The difference between supply chain integration and application integration is in their relationship to one another. One is the rail, the other is the train. Application integration, as we've discussed, requires placing new approaches and technologies around the process of extending the reach of applications, enabling them to exchange information with other applications that exist in other organizations. Supply chain integration represents the enabling processes that run on top of the infrastructure that application integration creates (see Figure 17.2). Whereas application integration is about a tactical process that depends heavily upon technology, supply chain integration is more about strategy. Figure 17.2. Application integration creates the infrastructure that allows supply chain integration (SCI) to work.The symbiosis of supply chain integration and application integration is clear. The technology, the approaches, and even the benefits are much the same. A tightly coupled supply chain is dependent upon the success of application integration, along with such application integration technology as message brokers, application servers, and standards such as XML, EDI, ebXML, UCCnet, and RosettaNet (covered in Part III of this book). Supply chain integration is a well-known and time-proven concept. There is significant literature dealing with it, so I will not cover it exhaustively here. My purpose is to understand the basic notion of supply chain integration and its usefulness in the context of application integration. Value of the ChainSupply chain integration may well represent the Promised Land. But as with most Promised Lands, the road leading to it is hardly smooth or straight. A substantial commitment to technological and organizational change must be made for supply chain integration to work. Companies with little corporate patience, companies with little corporate vision, and companies looking for short-term gains need not apply. There is risk aplenty on the road to this Promised Land. This glory bus is only for organizations willing to confront the risk, willing to face new and changing technological approaches, willing to absorb significant short-term expenses, and willing to invite the need to layer into other organizations not under their direct control other organizations that could even include a competitor or two. No foolproof method for integrating a supply chain exists. However, organizations can take steps to ensure that they minimize the risks. The smart strategy is to plan for the long term, implement in the short term, and "keep your eye on the ball" the business reasons for supply chain integration. The most difficult trick may be keeping the technology in perspective. It is there to be controlled, not to be worshipped. Ultimately, it is the tool, not the master. Finally, organizations must make wise decisions. They must avoid the carnival barkers in the technology marketplace. They need to base their decision making on what adds the most value to the chain, not on what glitters or what is trendy. You'll find the term "Supply Chain Acceleration" attached to many products these days; few have anything to do with supply chain integration. It is a fool who does not respect the risks involved. Every organization should feel the weight of these risks. However, the remarkable opportunity that supply chain integration represents is beginning to outweigh the risks. We are fast approaching a point of critical mass where the greater risk might well be in failing to integrate. Organizations can no longer afford the luxury of perceiving their operations as if they existed in a vacuum. No organization is an island, to paraphrase a quote. Every organization needs to collect comprehensive, accurate, and timely information throughout the supply chain. Once this information is gathered, it must be analyzed in order to better comprehend the causes and effects of the business environment on the core business. Once such an analysis has been accomplished, the resulting knowledge will allow the organization to make informed business decisions and to utilize information as a mechanism to gain market share. Supply Chain EntitiesWithin the notion of a supply chain there are several entities, including:
Suppliers are those organizations that supply a good or service as part of the supply chain. An example would be lumber providers for housing construction. It's the role of the supplier, in a supply chain, to accept an order and provide information back as to how the order will be completed. Suppliers typically receive payment. Consumers are those organizations that use the good or service to meet some business need, such as building a car or perhaps providing logistics services. It's the role of the consumer to place orders, providing order information. Consumers typically pay suppliers. Supplier and consumer systems are those systems that consume and produce information to carry out the defined roles of the supplier and consumer. These can be mainframes, Enterprise Resource Planning (ERP) systems, client/server systems, Web-based systems, or anything that can produce information of value to the supply chain and receive information as appropriate. In addition to the information systems themselves, you also have the notion of private and public information. Private information is information that is not to be shared within the supply chain; examples would be employee information or sales data. It is critical when dealing with a supply chain that you mark data as private or else risk having sensitive information get outside of the organization. In contrast, public information is information that is sharable and not sensitive, such as order information or payment verifications. In addition to information, you also have the concepts of public versus private processes. Like public and private information, private processes are processes that are intracompany and do not have anything to do with the supply chain. Public processes are shared, with participation by multiple organizations. Public versus private processes are very important in the world of application integration because they map to Process-Oriented Application Integration and are controllable within the process engines found in prevailing application integration technology. What's more, they may link to emerging and existing standards that define processes for supply chains, including RosettaNet and ebXML. Defining Your Supply ChainSupply chains support the flow of goods and services from their origin to their endpoint the customer. The components of the supply chain may include the original suppliers, multiple production operations, logistics operations, retailers, the customer, and even the customer's customer. For example, an organization that builds birdhouses has a supply chain that includes the lumber company that processes trees into lumber, the plant that turns the lumber into birdhouses, the company that supplies the paint for the birdhouses, the logistics department that ensures the availability of supplies, the sales staff, the shipping department, the retailer, and the customer who ultimately purchases the birdhouse (see Figure 17.3). As we suggested earlier, not all of these organizational components may be under the direct control of the organization that heads the value chain. Figure 17.3. Example of a supply chain.Supply chains include many concepts, such as the following:
