched. In theory at least, the collaboration that will
occur across such a holistic effort will move the linked business network toward
conditions of total enterprise optimization. In such an environment, the involved
firms will be making the greatest use of assets, will be at or near lowest cost
position, and will be generating the most new revenues by virtue of greater
overall satisfaction to the intended customer or consumer groups at the end of
the intelligent value network. In other words, they will have created a competitive
advantage.
Any discussion on the possibilities of achieving such advanced supply chain
management conditions and something like total enterprise optimization must
begin with an understanding of just how complex an extended enterprise has
become and why there is such a strong need for cross-organizational communication.
The original supply chain efforts were directed toward achieving
optimum operating conditions across a linear set of tightly linked, internal
process steps � from beginning raw materials to final delivery of products and
services
BUSINESS PROCESS MANAGEMENT AS THE BREAKTHROUGH
The challenges of integrating processes and knowledge within and across enterprises
are best answered by a combination of:
_ A visionary technical architecture:
_ To which the (extended) enterprise can transition over time
_ Which will allow the business to adopt new processes, applications,
and technologies quickly and efficiently
_ Which avoid redeveloping large portions of legacy software
_ Without disrupting existing users
_ Business process management systems provide:
_ A new generation of tools that put the management of business
processes back with the business community, freeing the IT community
to do what it does best � enable the processes with the best
available technology
On the upstream side, there can be multiple supply partners, and not just
raw material suppliers, including those helping with new product design or
product offerings, component suppliers, or contract manufacturers. In the middle,
there could be linked manufacturers, each making part of the final product, such
as Boeing and its major manufacturing partners engaged in constructing the new
7E7 airplane. Contractors in Japan, Europe, and the United States will be involved
in that endeavor. Distributors often play a key role in moving the products
to market as well, and because of their ability to service remote geographies,
multiple constituents might be used. In high-technology equipment, it is
usual to have value-added resellers involved in the processing. At the top of
Figure 2.1, we note that industry process hubs could be used, as well as industry
marketplaces or some form of portal for handling part of the processing, particularly
the sourcing function. At the bottom, we note several constituents
handling part of the logistics function. When we then consider that there are
now many types of end customers and consumers, the picture does indeed
become complex.
Any supply chain analysis that is limited to internal processing, which is a
small segment of the inter-enterprise business system, is doomed to operate with
suboptimized conditions, because the focus is only on a part of the total network
illustrated in 1. There are simply too many players in a typical business
network, creating the possibility that one or more can introduce complications
that negate a part or most of the savings generated internally. The end-to-end
processing that has come under scrutiny for improvement by the industry leaders
now includes a multitude of business partners. Concurrently, the necessary
flow of information and knowledge within a business network has become as
important as the physical flow of goods and the transfer of money across what
is clearly an extended enterprise. Without access to that information, a system
is doomed to fall short of the intended optimized conditions.
The next issue deals with that need for information, which is often supplied
through the use of the appropriate technology and systems. As indicated in
Figure 2.2, we see that progressing through the supply chain maturity model
requires matching enabling technology with the process changes occurring between
levels. In the early levels (1 and 2), we see that the focus on divisional
or business unit performance instead of the total organization drives firms to
seek help with process optimization. Here we note the introduction of transportation
management systems and warehouse management systems, along with
efforts to improve order management and inventory management.
are best answered by a combination of:
_ A visionary technical architecture:
_ To which the (extended) enterprise can transition over time
_ Which will allow the business to adopt new processes, applications,
and technologies quickly and efficiently
_ Which avoid redeveloping large portions of legacy software
_ Without disrupting existing users
_ Business process management systems provide:
_ A new generation of tools that put the management of business
processes back with the business community, freeing the IT community
to do what it does best � enable the processes with the best
available technology
On the upstream side, there can be multiple supply partners, and not just
raw material suppliers, including those helping with new product design or
product offerings, component suppliers, or contract manufacturers. In the middle,
there could be linked manufacturers, each making part of the final product, such
as Boeing and its major manufacturing partners engaged in constructing the new
7E7 airplane. Contractors in Japan, Europe, and the United States will be involved
in that endeavor. Distributors often play a key role in moving the products
to market as well, and because of their ability to service remote geographies,
multiple constituents might be used. In high-technology equipment, it is
usual to have value-added resellers involved in the processing. At the top of
Figure 2.1, we note that industry process hubs could be used, as well as industry
marketplaces or some form of portal for handling part of the processing, particularly
the sourcing function. At the bottom, we note several constituents
handling part of the logistics function. When we then consider that there are
now many types of end customers and consumers, the picture does indeed
become complex.
