Transcript Chapter 15. Technology Standards

Chapter 15
Technology
Standards
McGraw-Hill/Irwin
Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved.
15.1 Introduction
Technology standards are important in
supply chain management
 Review

IT related standards
 New technology platforms
 Evolving technology standards

15-2
New Developments
Radio Frequency Identification Devices
(RFID)
 Consolidation of market to a few players
 New approaches to system design


Service Oriented Architecture (SOA)
15-3
15.2 IT Standards

High level of standards evolving due to following
reasons:




Market forces
Standards reduce cost of system development and
maintenance.
Interconnectivity
Connecting different systems and work across
networks has pushed the development of standards
New software models
Internet has produced the need for software that has
new development and deployment characteristics.
Economies of scale
Standards reduce the price of system components,
development, integration, and maintenance.
15-4
Software Standards and the Next
Inflection Point
FIGURE 15-1: Software standards and the next inflection point
15-5
Four Phases
Proprietary
Until the early 80s
 Mostly mainframe computers accessed
through key punches and dumb terminals
 Little communication between systems
with few options such as private networks
or physical media.

15-6
Four Phases
Stand Alone

IBM PC software and hardware introduced the
first standard platform called Wintel



Eventually created a large user base and a large
market for applications
Communication standards developed mostly for
local networks


Ethernet and IBM token ring
For business networks private networks were
mostly used for file transfers


Microsoft Windows and Intel standard
Electronic data interchange (EDI)
Client/server was developed
15-7
Four Phases
Connected



Missing link in communications provided by the internet
Expanded the connection across organizations and
beyond the local network
Forms of communication enabled:






Electronic mail
File and information transfer
Electronic commerce from shopping, bidding, and exchanges
Shipment tracking
Extended collaboration between companies on joint forecasts,
transportation and other activities.
Year 2000 fears


Legacy systems replaced by client/server-based enterprise
resource planning (ERP) systems
ERP Systems:



1st generation systems: finance and human resource applications
Subsequent: Manufacturing and distribution
More recent: Adding supply chain capabilities
15-8
Four Phases
Collaboration

Next phase of standards
Currently being developed
 Addresses collaboration
 Supporting technology built around SOA and
BPM technologies
 Has further increased the importance of ERP
systems

15-9
15.3 IT Infrastructure



Critical in the success or failure of any system
implementation
Forms the base for data collection, transactions,
system access, and communications.
Infrastructure components:




Interface/presentation devices
Communications
Databases
System architecture
15-10
Interface Devices

Common devices:




Personal computers, voice mail, terminals, Internet devices, barcode scanners, PDA
Uniform access capability anytime and anywhere
Standard way to track products in order to provide
participants with the information they need to perform
efficiently
Uniform Code Council






Created the bar code system, Universal Product Code (UPC), in
1973
Scanning and recording information about products
Automatic data capture interfaces, bar-code readers and radio
frequency (RF) tags
RF tags used to locate items, particularly in large warehouses.
Together with GPS capabilities, enables tracking of tagged cargo
while in shipment.
RFID tag a replacement for the RF tag
15-11
System Architecture
Encompasses the way the components
are configured
 Components imply:



Databases, interface devices,
communications
Two main categories:
Legacy system architecture
 Client/Server architecture

15-12
Legacy System Architecture





Evolved as departmental solutions using
mainframe or minicomputers that were accessed
through “dumb” terminals
Company’s main systems for special
applications such as word processing or
spreadsheets.
PCs
Connecting PCs by means of local area
networks (LANs)
LANs extended across companies with wide
area networks (WANs)
15-13
Legacy System Architecture
FIGURE 15-2: Legacy system architecture
15-14
Client/Server Architecture




Systems take advantage of the PC’s computing
power and friendly graphic interface.
PC is typically called the “client”
Main processor is the “server.”
Client/server computing



a form of distributed processing
some processes are performed centrally for many
users
while others are performed locally on a user’s PC
15-15
Client/Server Architecture


Most current system design use this architecture
Variations in:




Sophistication and price of the client
Number and type of servers
Other design parameters
Internet a form of client/server



Local PC browser processes the HTML (hypertext
markup language) pages and Java applets (i.e., small
applications)
These are retrieved from servers
Evolving towards a Web-centric model where the
client is a Web browser connected to a Web server.
15-16
Client/Server Architecture
FIGURE 15-3: Client/server system architecture
15-17
Client/Server Architecture
Pros and Cons