These concepts represent such sophisticated processes that a number of large software companies, such as Manugistics and I2, have established a strong market in selling software to address them. Moreover, supply chain simulation software, such as that sold by Gymsym, provides users with the ability to model supply chains before they go into production. Even getting to this preliminary point depends upon a sound application integration infrastructure. The supply chain determines the speed of operation and time to market, as well as the inventory an organization must carry at any given time. Supply chain management determines the overall cost of goods sold as well as customer service and satisfaction. Supply chain management relies on the planning and the control of the flow of goods and services, information, and money throughout the supply chain. One more aspect to consider in understanding the need for supply chain integration involves the systems that enable these functions. These applications constitute possible data sources for a supply chain integration solution: In the enterprise domain, the inefficiencies spring from lack of process visibility among the functions. These functions are supported by applications, and a supply chain integration strives to tie these applications and processes together in a coherent, seamless whole to improve internal operations and minimize costs. These applications can be provided by a great variety of vendors and generally include complex, high-value engines for the generation of forecasts and plans for the management of operational processes. Often, these applications are a world unto themselves without much exchange of information, even among applications from the same vendor. Carrying information from one system to another encompasses time-consuming and error-prone operations that may span a few enterprise functions or may be geographically scattered. Having said all that, it becomes easier to understand and predict the problems that can arise from process isolation. For example, imagine that a discrepancy between demand forecast and actual orders placed is not communicated to production in an acceptable time: Either excess capacity or lost opportunity will result. Similar problems can be drawn, for example, from a production control that has poor communication with inventory control and procurement, or even between these functions. In general, process isolation leads to:
Often, enterprises spend significant effort and money in business process engineering, ERP systems, supply chain execution systems, supply chain planning systems, or other more-or-less integrated combinations thereof, only to realize that they still have difficulty decreasing their costs or affecting gains on the customer satisfaction front. Forecasting and Supply ChainsForecasts are approximated estimations of the behavior of the business environment not accurate representations. Although forecasts are used for long-range planning, they must be revised periodically with fresh data. This data can be historical (e.g., revise the forecast for the upcoming three months based on all the data available up to today) or forward looking. The former example has limited accuracy and puts enterprises in constant reactive mode in the face of changes in the business environment. The latter increases the accuracy of the forecasts and decreases the extent to which organizations react to their environment: Proactively responding to clients' needs or supplier peculiarities becomes a possibility. Clearly, access to the best data provides better forecasts; that's its link with application integration. Moreover, this information must come from multiple systems, both intra- and intercompany. Although the ability to detect changes in the business environment provides for a considerable competitive advantage, it is necessary to make this information actionable and communicate it to the appropriate function for follow-up. This function may be internal to the enterprise or may be at a business partner (for example, change orders communicated to suppliers). Although simple, this view of a value chain points to some needs in terms of information sharing that can have an adverse affect on the efficiency of the chain.
The collection of data into the data core of a supply chain integration solution presents two distinct problems: a technical problem and a business problem. Both are related to the attractiveness of the solution to the participants in a chain what is compelling in a solution to create an incentive for partners to participate, above and beyond the value statements mentioned above. To this end it is important to ensure that participation in a supply chain integration solution be economical and that it introduce little to no risk into the participant's organization; that is, the collection mechanism should be quick and easy to install and simple to maintain. In a further stage, participants may decide to deploy their own solution in order to manage their respective relationships and chain. A well-crafted supply chain integration and management system must create such a level of interdependency in a trading partnership that customers become locked in to such an extent that the cost of switching (not just the cost of goods but the cost of maintaining the relationship, as well) is so high that there is a permanent damper in the intent to switch to an alternate supplier. In a well-implemented supply chain integration environment, the flow of materials and monies is frictionless and the cost of altering the environment by substituting participants is potentially high. A well-crafted system will create an environment in which it is easy to add or delete a participant but difficult to replace an existing relationship. Particularly in the extended enterprise domain, supply chain integration is not meant as:
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