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2011

I have identified 3 key types of collaboration, or, 3 key functional areas within the supply chain that have been the focus of collaboration efforts.  These three areas are:

 

 

  1. Partner or Supplier collaboration and integration
  2. Intra-business organization, or the integration and collaboration across the key business functions like finance and supply chain, or operations, for instance
  3. Intra-operational within the supply chain, or the collaboration and integration across the supply chain functionality like receiving, or inventory control, or shipping.

 

 

I’ve listed these areas by what I consider to be their priority sequence and also their business value sequence.  In other words, the partner collaboration and interaction requirements and capabilities are the highest priority and the successful collaboration and integration in this area will provide the greatest value to an enterprise.  The value is provided by a reduction in manual and exception handling along with increased delivery success that would also provide reduced inventory requirements.  The second type of collaboration referenced above, intra-business organization promotes collaboration and communication across the business functions and while the benefits are similar to the partner integration, the value of these benefits are less.  The third type of collaboration reference above, intra-operational within the supply chain organization promotes collaboration across the functional areas within the supply chain and the benefits of this type of collaboration would most likely be the least of the three.

 

The collaboration and communication framework encourages and develops cultural benefits like increased partnership and ‘community’ relationship development.  These cultural benefits lay a foundation for increased collaboration and efficiencies within the three types, or functional areas, within the supply chain.  This framework increases the trust factor and encourages mutually beneficial objectives.  (This can be at odds with the more historical partner/supplier relationships which could sometimes be considered as antagonistic relationships and require additional effort to achieve the trust.)  This open communication and collaboration encouraged by the community relationship allows the members of the community to improve their ability to adjust to the challenges regularly encountered as a result of the extended supply chains currently in place.

 

The means to implement the communication and collaboration have a common life-cycle, they start manually (comparable to the ancient ‘sneaker network’) and as the collaboration requirements are defined and refined they can be automated with the goal of achieving an objective based and strategic implementation framework.  Previously, in a traditional IT centric integration framework, these integration methods could be very cumbersome and costly.  However, now the introduction of cloud services holds the promise of reducing the complexity and cost of integration through the implementation of standard services provided by a third-party.  The down-side, or strategic challenge, to the utilization of cloud services is an increase in complexity and risk if the services are not selected and implemented in a careful manner.  These risks are similar to the ‘best of breed’ software selection model where the disparate services must also be evaluated based on the ability and ease of integration into the enterprise framework.

 

I believe this is a key ‘test’ coming from the capabilities and promise of cloud services that could bring a major upheaval to the SCM collaboration and communication framework.  As I mention in an earlier article (https://community.kinaxis.com/blogs/TBrouillette/2011/06/29/the-perfect-storm--the-legacy-applications-landscape) the potential for upheaval will be similar to the introduction of the ‘office’ software package.  Our test in technology is how we will handle the integration, collaboration and communication challenges, and promise of benefits, provided by cloud services.  This upheaval will also drive initiatives to increase the maturity level of both the SCM software packages and the capabilities and practices of the customers implementing the software and cloud services.

 

Now for the audience participation portion of this program……

 

What is your experience with the benefits, risks and costs of collaboration and communication? 

 

Have you seen a progression of maturity? 

 

How do you see the cloud services impacting the successful implementation of these capabilities? 

 

Do you agree with my points on the importance of developing a community? 

 

What hurdles and challenges have you encountered in implementing your collaboration and communication initiative?

I was speaking with a colleague recently about WMS implementation projects and the challenges in managing the various stakeholders in these initiatives. Our conversation progressed (devolved?) into a discussion on the history of warehouse management software and the maturity of the market and I thought this would be an interesting topic to open up for discussion with the community at large.  I believe that by viewing the history and current state of the solutions and the vendor practices we can discern a direction for the future.