Any supply chain analysis that is limited to internal processing, which is a
small segment of the inter-enterprise business system, is doomed to operate with
suboptimized conditions, because the focus is only on a part of the total network
illustrated in 1. There are simply too many players in a typical business
network, creating the possibility that one or more can introduce complications
that negate a part or most of the savings generated internally. The end-to-end
processing that has come under scrutiny for improvement by the industry leaders
now includes a multitude of business partners. Concurrently, the necessary
flow of information and knowledge within a business network has become as
important as the physical flow of goods and the transfer of money across what
is clearly an extended enterprise. Without access to that information, a system
is doomed to fall short of the intended optimized conditions.
The next issue deals with that need for information, which is often supplied
through the use of the appropriate technology and systems. As indicated in
Figure 2.2, we see that progressing through the supply chain maturity model
requires matching enabling technology with the process changes occurring between
levels. In the early levels (1 and 2), we see that the focus on divisional
or business unit performance instead of the total organization drives firms to
seek help with process optimization. Here we note the introduction of transportation
management systems and warehouse management systems, along with
efforts to improve order management and inventory management.
SUPPLY CHAIN PROGRESSION REQUIRES A SUPPORTING ARCHITECTURE AND ENABLING TECHNOLOGY
As companies move along the maturity model with helpful business allies, they
reach the point where decisions need to be made regarding connectivity across
the extended network. No firm has all of the knowledge necessary to reach
optimized conditions. In spite of the very impressive profits we have seen some
firms return, we always find the opportunity for more, if we can only convince
the players to try a bit of inter-enterprise data sharing. Through whatever system
is selected, ASCM requires linking network business allies into a coherent
system of knowledge exchange. As the devices used (computers, wireless networks,
personal access equipment, and so forth) become more reliable and
globally connected, the chance to share data increases greatly. The information
exchanges, moreover, become more meaningful as they improve in reliability,
speed, and cost. Customer satisfaction under these conditions becomes more
than a rallying cry. It sets the new parameters, to be met by the intelligent value
network.
Meeting these challenges requires an end-to-end process, focused from
supplier relationship management to customer satisfaction, with products and
services delivered through people, systems, and business partners. It is at this
point where the constituents see a need for something that enables them to enter
each other�s databases and extract the vital information that assures positive
results. Enter BPM! BPM becomes the technical breakthrough. It takes advantage
of the ability to componentize within the software. By that we mean it
provides the linked firms the chance to reach into the databases and extract that
portion of the information that will help with the issue or problem being
addressed. Visibility becomes feasible, as previously hidden information is
now available to those who need it. Control across the people, systems, and
organizations reaches a new high level, closing the gap between management
intentions and execution and success. By means of directly executable business
process models, the connected businesses leverage the best of their IT infrastructure.
BPM then produces dramatic improvements to the targeted processes, ending
in better business results through lower costs, greater speeds, shorter cycle
times, higher quality, and better service. Successful implementations typically
begin as tactical solutions to specific problems, before being adopted as part of
the processing. Using a strong process-based methodology and paying careful
attention to the architecture become as important in this environment as selecting
the right technology. An early pilot to create a proof of concept becomes
a useful way to qualify the BPM tools being applied to specific problems and
opportunities.
reach the point where decisions need to be made regarding connectivity across
the extended network. No firm has all of the knowledge necessary to reach
optimized conditions. In spite of the very impressive profits we have seen some
firms return, we always find the opportunity for more, if we can only convince
the players to try a bit of inter-enterprise data sharing. Through whatever system
is selected, ASCM requires linking network business allies into a coherent
system of knowledge exchange. As the devices used (computers, wireless networks,
personal access equipment, and so forth) become more reliable and
globally connected, the chance to share data increases greatly. The information
exchanges, moreover, become more meaningful as they improve in reliability,
speed, and cost. Customer satisfaction under these conditions becomes more
than a rallying cry. It sets the new parameters, to be met by the intelligent value
network.
