Michael Liebow tells how a colleague describes the typical supply chain technology development process. "He likes to say that you build a set of requirements, then roll in the cement truck and lock it in. To make any changes, you have to get a jackhammer."
That is, even the best programs are difficult and expensive to change. And at a time when supply chain managers are working hard to develop agile and flexible networks, tools locked in metaphorical cement can become a major headache.
Help, though, is near at hand in the form of new software tools built on something called service-oriented architecture, or SOA. Liebow, who is vice president of SOA and Web services for IBM Global Services, and other industry insiders report that providers of enterprise-wide systems and supply chain specialists alike are rapidly developing and rolling out SOA-enabled tools. And those tools, sooner rather than later, should offer distribution, logistics, transportation and other supply chain managers ways to adjust business processes quickly and to develop customized processes that meet the requirements of even the most finicky customers—and to do it without breaking the bank.
Pick and choose
Put simply, SOA-enabled systems allow end users to pick the parts—or services—they need from among all installed systems and to assemble them into a business process that meets specific requirements. It enables it without major integration efforts and the time and cost they entail.
Ron Riggin, technology leader of supply chain technology provider RedPrairie, explains it this way. "Think of it as having every subroutine now exposed to the outside world. You don't have to run the whole program; you could just run the subroutine. For example, if you want to use [Microsoft] Word's spell check, you could do that and not run all of Word."
Better yet, you might not have to pay for all of Word. With SOA, users may be able to buy only the parts they need, says John Fontanella, senior vice president and research director for Aberdeen Group. "Five years ago, you would buy a WMS and pay $500,000 whether you needed everything or not," he says. "What SOA does is break down individual functions. So instead of buying a warehouse system, you could buy the putaway module or the inventory control module. In the future, you will be able to put those together to custom fit your needs."
As for how those different modules would communicate with one another, Eddie Capel, senior vice president of product management and customer relations for Manhattan Associates, describes the process as a series of well-orchestrated handoffs. "The notion of SOA is [that] you can have one application call another application to do some work and then pass back the results."
Capel gives the example of a warehouse management system (WMS) that is not RFID-enabled, but needs EPC numbers for shipping. "There is a business logic that goes into generating the EPC number. If the WMS does not have that logic, it has to get it from somewhere." An SOA-enabled WMS could output a message to another application, probably formatted in XML in order to use Web services. "It would say, 'Here's a piece of data'—it might be a carton number. Wrapped around that number would be instructions that say 'I need an EPC number for the carton.' And the receiving application—say, RFID software that is SOA-enabled—can receive the request and recognize it. It brings in that request, creates the EPC number and sends it back to you."
Theresult is that users can create what Hans Thalbauer, vice president for supply chain management for SAP, calls composite processes. Thalbauer says development of SOA makes particularly good sense for supply chain applications because of the demand for rapid change in business processes both within the enterprise and across the broader supply chain.
Great promise close at hand
Service-oriented architecture reaches well beyond supply chain applications. Enterprise system giant SAP, for example, has made major development efforts with SOA and expects to have all of its applications service-enabled by sometime next year.
Still, for supply chain managers, it can have great allure. Says Riggin, "It has immense applicability to the supply chain. Since the supply chain means shipping or receiving and communicating with trading partners, with the need to be more effective and to be more efficient, there's a tremendous value proposition. Service-oriented architecture is the best thing to ever hit that space as far as foundation technologies go. Having giant monolithic applications at each enterprise and periodic bulk transfers does not [benefit] anyone. It is going to improve efficiencies in everyone's supply chain."
Furthermore, SOA makes it easier to tap into Web-based applications. "The benefit of SOA is that I don't have to build it myself and I don't have to have it running on my server or on my enterprise," says Riggin. "The driving value is configuring your business processes to your needs and not having to own every single element."
The potential benefits are substantial. Dennis Gaughan, research director for AMR Research, says, "A perfect example is supplier on-boarding. Right now, it is a time-consuming and non-automated process. It involves entering data and managing across distinct systems." SOA-enabled systems, he says, would allow development of a composite application that could be built on data from disparate systems at both the supplier and the buyer.
Capel elaborates on what SOA could mean for WMS installations. In the past, he says, a WMS might require customization during an installation at a DC to meet specific business process requirements. "In days gone by, you would have to take that function and rewrite it as a custom application inside the WMS. Today, you don't have to do that. SOA allows the core application to just invoke business objects in existing applications. The cost of implementing and integrating the WMS is significantly reduced because you don't have to rewrite or eliminate applications you already have."
