Hype Cycle for Supply Chain Management, 2009 Tim Payne, Benoit J. Lheureux, Paolo Malinverno, Andrew White, Deborah R Wilson, C. Dwight Klappich, Tim Zimmerman
The focus in SCM is on cost optimization; competitive advantage via the supply chain has slipped down executive agendas. Market hype is centered on capabilities that support a chaos-tolerant supply chain theme, which firms can use to understand cost and competitive drivers in their supply chains.
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Analysis ............................................................................................................................................. 4 What You Need to Know ...................................................................................................... 4 The Hype Cycle .................................................................................................................... 4 The Priority Matrix ................................................................................................................ 9 On the Rise......................................................................................................................... 10
At the Peak ......................................................................................................................... 27 Business Process Networks.................................................................................. 27 Process Templates for SCM Innovation................................................................ 29 B2B Integration Outsourcing ................................................................................. 30 Inventory Strategy Optimization ............................................................................ 33 TMS Multimodal/International................................................................................ 33 Mobile (Wireless) Enhanced Supply Chain Management..................................... 34
Sliding Into the Trough .......................................................................................................36 Master Data Management of Product Data........................................................... 36 Dock Scheduling and Carrier Appointment Management ..................................... 38 Direct-POS Analytics Applications ........................................................................ 39 Radio Frequency Identification for Logistics and Transportation .......................... 40 Global Trade Compliance (Import and Export)...................................................... 42 Yard Management ................................................................................................. 44 Supply Chain Management (SaaS)....................................................................... 44
Climbing the Slope ............................................................................................................. 46 Capable-to-Promise Systems................................................................................ 46 RFID and Sensor-Based Inventory Management ................................................. 47 Sales and Operations Planning............................................................................. 48 Multienterprise Supply Chain Collaboration .......................................................... 49 Voice-Directed Picking in Warehouse Management............................................. 50 Integration as a Service......................................................................................... 52 Supply Chain Analytics.......................................................................................... 54 Business Process Hubs......................................................................................... 56 Warehouse Labor Management Systems ............................................................. 57 Service Parts Planning .......................................................................................... 59
Entering the Plateau ........................................................................................................... 60 Supply Chain Planning for Process Automation.................................................... 60
What You Need to Know Traditional supply chain management (SCM) techniques have led to finely tuned and well-engineered process models that describe how supply chains should operate and respond under predictable conditions. These strategies can generate value in predictable and steady-state environments.
With significant uncertainty and unpredictability now dominating most supply chains, and a relentless focus on reducing costs, while maintaining other supply chain performance characteristics, companies are increasingly realizing that factors outside their direct control are having a greater impact on their supply chain performance. They are also realizing that their steady-state, supply chain processes are not capable of closing this gap. Perfectly engineered processes and response patterns are inconsistent with reality and with how to survive in new and mature markets. A new approach — chaos-tolerant SCM — continues to emerge, and technology underpinnings are emerging (for example, product performance management and integrated business planning) to enable the adoption of such an approach.
Supply chains are longer, more complex, more connected and more dependent on other nodes, and these chains are operating more as ecosystems. Chaos-tolerant behavior and capability is increasingly becoming the "next big thing" for coping with this increasing supply chain complexity.
Existing SCM technologies and emerging technologies continue to be hyped by vendors and the market. Users need guidance and frameworks to identify the new technologies that support chaos-tolerant SCM strategies and that help improve the effectiveness of decision making across the operating ecosystem.
The Hype Cycle The common characteristics from the traditional focus of supply chain has been around the portfolio of business processes that make up SCM. Good practioners of SCM tended to have a laser-like focus on their SCM processes (for example, demand management process, inventory planning process, warehouse execution processes). However, the key learning that has recently come out of this era of economic volatility is the increasing value of information in a supply chain context (for example, the use of Six Sigma in the supply chain has highlighted to companies the need for data to support improvement efforts, as well as the general lack of readily available relevant information). Information about the environment, customers, suppliers, assets, people, plans and businesses are key to success and to coping better with your competitors; supply chain performance is now the right focus (as opposed to fragmented optimization), with strong links between the supply chain and other key business functions (such as financial planning and strategic planning); all characteristics of a chaos-tolerant SCM strategy.
Information is the core enabler of next-generation supply chain strategies: viable, complete, available, relevant and consistently interpreted information. As part of an integrated performance management framework, it is the "DNA" that makes a supply chain effective and competitive in the new operating environment, and to layer on top of traditional SCM capabilities. Getting access to this information, in terms of supply chain performance, is a key first step, but the step up in value comes from how an enterprise uses this information to analyze and remodel its supply chain to effectively change its performance profile to better match current operating and strategic conditions. This has to be a continuous effort, as these operating and strategic conditions will change, and the supply chain response model will need to change with it. Evidence of this shift exists already; companies that had moved manufacturing offshore through the early 2000s are re-
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evaluating whether this strategy still makes sense (for all products) when transportation costs have increased along with demand-side volatility. Gartner has seen an increase in inquiries, during the last six to nine months, from clients looking for analytical support that they can use to evaluate different scenarios that incorporate aspects of supply chain risk management.
Enterprises' supply chains are typically part of a network of trading partners' supply chains. These supply chains increasingly overlap and form networks that create new relationships and behavioral patterns that look more like an ecosystem that is characterized as being transient, dynamic, changeable and unpredictable. These characteristics drive chaotic behavior that cannot be designed out, or negated, with better engineering of business processes. The historical approach of trying to build a model to represent all this complexity and then optimize this model is neither possible nor usable by most enterprises. What is needed is a strategy that makes a supply chain tolerant to this chaos by:
• Harmonizing enterprise behavior end to end, spanning end customers through to suppliers (horizontal perspective)
• Harmonizing enterprise boardroom goal setting (strategy) and tactical planning all the way to operational execution (vertical perspective)
• Exploiting the convergence of business intelligence (where users accept decisions) and business applications (where users make decisions happen) and technologies through embedded analytics to drive more-expansive and deeper analytical capabilities
The leaders of SCM in 2009 and beyond will embed a supply chain and performance management capability at the heart of their SCM chaos-tolerant strategies. They should look to the 2009 SCM Hype Cycle first to see what is emerging, then decide what to support and exploit.
The technologies we review in this Hype Cycle converge on this common framework: from the more mature supply chain analytics, and sales and operations planning, to the emerging integrated business planning (IBP), multienterprise business process platforms (BPPs) and segmented supply chain response. Review all these technologies and the others in this Hype Cycle in light of a BPP strategy — that is, how your business plans to govern its business process and application assets — as well as from a chaos-tolerant SCM perspective. A BPP may be represented by a large, single-instance enterprise application vendor suite, or it might describe a complex, heterogeneous, multivendor, service-oriented architecture (SOA)-oriented stack. In all cases, these SCM technologies must be looked at in relationship to a BPP strategy, because this will help determine when, where and whether these SCM technologies will add the most value to the business.
The technologies Gartner researched for this SCM Hype Cycle address a broad range of supply chain capabilities. Many are mature and provide sound foundations, and organizations are learning to apply them more effectively, while other technologies are new and offer significant opportunities for innovation, often on top of stable foundations. Some technologies focus on:
• Process automation: performing SCM processes more efficiently and at lower cost
• Process innovation: changing the SCM processes
• Enterprise-centric activities: within the enterprise's four walls
• Multienterprise business processes (beyond the boundaries of the enterprise)
• Different aspects of performance management as it relates to the internal and external supply chain
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• Integrating different planning regimes to ensure alignment and capable scenario management
Review each technology to determine how it applies to your SCM strategies, and continuously evaluate how each technology meets your evolving business strategies (see "Use the Gartner SCM Maturity Model to Show the Business Benefits of SCM Investments").
Major Changes to the 2009 SCM Hype Cycle
The following technologies were deleted, renamed or merged on the 2009 Hype Cycles:
• Integrated demand and replenishment planning — retail-specific, and included on the "Hype Cycle for Retail Technologies, 2009"
• SOA-enabled order management — SOA-enabled business processes are part of the boarder adoption of SOA and BPPs. Merged with multienterprise business process platform.
• Network-based inventory and supply chain management — for basic inventory management requirements, see the profiles for multienterprise supply chain collaboration and business process hubs; for more advanced inventory and supply chain management requirements, see the profiles for business process networks and multienterprise business process platform.
• Global data synchronization — retail-specific and included on the "Hype Cycle for Retail Technologies, 2009"
• Supply chain planning (software as a service [SaaS]) — for some aspects of SCM, SaaS is an alternative deliver model (see the supply chain management [SaaS] profile). This is mainly in the areas of transportation planning and collaboration. However, supply chain planning (SCP) SaaS is not evolving, and on-premises remains the dominate delivery model for SCP functionality. Some vendors in the collaboration and process hub market provide aspects of SCP functionality as part of their offerings as users look for more value from multienterprise shared data. For collaborative demand and supply planning, see profiles for multienterprise supply chain collaboration and business process hubs; for more-advanced SCM requirements, see business process networks and multienterprise business process platform. For traditional, integrated SCP, see the profile for supply chain planning for process automation, which is not typically delivered via SaaS.
• B2B project outsourcing — renamed as B2B integration outsourcing
• Supply chain and product performance management — renamed as product performance management
• Gen2 class 3 sensor-based RFID — renamed as battery-assisted RFID
• Carbon-sensitive planning and execution — renamed as supply-chain-centric carbon-sensitive planning and execution
The following technologies are new on the 2009 Hype Cycle:
• Product portfolio optimization
• Supply chain performance management
• Yard management
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• Radio frequency identification (RFID) for logistics and transportation
• Global trade compliance (import and export)
Notable Position Changes
Many of the SCM technologies represented on this Hype Cycle have changed position since 2008, most of them incrementally. Several, however, have changed more substantially, including:
• Supply chain analytics — now flagged as obsolete; before it was on the Plateau of Productivity. More end-to-end supply chain performance management solutions (new for 2009) will replace departmental and functionally focused supply chain analytics solutions, as they will mature relatively quickly and bring more value to the enterprise.
• Battery-assisted RFID — moving quickly toward the Peak of Inflated Expectations, on the back of combined passive and active RFID tag characteristics, and better-understood use cases.
• Multienterprise business process platform — moving up the trigger curve. Still no full ME-BPPs on the market, but some vendors are evolving and moving in that direction.
• Master data management of product data — moving down toward the Trough of Disillusionment; more implementations, but incomplete and/or industry-specific solutions still prevail, as well as the need for strong governance of the data and associated processes.
• Product performance management (PPM) — moving up the trigger curve. Aspects of PPM, such as product portfolio optimization (PPO), are emerging to help companies better understand product behavior in the value chain.
• Integrated business planning (IBP) — moving up the trigger curve. Sales and operations planning (S&OP) solution providers and IBP point solutions are emerging and maturing, and companies are starting to deploy them as part of their overall business planning processes.
Technologies Unchanged
The following technologies have made slow progress since last year and remain in a similar position this year:
• SCP for process automation
• Warehouse labor management systems
• Voice-directed picking in warehouse management
• Business process hubs
• Capable-to-promise systems
• Mobile (wireless) enhanced supply chain management
• Inventory strategy optimization
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The Priority Matrix Mature SCM technologies that are yielding benefits for users within the two-year window include:
• SCP for process automation
• Warehouse labor management systems
These technologies continue to mature, with a range of large installed bases that have broad and deep experiences. Vendors are bringing competitive offerings to market, and the business processes supported by these SCM technologies are approaching commodity status as the wider market adopts them.
Several SCM technologies promise significant benefits on the two-year window and beyond:
• Product performance management
• Supply chain performance management
• IBP
• Business process networks
• Integration as a service
• Inventory strategy optimization
• Master data management of product data
• Multienterprise supply chain collaboration
• Sales and operations planning
• Service parts planning
• TMS multimodal/domestic
• B2B integration outsourcing
• Capable-to-promise systems
• Supply chain analytics
• Voice-directed picking in WMS
• Yard management
These solutions (see Figure 2) are a mix of older technologies (for example, SPP and S&OP) and newer technologies (such as product performance management and IBP), which leverage the new IT landscapes, including SOA, converged business intelligence and business applications and, overall, a broader strategy to reuse information and align business processes, within the context of a BPP strategy.