Can distribute functions among specialist
servers that perform them efficiently
Easier to add new modules and functions
Disadvantages:



Complexity of navigating between servers
Making sure that data are processed correctly and
updated across the network. T
Trend toward standardization

Called interoperability

Two systems capable of interacting in a sophisticated
way that is a built-in feature of their design
15-18
Middleware



Applications that reside between the server and
the client
Facilitate communication between different
system architectures, communication protocols,
hardware architectures
Important in the implementation of supply chain
systems



Can collect the data from various databases and
systems
Format the data in a way that can be used by various
planning tools
Enterprise Application Integration (EAI)

Above process applied between companies over the
Internet
15-19
Electronic Commerce




Replacement of physical processes with
electronic ones
Creation of new models for collaboration with
customers and suppliers
Facilitates interaction between different
companies as well as the interaction of
individuals within companies.
Examples:

Purchasing over the Internet/Exchanges/Order
tracking/E-mail
15-20
Standards and e-commerce

Has been in existence for many years
Private networks for corporations (e.g.,
WANs)
 Public networks at universities and
government agencies.


Internet standards
Intranets
 Extranets and Exchanges

 Differences
in who is allowed access to the system
15-21
Portals



Role-based entry into a company’s systems
Aggregates all the applications and sources of
information employees need in order to perform
their job into a single desktop environment,
typically through the Web browser.
Require integration technology for structured
and unstructured data sources, including
databases, Java classes, Web services, and
XML.
15-22
E-commerce

Several levels of sophistication



One way communication such as web browsing
Direct data base access for retrieving personal data
or creating transactions such as on-line purchases or
managing a bank account.
Advanced applications use:


Electronic Data Exchange (EDI)
XML-based processes


General standard that does not address the issue of
terminology in a specific industry
RosettaNet in High-Tech industry
15-23
Rosetta Net






Views itself as an e-business equivalent of the Rosetta
stone,
Carried the same message in three different languages,
enabling translation from hieroglyphics.
Aimed at producing a flexible standard governing on-line
business collaboration between manufacturers and
suppliers.
Defines dictionaries and Partner Interface Processes,
which handle multiple data transactions among partners.
Being used by some high-tech vendors
Has been expensive to implement.
15-24
Cross-Company Application
CPFR




Web-based standard
Enhances vendor-managed inventory and continuous
replenishment
Joint forecasting
Electronic exchange a series of written comments and
supporting data




Past sales trends
Scheduled promotions
Forecasts
Allows the participants to coordinate joint forecasts by
concentrating on differences in forecast numbers

Sharing of forecast information


Tends to reduce bullwhip effect
May lead to a significant decrease in inventory levels
15-25
CPFR Development

Developed by Voluntary Interindustry Commerce
Standards Association (VICS) committee





Retailers, manufacturers, and solution providers.
Mission to create collaborative relationships between
buyers and sellers
Improve efficiencies, increase sales, reduce fixed
assets and working capital, and reduce inventory for
the entire supply chain while satisfying consumer
needs
Created the CPFR Voluntary Guidelines in 1998
Published the CPFR Roadmap in November
1999

Roadmap explains how manufacturers and retailers
can implement a CPFR partnership.
15-26
CPFR Roadmap Steps
www.cpfr.org









Develop guidelines for the relationships.
Develop a joint business plan.
Create a sales forecast.
Identify exceptions for the sales forecast.
Collaborate on exception items.
Create an order forecast.
Identify exceptions for the order forecast.
Resolve/collaborate on exception items.
Generate orders.
15-27
15.4 Service Oriented Architecture
(SOA)

Standards based approach to managing
services




Different software packages
Business process orchestration
Delivers flexible use and configuration
Adopted by all the major business software
vendors


basis of their development tools and platforms
widely by systems integrators to develop custom
applications
15-28
SOA Contributions

SOA-based integration



Uses standards and the business process execution
language
Makes maintenance much simpler and is easier to
learn.
Improvement over traditional integration



Point to point using Enterprise Application Integration (EAI).
Hard to maintain
Uses proprietary technology with a separate infrastructure
15-29
SOA Contributions

SOA-based integration Composite
application development
Top down approach to application
development
 Composition of ready made components
which are reusable
 Built in integration (services) make them easy
to use and maintain

15-30
SOA Contributions

Modernizing Legacy applications
Many IT departments spend 70% to 80% of
their budget maintaining mainframe or other
legacy applications.
 Using SOA, companies can define the
business processes and start separating the
business logic from the application.