The importance of that kind of flexibility is hard to overstate. Liebow uses an anecdote to describe the problems many shippers face. "I know one large shipper that spent a lot of money home growing all [its] applications," he says. "Nothing off the shelf would work for them for the velocity they needed. What they built was an excellent system that served them very well. But as the business changed, it was not an adaptable or flexible system. You may get two changes a year to the system if you're lucky." Any changes require new code and extensive testing.
"You walk into any organization, and see what they have, and if they have to change, the response from IT will be they can do it in six months for $20 million. That's a frustration in the business. It has not gotten easier or cheaper."
Dismantling the barriers
What thatmeans is that despite a couple of decades of talking about integrated supply chains, the technology requirements have remained a barrier. Last fall, Fontanella wrote a report on the promise of SOA for supply chains. In the report, he posed the problem facing business managers this way: The high cost of software development and maintenance and the high cost of integration mean that only the most critical functions are interconnected and that many potential capabilities are denied to operations management. "If indeed companies compete with their supply chains, many are doing it with the technology arm tied behind their backs," he wrote.
Fontanella points out that most businesses rely on multiple applications. "No one is using their ERP to run the entire business," he says. Even within the enterprise, the task of getting different applications to work together has been difficult, time-consuming and expensive. And yet even aging legacy systems have value that businesses are loath to give up. SOA-enabled systems allow tapping into what's best about legacy systems even as new tools come along. "No company wants to pull out all its technology. SOA allows adding new functionality."
In his study, The Service Oriented Architecture in the Supply Chain Benchmark Report, Fontanella argues that SOA could "revolutionize the way the enterprise and its partners buy, build, and deploy supply chain technology." It could enable flexibility in processes now only available to a wealthy few firms.
Fontanella contends in the report that service-oriented architecture will lead to important changes in the development and management of supply chain applications. "For the first time, business users will be able to summon applications to support a business process rather than launch a business process constrained by the application." Deployment of SOA, he says, will lead to "cheaper and faster integration and more flexible business processes." It should enable selection of services and functions from among multiple applications to create customized customer-specific processes. Or looked at another way, it enables supply chain managers to meet the specific demands of different customers, as varied as those demands may be.
What's old is new again
SOA has been around for a while. Gaughan says it is already well established in service industries such as banking, finance, insurance and telecommunications. And chances are, your IT people are thoroughly familiar with it.
But it has only recently begun to emerge as a foundation for supply chain applications. SAP, for example, is approximately in the middle of its effort to roll out its service applications, according to Thalbauer. He says the company is working with its partners on releases for inventory optimization, demand management, and other tasks. For supply chain, the initial focus is on demand planning and supply planning, followed by transportation planning and execution.
As a group, suppliers of enterprise systems and supply chain applications are investing heavily in new generations of systems and tools built on SOA. In part, that's to their own benefit, Fontanella says. "For the application vendor, it greatly reduces development time and implementation time." With technology companies snapping up other firms, SOA significantly reduces the cost of integrating technologies. "Vendors are adopting it in their own best interests," he says.
The good news for those in the initial stages is that it's not too late. "We're still in the early days," Liebow says, when asked about the state of evolution of SOA in the supply chain. "Most organizations are in the planning stages."
Capel says, "I would say that a number of companies have some SOA implemented. The level at which it's implemented may be quite modest. Implementation is not ubiquitous. That is just a question of time. There are not significant cost barriers."
Proceed with caution—but do proceed
Still, Fontanella warns that business managers had better look carefully at technology that promises SOA compatibility. "Too often, we're seeing companies put out requests for information on supply chain technology and asking about SOA, and vendors are just checking it off," he says. "Companies are not doing their due diligence to see if the vendors have the platform or are building one in the next 10 years." Choosing the wrong technology now, he says, could lead to major headaches as true SOA-enabled technology rolls out over the next few years.
Despite the potential simplicity in using SOA-enabled systems, change will not come overnight. "You have to be very focused," Liebow says. "This is not a panacea. Organizations may find it difficult. But as with any change, over time, it gets easier."
He suggests starting slowly, with projects that can quickly have a big effect and prove the concept. He urges taking on real problems and developing a project around them— not a pilot, he says, but implementing into actual operations. "It could be a single product number or customer record, or something else with low risk and high requests." He tells of one large shipper that began with customer data integration. "In the old technique, IT would take all the databases, restructure everything, and create one master record. In the new way, you leave the databases alone, create a virtual integration layer, connect the databases and create a virtual record." As a result, all customer information, from a variety of systems, becomes available in the form required by the end user.
Though he acknowledges that it might require giving IT a push, Liebow insists it's worth the effort. "The results are astounding," he says. "Once you start to free up the information flow, you start to free up dollars like you cannot imagine. You can redeploy labor, accelerate your ability to react to changes in the marketplace, and take a business process that may have taken 60 days to implement, and take it to minutes or days or weeks—at a fraction of the cost."