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Figure 2. Priority Matrix for Supply Chain Management, 2009
Global Trade Compliance (Import and Export)
low
years to mainstream adoptionbenefit
moderate
high
transformational
As of July 2009
Battery-Assisted RFID
Capable-to-Promise Systems
Mobile-Asset Optimization
Supply-Chain-Centric, Carbon-Sensitive Planning and Execution
B2B Integration Outsourcing
Business Process Hubs
Dock Scheduling and Carrier Appointment Management
Sales and Operations Planning
Supply Chain Management (SaaS)
Voice-Directed Picking in W arehouse Management
Yard Management
Supply Chain Planning for Process Automation
Direct-POS Analytics Applications
'MDM Aware' Applications
Mobile (Wireless) Enhanced Supply Chain Management
Multienterprise Business Process Platform
Process Templates for SCM Innovation
Product Performance Management
Segmented Supply Chain Response
Supply Chain Performance Management
TMS Multimodal/ International
Business Process Networks
Integration as a Serv ice
Inventory Strategy Optimization
Master Data Management of Product Data
Multienterprise Supply Chain Collaboration
Product Portfolio Optimization
Radio Frequency Identification for Logistics and Transportation
RFID and Sensor-Based Inventory Management
Service Parts Planning
Warehouse Labor Management Systems
Chaos-Tolerant SCMIntegrated Business Planning
more than 10 years5 to 10 years2 to 5 yearsless than 2 years
Global Trade Compliance (Import and Export)
low
years to mainstream adoptionbenefit
moderate
high
transformational
As of July 2009
Battery-Assisted RFID
Capable-to-Promise Systems
Mobile-Asset Optimization
Supply-Chain-Centric, Carbon-Sensitive Planning and Execution
B2B Integration Outsourcing
Business Process Hubs
Dock Scheduling and Carrier Appointment Management
Sales and Operations Planning
Supply Chain Management (SaaS)
Voice-Directed Picking in W arehouse Management
Yard Management
Supply Chain Planning for Process Automation
Direct-POS Analytics Applications
'MDM Aware' Applications
Mobile (Wireless) Enhanced Supply Chain Management
Multienterprise Business Process Platform
Process Templates for SCM Innovation
Product Performance Management
Segmented Supply Chain Response
Supply Chain Performance Management
TMS Multimodal/ International
Business Process Networks
Integration as a Serv ice
Inventory Strategy Optimization
Master Data Management of Product Data
Multienterprise Supply Chain Collaboration
Product Portfolio Optimization
Radio Frequency Identification for Logistics and Transportation
RFID and Sensor-Based Inventory Management
Service Parts Planning
Warehouse Labor Management Systems
Chaos-Tolerant SCMIntegrated Business Planning
more than 10 years5 to 10 years2 to 5 yearsless than 2 years
Source: Gartner (July 2009)
On the Rise 'MDM Aware' Applications Analysis By: Andrew White
Definition: "Master data management (MDM) aware" applications are not technologies that stand alone, but are business applications that have been altered, developed or designed to work with MDM solutions more effectively. As MDM slowly emerges as an underlaying part of an enterprise's information infrastructure, the traditional business application architecture is
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challenged to coexist with MDM, because so much of the business application design assumes that each business application is the manager of its own data. With MDM, this is no longer the case.
The MDM discipline and governance process that is adopted will unify the controls to ensure the integrity of the master data across all applications, data stores and MDM systems, using the various implementation styles of MDM. Business application data is, therefore, governed according to MDM, not according to each business application domain. MDM-aware applications externalize their master data and/or data models to the point where: (1) the data model design is visible and adjustable in terms of design authority coming from outside the purview of the applications (i.e., from the MDM system), and (2) the actual data can be accessible from external systems (i.e., from an MDM system or a service bus carrying messages to/from MDM/application). As more master data is externalized from application sources (packaged applications, applications developed in-house, business intelligence data warehouses, etc.), the implementation style of MDM will have to change, to take into account the growing number of data sources and subscribers.
Position and Adoption Speed Justification: The need for business applications to "play well with others" has long been known, but most packaged applications, and even many custom-made applications, do not. A significant amount of IT budget is spent on data and application integration, the vast majority of which is spent on traditional point-to-point integration methods. With the increased attention on initiatives such as enterprise information management and service-oriented architecture (SOA), and business requirements for cost optimization, revenue protection and compliance, the need to simplify data management increases, which explains the ongoing high level of interests in MDM. To make MDM work effectively, legacy data stores that keep a copy of master data for use in each specific application, and the emerging MDM systems, need to evolve so that interaction between the two is radically simpler, faster and more easily managed.
This development is due to the growth of MDM. A small number of business application vendors claim that their applications are "MDM aware." These applications have externalized some or all of their master data and/or application data model, so that a more usable publish-and-subscribe infrastructure can be implemented with an MDM infrastructure. As the adoption of MDM continues, we expect the hype around MDM-aware applications to increase quickly. Being new, and highly dependent on how MDM evolves and matures, these will require more application interaction with MDM systems.
A consideration that will slow down the availability of such MDM-aware applications will be the degree to which each MDM implementation style is adopted. Many early MDM initiatives focused on specific styles; as additional master data domains came online, the master data life cycle was highlighted and different implementation styles were needed. Application vendors are beginning to feel the impact of the different implementation styles, and how each requires a different form of interaction (messaging, publish/subscribe, push/pull, replicate, link) across the information infrastructure.
User Advice: For users of packaged applications: Understand that there are very few MDM-aware offerings. As you continue to select and adopt packaged applications, vet the vendors for MDM awareness and ensure that new packaged applications have a road map whereby their master data will be exposed more easily and made visible for integration to your emerging MDM infrastructure.
For developers of business applications — transactional, as well as business intelligence and analytic: Ensure that your application architecture supports an externalized master data model that can support a uniform master data model for the enterprise. Ensure that your SOA strategy
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supports a publish/subscribe framework of services among the externalized (and legacy) data stores with your MDM application.
Business Impact: Applications will have to become MDM aware to interact effectively wherever MDM systems are deployed. Packaged applications (e.g., CRM, supply chain management, ERP, product life cycle management, procurement and industry-specific), customized applications, application development strategy and application architecture will have to adapt to this. We are seeing initial work in supply chain packaged applications (complex B2B environments where multiple firms have to share product master data), as well as in retail and distribution (where there is a high degree of heterogeneous applications, and a low density of large, dominant, single data-model-based application vendors). Given the primary focus of MDM in the customer and product data domain, we expect application vendors and developers in these areas to adopt an MDM-aware strategy.
The benefits will focus on:
• IT benefits, in terms of simpler and more-manageable integration environments across heterogeneous systems, leading to lower costs.
• Business benefits, in terms of how implementation of new business applications will take less time; data will be more accurate in that they "plug into" the established MDM infrastructure, thus improving the efficacy of user decision making taking place in the relevant business applications.
Benefits will vary, but will be focused on the business department and the domain that adopts the MDM-aware application.
Benefit Rating: High
Market Penetration: Less than 1% of target audience
Segmented Supply Chain Response Analysis By: Tim Payne
Definition: Segmented supply chain response is a set of competencies, processes and technologies that enables an enterprise to identify, analyze, model, deploy and execute on a portfolio of supply chain responses that help align supply chain performance profiles with the characteristics of specific product/customer segments.
Position and Adoption Speed Justification: Segmentation, or classification, has been around for many years in supply chains — ABC classification, for example. Customer segmentation has also existed in the CRM arena. As supply chains have to cope with increasing levels of external chaos (driven by such factors as globalization, virtualization and economic crisis), complexity and business strategy diversity, a new strategic dimension is evolving that bestows a chaos-tolerant capability on these supply chains.
Enterprises looking to expand the scope of their segmentation strategies have to bring together capabilities from different technology areas, such as supply chain analytics, supply chain planning (SCP) and supply chain execution (SCE) applications, ERP, business intelligence, sales and operations planning, network design, simulation, and inventory optimization strategy applications. During the next two years, some of these applications will continue to merge to progressively form more-coherent capabilities that support aspects of segmented supply chain response. For
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example, inventory strategy optimization (ISO) and network design are already converging, adding design capability to the analysis and modeling capabilities of the ISO solutions — all important aspects of segmented supply chain response.
SCP and supply chain performance management are converging to enable business-intelligence-derived insight to have an impact on business processes. These two islands have to converge for strategic plans to align with operational plans. However, some pieces are still missing. The necessary convergence of planning and execution — that is, the ability to execute across a parallel set of supply chain configurations — is missing from most vendor road maps, although capabilities at the network level exist in both of these domains. The initial identification and analysis of product/customer clusters, as they are relevant to supply chain performance, are only available via data mining and offline ad hoc analysis, and are fragmented across different organizational domains, such as CRM and supply chain management.
User Advice: Segmented supply chain response is a set of competencies requiring a portfolio of solutions and, as such, cannot yet be purchased in its entirety from one vendor. However, pieces are available, with the most obvious route being through the use of network design and new analytic applications, such as the slowly maturing inventory strategy optimization applications used to leverage investments in SCP applications, as well as supply chain performance management solutions, leveraging business intelligence capabilities. Users interested in segmented supply chain response should start with these solutions. Eventually, this point-solution sourcing approach will be replaced by the integration of planning and execution — perhaps via the ERP vendors as they develop their functional depth and breadth, and provide suitable segmentation frameworks.
Business Impact: A segmentation approach has demonstrated significant benefits in terms of customer service and total delivered cost to enterprises by addressing one of the primary reasons for underperforming supply chains — the mismatch between product/customer characteristics and the supply chain performance profile.
Benefit Rating: High
Market Penetration: Less than 1% of target audience
Recommended Reading: "Segment Your Supply Chain Response to Drive Enhanced Performance"
"Development of Chaos-Tolerant Processes Is Key to Supply Chain Optimization"
"Who's Who in Inventory Strategy Optimization"
Integrated Business Planning Analysis By: Tim Payne
Definition: Integrated business planning (IBP) is a set of systems, processes and competencies that provides a performance management environment that supports the strategic alignment and modeling capability missing from the traditional operationally focused sales and operations planning (S&OP) processes for the supply chain. IBP links corporate performance management (CPM) to operational S&OP, with the capability for strategic and financial modeling and analytics, enabled by approaches such as supply chain performance management. IBP is an example of an
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analytical application; by embedding analytics so closely in the business process, performance management is more readily realized.
Position and Adoption Speed Justification: IBP is developing as a separate and distinct layer of capability that sits over an operational S&OP process, and that is linked to a CPM solution as part of a wider performance management initiative. S&OP has been available for many years, and is particularly well-known in manufacturing organizations. S&OP was intended to reconcile business strategies as well as operational plans. However, the strategic dimension is missing from most S&OP processes, and they are mainly operational in nature instead. Therefore, the concept of IBP is developing to embrace strategic and financial modeling and reconciliation capabilities that leverage the operational planning and S&OP processes, and that link into the organization's CPM initiatives.
User Advice: IBP requires a range of capabilities and, as such, cannot yet be sourced as a complete product from one vendor. However, different classes of vendors are progressively developing capabilities that are moving toward IBP capabilities (for example, CPM, supply chain planning, ERP and best-of-breed IBP vendors). If you need to develop IBP capabilities, then approach this with a best-of-breed strategy for the next few years, prior to more-integrated and performance-management-enabled solutions emerging during the next one to two years. Work with your S&OP vendors to see which areas of IBP they are able to support, and also work with specialized strategic modeling vendors. Expect to see business suite vendors (such as Oracle and SAP), which have functionality in many of the different areas and integrate these pieces into more-holistic solutions, although early releases will likely be functionally light.
Business Impact: These capabilities will enable companies to model and align business strategies to operational strategies, ensuring significantly improved supply chain and business performance.
Benefit Rating: Transformational
Market Penetration: 1% to 5% of target audience
Maturity: Emerging
Sample Vendors: i2; Jonova; Oracle; River Logic
Recommended Reading: "Assessing the Maturity of Your Sales and Operations Planning Process"
"Integrated Business Planning Fills the Gap Between Strategic Planning and S&OP"
"MarketScope for Sales and Operations Planning"
Product Portfolio Optimization Analysis By: Andrew White
Definition: Product portfolio optimization is an analytic application focused on a business process and discipline that has, to date, not been addressed effectively with technology. Product portfolio optimization focuses on how senior executives in sales/marketing/service, finance, operations, supply chain management, engineering/development and procurement, together with the COO, determine what market (which products, product categories, channels, and mix and price of each) to address. This is a strategic task that takes place periodically and is a key aspect of product performance management (PPM). Product portfolio optimization is a new analytic application that supports the business goal of enhancing PPM.
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Position and Adoption Speed Justification: The problem of determining what markets to address and with what products and/or services, and the evaluation of market and product profitability at the strategic level, has been central to how firms operate. Despite the importance of this problem, IT support has been, to date, very poor. Most firms use reports and manual procedures to make such strategic decisions; and the output of such decisions is often disconnected from tactical and operational business activities. Thus far, business intelligence has been used as a platform to help provide some of the data needed, but without formal, structured business processes. A sector of the market, mainly manufacturers with a strong product life cycle management (PLM) discipline, has formalized this process. The technology, referred to as product portfolio management, typically has not evolved to support non-PLM environments, or to support cross-departmental and executive requirements.
Product portfolio optimization will likely mature quickly, because it represents the use of a known technology capability to a different business problem (modeling, optimization, simulation and analysis). The technology will likely evolve to include business process modeling technology for more-complex process impact analysis. Vendors are emerging that are not tied to any one business domain or application stack; this bodes well for users, because it leads to a stronger integration solution. Some industries use different terms to refer to this area. In retail, for example, product portfolio optimization is included in the broader focus of merchandise and category optimization. The terms are different, but the business goal is the same to determine strategic plans over which products, categories and business segments to address.
User Advice: Despite the newness of this technology, it warrants being evaluated by early adopters. Product portfolio optimization is a proven technology that is being applied to a new problem. With the right data, right processes and right organization, this technology can provide immediate benefits to the business.
Users with immature business intelligence and/or business application architectures also can take advantage of such solutions, although the execution will be difficult. Companies with more-effective and/or mature business intelligence or business application architectures take advantage of such technologies that are, by definition, noninvasive and more quickly deployed. Users that struggle with making effective decisions at the strategic level, and determining how to re-evaluate such strategic decisions on a timely base, should look into this emerging technology.