 

In the beginning there were custom developed applications that were developed by the large enterprises to support their specific needs and practices.  These large companies were able to develop extremely robust, and highly customized, applications to support the individual and specialized needs of the individual enterprise.  At the same time consulting organizations came about to provide the specialized and industry experience (along with additional bodies to support the short term needs) that they gained by supporting different enterprises in their initiatives.  The nature of these initiatives and the focus of the requirements and applications were on the based and designed around the specific individual needs and specialized requirements of each enterprise.  These specialized needs included product handling, building configuration, material handling equipment integration, supplier requirements as examples.   At this time each enterprise looked at the ‘way’ they performed activities as differentiating factors.

 

As time progressed and the software and automation market grew, the consulting organizations that specialized in supply chain management realized they could reuse many common modules for different clients, with client specific modifications, of course.  This concept provided a differentiating factor for their services.  While the end result was still a custom application, it started with a framework of common processes as its base.  This progressed as consulting organizations matured and developed a library of best practice modules to offer to their clients.  After a period of time some of the consulting organizations marketed their best practice modules as software packages.  When these software packages were initially offered there was still a high level of customization that was provided by the vendor to support the individual customer needs.  The advantage of the software package model was that the software would be continuously improved by the new features requested by other customers to meet the needs of their business.  This also brought about a shift in the enterprise focus to ‘exemplary execution’ of the activities; it wasn’t the way they performed the activities, it was the efficiencies in the performance that made the differentiating factor.

 

I suggest that ‘software package’ is almost a misnomer in supply chain management software because of the high level of customization that is still required/supported and even encouraged by the software package vendors.  Each customer requires custom services to ‘tailor’ the package and capabilities to the individual and specific requirements of the customer.  Granted, the level of feature customization has been dramatically reduced when compared to the initial releases of the software packages, but every implementation requires a certain level of customization and configuration to support the client requirements. 

 

Don’t get me wrong, the progression of capabilities and maturity of the software ‘package’ has been dramatic in both features and functionality along with ease and speed of implementation.  I’m saying though we still have a way to go to get to a state comparable to the shrink-wrapped photo customization software as an example.  I suggest that one way to measure the maturity of the software package is to measure the contribution of services to the revenue of the software package vendors.   In other words, as the services revenue shrinks for the software package vendor, the maturity of the package increases.  This maturity level is also mirrored by the maturity level of the clients that implement the software, the customer maturity has progressed from absolutely requiring customization of the package to fit the customer requirements; to a current state where many customers will revise their business process to fit with the package capabilities. 

 

I believe there is a ‘test’ coming from the capabilities and promise of cloud services that could bring a major upheaval to the SCM software package market.  As I mention in an earlier article (https://community.kinaxis.com/blogs/TBrouillette/2011/06/29/the-perfect-storm--the-legacy-applications-landscape) the potential for upheaval will be similar to the introduction of the ‘office’ software package.  Our test in technology is how we will handle the integration, collaboration and communication challenges, and promise of benefits, provided by cloud services.  This upheaval will also drive initiatives to increase the maturity level of both the SCM software packages and the capabilities and practices of the customers implementing the software and cloud services.

 

Now for the audience participation portion of this program……

 

What is your experience with the market and implementation?  Have you seen a progression of maturity?  How do you see the cloud services impacting the software vendors and the consumers of this software and services?

 

How can this community help you to move the conversation forward in your organization? 

 

Tom Brouillette – President & principal Consultant

Monarch Supply Chain Management, LLC

www.monarchscm.com

‘the logical choice’

Aberdeen research found that custom built applications rank first in current usage for global Supply Chain technology but drop to last place in popularity for new IT implementations.  By comparison, on-demand applications (SAAS model) are used today by the least number of respondents but rank second in popularity for future adoption.  This would suggest that the risk to the business that can be introduced by these decisions is gaining greater weight in the decision process.  The dramatic increase in popularity of the SAAS model suggests that the enterprise decision making process is closely reviewing the promised total cost of ownership at the very least.

 

 

The following areas of consideration must be thoroughly evaluated and rationalized.  The impact of changes to these areas and the risk to the business is greatly increased in a system replacement program as compare to an enhancement program.

