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Transcript of McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter...
McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter 15
Technology Standards
15-2
15.1 Introduction
Technology standards are important in supply chain management
Review IT related standardsNew technology platformsEvolving technology standards
15-3
New Developments
Radio Frequency Identification Devices (RFID)
Consolidation of market to a few playersNew approaches to system design
Service Oriented Architecture (SOA)
15-4
15.2 IT Standards High level of standards evolving due to following
reasons: Market forces
Standards reduce cost of system development and maintenance.
InterconnectivityConnecting different systems and work across networks has pushed the development of standards
New software modelsInternet has produced the need for software that has new development and deployment characteristics.
Economies of scaleStandards reduce the price of system components, development, integration, and maintenance.
15-5
Software Standards and the Next Inflection Point
FIGURE 15-1: Software standards and the next inflection point
15-6
Four PhasesProprietary
Until the early 80s Mostly mainframe computers accessed
through key punches and dumb terminalsLittle communication between systems
with few options such as private networks or physical media.
15-7
Four PhasesStand Alone
IBM PC software and hardware introduced the first standard platform called Wintel Microsoft Windows and Intel standard
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 Electronic data interchange (EDI)
Client/server was developed
15-8
Four PhasesConnected
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
15-9
Four PhasesCollaboration
Next phase of standardsCurrently being developedAddresses collaborationSupporting technology built around SOA and
BPM technologiesHas further increased the importance of ERP
systems
15-10
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
15-11
Interface Devices Common devices:
Personal computers, voice mail, terminals, Internet devices, bar-code 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
15-12
System Architecture
Encompasses the way the components are configured
Components imply:Databases, interface devices,
communicationsTwo main categories:
Legacy system architectureClient/Server architecture
15-13
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)
15-14
Legacy System Architecture
FIGURE 15-2: Legacy system architecture
15-15
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
15-16
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.
Client/Server Architecture
15-17
Client/Server Architecture
FIGURE 15-3: Client/server system architecture
15-18
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 interoperabilityTwo systems capable of interacting in a sophisticated
way that is a built-in feature of their design
Client/Server ArchitecturePros and Cons
15-19
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
15-20
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
15-21
Standards and e-commerce
Has been in existence for many yearsPrivate networks for corporations (e.g.,
WANs) Public networks at universities and
government agencies. Internet standards
IntranetsExtranets and Exchanges
Differences in who is allowed access to the system
15-22
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.
15-23
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
15-24
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.
15-25
Cross-Company ApplicationCPFR
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
15-26
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.
15-27
CPFR Roadmap Stepswww.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.
15-28
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
15-29
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
15-30
SOA-based integration Composite application developmentTop down approach to application
development Composition of ready made components
which are reusable Built in integration (services) make them easy
to use and maintain
SOA Contributions
15-31
Modernizing Legacy applicationsMany 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.
SOA Contributions
15-32
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
15-33
SOA Layered Architecture
FIGURE 15-4: SOA layers
15-34
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
15-35
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.
15-36
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
15-37
Web services description language (WDSL) 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
Simple object access protocol (SOAP) 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.
J2EE and .Net Platforms
15-38
ERP Vendor Platform:SAP & Oracle
Both competing on their own SOA platforms
SAP strategyTie developers to its platformCreate 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.
15-39
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
15-40
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.
15-41
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
15-42
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.
15-43
15.5 RFID Technology that deploys tags emitting radio
signals and devices, called readers, which pick up the signal.
Tags: Active (broadcast information) Passive (respond when queried by a reader) Read-only or read/write and one-time or reusable.
Can be used to read an Electronic Product Code (EPC)
EPC: 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.
15-44
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.
15-45
RFID ApplicationsTwo important drivers
Mandate by some major channel masters and procurement agencies
Immediate benefits that can be gained from implementing the technology.
15-46
Level of ImplementationPallet/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 useNew IT systems would be required to track
individual items
15-47
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
15-48
RFID and POSPOS 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 itemsConservative estimate of 7% of salesNo one knows real value
15-49
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
15-50
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
15-51
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.
15-52
RFID Benefits to Retailers
Reduced inventory one time cash savings of about 5% of total
system inventory Store and warehouse labor reduction
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
15-53
RFID Benefits to Manufacturers Inventory Visibility
Better tracking of inventory throughout its facilities.
Labor efficiency Reduced cycle counting, bar code scanning
and manual recording Improved fulfillment
Reduced shrinkage, improved dock and truck utilization and improved product traceability.
15-54
RFID Implementation Costs Tagging
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
Readers 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.
15-55
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.
15-56
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
15-57
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.