Business Impact: Benefits, short term, will accrue on product portfolios: what is to be developed and sold, and what should not be sold. Longer-term benefits will focus on new market and channel development that is founded on a better understanding of what product portfolios exist and what is needed.
Benefit Rating: High
Market Penetration: Less than 1% of target audience
Maturity: Emerging
Sample Vendors: Centric Software; Jonova; Lawson; River Logic
Recommended Reading: "Single View of Product Data Can Improve Supply Chain and Drive Product Performance Management"
Multienterprise Business Process Platform Analysis By: Andrew White; Debbie Wilson; Benoit Lheureux
Definition: A multienterprise business process platform (ME-BPP) is Gartner’s high-level conceptual model of a multistakeholder environment where multiple businesses’ operational
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processes and the contributing resources are governed. The ME-BPP is a combined set of shared IT and shared business models that enables multienterprises to accommodate rapid but controlled business process change through the use of an integrated composition environment and reusable software business services in a shared managed environment. The business services repository (BSR) portion of a business process platform (BPP) exposes automated business functionality as reusable software assets to be used in process compositions.
When participating in an ME-BPP, the following technologies and assets will be governed in a shared fashion: B2B data and application integration technologies and a range of packaged business application solutions, coupled with technology services related to (supply chain) visibility, business intelligence, analytics, and performance management, workflow, business process management technology, multienterprise master data management, multienterprise security and governance, supplier community management services and portals. A BSR will be used and implemented in a shared environment, where reusable services are exposed to support composition and integration. The last piece, which makes this more than just an aggregation of technology, is that an ME-BPP is architected so that end-user enterprises can extend and adapt what starts out as a packaged/standardized business application, using service-oriented architecture (SOA) and BPM modeling tools to modify processes and define custom, multienterprise composite applications that use the same infrastructure (that is, common services). The result is a centralized offering of commoditized applications that also supports the additional need for innovative business applications that are sometimes modified versions of the existing applications and other times new applications. Ultimately, the ME-BPP will evolve to support the more human-centric social networks or "process of me" (informal, but critical) processes most often referred to as "Facebook for the supply chain."
The relationship of your ME-BPP to your BPP: Enterprises will not share a (singular) BPP. Your BPP is used to govern the assets inside your enterprise. We called this new pattern “ME-BPP” to be very specific about the key characteristic that is unique to a BPP — that multiple enterprises can and will share governance of some of those assets and technologies (that already do exist and enable their BPP) in a unique fashion that we have not seen today. Adopting an ME-BPP rationalizes all the B2B interaction efforts, tools and governance through one framework — the ME-BPP. In this way, enterprises can share some assets in their ME-BPPs, that part of the supply chain that gets value from shared governance: QED multienterprise applications.
Position and Adoption Speed Justification: There are no ME-BPP offerings on the market, per se, although there are some business process hubs (BPHs) and business process networks (BPNs) with a combination of technology and methodologies in varying stages of evolution (notably, E2open, iTradeNetwork and Wesupply) that are converging toward an ME-BPP. Vendors might be more focused on multienterprise integration (BPNs) and others on multienterprise business applications (BPHs); none has unified BPN and BPH technology with a metadata-driven process modeling and SOA, and the sufficient community management and performance management infrastructure needed to fully qualify as supporting the needs of an ME-BPP.
Type A (early technology adopters) enterprises are asking their technology providers, "Why do I have so many different vendors to support all my different interactions with my trading community?” These users are looking to rationalize their investments into a few moving parts. This is a short-term driver, and these same Type A users and their strategic IT partners are just realizing that something new is emerging from this cost-based driver, something that will yield cost savings, as well as a competitive advantage. Users will have to look opportunistically for ME-BPP-like offerings among the multitude of BPHs and BPNs that are offered in the market. The barriers that are slowing the adoption and development of ME-BPPs, barriers that are slowing eroding, include lack of maturity in infrastructure, trading partners not at the same stage of IT maturity or readiness, insufficient use of metadata-driven approaches to master data and
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application modeling, lack of shared governance models (although industry- and community-based process and data standards will help) and inertia (current investment plans have a return-on-investment target that still has to be met). ME-BPP is less hyped (so far) than the enterprise “version,” BPP, which has matured as a discipline earlier, since it is older in concept and pertinent to every enterprise. It is quite likely that the hype related to ME-BPP will always be less than its enterprise-oriented version.
User Advice: To gain a good understanding of their operational multienterprise processes, clients should create a multienterprise process architecture that identifies the major core (aka commoditized) versus differentiating multienterprise processes. Business process analysts should focus on designing the differentiating multienterprise processes for change and working with their own and partner IT organizations to implement the first iteration of such processes, including a strategy and plan for ongoing changes to keep them differentiating or to move them gradually into the core as competitors catch on and copy their approach.
Leverage emerging ME-BPPs (BPHs and BPNs that are building toward an ME-BPP offering) to implement configurable, extendable shared multienterprise processes. Recognize that an ME-BPP is part technology and part application infrastructure design concept, with methodologies to support a multistakeholder-governed infrastructure. An ME-BPP supports a business strategy enabled by technology that involves communities of interest (business relationships), communities of trust, shared infrastructure (including integration as a service), and shared or multienterprise business applications. Develop a multienterprise strategy involving a "portfolio approach" of B2B interactions that might, over time, rationalize a move toward fewer methods. Seek to consolidate separate B2B projects on one infrastructure; incorporate your B2B integration strategy into your business application strategy, and establish clear metrics for tracking the success of your multienterprise projects.
Business Impact: Initial impact is being seen in a number of areas, notably global trade, third-party logistics, distributed order fulfillment, procure-to-pay and multienterprise collaboration. In the longer term, we expect to see more adoption across widespread deployed business processes, such as those found in application domains such as CRM, ERP, product life cycle management and supply chain management, as well as industry-specific applications.
Benefit Rating: High
Market Penetration: Less than 1% of target audience
Recommended Reading: “Findings: Ownership of Processes Distinguishes Internal BPP From Multienterprise BPP”
"The Emergence of the Multienterprise Business Process Platform"
"Best Practices: Checklist for Issues to Consider in Multienterprise Collaboration"
Chaos-Tolerant SCM Analysis By: Tim Payne
Definition: Supply chain management (SCM), as a discipline, is approaching a watershed where the old precepts of well-engineered, but rarely connected, business functions and processes, supported by fragmented business applications, will no longer be enough for the supply chains of the next decade. Even when global economies come out of the recession, the role of an
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enterprise's supply chain will have changed forever. Gone will be the pure cost reduction and efficiency focus of the past 20 years, to be replaced by a cost optimization and value maximization mind-set that will require a radical rethinking of how SCM is practiced, and of some of the technologies that will be required to support this brave new world. The best practices of the 1990s and early 2000s focused heavily on the lean and demand-driven strategies that have led to precariously balanced supply chains. With change, volatility and unpredictability now at unprecedented levels, supply chains that are based on out-dated, steady-state, traditional concepts will continue to be at breaking point. Thus, something new must take over if performance and effectiveness across the network is to be maintained and enhanced (see "Development of Chaos-Tolerant Processes Is Key to Supply Chain Optimization").
Companies looking for superior supply chain performance will need to develop and adopt chaos-tolerant SCM capabilities. These capabilities will be in addition to the concepts of lean and demand-driven, and will give an enterprise the ability to compete more effectively in global markets. Chaos-tolerant SCM is not a technology, but a business strategy/concept that will need to be supported by a portfolio of specific technologies, namely:
• Multienterprise collaboration — many of the process components of chaos-tolerant processes will depend on collaboration, not automated transaction processing, throughout the value network.
• High-performance decision support — chaotic supply chains will not allow for the construction of a well-thought-out policy and process design for every contingency or disruption the enterprise will face. Much of the time that people spend responding to unanticipated business conditions involves gathering the data required to formulate a reasonable response. Performance management and scenario management, as well as the ability to sense changes from the external environment, will be key.
• Data and process integration, integrity, and synchronization — to support chaos-tolerant processes and performance management capabilities, a comprehensive master data strategy and business process improvement routine are required, and they must reach across trading partners and the enterprise.
• Sensory networks — radio frequency identification and other sensory technologies yield the greatest value in situations without process discipline or formal process controls. This makes them vital components of an operations strategy aimed at managing chaos-tolerant processes.
• Business process platform (BPP) — a BPP strategy helps companies respond to unanticipated events, if a business analyst is empowered to orchestrate a new business process on the fly without prior process or policy guidance. The process agility coming from a BPP enables an enterprise to rapidly incorporate lessons learned from dealing with unanticipated processes introduced into its process library.
Position and Adoption Speed Justification: Until six to nine months ago, few enterprises were pursuing an integrated chaos-tolerant SCM strategy, although elements of it may have been in place or may have been planned, especially by Type A (innovators and early adopters) companies. However, when the key characteristics of a chaos-tolerant strategy were described to these end users, many "got it" and agreed that it made a lot of sense, even if current trading conditions deprived them of the budget to pursue it. The economic conditions in the supply chains of many companies have changed so much from 2H08 that the interest in aspects of a chaos-tolerant SCM strategy and associated capabilities is starting to accelerate. User interest in areas such as product performance management, integrated business planning (IBP), and multienterprise business process platform and performance management has increased significantly as enterprises try to figure out how to effectively manage their supply chains a new
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world that is characterized by volatility and unpredictability. However, mass adoption by Type B (late adopters) and Type C (followers) companies will take many years, because these organizations are mired in the weak economy, and are focused on adopting foundational SCM capabilities (the right-hand side of the SCM Hype Cycle).
You cannot purchase chaos-tolerant SCM; it is a business strategy. As such, there is a technology element, as well as knowledge, process and organizational elements. Also, a chaos-tolerant SCM does not "emerge" automatically; rather, it must be a specifically desired behavior. Service providers and technology providers can be of help.
User Advice: Although many companies are beginning to focus on collaboration tools, this collaboration strategy must be extended to support value-network-level operations processes. The collaboration tools need to have real-time links to operations data stores, and they must have templates for dealing with operations, rather than administrative processes.
A high-performance decision support strategy mandates two adaptations that enterprises need to take into account in their SCM technology strategies:
• Extending corporate performance management frameworks beyond finance, and connecting supply chain performance to business strategy with analytic applications, such as IBP
• Upgrading transactional and supply chain visibility applications to make them part of a unified, event-driven architecture layered with business activity monitoring (BAM) tools on top of operations processes, to enable the best operations decisions to be made "on the fly," without the guidance of an operations or process policy
Companies should embrace a trading partner integration center and build an operations-oriented master data management strategy. When taking a chaos-tolerant view, companies need to consider technology and techniques that push the boundary of their sensory networks into their customers' customers and suppliers' suppliers.
Users need to examine their IT strategies and ensure that critical SCM technologies are supported, in terms of a BPP model, to the degree needed to support a chaos-tolerant SCM strategy.
Business Impact: Leading organizations that create chaos-tolerant capabilities as part of their overall SCM strategy will be able to deliver superior supply chain performance through better cost optimization, competitive advantage and business growth, no matter what the operating environment is or how it might change.
Benefit Rating: Transformational
Market Penetration: Less than 1% of target audience
Maturity: Emerging
Sample Vendors: i2; IBM Global Business Services
Recommended Reading: "Development of Chaos-Tolerant Processes Is Key to Supply Chain Optimization"
"Gartner’s SCM Scenario: Post-Lean Supply Chain, 2008 and Beyond"
Mobile-Asset Optimization Analysis By: Tim Payne
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Definition: Mobile-asset optimization refers to the use of a combination of business process software, sensory technologies and operational research skills (such as demand forecasting), and business intelligence to optimize the use of an enterprise's mobile assets. This combines many principles of supply chain management (SCM) — which has focused on inventory optimization — with asset management leveraging sensory technologies. Not all SCM principles apply to the optimization of assets; however, many do, including demand forecasting, transportation optimization and analytics.
Historically, asset management technologies, such as enterprise asset management, have been the primary systems focused on assets. These solutions were concerned with managing the maintenance of assets to ensure that the costs of downtime and maintenance were optimized against the needs of the business.
A new category of asset management solutions focuses on optimizing the positioning and use of assets without a related maintenance schedule. This is a step beyond real-time location systems (RTLS), where you not only know where the asset is, but also information about the variable conditions. Most of these assets are mobile; the emerging systems focus on several phases of mobile-asset optimization:
• Planning for the repositioning of assets for optimal use
• Locating assets
• Positioning assets according to plan
• Tracking the use of assets
• Analyzing data to infer improvements to business processes
In addition to these operational phases of mobile-asset optimization, there are three administrative functions:
• Dynamically keeping a catalog of assets and their status
• Maintaining an on-demand view of where all assets are
• Assigning responsibility for the ownership and costing of asset use
These solutions are not specifically tied to a maintenance schedule, because they are not maintained, or the primary concern isn't maintenance — that is, the assets involved are mobile and they may cycle through the internal and external supply chain many times (for example, roll cages used in distribution). This doesn't mean that these assets have short useful lives. It means that the primary concern of the business is optimizing the use and positioning of the assets, rather than their maintenance. In addition, Gartner draws a distinction between assets and inventory: Assets are reused, whereas inventory is consumed by a customer or a value-added process.