Meeting these challenges requires an end-to-end process, focused from
supplier relationship management to customer satisfaction, with products and
services delivered through people, systems, and business partners. It is at this
point where the constituents see a need for something that enables them to enter
each other�s databases and extract the vital information that assures positive
results. Enter BPM! BPM becomes the technical breakthrough. It takes advantage
of the ability to componentize within the software. By that we mean it
provides the linked firms the chance to reach into the databases and extract that
portion of the information that will help with the issue or problem being
addressed. Visibility becomes feasible, as previously hidden information is
now available to those who need it. Control across the people, systems, and
organizations reaches a new high level, closing the gap between management
intentions and execution and success. By means of directly executable business
process models, the connected businesses leverage the best of their IT infrastructure.
BPM then produces dramatic improvements to the targeted processes, ending
in better business results through lower costs, greater speeds, shorter cycle
times, higher quality, and better service. Successful implementations typically
begin as tactical solutions to specific problems, before being adopted as part of
the processing. Using a strong process-based methodology and paying careful
attention to the architecture become as important in this environment as selecting
the right technology. An early pilot to create a proof of concept becomes
a useful way to qualify the BPM tools being applied to specific problems and
opportunities.
A VISIONARY TECHNICAL ARCHITECTURE FORMS THE FOUNDATION
As supply chain efforts progress, stovepipe thinking and point-to-point technical
integration give way to flexible, business-processbased
architectures. The complexity and diversity
of enterprise systems, the growth of middleware,
and the drive for the next level of efficiency and
productivity, both within and across organizational
boundaries, mandate process thinking. But unlike
reengineering, today�s processes must be directly
executable and evolve incrementally, with minimal
impact on business operations. It is for this environment that CSC e4SM has
been designed.
The future enterprise will be
complex, federated, connected,
collaborative, dynamic,
constantly evolving,
and unpredictable.
CSC e4SM provides the flexibility of approach that enables a firm to adapt
its infrastructure to new business conditions (for example, acquisitions) and new
technologies, without the need for wholesale changes and integration retesting.
It has been especially designed to meet the future architecture challenges facing
most businesses attempting to excel at extended enterprise processing. As the
evolution of IT infrastructure and architecture continues, exploiting existing and
emerging technologies, CSC e4SM seeks to address many of the problems facing
businesses and their supply chains today and bring answers to many questions:
_ How does a business operate in a state of perpetual change and adaptation?
_ How does an individual firm become an enabler of business process change
while not throwing away the investments made in legacy systems?
_ How does a company integrate IT following mergers or acquisition?
_ How does a business operate with some of the world�s largest companies
while also gaining value from some of the smallest and more
innovative firms?
_ How can a firm provide a cost-effective, common multichannel Web
access for users, suppliers, and customers?
_ How does a business take cost-effective advantage of new access
technologies?
_ How does a business organization and its allies implement IT architecture
that will dynamically grow with business and IT objectives?
_ How are third-party applications brought in, without major business risk
and upheaval?
_ How can a business achieve �true� collaboration with business partners
and service providers?
integration give way to flexible, business-processbased
architectures. The complexity and diversity
of enterprise systems, the growth of middleware,
and the drive for the next level of efficiency and
productivity, both within and across organizational
boundaries, mandate process thinking. But unlike
reengineering, today�s processes must be directly
executable and evolve incrementally, with minimal
impact on business operations. It is for this environment that CSC e4SM has
been designed.
The future enterprise will be
complex, federated, connected,
collaborative, dynamic,
constantly evolving,
and unpredictable.
CSC e4SM provides the flexibility of approach that enables a firm to adapt
its infrastructure to new business conditions (for example, acquisitions) and new
technologies, without the need for wholesale changes and integration retesting.