 

 

1)      The integration of legacy applications in a stovepipe environment

 

2)      The stability, structure and platforms housing the systems and applications

 

3)      Business Process definition and management

 

  • This is impacted dramatically by the ‘tribal knowledge’ understanding and lack there-of brought about by reductions in force to meet expense reduction targets.
  • Any revisions to the application(s) must take into consideration any possible impact to the business process
  • Ability to identify and implement change to the business and Supply Chain operations
  • Successful Off-the-shelf software implementation requires changing the business process, procedures and operation!

 

 

 

 

4)      Integration requirements and interoperability between applications and platforms

 

  • How is the data utilized across applications and platforms?
  • Are the applications ‘tightly coupled’ by the integration and data utilization?
  • Environmental stability and the impact to the stability of changes and especially replacing applications

 

 

 

5)      Risk to the business and the operations

 

6)      Change management considerations and the ability of an organization to accept changes

 

  • Business processes and relationships changes must be thoroughly analyzed and planned
  • Significant changes to the applications can drive significant changes to the business processes.  These changes will drive significant changes to the culture of the organization that must be taken into account
  • Training requirements must be thoroughly analyzed from all aspects
    • Leadership
    • Culture
    • Technical
    • Job functions

 

 

 

 

 

 

 

7)      Clearly define the options up to and including the modification of existing systems.

 

8)      Define and quantify the benefits of each of these choices

 

 

The business process and applications environment will require a significant effort to analyze the impacts and define revisions in an application replacement program.  These efforts and the level of complexity in analyzing and possibly re-designing the business process would significantly reduce the benefit and increase the risk to the business!   There are many new BPM/BPA tools that should be taken into consideration for incremental improvements to the legacy application in conjunction with a stabilization and decoupling program.

 

 

Identification and implementation of an appropriate tool and strategy to utilize the tool provide the following capabilities to address business concerns:

 

 

  • Business Applications Continue to Drive the Transactions of Your Entire Enterprise:
  • Do not change their control, command or process; no modification, replacement or integration.
  • Establish a solid base for continued operation without risk, disruption or delay.
    • Business Applications are Stabilized so Change Happens Outside Boundaries:
  • Explore and measure opportunity value in response to change by investing only in projects already proven.
  • Add new technology, data and processes risk free.
    • Changes become Opportunities to Adapt and to Apply Competitive Pressure:
  • Change is seamless, Opportunity is immediate and your Enterprise increases its sales, margin and satisfaction

 

 

 

 

 

 

 

 

What is the ‘right’ decision?

 

There is a real, and beneficial, alternative to the ‘full replacement’ choice and that is to target specific improvements to stabilize and provide tactical and strategic improvements to the operations and the business.  When an organization makes an honest, unbiased and thorough evaluation of the options, in many cases they will realize the best decision may not be a full replacement of their legacy applications.  The best decision may be to develop specific improvements and prepare for an eventual replacement.

 

Each organization has its own ‘right’ decision and that should be determined based on the criteria they determine to be critical to their business.  In most cases the legacy applications that have been supporting a business can be productive and valuable for a number of years by implementing some enhancements to both improve the functionality and the stability of the environment.  These improvements in most cases will cost a great deal less than a full replacement.  The legacy applications have been honed and tuned to meet the individual needs of an operation and the effort, cost and risk to replacing these applications should not be taken lightly!

 

 

 

 

 

The decision to replace the supply chain legacy applications must take into account;

 

 

  • The cost of the replacement software
  • The cost and the risk to the business of the integration of the new software
  • The cost to analyze the legacy applications and operation to define and update the business process documentation.  This is no small effort considering the very high likelihood that very few people in the organization have a deep understand of the current business processes and application functionality.
  • The risk to the business that would be caused by a failure or serious delay of the replacement software implementation
  • The risk to the business that would be caused by missed, or overlooked, business functionality that was not provided in the replacement software
  • The cost to the business from the post implementation stabilization requirements and possible volume and delays in delivery

 

 

 

 

 

 

 

After an honest and unbiased evaluation of the considerations, cost and risk of replacing the legacy supply chain applications, many organizations will come to the realization that the most cost effective decision is to develop high value business enhancements to the applications and also enhance and implement stabilization and business system decoupling integration points to the legacy applications.  A strategy to perform incremental improvements can provide very beneficial results for a fraction of the cost and risk to the business!