This definition of mobile-asset optimization incorporates the use of sensory technologies, such as active radio frequency identification (RFID), mesh networks, GPS, satellite technology and Wi-Fi-based tracking systems, as well as emerging technologies, such as ultrawideband. However, it is the use and associated decisions using the collected information that separates this solution from independent sensory components.
Position and Adoption Speed Justification: This technology is emerging due to:
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• The emergence of sensory technologies (such as RFID and GPS) that enable mobile-asset tracking and positions to be more accurately tracked
• An increasing desire of enterprises to manage the utilization of mobile assets, such as shipping containers in warehouses and wheelchairs in hospitals, to optimize their contribution to the value chain
This technology is at an early stage — few users have adopted it, and the solutions are still being developed. At this point, there is no technology leadership regarding which sensory technologies will be dominant. Users must still proactively identify and manage solution components. However, these projects will be easier to pursue than sensor-based inventory projects. Mobile-asset optimization technology does not usually compete with bar code technology, because it is not as developed as bar-code-based inventory management.
There are numerous industry-specific examples of this technology, including knowing the status and utilization of a kidney dialysis machine in addition to its location, shipping container management among logistics service providers, and rolling cage tracking in the automotive industry. The commonality among these business problems is that the assets comply with the five phases of asset optimization. Although some industry-specific approaches will continue, the horizontal approaches to this discipline will accelerate adoption across a broad range of industries.
User Advice: Start any project in mobile-asset optimization by establishing the discipline of a life cycle of mobile assets and building business processes to optimize them. Many enterprises start by just wanting to track assets, but they later find that they need a holistic view of mobile-asset optimization to achieve business value.
From a sensory perspective, establish use cases and general infrastructure components for mobile-asset optimization projects to understand the information that is available and the additional information that may be needed to further optimize the process. Understand the infrastructure patterns for indoor/campus-asset tracking, outdoor-asset tracking, shop-floor asset management and wide-area asset management, as well as how additional information beyond RTLS can be beneficial.
Business Impact: Traditional asset management systems have focused on cataloging and documenting the location and maintenance of assets. Sensor technologies can enable enterprises to determine where the assets are and how they're being used in a process in real time, especially as more assets become mobile. This can be used to infer the status of a business process or assign responsibility for assets to the individuals or entities that controlled the assets. Ultimately, this improves the efficiency or accuracy of the business process. It can also reduce the number of misplaced and stolen assets.
Supply-Chain-Centric, Carbon-Sensitive Planning and Execution Analysis By: Dwight Klappich
Definition: Carbon-sensitive planning and execution refers to a range of technologies and applications that enable enterprises to identify, model and, ultimately, optimize their carbon effects across entire supply chains. Initial solutions will be narrowly focused on specific supply chain processes and activities, such as transportation planning, network design and carbon footprint dashboards. In the near term, they will model and optimize around a limited set of resource constraints, such as minimizing carbon footprints. Later, yet-to-emerge solutions will extend across other resource constraints, such as emissions, and across the extended supply chain and product life cycles for all environmental conditions. Although carbon footprint is the primary focus today, in the future, users will need to consider other factors that affect their environmental sustainability impact, such as direct operational emissions of other pollutants, energy consumption and waste generated.
Position and Adoption Speed Justification: Tools exist that can minimize or optimize variables that can be inferred to affect the carbon footprint, such as transportation planning to minimize wasted miles or transportation mode, which can be inferred to reduce carbon emissions. However, tools that explicitly include carbon footprint as an optimization goal, and have content databases that provide carbon footprint variables (such as transportation mode data, where a diesel truck of a certain size emits a certain amount of carbon dioxide per mile driven), are just now emerging, and quality is uneven.
Narrowly focused tools will first emerge on top of existing applications, such as transportation management systems (TMSs) or network design, and these will simply add carbon considerations as variables or data elements that can be optimization goals (for example, they will minimize the carbon footprint of a specific body or a specific kind of work). However, it will be several years before more-holistic solutions emerge that span multiple functional/application domains, and that can optimize around and provide a more-complete picture of an organization's carbon footprint.
User Advice: Identify the largest contributions to your supply chain carbon footprint.
• Complement your carbon footprint reporting, and move toward resource optimization.
• Adopt supply chain management technologies (such as new attributes, data and new models) that identify, track and reduce your supply chain's carbon output.
Business Impact: At a minimum, these solutions will enable enterprises to comply with emerging government mandates and regulations, as well as leverage their adoption of green initiatives as good publicity. However, in many cases, optimizing around green considerations has complementary business justification, because reducing emissions can reduce other costs. For example, reducing wasted miles driven for a green initiative translates into significant savings on fuel and overall transportation costs.
Benefit Rating: Moderate
Market Penetration: Less than 1% of target audience
Supply Chain Performance Management Analysis By: Tim Payne
Definition: Supply chain performance management (SCPM) is a technology-enabled discipline that includes the performance-driven processes used to help manage "assets" (such as customer service, costs, inventory, physical assets, operational plans, tasks and activities) across an end-to-end supply chain; the methodologies that drive some of the processes (such as the balanced scorecard or value-based management); and the metrics used to measure performance against strategic, operational and tactical performance objectives. SCPM represents the convergence of business and analytical applications that provides the functionality to support these processes, methodologies and metrics, which are targeted at strategic users through to tactical, day-to-day supply chain decision making in relation to products and services flowing through a supply chain. Capabilities include portals, dashboards, metrics, industry templates, business activity monitoring, predictive analysis, key performance indicator (KPI) maps and the ability to drill down from high-level metrics into lower-level metrics in support of root cause analysis.
Position and Adoption Speed Justification: SCPM contains the tools required to support more end-to-end SCPM. By providing one point of performance management for the supply chain, SCPM gets around the drawback of supply chain analytics (which monitor performance only at a departmental or functional level) by providing a more complete and integrated view of SCPM.
SCPM is gaining interest from users who are currently using more departmentally focused supply chain analytics solutions (often as part of their SCM vendors' solutions). SCPM will develop to the point that it will replace disparate supply chain analytics solutions as users recognize the value of having an integrated performance management capability across their supply chains. This more integrated approach will facilitate the links between strategic and operational planning and execution, whereas supply chain analytical solutions tend to support more on the departmental operational level, and will be a key part of a companies broader performance management initiatives, such as corporate performance management (CPM) and product performance management (PPM), as well as supporting business processes, such as sales and operations planning (S&OP) and integrated business planning (IBP). As users become more focused on overall supply chain performance they will start to favor SCPM solutions over functionally specific supply chain analytics solutions.
User Advice: SCPM solutions are just starting to emerge in the market, but these tend to be analytical applications focused on aspects of SCPM, as opposed to platform-based SCPM solutions addressing the whole supply chain. This emergence is being facilitated by business application and business intelligence (BI) vendors converging and moving toward these more-end-to-end, process-oriented performance management solutions. The acquisitions of BI vendors by business application and technology vendors (for example, SAP and Oracle acquiring BusinessObjects and Hyperion, respectively) are sign posts for these vendors intentions, as well as a recognition that enhanced process performance has to come from a deeper insight into supply chain business processes across multiple domains, functions and departments. The elevation of BI to the business application platform level will support a drive toward more SCPM capability.
Enterprises looking for departmental or functional SCM performance management support should focus first on the performance management solutions that are seamlessly integrated with core SCM applications.
Enterprises with extreme SCM application heterogeneity and/or looking for a consolidated view of all SCM metrics should consider SCPM offerings, although these offerings are still immature and incomplete, and may not cover all areas of SCM, depending on the historical focus of the vendor.
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The users likely to be interested in SCPM are those that focus on maximizing supply chain performance, understanding the need to comprehend end-to-end performance and the necessary trade-offs involved in supply chain management. SCPM solutions will be more applicable to enterprises where a clear supply chain strategy is in place.
Business Impact: User focus on the linkages between the performance of adjacent processes (horizontally and vertically) will support the maximization of end-to-end supply chain performance. SCPM supports proactive and intelligent management of all aspects of a company's supply chain as part of an enterprisewide performance management strategy.
Benefit Rating: High
Market Penetration: Less than 1% of target audience
Maturity: Emerging
Sample Vendors: IBM (Cognos); Manhattan Associates; Oracle; SAP
"Top Seven Supply Chain Planning Processes, 2009 to 2014"
"Top KPIs for Supply Chain Management"
"Top 7 Supply Chain Execution Processes, 2009 to 2014"
Product Performance Management Analysis By: Andrew White
Definition: Product performance management (PPM) is defined as the use of processes, methodologies, metrics and technologies to manage, analyze and influence business performance as it relates to all aspects of the product.
PPM provides a unified environment linking strategic analysis related to product performance (at the highest level of the enterprise) with operational and day-to-day activities. Products move physically through the business, from raw material suppliers to end customers. Traditionally, performance of the product as it moves through the chain is measured in fragmented process (horizontal and functional perspective) and departmental (vertical perspective) silos. Business leaders are looking to move beyond this fragmented view that restricts the ability to measure and optimize business performance holistically, toward an enterprisewide, process-centric analytic application, to answer business decisions that are not supported by business intelligence (BI) or business application technology. Short term, this is leading to new, stand-alone point solutions to address the links between strategy and operations (for example, product portfolio optimization [PPO], which helps executives across the business determine which markets and products to sell). Long term, larger portfolio and application vendors are building out performance management platforms to allow users to embed reusable analytic services into their reusable business application assets (for example, business process platform). PPM is one element in an enterprisewide adoption of performance management. The technology and disciplines needed to adopt PPM overlap, and are consistent with, other performance efforts, such as supply chain performance management.
Position and Adoption Speed Justification: Transactional-oriented business applications that manage product performance do not have the analytic capabilities to support the business need for PPM; thus, users have tended to create silos of reports and analyses. Users seek to make better and smarter business decisions concerning how products perform across the value chain.
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However, this current architecture enforces a separation in role, technology and process between business applications and BI (for example, using reports and dashboards to present data on product profitability independent of the supply chain planning application that plans the sourcing, making and moving of product, which contributes to its profitability, or not). This leads to multiple data definitions and process silos that make answering complex business problems difficult and leads to supply chains that can significantly underperform.
A new category of business application — PPO — is one of the first PPM applications. PPO addresses the business problem that executives face: to determine, methodically, which markets to sell to and which products to sell by simulating and optimizing alternative business plans, taking into account market conditions, competitive dynamics and potential profitability. Analytics and key performance indicators, specific to the product domain and appropriate for each industry, are embedded in the business application that is used to make and take the business decision. To date, there has been no effective business application vendor offering in this space, because most users have focused on the transactional part of the business. PPO embeds analytics into a business application that formalizes the process of portfolio management.
There are other new applications that support the needs of PPO, such as integrated business planning (IBP), which helps manufacturers link strategic decisions to operational demand/supply chain balancing activities. These are packaged applications that are noninvasive, in that they do not replace previously installed applications; most of these business processes have little formal IT support in the form of business applications. Some ERP vendors are developing this capability (for example, Lawson), and some niche or best-of-breed vendors are as well (for example, Jonova). As yet, there is no performance management platform on which to unify data, analytics and processes.
User Advice: There are no comprehensive platform solutions for enterprisewide PPM, although larger vendors are moving in this direction, as seen in the acquisitions of BusinessObjects by SAP, Cognos by IBM, and Hyperion and Siebel by Oracle. Some small vendors are addressing niche areas in which PPM can meet more-strategic business decisions related to product performance. If you need to make a smarter decision related to product portfolio, then use a best-of-breed strategy for the next couple of years as larger platform offerings emerge and mature. Align your vendor partners with specific business "pain points" (such as PPO, or integrated business planning, if you are a manufacturer) related to improving product-oriented decision making across the value chain.
It is not necessary to adopt a BI platform strategy to adopt any performance management strategy, but doing so will probably help. Technology from the BI platform world would have to be transplanted (that is, more than integrated, and more like embedded) into the business applications world for the business user to make and take decisions in one place. Until such platforms exist, expect to deploy point solutions (such as PPO) that address specific performance-management-related opportunities.
Business Impact: Immediate availability of fast maturing niche solutions targeting aspects of PPM promise significant benefits to the business through the application of technology to a part of the business that had previously been slow, informal and unintegrated with anything outside of the boardroom. This value may be noticeable by the business because it is of great value, and this will support running and growing the business type requirements; however, transforming of the business requirements will not be accomplished until a platform approach is taken to support PPM holistically. By more formally making business decisions that relate to product performance, and by operationalizing and integrating them, an enterprise can make competitive decisions more quickly, and execute and retune those plans more effectively than the competition.
Benefit Rating: High
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Sample Vendors: InfoNow; Jonova; Lawson; QlikTech; River Logic; SAP
Recommended Reading: "Single View of Product Data Can Improve Supply Chain and Drive Product Performance Management"
"Integrated Business Planning Fills the Gap Between Strategic Planning and S&OP"
Battery-Assisted RFID Analysis By: Timothy Zimmerman
Definition: There are two types of battery-assisted radio frequency identification (RFID) tags: battery-assisted passive (BAP) tags and active tags, which are used to collect and communicate asset-level information. BAP, or Generation 2 (Gen 2) Class 3, tags use a battery for the operation of the internal circuitry to manipulate and increase the read range of the tag. Active (Gen 2 Class 4) tags use batteries to power all functions of the tag — the receiving and transmitting of a signal, as well as the power for the processing and memory chips. Both solutions differ from passive-only tags, where there is no battery for communication, additional processing or storage. While active and BAP tags can technically be implemented at all frequencies where RFID is used, they are most common at 433MHz, 900MHz and 2.4GHz.
