BREAKING THE SUPPLY CHAIN BARRIER. Joshua Greenbaum Principal, Enterprise Applications Consulting. White Paper

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1 White Paper BREAKING THE SUPPLY CHAIN BARRIER Joshua Greenbaum Principal, Enterprise Applications Consulting e2open.com White Paper: Breaking the Supply Chain Barrier

2 A Changing Business Climate The changing nature of global business has had a dramatic effect on how companies design, build, and deliver goods and services across virtually every industry. Gone are the days when supply chains were linear, static, in-country, and tightly coupled to the brand owner or original equipment manufacturer s (OEM s) internal manufacturing capacity. As supply and demand have gone global, and as outsourcing has become standard operating procedure, the concept of a supply chain has undergone a radical transformation. The linear model has been replaced by a much more dynamic demandsupply network that extends across the globe and relies heavily on contract manufacturing and other outsourced capacity on the supply side, and distributors and channel partners on the sell side. Today s demand-supply networks involve more players in more parts of the world, and are therefore increasingly difficult to manage effectively. Increasing Complexity, Decreased Network Control As networks continue to grow and diversify, vigilant, proactive management becomes a strategic imperative. Of course, the more complex the demandsupply network, the more difficult it is to enable visibility, control, and collaboration across the extended network of suppliers, contract manufacturers (CMs), assemblers, distributors, and logistics providers, to name a few. Visibility, control, and collaboration are cornerstones to effective demandsupply network management, but are nearly impossible to enable with current on-premise supply chain management solutions. In short, the aging technologies that were implemented to serve the needs of linear, asset-heavy supply chains are no longer sufficient to solve for the growing set of issues facing OEMs. Case in Point: Xerox In an interview conducted with Denny Wyckoff, Vice President of Business Systems and North American Transportation at Xerox Corporation, Denny articulated some of the issues he was facing with his current supply chain management system. While the capabilities for meeting Xerox s needs were theoretically available from the company s existing ERP system, the timeto-value was not promising. One major challenge was the need to connect multiple disparate systems and stakeholders using service-oriented architecture (SOA) technology. I would have had to take people not yet expert in SOA to build a set of services that would be invented as we went along, said Wyckoff. Underlying the need for SOA connectivity was a need to support a broad Page 2

3 number of suppliers in an ever-changing network. Xerox s need to integrate supply in a global plan not only required it to have visibility into a dynamic, networked supplier base, but to do so rapidly and cost-effectively. We would have had to do too many customizations to the existing ERP system, adding significant complexity, cost, and time to value, Wyckoff added. As Xerox and many others have discovered, effecting the changes necessary to effectively manage a twenty-first century demand-supply network is largely impossible using existing ERP and SCM solutions, particularly when it comes to applying these solutions on-premise technology infrastructures. The Shortcomings of On-Premise Solutions EAC has determined five major barriers to implementing an efficient and effective on-premise system. Technology Barriers The problems of integrating transactional data from multiple heterogeneous systems a key means by which a networked supply chain can automate supply chain operations are an ongoing issue across the enterprise. While it is theoretically possible for an on-premise IT staff to build and maintain the interfaces needed to keep all these external systems in line with network requirements, the cost of doing so would be prohibitive. Process and Support Barriers The development of an on-premise demand-supply network is also complicated by the need to master the service and support processes necessary to maintain a complex network of heterogeneous systems. This need is driven by the requirement for a networked infrastructure that can support 24/7 uptime, with a high degree of system security, reliability, and redundancy. This level of process network mastery is, EAC believes, too specialized and costly to be an effective use of corporate resources, particularly in a recessionary economy. Internal ERP Barriers Internal ERP systems do a relatively good job of managing internal supply chain requirements, but they are generally unsuited to managing a heterogeneous, largely external demand-supply network. A network s specific requirements for order and inventory management, demand-supply synchronization, logistics management, and channel visibility are either completely unsupported or difficult to support using existing ERP systems. Barriers to Visibility Most ERP systems are not designed to pull supply chain data from supplier systems or demand information from sell-side systems, and the lack of process Page 3

4 and security controls have made many partners resistant to share data with an OEM s internal ERP system. These barriers part technical, part processoriented have meant that demand-supply networks using internal ERP systems are likely to have serious limitations regarding the visibility it can offer relative to external resources and inventory. Lack of Flexibility In addition to supporting interface and master data changes that result from internal or external software upgrades and migrations, an on-premise solution must also be capable of managing and propagating business process changes across the entire demand-supply network. This change management requirement is extremely difficult and costly to maintain in an on-premise system. Meeting the Needs of Today s Demand-Supply Networks: On- Demand Solutions Supporting the shift from linear to networked systems is one of the key benefits that an on-demand offering can provide. In addition, on-demand solutions are designed to support complex, dynamic network topologies, and enable rapid onboarding of 100 percent of trading partners. Additional advantages of ondemand supply chain solutions are outlined briefly below. Rapid Business Process and Network Change The ability to support rapid, continual business and network changes is a key requirement of today s global businesses an on-demand deployment model is ideal for supporting this requirement. Rapid, Low-Cost Onboarding and Integration The ability to integrate trading partners to a central integration hub in the on-demand environment has enormous impact on the speed and cost of integration. Improved Customer, Supplier, and Manufacturer Relations The ease and speed with which an on-demand model facilitates deployment also has tremendous value in terms of improving the working relationship between suppliers, customers, and manufacturers. For instance, Xerox s Denny Wyckoff suggests, The whole value chain has to feel that they are in this together. Most manufacturers want flexibility, but the old S&OP processes created a bull whip effect. With E2open the supplier should get a smoother signal. Business Process Alignment One of the characteristics of most on-demand models is that they tend to Page 4

5 discourage excessive customization. The cost model of on-demand applications breaks down if a vendor is forced to support highly customized, one-off deployments. Optimal cost-effectiveness is achieved by leveraging a singly deployment model, standard business practices, and common data models across multiple customers. Quality Measurement and Improvement The ability to use an on-demand hub to measure and improve the quality of relationships in the extended network can be a major benefit to manufacturer, supplier, and customer alike. The ability to aggregate information regarding stakeholder interactions in an on-demand environment provides a level of consistency and accuracy to trading partner management that is not possible in a non-automated, multi-point network. The on-demand world is moving well beyond its initial value proposition as a provider of low-cost alternatives to costly on-premise solutions. Today s ondemand solution providers are radically transforming traditional supply chain models, and are enabling their customers to leverage their demand-supply networks to provide both competitive advantage and cost savings. In today s turbulent economic times, this is timely progress indeed. About E2open E2open is the leading provider of software and services to manage inter-company processes such as inventory management, order management, demand/supply forecast synchronization, outsourced manufacturing visibility and multi-tier visibility integrating trading partners across multiple tiers of distributed global supply and demand networks. For more information, call or visit Published: 2009 E2open, Inc. E2open and the E2open logo are registered trademarks of E2open, Inc. Customer legal disclaimer goes here. All other marks are trademarks, service marks or registered trademarks of their respective owners. All rights reserved. Offices E2open U.S.A. Corporate Headquarters Foster City, CA Dallas, TX Austin, TX E2open Europe Reading, UK E2open Malaysia Kuala Lumpur, Malaysia E2open Taiwan Taipei, Taiwan Page 5