 

 

Tom Brouillette – President & principal Consultant

 

Monarch Supply Chain Management, LLC

 

www.monarchscm.com

 

‘the logical choice’

 

 

Preparing the Supply Chain Environment for Recovery

 

Organizations are struggling with the impact of the recession:

 

  • Expense reductions and reductions in force
  • Delays and cancelled capital improvement projects
  • Companies are re-evaluating business drivers
  • The spending focus is beginning to shift to business and strategic improvements

 

 

 

 

 

Over the years organizations have developed a strong dependence on ‘tribal’ knowledge provided by the long term employees supporting the business in both operations and IT.  This dependence has placed the organization at risk due to the reductions in force as a result of the recession.  At the very least, companies are at risk of poor decisions and execution of strategy and the worst case is the inability to determine and execute new strategies.  This leads to uninformed decisions that can seriously impact the operation.

 

 

4 Key reasons to start Supply Chain improvements

 

  1. The Supply Chain generally accounts for 60% - 90% of all company costs
  2. A 2% improvement in process efficiencies for Supply Chain processes has 3000% - 5000% the impact of a 2% improvement in IT, HR or Finance
  3. Focus on Supply Chain improvements can provide both business process improvements and significant reductions in cost
  4. These benefits and return on investment can be used to fund other strategic business improvements.

 

 

 

 

 

 

According to McKinsey, poor technology integration and fragmented oversight mean that manual entries, overlapping requirements and high volumes of paperwork are the order of the day – bogging down processing times, adding costs and frustrating customers.   These points can be addressed incrementally through stages rather than through applications replacement.  It is critical, however, to evaluate the entire operation to identify appropriate improvements.  In many cases a ‘quick and dirty’ approach can fail to integrate applications, processes and systems at the appropriate level and un-do, or fail to realize, many of the expected benefits.  This causes operational changes to fail to gain a toehold and allow employees to fall back into their old ways of working.  This also makes any future initiatives even harder to justify!

 

 

According to McKinsey, wiring technology into the improvement effort makes it easier for employees to sustain the successes.  With a unified process and supporting application in place reverting to the earlier practices is harder – by default, the new application becomes the standard operating procedure.  Automating the operational processes also has the advantage and benefit of reducing the number of errors encountered in the operation.   Allowing IT to play a central role in developing and driving the implementation of these incremental strategic initiatives can help organizations to better address the two problems that have plagued these initiatives; high complexity and poor sustainability.

 

 

There have been improvements in ‘packaging’ and ‘wrapping’ services that can provide many of the desired improvements or results in the look and feel along with the Business Process Management and subsequent automation of business processes.  These capabilities can provide significant benefits to the operation and business while dramatically reducing the risk compared to a replacement!

 

 

Key factors to include in the evaluation and decision making process:

 

  • Benefits of current applications customized to meet the specific needs of the business
    • Identify appropriate tools to help in delivering the improvements
  • The full impact of the replacement  and risks to the business
    • Business process definition
    • Requirements definition
    • Feature definitions
    • Integration considerations
  • Point solution alternatives that can extend the capabilities of the legacy framework
    • Include all types of Cloud services
    • Requires careful consideration of the potential impact to the legacy
    • Valid option may be providing ‘throw away’ services to improve time-to-market and gain benefits quickly
  • Robust project and program management capabilities

 

 

Tom Brouillette – President & Principal

Monarch Supply Chain Management, LLC

www.monarchscm.com

www.facebook.com/MonarchSCM

Twitter - @tbrouill