Position and Adoption Speed Justification: Cold storage and perishable food supply chain process requirements need tags to know not only where the asset is located, but also to have knowledge of the environment. To acquire this information, more intelligence is being added to RFID tags so that they can measure variables, such as temperature, vibration or humidity, that affect products in transit. The advancement of battery technology and the integration of sensors into RFID packaging are fueling the adoption of these types of RFID solutions. However, there continue to be issues with lack of communication standards and interoperability within some of the applicable frequencies and within ultrahigh frequency ranges, where ISO 18000-6C provides Gen 2 communication compatibility, the available information on the tag is vendor-specific.
User Advice: Users need to understand their business requirements and the expectations of a battery-assisted RFID solution. Many solutions continue to be proprietary (depending on the frequency and format), are not interoperable, and will require trading partners to agree on a common implementation to clear this hurdle through alliances or standards. There will continue to be vendor differentiation and technical competition that will improve battery-assisted RFID in terms of performance and robustness of data collected, but that also creates the need for use-case testing.
Business Impact: Battery-assisted RFID will continue to address asset knowledge applications, requiring the collection of data during the transportation of goods in the supply chain. Cold storage and perishable goods items can see a significant return on investment for using the sensor capability of battery-assisted tags, because the safety and shelf-life of these products can be adversely affected by changing transit conditions. A battery-assisted passive tag is the tag of choice when it is available, because it usually has a lower cost, compared with equivalently functional active solutions. As technologies develop, there is a surge in the integration of battery-assisted RFID tags into new areas where temperature, vibration or new parameters enable vendors to make better business decisions.
Benefit Rating: Moderate
Market Penetration: Less than 1% of target audience
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At the Peak Business Process Networks Analysis By: Benoit Lheureux
Definition: A business process network (BPN) is a process-specific instance of multienterprise integration between two or more companies. A BPN is not a category of IT vendor; it is a type of B2B IT project, something that a wide range of IT vendors and private communities implement.
BPN can be defined from a:
• Business process point of view — A BPN links the execution of a specific business process, such as order-to-cash or claims adjudication, between the applications and IT infrastructure of two or more companies. A BPN doesn't execute the business process logic per se, because such process execution occurs within the participating applications and business process management logic (and, at times, partially within a multienterprise application that is included in the B2B project). The multienterprise integration project can leverage B2B standards or proprietary specifications. For example, to implement the order-to-cash process, a community might use industry-standard B2B specifications (such as EDI X12, RosettaNet or UBL) or, alternatively, a proprietary specification defined solely, for example, by a large manufacturer or retailer.
• Multienterprise community point of view — The scope of a BPN can be one-to-many or many-to-many. BPNs that are implemented only between a company and its private external business partners are one-to-many (for example, a high-tech manufacturer that implements the integration tasks associated with a vendor-managed inventory process with its electronic component suppliers). Many BPNs are implemented to support the interactions of a large number of companies in a peer-to-peer fashion and are many-to-many (for example, Global Data Synchronization or SWIFT).
• IT implementation point of view — A BPN can be implemented using B2B gateway software, integration as a service (IaaS) or any form of B2B infrastructure (see "Taxonomy and Definitions for the Multienterprise/B2B Infrastructure Market"). In addition to or as an alternative to such process-integration technologies, some BPNs use business process management technologies (BPMTs; see "Findings: Confusion Remains Regarding BPM Terminology"). BPNs use BPMTs particularly when end-to-end business process visibility is important to network participants and when network participants want business stakeholders to make some changes to process flows, rules and user interfaces with minimal IT intervention. BPNs can be operated directly by companies or by a wide range of IT service providers, including providers of application hosting, IT outsourcing, cloud computing, software as a service (SaaS) and IaaS. Many offer extensive complementary services for participant onboarding, participant training and participant help desk.
BPN examples:
• BPNs are often run out of the data center of a prominent host for a community of interest. Examples are Dell, the U.S. Postal Service, and Wal-Mart, which operate their own BPNs to support their supply chains.
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• BPNs are operated by business process hubs (formerly called marketplaces), which combine multienterprise integration and multienterprise applications for specific industries. Examples include Elemica in petrochemicals, Exostar in aerospace and defense, Liaison in paper and pulp, and Quadrem in mining.
• Procurement networks, a type of BPN related to e-commerce supplier and buyer value chains, are operated to exchange procure-to-pay documents and data using a diverse set of B2B specifications, such as cXML, AS2 and flat-file upload. They are operated by vendors such as Ariba, Ketera, cc-hubwoo, SciQuest and Perfect Commerce (see "The Role of Procurement Networks in EIPP").
• Organizations such as SWIFT, GS1 and E4X have implemented financial BPNs to support the exchange of financial transactions, product information and foreign currency exchange data, respectively (see "Business Process Networks: How to Evaluate Options in the Investment Services Industry").
• Providers of IaaS, such as GXS, Inovis and Sterling Commerce, also operate private BPNs (for example, to support the supply chains for specific retailers or manufacturers) and public BPNs, such as GDS, so that their customers can publish product information to regional data pools.
• IT service providers, such as Accenture, Atos Origin, EDS and IBM, typically implement private BPNs to support multienterprise projects for their outsourcing customers, such as the multienterprise integration component of a much larger overall procurement business process outsourcing project.
Position and Adoption Speed Justification: Some BPNs, such as SWIFT, have been available for decades. However, most B2B projects for specific multienterprise process integration problems are still emerging or in the early adoption stage. IT end users' understanding of B2B integration projects is evolving from the notion of "exchanging transaction data" to the notion of "linking business processes" and the distinctions between these (such as the implementation of process visibility tools and rule engines in BPNs to drive process improvement).
As the IT industry continues to evolve and more IaaS, SaaS, application platform as a service and other forms of cloud computing become available, awareness and adoption of BPNs will rapidly proliferate, driving the hype around these to a Peak of Inflated Expectations in the next year or so. Next, we expect there will be a mild slip into the Trough of Disillusionment as communities of interest discover that, despite their utility, BPNs: (1) will not be flexible enough and cannot evolve fast enough to meet more rapidly changing business requirements if not implemented using modern approaches, such as service-oriented architecture and metadata-driven process definitions, and (2) do not easily solve diverse semantic business process differences and, thus, processes will not be easily linked across industries. For example, most BPNs support substantially unique processes within their communities of interest or industries.
User Advice:
• Enterprises of all sizes should look for opportunities to operate or participate in BPNs when they offer a preconfigured method of implementing multienterprise integration for a specific business process as an alternative to a custom multienterprise integration project.
• When available, consider industry standards, such as RosettaNet, SWIFT and UBL, as the basis for BPNs, because these will accelerate time to production and are preferable to proprietary B2B specifications when they can be leveraged.
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Business Impact: Enterprises can implement multienterprise integration projects with external business partners faster and for less money when a BPN is available, versus having to design and implement a set of B2B standards and implement a multienterprise infrastructure from scratch. BPNs are available for automating supply chains, making electronic payments, exchanging product information, sharing foreign exchange calculations and linking a wide range of other business processes among enterprises.
Benefit Rating: High
Market Penetration: 5% to 20% of target audience
Maturity: Early mainstream
Sample Vendors: Ariba; cc-hubwoo; E2open; E4X; Elemica; Financial Information eXchange; GXS; Inovis; Ketera Technologies; Liaison Technologies; Open Business Exchange; Perfect Commerce; Quadrem; Quick Connect Computer Services; SciQuest; Society for Worldwide Interbank Financial Telecommunication; Sterling Commerce; StrikeIron; SupplyOn; Wesupply.com
Recommended Reading: "The Four Styles of Process Execution in Multienterprise Scenarios"
"Magic Quadrant for Integration Service Providers"
"The Emergence of the Multienterprise Business Process Platform"
Process Templates for SCM Innovation Analysis By: Andrew White; Tim Payne
Definition: Web-oriented architecture (WOA) and service-oriented architecture (SOA) approaches will facilitate commoditization of business processes, through widely deployed, reused, standardized services. Differentiated and innovative business processes will still emerge from the normal competitiveness of industry, but the business application technology that operationalizes this innovation will not be deployed as a packaged application, but as a custom-assembled set of process, application and data services. These SOA-oriented composites will be more easily replicated than packaged applications, thus driving up the process of commoditization of innovation more quickly, and will be more easily revised, thus reducing the cost for many more enterprises to develop new innovative process forms.
The basis for how IT supports competitive behavior will change — it will no longer be serviced by application vendors, but from innovative business processes delivered by a range of vendors as "interoperable services." The providers of these unique business services — in the form of business process templates, next-practice models (as opposed to standardized best practice models), industry-specific data and process models and business services — will emerge from a small number of best-of-breed or pure-play supply chain management (SCM) vendors that are evolving away from packaged-application vendors to become SCM innovation partners. Other vendors addressing the SCM market, including external service providers and business process management solution vendors, may also bring to market SCM process innovation templates.
Position and Adoption Speed Justification: As end-user enterprises build out their business process platforms (BPPs), leading best-of-breed SCM vendors and system integrators are beginning to make the necessary technical and strategic changes to work within the BPP framework. The rate of adoption of a BPP, itself being driven by the need for IT and the business to govern its existing business application and business intelligence assets, is creating an environment for the packaging and repackaging of those services — the process template. Innovation emerges over time from unique combinations within and support by those templates.
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User Advice: Regardless of how they are sourced — behind the firewall, hosted or software as a service — for differentiated business processes, SCM process innovation templates help reduce your reliance on packaged applications. There is a change in the technology (the asset is no longer a larger, packaged application, but will become a set of reconfigurable application and data services), as well as the provider (it's no longer the application vendor, but the integrator that understands how to assemble a useful composite application for your business). You should already be selecting and validating your IT partners based on this emerging model to prepare for the business's future needs for process innovation.
Business Impact: By providing innovative templates in the form of whole business processes, process extensions, data and process models that consume standardized services, the provider of those templates — the SCM innovation partner — will help enable mainstream adoption of innovative processes (via SOA- or WOA-oriented business process orchestration) with minimal disruption, while preserving and recognizing the value of innovative business application providers in the market.
Definition: Business-to-business (B2B) integration outsourcing is an extension of integration as a service (IaaS) and a specific category of discrete IT project outsourcing. It combines the outsourcing of technical multienterprise (B2B) infrastructure (IaaS) and the outsourcing of B2B projects (outsourcing of people and processes to implement and manage multienterprise infrastructure). There is no well-established industry label or acronym for these projects, but B2B project outsourcers have used labels such as "managed electronic data interchange" (EDI), "outsourced EDI" and "EDI software as a service" (SaaS). So far in 2009, companies have spent more than $500 million on B2B integration outsourcing, and, based on demand from IT end users, we estimate that this market segment will register a compound annual growth rate of 20%, at least through 2009 and 2010.
Companies outsource B2B infrastructure projects regardless of the type of project, but specific multienterprise projects include:
• E-commerce projects (such as for buy- or sell-side direct procurement of materials in the manufacturing sector, and retail/consumer packaged goods procurement relating to supply chain management and CRM projects).
• ERP extension projects (when connecting ERP or other internal applications to external business partners).
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• Service-oriented architecture (SOA) extension projects (similar to ERP extension projects, but for connecting internal SOA infrastructure to external business partners).
• Cloud computing/SaaS integration projects (to integrate cloud-to-cloud and cloud-to-on-premises applications and data).
• B2B consolidation projects (to combine multiple B2B projects in one infrastructure).
B2B integration outsourcing generally includes the following high-level components:
• B2B infrastructure (on-premises or on-demand) — in many cases, the B2B infrastructure is a multitenant IT stack supporting multiple B2B projects, so the vendor benefits from some economies of scale.
• One-time implementation of key B2B functionality — for example, B2B documents and maps for translation.
• One-time provisioning of connections to trading partners and external service providers.
• In most cases such projects also include ongoing B2B infrastructure operations, reporting and change management — that is, B2B integration outsourcing combines project implementation tasks (above) with managed services for ongoing B2B project operations.
Vendors such as GXS, Sterling Commerce and Inovis offer stand-alone B2B integration outsourcing services, typically for traditional e-commerce projects. Vendors such as Capgemini, EDS and IBM offer B2B integration outsourcing more typically in the context of larger outsourcing projects, such as business process outsourcing. Vendors such as Appirio, Bluewolf and Celigo conduct B2B integration outsourcing in conjunction with cloud computing/SaaS projects. SaaS providers such as Workday offer B2B integration outsourcing in conjunction with their SaaS offerings so that integration is no obstacle to doing business with them (see "Seeding the Cloud: B2B Flexibility Drives SaaS Adoption").
Position and Adoption Speed Justification: IT vendors have offered various forms of B2B integration outsourcing for years, but the recent growth of multienterprise projects (see "Q&A: Hot Questions for Multienterprise (B2B) Integration") is prompting more companies to reconsider their B2B strategies, including whether to implement multienterprise infrastructure themselves or to outsource this task. The proliferation of cloud computing including SaaS is also driving additional forms of B2B integration outsourcing, to address cloud-to-cloud and cloud-to-on-premises integration projects.