It has been especially designed to meet the future architecture challenges facing
most businesses attempting to excel at extended enterprise processing. As the
evolution of IT infrastructure and architecture continues, exploiting existing and
emerging technologies, CSC e4SM seeks to address many of the problems facing
businesses and their supply chains today and bring answers to many questions:
_ How does a business operate in a state of perpetual change and adaptation?
_ How does an individual firm become an enabler of business process change
while not throwing away the investments made in legacy systems?
_ How does a company integrate IT following mergers or acquisition?
_ How does a business operate with some of the world�s largest companies
while also gaining value from some of the smallest and more
innovative firms?
_ How can a firm provide a cost-effective, common multichannel Web
access for users, suppliers, and customers?
_ How does a business take cost-effective advantage of new access
technologies?
_ How does a business organization and its allies implement IT architecture
that will dynamically grow with business and IT objectives?
_ How are third-party applications brought in, without major business risk
and upheaval?
_ How can a business achieve �true� collaboration with business partners
and service providers?
THE BENEFITS OF THE NEW ARCHITECTURES
New architectures, of the type exemplified by CSC e4SM, provide reduced total
cost of process and infrastructure ownership while increasing the strategic return
on investment from deployment of reusable and manageable enterprise architecture.
This translates into the following business and technical advantages:
End-to-end process visibility, control,
and accountability
Rapid introduction of new business
units and new products and services
that are operationally dependent on automated
processes
Ability to manage process value end
to end and extend those disciplines
across all processes within and across
the enterprise
Focus on customer through strategydriven
business process design
A renewed enterprise architecture under
the control of the business
Lower integration and operational
cost
Resources freed up from legacy
maintenance to focus on process
improvement
Flexibility to add and remove application
components to decrease
time to market and exploit windows
of opportunity
Technical barriers to business collaboration
and change eradicated
Facilitate restructuring and repurposing
of legacy applications
cost of process and infrastructure ownership while increasing the strategic return
on investment from deployment of reusable and manageable enterprise architecture.
This translates into the following business and technical advantages:
End-to-end process visibility, control,
and accountability
Rapid introduction of new business
units and new products and services
that are operationally dependent on automated
processes
Ability to manage process value end
to end and extend those disciplines
across all processes within and across
the enterprise
Focus on customer through strategydriven
business process design
A renewed enterprise architecture under
the control of the business
Lower integration and operational
cost
Resources freed up from legacy
maintenance to focus on process
improvement
Flexibility to add and remove application
components to decrease
time to market and exploit windows
of opportunity
Technical barriers to business collaboration
and change eradicated
Facilitate restructuring and repurposing
of legacy applications
ANSWERS COME FROM THE NEW BREED OF IT ARCHITECTURE:
CSC e4SM is a proven world-class, award-winning example of the new-style IT
architecture used for ASCM � a breakthrough capable of integrating individual
applications, whether new or within legacy systems � that enables the open
flow of processes and all the attendant data between systems, across organizations,
between enterprises, and among trading partners. CSC e4SM can rapidly
integrate Web-based applications, front- and back-office systems, enterprise
resource planning systems, and package software applications. It verifies what
can be accomplished using BPM as the link between extended enterprise business
partners.
The architecture uses application adapters to allow true plug-and-play capability,
banishing repetitive and costly point-to-point solutions. CSC e4SM has
been designed to be flexible, scalable, and rapidly deployed, so as to deliver
a future-proof solution to extended enterprises for a low cost of ownership. Its
flexibility allows business processes to be tuned or amended without any coding
changes.
CSC e4SM uses a component approach that integrates Web technology and legacy
and commercial applications with a process management engine connected by
adapters to middleware services, to deliver a business-process-oriented solution.
The business logic of the adapters allows drag-and-drop capability when
reengineering processes, which, along with CSC e4SM�s true plug-and-play and
vendor-independent flexibility, delivers a future-proof solution to any IT architecture.
The key aspects of CSC e4SM are shown in Figure 2.5.
These aspects come in layers and begin with the distribution layer, designed
to provide multichannel access within the network. Users can interact through
various channels, including browsers, PDAs, and mobile phones, enabling
employees to use the channel best suited to their work and consumers to select
the device of greatest convenience. CSC e4SM allows the process designer to take
advantage of the features of various channels. This layer also manages the
physical connections, ensuring authentication, security, and eligibility of the
source. The architecture creates an enterprise format, so important for crossbusiness
communication, allowing users to interact across the full network and
manage tasks associated with their process steps.