15-31
SOA and BPM
Strongly linked
 SOA drives a layered approach

Business process tools use business services
or composites to design the application
 Lower levels provide orchestration,
implementation services and the actual
applications

15-32
SOA Layered Architecture
FIGURE 15-4: SOA layers
15-33
SOA Strategies of Major Software
Companies
Vendor
SOA Strategy
Composite Platform
Repository
Ecosystem
IBM
Focus on platform for
applications custom
and ISVs
IBM SOA Framework
Websphere registry
PartnerWorld
Industry Networks
Microsoft
Focus on platform and
some Service
interfaces for current
applications
.NET Framework +
WinFX + Biztalk
server
None
.NET Partner
program
Oracle
Fusion platform
Oracle Fusion
middleware
Part of fusion
architecture
Generic partner
program
SAP
Enterprise service
applications on the
Netweaver platform
Netweaver composite
applications
Part of Netweaver
architecture
.NET Partner
program
15-34
Technology Base: IBM and
Microsoft

Microsoft


Focused on development platforms for SOA software
development.
Major platforms:



Java 2 Enterprise Edition (J2EE)
Microsoft .NET
IBM



Focused on the technology platform
Less on the applications.
Middleware technology called Websphere

Positioned as a supplier of components and services for the
creation of custom applications.
15-35
J2EE and .Net Platforms

eXtensible markup language (XML)



Facilitates direct communication among computers on
the Internet
XML tags give instructions to a Web browser about
the category of information
Universal description, discovery, and integration
(UDDI)


Web-based distributed directory
Enables businesses to list themselves on the Internet
15-36
J2EE and .Net Platforms

Web services description language (WDSL)




Simple object access protocol (SOAP)



XML-formatted language that UDDI uses
Developed jointly by Microsoft and IBM
Describea a Web service's capabilities as collections
of communication endpoints capable of exchanging
messages
XML-based messaging protocol
Used to encode the information in Web service
request and response messages before sending them
over a network.
Business Process Execution Language (BPEL)


specification that defines how Web services can be
combined to orchestrate long-lasting business
processes
Has been submitted for standardization by a group
led by IBM and Microsoft.
15-37
ERP Vendor Platform:
SAP & Oracle
Both competing on their own SOA
platforms
 SAP strategy

Tie developers to its platform
 Create innovation around it that will drive
adoption.


Oracle strategy

Focused on integrating the many software
vendor packages it has acquired in the last
few years under one platform.
15-38
SAP

Enterprise-services architecture (ESA)
Blueprint for services-based, enterprise-scale
business solutions that offer increased levels
of adaptability, flexibility, and openness.
 Based on SAP Netweaver

15-39
NetWeaver




Collection of infrastructure and integration technologies
Basis for SAP's applications like mySAP ERP, SRM,
CRM, etc.,
Flexibly interoperate with one another and with pieces of
applications from other software vendors.
Elements of NetWeaver






Application server
Integration server
Web portal
Business intelligence software
Master data management system
Plan to replace the three-tier client/server architecture
used by the current ERP suite.
15-40
Oracle


Traditional application development vendor
Several acquisitions from 2005







Peoplesoft (which already included JD Edwards)
CRM vendor Siebel
SCM vendors such as Demantra for demand planning and
G-log for transportation.
Platform called Oracle Fusion around which all
applications will eventually standardize.
Middleware applications include JDeveloper, BPEL
Process Manager, Enterprise Service Bus, Oracle Web
Services Manager, Business Rules and Oracle Business
Activity Monitoring.
Impact beyond installed base not strong
Strength with traditional technology-based developers

Supporting developers/Does not fully address the business
user’s needs
15-41
SOA Summary






SOA changes the method and possibilities of
designing application software
An application architecture with standard ways
to integrate services.
Services defined using a standard description
language and have evocable interfaces
Services can be part of business processes
Processes, transactions, and special functional
components all have to be exposed as services
allowing composite, diverse applications to be
exposed as well.
Each interaction should be independent of each
and every other interaction and the interconnect
protocols of the communicating devices.
15-42
15.5 RFID


Technology that deploys tags emitting radio
signals and devices, called readers, which pick
up the signal.
Tags:





Can be used to read an Electronic Product Code
(EPC)
EPC:


Active (broadcast information)
Passive (respond when queried by a reader)
Read-only or read/write and one-time or reusable.
unique ID number for a specific item in the supply
chain
EPCglobal network

allow password protected access to the internet of
RFID data anywhere in the supply chain.
15-43
RFID Development



Proliferation and full implementation of the
technology will take many years
EPCglobal network has not yet even been
accepted as the standard.
Other Challenges:




Lack of common international standards for tags,
technical problems with tag scanning accuracy, and
reduction in the cost of tags.
Reliability of tags
Problems reading tags through metal or liquids and
interference from nylon conveyor belts.
Policy issues related to privacy concerns.
15-44
RFID Applications

Two important drivers
Mandate by some major channel masters and
procurement agencies
 Immediate benefits that can be gained from
implementing the technology.

15-45
Level of Implementation
Pallet/case or Individual Item

Item level tagging
Required to achieve many of the benefits of
RFID such as preventing counterfeiting and
theft.
 Cost of the tags prevents widespread use
 New IT systems would be required to track
individual items

15-46
RFID Mandated Applications




Wal-Mart
Department of Defense
Food and Drug Administration
In-Use Applications






Package Tracking
Product Tracking
Storing
Manufacturing
Warehouse Management
Product Launch
15-47
RFID and POS

POS as historical data used by many
demand planning tools to forecast
demand.
Does not measure real demand because of
lost sales due to out-of-stock items
 Conservative estimate of 7% of sales
 No one knows real value

15-48
Current Store and DC Execution
Problems





Scanning errors
Items not moved from storage to shelf
Wrong item picked at the DC
Items from the DC not verified in the store.
Maintaining accuracy and replenishing shelves
difficult due to:




Large product variety
Cramped storage
High inventory
Results:


Misplaced SKUs
Significant discrepancies between physical inventory
levels and information system inventory records
15-49
RFID Provides More Detailed
Information

Much beyond POS:






Received at Wal-Mart DC
Departed DC
Received at store
Departed store stock room (arrived on shelf)
Case (or tag) destroyed
Immediate benefits:




Better control over Overage, Shortage and Damage
claims
Management and ability to better assign responsibility
to the supplier, the carrier or Wal-Mart
Better control over product recall;
Use the data to improve processes through
collaboration
15-50
True Advantage


For the first time lost sales can be quantified.
Retailer knows:





what is sold
what is in inventory
when the shelves are not stocked
It will be possible to determine realized demand
based on actual sales plus lost sales
Analysis will require new statistical and
forecasting techniques that will take advantage
of the new information.
15-51
RFID Benefits to Retailers

Reduced inventory


Store and warehouse labor reduction


one time cash savings of about 5% of total
system inventory
annual reduction of store and warehouse
labor expenses of 7.5%
Reduction in out of stock

yearly recurring gain of 7 cents per dollar
sales
15-52
RFID Benefits to Manufacturers

Inventory Visibility


Labor efficiency


Better tracking of inventory throughout its
facilities.
Reduced cycle counting, bar code scanning
and manual recording
Improved fulfillment

Reduced shrinkage, improved dock and
truck utilization and improved product
traceability.
15-53
RFID Implementation Costs

Tagging



Readers



Recurring cost incurred by manufacturers
Most companies that sell RFID tags do not quote
prices because pricing is based on volume, the
amount of memory on the tag and the packaging of
the tag
Fixed cost that retailers and manufacturers will incur.
Large retailers: $400,000 for a distribution center and
$100,000 per store
Information Systems

Handle the type of real-time, item-level information
that RFID provides.
15-54
Differential Benefits


High benefits for manufacturing companies
selling a low volume of expensive goods, such
as drugs and general merchandise
Benefits not clear for manufacturers of high
volume-low cost products, such as food and
grocery, the benefits from RFID are not as clear.


These industries already have efficient supply chains
through the implementation of a variety of
technologies and processes;
Uncertainty in these industries is relatively small and
hence demand is highly predictable.
15-55
Supply Chain Benefits




Conceptually RFID implies perfect information
through the supply chain
Movement of goods can be triggered by a sale
of a single item
Not practical for many supply chains because of
costs/scale economies/other managerial issues
Needs a balance between pull chains and push
chains built on lead times and economies of
scale
15-56
SUMMARY
1990s evolution of the internet has been a
major factor in supply chain changes.
 SOA provides the backbone for building
more adaptable systems that can operate
across different technology infrastructures.
 RFID is a revolutionary technology that will
significantly impact the way supply chains
are managed and lead to greater
efficiency.

15-57