Although many companies successfully brought B2B projects "in-house" via B2B software during the decline of EDI value-added networks in the early 2000s, the need to scale these projects up to cope with more B2B dealings, combined with increasing pressure on IT organizations to outsource noncritical competencies, is fueling a selective withdrawal from in-house B2B projects and increasing interest in the outsourced approach. In addition, as companies make a "leap of faith" by capitalizing on business functionality from cloud computing and SaaS vendors, it is natural for the same companies also to outsource their cloud computing/SaaS integration requirements.
Also, vendors are doing a better job of creating bundled IT outsourcing offerings that more consistently and clearly combine the right services (such as multienterprise communications, in-line translation, community ramp-up and ongoing project management) into simpler pricing models; some of these include fixed-price components — for example, a single price to develop a map for translation or to "onboard" a new external business partner. Expectations (and hype) for outsourced B2B integration will soon peak as companies look for relief. This will lead to a slide
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into the Trough of Disillusionment as the complexities of B2B projects — and the challenges of outsourcing them, including customization (for example, to address compliance needs relating to the U.S. Health Insurance Portability and Accountability Act and to meet B2B project requirements ranging from EDI to SaaS and more complex supply chain management processes) — become better understood.
User Advice:
• Like internal integration, multienterprise integration is a complex task. Also, much of the intellectual property associated with B2B projects is often "sticky" and, as such, difficult to transfer to another provider or to return in-house. You therefore need to select B2B integration outsourcing vendors carefully, treating them as strategic technology partners. This is important because, although "multisourcing" such projects could save you if one vendor falters, this approach also means that intellectual property related to integration — such as maps for translation — is implemented using different solutions from different providers. Another drawback of multisourcing is lower economies of scale — relative to a larger project with a single vendor — which is likely to mean a higher overall project cost.
• Vendor viability will be particularly important for larger projects (involving hundreds or thousands of external business partners) with a five-year or longer life span. Although complex projects may require custom implementations and quotes, prospective customers should consider vendors that manage costs by using a multitenant B2B infrastructure implementation — and (when available) pre-built integrations, rather than custom deployments — and that offer unit pricing for one-time and recurring fees (rather than custom quotes).
Business Impact: Although many companies implement their own B2B integration projects, the alternative — B2B integration outsourcing — offers potential benefits for almost all firms, small or large, across all industries and geographies. This is because these IT projects are relatively easy to segregate and outsource, and because providers of B2B integration outsourcing offer a viable and cost-effective alternative to implementing these projects in-house. The impact of B2B integration outsourcing could be substantial, as we predict that, by 2011, midsize and large companies will at least double the number of multienterprise integration and interoperability projects they manage and will spend at least 50% more on B2B projects, compared with 2006. We also predict that most midsize and large companies will both outsource some of their multienterprise integration projects and implement some in-house (see "Q&A: Hot Questions for Multienterprise (B2B) Integration").
Inventory Strategy Optimization Analysis By: Andrew White; Tim Payne
Definition: Inventory strategy optimization (ISO) is an analytic application that helps users optimize their supply chain response strategy across a multitiered supply chain. This technology has evolved from what was known three years ago as multiechelon inventory optimization (MEIO), which initially only looked at optimizing total inventory assets across the network. This technology is slowly evolving to help users to look beyond inventory in the supply chain, to include all facets of it, including sourcing, pooling, replenishment strategies and demand priorities, to develop segmented supply chain response strategies (for example, plan inventory levels, sourcing points, postponement, routing rules and push/pull decoupling points) across the entire supply chain, in response to customer and channel segmentation strategies. These solutions are beginning to be integrated, and even encompass, at one end, supply chain network design constraints and tools, as well as, at the other end, operational supply chain planning (SCP) constraints and tools.
Most ISO solutions use optimization-based technologies with limited business intelligence (BI)/analytics capability, and, over time, are adopting event-based simulation and stochastic algorithms that enable companies to represent uncertainty factors. Long-term business "what if" evaluations and scenario planning will be commonplace, in support of any number of strategy and tactical "what ifs." Eventually, users will need frameworks to support the allocation of products to specific supply chain response models
Position and Adoption Speed Justification: A small number of vendors have defined the basis of this technology. Vendors originally offering MEIO are expanding their functional footprints to help users model any number of constraints, with a view to determining the range of responses that need to be adopted to achieve business objectives. These capabilities will eventually evolve into innovation/best-practice templates.
User Advice: For complex, distribution-intensive industries (such as consumer goods, retail, aerospace and defense, and utilities or telephone companies), use these tools, as well as classic SCP tools, to extract the greatest value from inventory and supply chain assets.
Business Impact: These solutions enable enterprises to use supply chain assets (people, equipment, inventory, money, suppliers, routes, locations and promises) more effectively, while at the same time realigning (segmenting) their use across multiple customer and channel segments.
Definition: Global logistics applications help automate the movement of goods globally by ensuring that processes are synchronized with all the parties involved in the international
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shipment. International shipments are typically complex, multileg movements in which goods and information flow among many constituencies, such as suppliers, port operations, governments, ocean and air carriers, and domestic truck or rail carriers. Global logistics must support different modes of transportation, such as by water, truck, rail and air, with unique planning and execution requirements not traditionally addressed by domestically oriented transportation management system (TMS) applications designed for truck and rail transport.
Position and Adoption Speed Justification: Solutions are changing rapidly because of pent-up buyer demands and consideration of global shipping requirements by many enterprises, coupled with the increasing economic pressures to reduce supply chain costs. Although solutions are incomplete, they are maturing rapidly, and support for international shipping requirements is improving. Getting accurate source data, such as vessel sailing schedules, as well as difficulties in modeling the complexities of itinerary construction across multiple models, such as wait time at port, have limited adoption of these solutions as well. Legislation such as the U.S. Customs and Border Patrol 10+2 program will increase demand for international logistics tools that can capture many of the data elements required to support 10+2 and similar global initiatives.
User Advice: Enterprises with significant international logistics operations should consider these solutions, paying particular attention to the breadth and depth of the TMS solutions, with equal or greater attention focused on vendors' global logistics domain expertise.
Business Impact: Complexity and the rising cost of global logistics, particularly rising fuel costs, combined with the need to manage international operations cost-effectively and with sufficient management controls for the safe and secure transit of goods, drive the need for software to help manage global logistics operations.
"Self-Diagnostic Model for Building a TMS Business Case and Evaluating TMS Sourcing Options"
"Issues to Consider When Building a TMS Business Case and Evaluating TMS Sourcing Options"
"TMS Sourcing Options Are Expanding With the Increase in the Number and Types of Products"
"Stratifying Transportation Management Systems: A Multilevel View"
"Magic Quadrant for Transportation Management Systems"
Mobile (Wireless) Enhanced Supply Chain Management Analysis By: Dwight Klappich
Definition: To improve the effectiveness of distributed supply chains, logistics and distribution-related processes, mobile (wireless) supply chains automate data capture, communications and user activities by integrating one or more of the following: radio frequency identification (RFID), Wi-Fi, Global Positioning System (GPS), vehicle connectivity, cellular phones, etc. Supply chain management (SCM) mobility solutions integrate the processing of mobile workers' tasks and activities with enterprise applications, as well as provide data capture from, monitor and track
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mobile assets, such as trucks. Mobile (wireless) supply chains span multiple capabilities, enabling mobile worker tools to access and share information (including deliveries and delivery confirmations), as well as monitor the location, condition or behavior of mobile assets, such as trucks.
Position and Adoption Speed Justification: Maximizing the effect of mobile/wireless technologies on the supply chain requires high levels of standardization and the redesign of business processes, based on the unique needs of mobile people and assets, as well as technological capabilities, such as real-time data capture, input and distribution. Simply applying mobile technology (such as RFID) to established processes, however, is not likely to yield much return on investment (ROI). Although mobile/wireless technologies have been mainstream in such areas as the warehouse, route delivery and retail, emerging technologies such as RFID have not been widely deployed, nor have they embraced core standards for interoperability among supply chain partners. Technologies such as location-aware applications are still in their infancy, and they require broader implementation and new types of service pricing commensurate with the value they bring to the supply chain — for example, consumer smartphone pricing will not work for machine-to-machine (M2M) applications.
Emerging mobile applications will use the capabilities offered by mobile technologies, such as GPS tracking or pulling data from the vehicle's engine computer to create new or enhanced business solutions that exploit these capabilities for added benefit. Wireless technologies now permit automation to reach out to every area of the supply chain, creating the possibility of highly integrated long streams of automated processes. For example, GPS on a vehicle could be used to "geo-fence" a location so that a message to the facility is automatically generated when the vehicle is within a specified distance. Tools such as appointment scheduling could then use this information to automatically confirm an appointment.
Mobility solutions that pull data from onboard computers on trucks and distribute the information via satellite communications are mature, but historically expensive. Newer solutions exploit less-expensive technologies, such as cellular, and are making the value of these solutions available to a larger market. As such, the solutions built around the increased availability of information, such as automated hours of service or vehicle/driver performance based on vehicle activities (for example, idling or hard-stopping) are becoming more pervasive.
User Advice: Be realistic about the potential for mobile/wireless technologies to improve your SCM processes. Maximizing the value from mobile technologies will depend on an enterprise's ability to leverage real-time data in new or improved processes, including automated alerts. These processes are based on consistent data communication standards.
Develop a multiphase IT strategy that leverages mobile/wireless technologies' short-term potential, such as vehicle inventory management, and establishes an infrastructure to fully exploit a technology's long-term potential, such as automated appointment scheduling, or real-time routing and scheduling. Recognize that a real-time supply chain requires a real-time information chain beneath it. Without wireless, such an information chain is not possible.
Business Impact: A mobile/wireless supply chain brings the real-time enterprise scenario closer to SCM. Although initial solutions will augment established processes with moderate benefits from automation, future generations of solutions will exploit mobility technologies to engineer new or significantly enhanced processes that add greater levels of value.
Benefit Rating: High
Market Penetration: 1% to 5% of target audience
Maturity: Adolescent
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Recommended Reading: "Cool Vendors in Supply Chain Management, 2009"
Sliding Into the Trough Master Data Management of Product Data Analysis By: Andrew White
Definition: Master data management (MDM) of product data (formerly known as product information management [PIM]) is a discipline that seeks to achieve and maintain a "single version of the truth" for product data across the enterprise and interested stakeholders. The discipline is technology-enabled as a workflow-driven or transaction-oriented process to cleanse, identify, link, harmonize, publish and protect common product information assets that must be shared enterprisewide. They create and manage a physical, database-based system of record, often referred to as a central product master, and enable the delivery of a single product view across channels, systems and lines of business, usually, but not only, in the operational environment. This can greatly assist an organization's ability to increase revenue, optimize cost, increase agility and meet compliance requirements. MDM of product data solutions are beginning to bridge needs for a "single view" across operational systems (transactional, ERP, core business applications) as well as analytical and reporting systems (business intelligence platforms). As such, firms are looking to manage and master relationship and hierarchy data in one place — the MDM systems — to achieve single view objectives.
MDM of product data systems are relevant to all industries and to government; however, the projects will take different forms, depending on whether the product is a physical product or a service, the complexity of the product structure and whether the focus is on the sell side or the buy side of the business.
An MDM of product data strategy forms part of a wider multidomain MDM strategy (potentially encompassing customer, product, supplier, employee, location, asset and financial master data). MDM ensures the consistency, accuracy, stewardship, semantic agreement and accountability for the core information of the enterprise, enabling organizations to eliminate endless debates about "whose data is right." An MDM program is a key part of a commitment to enterprise information management (EIM) and helps organizations and business partners break down operational barriers, enabling greater enterprise agility and simplifying integration activities.
Position and Adoption Speed Justification: The market for packaged solutions for MDM of product data is maturing quickly and has been growing since its inception in 2001. The early products have evolved from traditional PIM to more holistic MDM solutions. The technology has passed the Peak of Inflated Expectations, although MDM overall (suite-based or multidomain) is approaching it. Gartner estimates that there are close to 1,500 implementations worldwide across numerous industries, and, in 2009, service industries are increasingly looking to this technology to help master complex configured product and services. The market is dominated by three megavendors (IBM, Oracle and SAP), although niche or best-of-breed vendors are doing well by specializing on data domain, industry and/or use case. Few, if any, vendors, even the large ones, have created products or strategies that dominate niches (domain, use case) across more than one or two significant industries.
The MDM of product data is increasingly defined by complex requirements, which are converging around different user-oriented focal points.
Some of the main customer requirements include:
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• Complex, often-engineered products coinciding with the use of business applications known as product life cycle management
• Highly heterogeneous and/or multidivisional ERP with large amounts of legacy business applications with multicommerce (commerce, print/catalog, multichannel integration and data sync) needs, with customers for sell-side (retail or manufacturing)
• Procurement, buy-side, distribution-intensive enterprises, across retail, distribution, wholesale, healthcare and other industries
• Services (nonphysical products), most often financial services, banking, insurance and telecommunications, with complex customer/event/order-bundling configurations and rules
Industry adoption also varies where enterprises with physical products (rather than services) are focused on this technology longer than other enterprises, due to the need to share such data among organizations in business-to-business relationships. Early adopters are being joined by fast followers, and there are potential benefits for those that can exploit the technology, coupled with effective governance practices. Application platform vendors (such as IBM, Oracle and SAP) have realized the strategic importance of managing master data and, specifically, product master data. This market has spawned other segments of MDM, namely MDM of asset data and procurement data. These two forms of MDM are slowing forming toward being legitimate markets. By 2012, MDM of product data technology should be mature; in the meantime, be aware that vendors' products vary in terms of maturity and capability, and there's likely to be further vendor consolidation in the market.