Moving through the enterprise portal to the business process engine, the
process manager allows the business architects to describe the end-to-end processing
using available services. It permits process design logic to be based on
data captured from enterprise applications, while allowing rapid deployment of
new and changed business processes. Design patterns can be reused as subprocesses
within larger processes. The process manager can also establish the
definition of synchronous, asynchronous, and parallel steps within a process.
The coordination layer manages the Web services and applications integration
requirements. It marshals requests for services to the correct component
interface, ensuring that responses occur in context with the overall process
design. This layer provides services for current industry data and application
format conversion between process constituents. Middleware technology is used
to deliver all service requests and to connect applications.
architecture used for ASCM � a breakthrough capable of integrating individual
applications, whether new or within legacy systems � that enables the open
flow of processes and all the attendant data between systems, across organizations,
between enterprises, and among trading partners. CSC e4SM can rapidly
integrate Web-based applications, front- and back-office systems, enterprise
resource planning systems, and package software applications. It verifies what
can be accomplished using BPM as the link between extended enterprise business
partners.
The architecture uses application adapters to allow true plug-and-play capability,
banishing repetitive and costly point-to-point solutions. CSC e4SM has
been designed to be flexible, scalable, and rapidly deployed, so as to deliver
a future-proof solution to extended enterprises for a low cost of ownership. Its
flexibility allows business processes to be tuned or amended without any coding
changes.
CSC e4SM uses a component approach that integrates Web technology and legacy
and commercial applications with a process management engine connected by
adapters to middleware services, to deliver a business-process-oriented solution.
The business logic of the adapters allows drag-and-drop capability when
reengineering processes, which, along with CSC e4SM�s true plug-and-play and
vendor-independent flexibility, delivers a future-proof solution to any IT architecture.
The key aspects of CSC e4SM are shown in Figure 2.5.
These aspects come in layers and begin with the distribution layer, designed
to provide multichannel access within the network. Users can interact through
various channels, including browsers, PDAs, and mobile phones, enabling
employees to use the channel best suited to their work and consumers to select
the device of greatest convenience. CSC e4SM allows the process designer to take
advantage of the features of various channels. This layer also manages the
physical connections, ensuring authentication, security, and eligibility of the
source. The architecture creates an enterprise format, so important for crossbusiness
communication, allowing users to interact across the full network and
manage tasks associated with their process steps.
Moving through the enterprise portal to the business process engine, the
process manager allows the business architects to describe the end-to-end processing
using available services. It permits process design logic to be based on
data captured from enterprise applications, while allowing rapid deployment of
new and changed business processes. Design patterns can be reused as subprocesses
within larger processes. The process manager can also establish the
definition of synchronous, asynchronous, and parallel steps within a process.
The coordination layer manages the Web services and applications integration
requirements. It marshals requests for services to the correct component
interface, ensuring that responses occur in context with the overall process
design. This layer provides services for current industry data and application
format conversion between process constituents. Middleware technology is used
to deliver all service requests and to connect applications.
BUSINESS PROCESS MANAGEMENT SYSTEMS BECOME THE KNOWLEDGE LINK
At the heart of the new architectures is BPM. BPM is an emerging technology
that heralds a replacement for the painful experience of past reengineering
projects, where processes were redesigned in a one-off exercise, which led to
At the heart of the new architectures is BPM. BPM is an emerging technology
that heralds a replacement for the painful experience of past reengineering
projects, where processes were redesigned in a one-off exercise, which led to
The business processes that are
crucial to an enterprise�s strategy are by their nature both complex and dynamic.
�Complex and dynamic� means the processes have many steps and participants,
and the participants are free to run a process in a way that is best suited to the
situation they are in. This condition is illustrated in Figure 2.6. Until now,
available technologies have been unable to deal with these processes as they
would ideally be executed. Instead,
they have dealt with them by dumbing
them down, making them less strategic
by either remodeling the processes
to fit into a package or leaving them as
manual processes. Package processes
are less likely to allow a company to
distinguish itself from its competitors.
Rules-based processes are limited to
the number of different situations that
the process designers can dream up and
cater to; anything else is an exception,
to be handled outside the process.
BPM for the first time lets businesses
take full ownership of their
processes without the limitations of
underlying technologies. BPM does not
so much change processes � which are the things people do � as allow people
to change them by providing a supporting technology that is more flexible than
anything that exists today.
BPM is a framework that consists of tools and services that provide real-time
visibility, continuous management, and optimization of end-to-end business processes
that interact with people, systems, and across organizational boundaries. The
BPM methodology is based on the following set of assumptions:
_ Business processes operate in a state of perpetual change and adaptation.
_ Processes interact with other processes and cross-cut each other.
_ Processes can be distributed, end to end, long-lived, collaborative, and
transactional and involve several participants (people and systems).
_ BPM is based on a technology solution, a BPMS, to create directly
executable business processes that evolve.
Central to a BPMS is Business
Process Management Languages
(BPML). There are a number of standards
emerging, with which these languages
comply. These are illustrated
in Figure 2.7. The supply chain processes defined, for example, in SCOR� and
collaborative planning, forecasting, and replenishment (CPFR) are all definable
in the BPML. This feature goes to the core of the benefit of these new tools.
BPMS is not business process reengineering, enterprise application integration
(EAI), work flow, or another package application. It is the synthesis and extension
of all these technologies into a unique whole. This unified whole
becomes a new foundation upon which the enterprise is built, one more in tune
with the nature of business processes and their management.
A complete BPMS platform incorporates all of the following types of
functionality:
that heralds a replacement for the painful experience of past reengineering
projects, where processes were redesigned in a one-off exercise, which led to
At the heart of the new architectures is BPM. BPM is an emerging technology
that heralds a replacement for the painful experience of past reengineering
projects, where processes were redesigned in a one-off exercise, which led to
The business processes that are
crucial to an enterprise�s strategy are by their nature both complex and dynamic.
�Complex and dynamic� means the processes have many steps and participants,
and the participants are free to run a process in a way that is best suited to the
situation they are in. This condition is illustrated in Figure 2.6. Until now,
available technologies have been unable to deal with these processes as they
would ideally be executed. Instead,
they have dealt with them by dumbing
them down, making them less strategic
by either remodeling the processes
to fit into a package or leaving them as
manual processes. Package processes
are less likely to allow a company to
distinguish itself from its competitors.
Rules-based processes are limited to
the number of different situations that
the process designers can dream up and
cater to; anything else is an exception,
to be handled outside the process.
BPM for the first time lets businesses
take full ownership of their
processes without the limitations of
underlying technologies. BPM does not
so much change processes � which are the things people do � as allow people
to change them by providing a supporting technology that is more flexible than
anything that exists today.
BPM is a framework that consists of tools and services that provide real-time
visibility, continuous management, and optimization of end-to-end business processes
that interact with people, systems, and across organizational boundaries. The
BPM methodology is based on the following set of assumptions:
_ Business processes operate in a state of perpetual change and adaptation.
_ Processes interact with other processes and cross-cut each other.
_ Processes can be distributed, end to end, long-lived, collaborative, and
transactional and involve several participants (people and systems).
_ BPM is based on a technology solution, a BPMS, to create directly
executable business processes that evolve.
Central to a BPMS is Business
Process Management Languages
(BPML). There are a number of standards
emerging, with which these languages
comply. These are illustrated
in Figure 2.7. The supply chain processes defined, for example, in SCOR� and
collaborative planning, forecasting, and replenishment (CPFR) are all definable
in the BPML. This feature goes to the core of the benefit of these new tools.
BPMS is not business process reengineering, enterprise application integration
(EAI), work flow, or another package application. It is the synthesis and extension
of all these technologies into a unique whole. This unified whole
becomes a new foundation upon which the enterprise is built, one more in tune
with the nature of business processes and their management.