User Advice: Make MDM of product data part of your overall enterprise MDM strategy, and determine when, not whether, you will adopt MDM. Look for business benefits across all IT programs, as well as business intelligence and application programs that can be addressed with one information management approach, rather than the traditional piecemeal approach. Review the organization's capabilities and challenges in governance, process and organizational change, toward managing product data in a uniform manner, as well as its ability and political willingness to use a single product view. Educate the organization about these challenges and their effects on the business.
Create a vision (that is, business outcome, technology, processes and organizational commitment) for what could be achieved. Think in terms of creating a central MDM for a product data repository that integrates with established source systems and becomes the system of record for master product data in a synchronized, heterogeneous environment. Focus on key business problems, and build a business case that is based on benefits. Analyze the likely scenarios in which the enterprise wants to use an MDM system in the short and long term. This will guide your choice of an MDM vendor, because vendors' products have different "sweet spots" that differ by industry and implementation style. MDM of product data systems must have a rich, tightly knit combination of facilities, including a comprehensive data model, information quality tools, workflow engine and integration infrastructure. Evaluate MDM products, including those embedded within business applications, based on a set of objective, balanced criteria, including industry experience. Start small, but "think big," and deliver early and often.
Business Impact: Large, complex and heterogeneous enterprises, as well as many midsize enterprises, spread product data across many systems. It is fragmented and often inconsistent. This makes it difficult for organizations to streamline business processes and operations efficiently, and to develop new, agile business processes. Without a single view of a product, organizations cannot effectively deliver on the promise of increased effectiveness across the supply chain, deliver a sustained and effective customer experience, leverage operational benefits from merger and acquisition activity, identify efficiencies on the buy side with deep
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insights on spending data analysis, or achieve a competitive new-product introduction process. There will also be some inhibitors on upselling and cross-selling if firms do not have a sufficient handle on what products and services customers have acquired. Some form of a single product view is, therefore, fundamental for managing the value chain. Over time, the impact on business applications and business intelligence can be significant as firms grapple with the complex workflow nature of this initiative. MDM, and specifically MDM of product data, impacts all business applications and business intelligence data stores, in that it becomes the centralized governance framework across all data stores.
Recommended Reading: "Mastering Master Data Management"
"How MDM Can Help Enterprises Achieve a Single View of Product"
"Toolkit Best Practices: Strategies for Successful MDM Implementation"
Dock Scheduling and Carrier Appointment Management Analysis By: Dwight Klappich
Definition: Dock scheduling and carrier appointment management refers to the use of optimization and scheduling tools to automate carrier appointment scheduling, and improve the overall use of shipping and receiving docks in distribution centers. In this system, a dock calendar is maintained showing all operating constraints, such as open/close time, commodities accepted through the dock door (for example, refrigerated or ambient) and trailer types accepted. Carriers, customers and suppliers with pending shipments or receipt requests can query the system to determine available dock times. In the most-sophisticated optimization systems, these external queries are held together with load tenders, and are optimally assigned at a specified point based on maximum resource use. For example, if there is congestion during a particular period, then the system would not operate on a first-come, first-served appointment basis. Instead, the materials being delivered or shipped would be evaluated based on criticality or capacity to determine which appointments must be scheduled during the congested period, and which can be scheduled during alternative periods.
Position and Adoption Speed Justification: Scheduling functionality is a long-standing concern among many of the world's largest shippers. However, recent challenges in carrier capacity, increasing customer requirements around on-time shipment performance and the effects of government mandates (such as hour-of-service rules that demand faster and more-consistent shipment turnaround) were driving more enterprises to evaluate this technology. With the economic slump, some of the business drivers have eased, but pressures to reduce costs and increase productivity have kept interest in dock scheduling. In addition, a scheduling and appointment management system can be used in conjunction with constraint-based warehouse optimization to begin creating a supply chain execution model that moves more toward flow-through and cross-docking models.
Integration with warehouse management systems (WMSs), transportation management systems or yard management systems is becoming a more-important consideration, and vendors of these types of solutions are adding rudimentary, often Web-based, appointment requesting and dock door allocation. More-advanced solutions are emerging from the leading WMS vendors. Current
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models use portals to request appointments, but increasing acceptance and availability of mobile applications offer the potential to move this closer to the driver and mobile assets, as well as to add additional capabilities, such as geo-fencing, wherein a GPS device notes when a truck is within a certain distance of the distribution center, and the appointment can then be electronically confirmed.
User Advice: Users with capacity constraints in their yard or dock areas should evaluate this system. In addition, users that are capacity-constrained within the warehouse should evaluate dock scheduling and optimization as part of an overall flow-through system. Users with large numbers of unnecessary penalties for excessive dwell time caused by drivers having to wait for a dock should also look at these technologies.
Business Impact: Dock scheduling and carrier appointment management reduces the amount of administrative time required to set carrier appointments and manage the dock schedule. If managed properly, this approach can improve relations with an enterprise's carriers, customers and suppliers, because the system can be more responsive than manual processes. Finally, scheduling and appointment management can improve the overall throughput and capacity of a warehouse by optimizing appointments and activities, reduce operating labor costs by reducing idle time, and reduce transportation costs by increasing the number of cross-docking opportunities.
Benefit Rating: Moderate
Market Penetration: 5% to 20% of target audience
Maturity: Adolescent
Sample Vendors: i2; Manhattan Associates; One Network; Oracle; RedPrairie
Recommended Reading: "Issues to Consider When Building a TMS Business Case and Evaluating TMS Sourcing Options"
"TMS Sourcing Options Are Expanding With the Increase in the Number and Types of Products"
"Evaluating the Efficacy of TMSs as SaaS"
"Stratifying Transportation Management Systems: A Multilevel View"
"Magic Quadrant for Transportation Management Systems"
Direct-POS Analytics Applications Analysis By: Andrew White
Definition: Direct-point-of-sale (POS) or analytic-based vendor-managed inventory (VMI) applications are tools that enable a supplier to automate, manage and ensure inventory-driven customer service levels at customer locations. These tools are less than five years old. They differ from order- and forecast-based solutions that are older and more mature, because they use execution/POS data directly from retailers, with analytic engines to guide decision making in the forecast/replenishment process to determine retail and supplier activities. These tools store POS and other demand-type data from many sources and in many formats, across demand chains, sales and marketing, and supply chains, including radio frequency identification (RFID), scanning data, order management, syndicated data services, sales and marketing forecasts, estimates, insights, supply chain planning data and so on. These technologies support various business processes, including improved one-number planning, category planning and supply chain planning, often named specifically for industry-oriented use.
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Some VMI approaches are scan-based (when the item has been sold); others are focused on RFID (when the item has moved) or are syndicated POS-oriented repositories (provide remote or delayed data, advising that an item has been sold) that aggregate demand data for more than one channel. These solutions seek to ensure the accuracy of the demand (direct POS versus syndicated POS, scan or RFID trigger), as well as the inventory record at the store, which is notoriously difficult for suppliers to perform remotely, and for retailers to manage and share on a timely basis with their partners.
Position and Adoption Speed Justification: Interest is again evident for direct-POS analytics applications for VMI. Newer technology approaches are being offered to users who have a more mature understanding of the process. VMI as a process is well-known, so visibility of these new tools and technologies is increasing rapidly, hence the substantial movement along the Hype Cycle. A range of tools offer this functionality, but only a few are deployed across multiple channels, or model enough of the demand chain for one channel. During the next two years, this should change, and the technology should begin to show stronger signs of maturity.
User Advice: Use direct-POS analytics applications when your VMI process is focused on the need to ensure accuracy of the inventory data and demand trigger at the store level. When visibility to future plans at the store level is required for midterm planning, integrate direct-POS analytics applications with forecast-based VMI tools. Compare and contrast approaches, and align the approach to your desired business goals and IT environment. It is possible that no single approach will meet all business requirements across all channels, although this is being tested in 2009 and may yet be possible by year-end 2010. Most solutions in this wave of technology innovation remain immature and limited in terms of numbers of channels modeled; therefore, beware of vendor hype claiming maturity and large installed bases. Check with references to ensure that you know exactly what was implemented.
Business Impact: Direct-POS analytics applications for VMI enable enterprises to align supply (inventory and orders) and demand data (direct POS, RFID triggers and orders), and business plans (including sales, forecasts, promotions, events and replenishment plans) between customers and their suppliers. This should improve rates of in-stock availability at customer locations, thus increasing sales, while reducing inventory and distribution costs, even in intensive periods with excessive seasonal promotions.
Recommended Reading: "Vendor-Managed Inventory: Market and Technology Update"
"Top Seven Supply Chain Planning Processes, 2009 to 2014"
Radio Frequency Identification for Logistics and Transportation Analysis By: Dwight Klappich; Timothy Zimmerman; Tim Payne
Definition: Radio frequency identification (RFID) is an automated data collection technology that uses radio frequency waves to transfer data between a reader and a tag to identify, track and locate the tagged item. RFID does not necessarily require physical sight or contact between the reader and the tag. An RFID reader is a radio frequency device that emits a signal through an antenna. This signal is received and responded to by the RFID tag. Readers come in various
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forms. A portal reads tags as they pass through it. A handheld device reads tags in a portable manner. Mounted readers are affixed to mobile assets to communicate with tags.
RFID tags are small devices that have a range of capabilities in terms of memory, read range and level of read/write, and contain information ranging from the product serial number to product history. There are two basic categories of tags — passive and battery-enabled. Passive RFID, specifically ultrahigh-frequency (UHF) passive, is the most-common form of RFID system in the logistics market. A traditional passive tag does not have a battery, and collects the necessary power from the radio interrogation of the reader. It usually provides only minimal information, such as identification numbers, and has a limited read distance. These fairly inexpensive tags cost from 10 cents to $10, with a range not normally exceeding 20 feet.
Battery-enabled tags fall into two major groupings: battery-assisted passive (BAP) technology and active RFID tag technology. BAP tags maintain many of the characteristics of traditional passive tags, but add additional value two ways:
• By increasing read reliability
• Through the ability to do more than hold a product ID — for example, they can be used to monitor the condition of goods, such as temperature or excessive vibration.
Active RFID uses an integrated battery to respond to a reader and provides more capabilities, such as the ability to identify individual items and provide basic processing. These tags have historically operated at 433MHz and 900MHz. The cost of active RFID runs from $5.00 to hundreds of dollars, with a range not normally exceeding 300 feet. BAP technology is essentially a low-cost active tag, but it is referred to as BAP because it uses passive RFID protocols. BAP is being researched and enables the long read range of active tags to be combined with the low cost of passive tags.
Position and Adoption Speed Justification: Numerous applications of RFID have been hyped for inventory management; however, RFID and similar sensory technologies are emerging as a strong asset management tool with the ability to collect information about an asset as it moves through the supply chain, as well as provide asset location visibility. Airlines facing economically challenging conditions will be slow adopters of RFID-enabled management systems for their baggage-handling applications, as well as inventory parts tracking. Many large carriers and shippers will consider RFID-enabled projects because of the global adoption of electronic manifesting. However, standard RFID technologies alone cannot provide long-range geolocating, such as tracking the location of a vehicle miles from its domicile, so look for sensory technologies to intertwine with RFID tags to observe and communicate location and environmental conditions.
One trend in this market is the combination of sensory technologies: RFID/GPS, RFID/onboard computer, RFID/bar codes, RFID/Wi-Fi, etc. Sensor-based combinations will become more viable with the standardization of the interface between the tag and the sensor, which is currently defined as Gen2 Class 3.
It has been assumed that a network of connected RFID readers will emerge at ports of entry, warehouses or mobile assets, such as on light rail, but this has not yet materialized beyond narrow pilots. The technical and architectural requirements of sensory-based combinations, or "automated identification technologies," will be dramatic in scale. This will be difficult and expensive to achieve beyond specific usage scenarios. If the technical and architectural goals are achieved, it will be vital to understand what to do with the data now being collected along a sensory supply chain to provide a realistic return on investment. Although there have been some large-scale deployments (such as the U.S. Department of Defense) that span multiple organizations, these specialized and often-expensive initiatives have not been fully
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commercialized. More narrowly focused offerings that are more commercialized will help improve adoption.
Various technologies will coexist, because each technology is suitable to specific process situations. RFID use varies by segment, with asset management, such as tracking returnable assets and transportation, leading adoption. On the government track, be prepared for RFID-enabled projects to monitor assets with relatively long use cycles. Toll payment (900MHz) and contact-less cards (13.56MHz) have been in use for some time, whereas applications in logistics and traffic management are emerging. However, RFID will not replace bar codes or other mobility solutions such as GPS.
User Advice: Monitor and be aware of privacy impact assessments. Participate in RFID-enabled tracking systems, if only as a pilot project, to gain experience and positioning for the widespread adoption of larger, RFID-based system implementations in the future. RFID will require an infrastructure beyond tag/reader — it will require data storage, network performance, middleware and applications.