A complete BPMS platform incorporates all of the following types of
functionality:
BUSINESS PROCESS MANAGEMENT OPERATES WITHIN THE NEW ARCHITECTURE
Attention can now be turned to the advantages for the supply chain provided
by the combination of a new-style architecture with a BPMS at its heart. Change
is a fundamental driving force in business, and therefore agility is a mandatory
requirement of enterprise architecture. A BMPS streamlines internal and external
business processes, eliminates redundancies, and increases automation, providing
end-to-end process visibility, control, and accountability. This improvement
is not limited to the processes in a department or a business unit. Processes
that comply with the new standards can join with other similarly compliant
processes wherever they are � in other parts of a single enterprise or with value
chain partners across the whole supply network.
The new BMPS, embedded at the heart of a new architecture, support the
automation and continuous improvement of traditional processes such as mar-
keting and sales, human resources, finance, operations, supply chain, product
design, forecasting, logistics, and customer relationship management, as well
as:
_ Commonly used process design patterns such as CPFR, SCOR�, straight
through processing (STP), and Telemanagement Forum (TMF)
_ Industry standards such as XML, J2EE, and .net
_ Open standards like GPL, JCA, and BPML
Now the user of a process has a completely new experience. The computer
screen used to access the process is designed to show only those elements that
are needed to execute the process � even if the data being processed are in
several different applications. The steps in the process are presented precisely
the way the user finds them in the easiest manner. If she or he wants to change
the process for the better, the business user can do so, in the BPMS, usually
without having to involve the IT community at all. The major advantages
include:
_ Help for the business user, who knows, owns, and can upgrade the
process
_ Minimize the time in executing the process � no more logging on and
off different applications until the job is done
_ Extend the process across departmental and company boundaries, so the
environment for collaboration is set up, ready to go
Other questions can be adequately answered as well, like what�s in it for
IT. To start, the IT community can implement a new-style architecture and
provide functionality to the user more quickly than before. Applications are
implemented in their vanilla form, and processes and screens are developed
more quickly in the BPMS. Fewer user screens are needed because processes
are executed in fewer steps. Once the new architecture is up and running,
application upgrades can be made at the time that suits the IT community and
are totally transparent to the user community, so maintenance costs are reduced.
by the combination of a new-style architecture with a BPMS at its heart. Change
is a fundamental driving force in business, and therefore agility is a mandatory
requirement of enterprise architecture. A BMPS streamlines internal and external
business processes, eliminates redundancies, and increases automation, providing
end-to-end process visibility, control, and accountability. This improvement
is not limited to the processes in a department or a business unit. Processes
that comply with the new standards can join with other similarly compliant
processes wherever they are � in other parts of a single enterprise or with value
chain partners across the whole supply network.
The new BMPS, embedded at the heart of a new architecture, support the
automation and continuous improvement of traditional processes such as mar-
keting and sales, human resources, finance, operations, supply chain, product
design, forecasting, logistics, and customer relationship management, as well
as:
_ Commonly used process design patterns such as CPFR, SCOR�, straight
through processing (STP), and Telemanagement Forum (TMF)
_ Industry standards such as XML, J2EE, and .net
_ Open standards like GPL, JCA, and BPML
Now the user of a process has a completely new experience. The computer
screen used to access the process is designed to show only those elements that
are needed to execute the process � even if the data being processed are in
several different applications. The steps in the process are presented precisely
the way the user finds them in the easiest manner. If she or he wants to change
the process for the better, the business user can do so, in the BPMS, usually
without having to involve the IT community at all. The major advantages
include:
_ Help for the business user, who knows, owns, and can upgrade the
process
_ Minimize the time in executing the process � no more logging on and
off different applications until the job is done
_ Extend the process across departmental and company boundaries, so the
environment for collaboration is set up, ready to go
Other questions can be adequately answered as well, like what�s in it for
IT. To start, the IT community can implement a new-style architecture and
provide functionality to the user more quickly than before. Applications are
implemented in their vanilla form, and processes and screens are developed
more quickly in the BPMS. Fewer user screens are needed because processes
are executed in fewer steps. Once the new architecture is up and running,
application upgrades can be made at the time that suits the IT community and
are totally transparent to the user community, so maintenance costs are reduced.
Subscribe to:
Comments (Atom)