Business Impact: Major initiatives that use or propose to use this technology will include tracking of assets, loss prevention, inventory management, rail transportation, logistics, toll payment, traffic management, and transportation asset tracking and control. The impact and business value will vary across industry segments, proposed use, or business solutions and regions. Within an enterprise, the value will be derived from the potential additional benefits of using RFID technologies versus other identification technologies, such as bar coding. In these cases, a cost-benefit analysis should compare the various identification technologies, and RFID should only be chosen if the business case proves it to be the better approach.
The grander, yet still elusive, vision is the value RFID would offer as part of the extended supply chain and logistics challenge, where RFID would be used to track, monitor and facilitate the flows of products and modes of transportation across the global supply chain. To achieve RFID's end-to-end vision, standards must emerge that define the requirements that the system components must follow to operate across enterprises and geographies. For example, global supply chains will require a set of common standards to facilitate proper interchanges of information across all the entities involved in an international shipment transaction.
Recommended Reading: "Securing UHF RFID Passive Tag Communications"
"RFID in the 2009 Supply Chain: Overview and Best Practices for Maximum Investment Value"
"Cool Vendors in Supply Chain Management, 2009"
Global Trade Compliance (Import and Export) Analysis By: Dwight Klappich
Definition: Global trade compliance (GTC) — import and export compliance — refers to a category of software that addresses the rules and regulations and trade-specific costs of conducting cross-border trade. GTC is fundamental to the execution of cross-border transactions, and addresses the regulations of the importing and exporting countries, the parties involved in the
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transaction, the categorization of goods, the intended usage/state of the goods, and the source and destination of goods while considering things like free-trade zones. Critical to trade compliance solutions is the richness and flexibility of the content databases that codify trade regulations and restrictions. GTC solutions have two primary components: the business application and the trade content. Trade content is the repository of the data, rules and costs for each harmonized tariff schedule (HTS) code by source/destination country. Some GTC vendors provide both the application and content, while others only provide the application, and the customer sources content independently. Holistic GTC solutions cover restricted/denied/sanctioned/Office of Foreign Assets Control (OFAC) screening, import compliance, export compliance and free-trade-zone support.
Position and Adoption Speed Justification: GTC is a relatively mature application category, but solutions continue to evolve to cover more geographies within a single solution, and to enable broader trade compliance coverage. However, GTC remains underautomated, largely because many companies lack the internal expertise to perform GTC in-house, irrespective of the availability of good systems, so they outsource this activity to customs brokers. We find the GTC vendor landscape changing, with new entrants moving in front of more-established vendors due to several factors, including better technology, richness of trade content or the availability of GTC as part of an integrated suite.
User Advice: Users must understand that the business application and trade content are two independent, but tightly connected, aspects of GTC solutions. Users must first understand their content needs and then use this information as they evaluate GTC offerings. Although there are advantages to a single-vendor offering of both the application and content, this should not overshadow all other considerations, such as integration to back-end systems, vendor domain expertise and the cost of ownership.
Business Impact: GTC is an application category that is important, but not value-adding. Users must be able to comply with the rules that govern global trade, and any viable application must be able to support this need, but GTC is primarily a risk-avoidance investment, and doing compliance better than a competitor is not a source of strategic differentiation. The business benefits can include reduced administrative costs, avoidance of penalties and less disruption in the flow of goods.
Benefit Rating: Low
Market Penetration: 5% to 20% of target audience
Maturity: Early mainstream
Sample Vendors: Integration Point; Kewill Systems; Management Dynamics; Precision Software (a division of QAD); QuestaWeb; SAP; TradeBeam; Vastera (Morgan Stanley)
Recommended Reading: "Target Global Trade Investments Tactically"
"Developing an End-to-End Global Trade Management Functional Map"
"The Pull-Push Paradox of Global Supply Chain Management"
"Develop an Application Portfolio Strategy to Address the Needs of Global Trade Management"
"How Globalization Has Affected Direct Material Sourcing"
"Global Economic Crisis Demands New Strategies for Managing Global Supply Chains"
"Supply Chain Management Vendor Guide, 2008"
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"Roundup of Supply Chain Execution Research, 2008"
Yard Management Analysis By: Dwight Klappich
Definition: Yard management is a set of capabilities, normally closely associated with warehouse management, that deals with the management and process execution tasks and activities related to, or that impact, a company's shipping yard and dock doors, taking into consideration equipment/facility/employee constraints and activity demands.
Position and Adoption Speed Justification: In modern, large, high-volume logistics operations, the yard has become an extension of the warehouse both in terms of synchronizing the yard with dock doors for shipping and receiving, and in using the yard as a supplementary storage location. Coordinating and managing the flow and movement of vehicles and trailers throughout the yard has become an important activity for logistics operations. Yard management can be fairly rudimentary, with the application simply noting manual entries of asset movements in and out of parking spaces to very advanced use of real-time asset-tracking technologies, such as radio frequency identification (RFID) and related technologies, to provide real-time visibility of asset movements and locations. The former is well-addressed by mature applications, while the latter is less mature, but solutions exist and are evolving rapidly.
User Advice: High-volume, logistics operations should consider yard management, preferably as an extension of their warehouse management system (WMS), for integration reasons. However, the largest and most complex yard operations should consider best-of-breed solutions that offer real-time locating technologies.
Business Impact: Improving logistics throughput demands that yard activities be coordinated with warehouse activities, like receiving and shipping, to ensure that goods flow smoothly and as quickly as possible. For very large yards, the ability to quickly identify the location of goods in the yard can eliminate wasted time looking for the right trailer or containers. Yard management can also provide improved security of goods coming into and moving around the yard.
Definition: Supply chain management (SCM) as software as a service (SaaS) refers to SCM software that is owned, delivered and managed remotely by one or more providers. Companies have multiple options for sourcing SCM applications: on-premises, hosted, on-demand/SaaS or outsourced/managed service. If the SCM vendor mandates installation of software on-premises using the companies infrastructure, then this is not SaaS. SaaS SCM requires that the vendor provide remote, outsourced access to the SCM application, as well as maintenance and upgrade services for it. The infrastructure and IT operations supporting the applications must also be outsourced; however, unlike with hosting, the infrastructure is shared across user organizations.
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Just having a subscription pricing model does not qualify an application as SaaS, unless it meets the criteria we've just presented.
In some cases, SaaS is simply an alternative method for sourcing SCM functionality. However, in the SCM areas where SaaS has the most usage aspects of supply chain collaboration, transportation management and global trade management, SaaS offers additional characteristics that support these multienteprise processes and differentiates it from traditional on-premises implementations of the same type of functionality.
In the case of transportation management systems (TMSs), a distinguishing characteristic of SaaS TMS is the availability of a preonboarded carrier network that allows shippers using the SaaS TMS to have electronic access to a large population of freight carriers. With SaaS TMS, users can theoretically tender shipments to any carrier already on the network. In most cases, however, shippers will only work with carriers with whom they already have negotiated a contract.
In global trade management (GTM), there are two areas where SaaS is prevalent: trade compliance and global visibility. With global visibility, the differentiating characteristic of SaaS is similar to SaaS TMS. There is a preonboarded network of carriers and other trading partners that participate in international shipments, wherein users are electronically connected to organizations on the network. With trade compliance, the differentiating characteristic of SaaS is on-demand access to trade compliance content — the rules and regulations for conducting cross-border trade transactions. Because compliance content can change daily, SaaS allows the vendor to update content once for all users, whereas traditional on-premises models require a content publishing capability.
SaaS in other SCM areas is not as prevalent, nor in demand by users, because other SCM areas have not been as affected by the need to operate multienterprise processes. However, there are some vendors beginning to offer SaaS versions of supply chain planning and warehouse management.
Position and Adoption Speed Justification: On-premises applications are still the dominant delivery vehicle for SCM applications. Over all, SaaS represents less than 20% of the SCM application market. However, in TMS and GTM, SaaS is growing and has moved from an option to a preference for many users. In TMS, SaaS is becoming the preferred delivery option for smaller shippers with annual freight spending of less than $50 million per year) and is a viable alternative in one-half or more of large shippers considering TMS. For GTM, most of the vendors favor SaaS deployment; vendors that offer on-premises are the exception. Over all, market penetration of SaaS TMS remains modest; but in the aforementioned categories, it is growing rapidly. In other areas, like supply chain planning and warehouse management systems, growth is negligible.
User Advice: Understand and evaluate the trade-offs between rich functionality, which, for most categories other than GTM, favors leading on-premises SCM applications, and upfront costs, which, in most cases, favor SaaS. Companies with complex requirements and that want and need more than the basic SCM capabilities should focus on market-leading SCM solutions, which are primarily on-premises solutions today. Companies with less-stringent requirements or that are looking for an interim solution — less than three to five years planned solution life — should consider SaaS SCM. Model costs for on-premises and SaaS to at least five to seven years. This will enable you to compare total cost of ownership looking at long-term subscription costs compared with upfront license and annual maintenance costs, taking into consideration possible annual increases. Carefully review implementation costs for which many SCM SaaS vendors overstate their advantages.
Business Impact: In general, SaaS SCM applications deliver the same business advantages of the relative SCM application category, whether on-premises or SaaS. However, in TMS and
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GTM, the availability of a preonboarded network improves the ability to collaborate with trading partners, and allows for added flexibility for users to change their network when and if needed, without the burden of onboarding new trading partners each time.
Recommended Reading: "The Emergence of the Multienterprise Business Process Platform"
"Issues to Consider When Building a TMS Business Case and Evaluating TMS Sourcing Options"
"TMS Sourcing Options Are Expanding With the Increase in the Number and Types of Products"
"Evaluating the Efficacy of TMSs as SaaS"
Climbing the Slope Capable-to-Promise Systems Analysis By: Dwight Klappich
Definition: Capable-to-promise (CTP) systems enable enterprises to commit to customer orders based on production/resource capacity (available or planned) and inventory. CTP solutions consider resource (equipment, people and materials) availability/capacities, constraints, work in progress or planned work, multiple steps in the production process, multiple nodes in a supply chain network (including, in some sophisticated use cases, supplier networks), and various rules to calculate accurate promises. Newer systems also consider non-production-related constraints, such as transportation, which enable delivery factors (such as shipping mode options) to be factored into promise dates.
Position and Adoption Speed Justification: CTP products are available and proven, but many users struggle with issues of data availability, accuracy, information latency and cultural change. Although CTP technology has been around for several years, adoption has not been widespread, and further adoption will remain relatively slow because of user demand, not for lack of CTP technology. Many customers have resorted to less-sophisticated, available-to-promise (ATP) systems, even though visionaries are already talking about concepts beyond CTP, such as profitable-to-promise systems. Historically, best-of-breed solutions have been the most robust alternatives, and they created integration challenges. However, some ERP vendors are enhancing their CTP capabilities, but are not likely to see increased adoption until the economy supports more long-term investment efforts needed to support CTP.
User Advice: CTP is a more sophisticated technology than ATP, because it must look at more resources and constraints. Select the appropriate approach that yields the desired level of customer service. Recognize that CTP requires greater integration and more data from supply chain planning solutions than ATP engines.
Business Impact: CTP systems enable enterprises looking at postponement, make-to-order and assemble-to-order strategies to better use their assets and improve customer satisfaction by providing better and more-informed promise dates.
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RFID and Sensor-Based Inventory Management Analysis By: Tim Payne
Definition: Sensor-based inventory management involves the visibility and/or tracking of inventory with sensor technologies, such as radio frequency identification (RFID). Most of these applications use passive RFID, along with a range of software, to support the relevant business processes of inventory management. This concerns the direct sensing and observation of inventory, because the tracking of containers and other types of assets that contain inventory is likely to fall under sensor-based asset management.
Position and Adoption Speed Justification: Retailers have been the most-prominent users of this technology. Retailer delays and difficulties with passive RFID-enabled inventory management indicate to many observers a broader problem with passive RFID. However, the industry's hyperfocus on retail RFID projects and their use as a broad indicator for the overall health of RFID is somewhat misleading. Prominent retailers have pursued open-loop RFID projects, where the cost of the implementation is spread over many business partners that potentially can share the information on the tag. The success or failure of large retailers that are trying to lead the movement to RFID does not predict how well other enterprises can use RFID. As the technology continues to evolve and address operational concerns, the success of most inventory-based RFID projects is tied to the business case and the ability of the enterprise to construct business processes that leverage additional information about the inventory and products that RFID provides. Many of the successful implementations are closed-loop applications, where the company deploying the technology has more control over the end-to-end solution.
Therefore, the maturation of passive RFID-based inventory management will depend largely on the specific business process conditions that the enterprise faces, rather than on industrywide mandates of the technology.
User Advice: The worst thing that happened to RFID was that it was conceptualized as the "next bar code." This caused many enterprises to focus on established uses of bar codes and to replace them with RFID. This embodies the worst elements of business-case construction,
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because, for the most part, the bar-coding process works, and RFID technology is unable to match it in many ways. Where the business process is under the authoritative control of the enterprise, bar coding is usually the better option, unless bar codes are not physically feasible (for example, where there is a lack of line of sight or specific process conditions).
Gartner recommends that sensor-based, inventory-focused applications focus on supporting inventory visibility, traceability and management in more-chaotic business processes that are beyond the authoritative control of the enterprise, and where additional information is needed beyond what a bar code traditionally supplies. For example, retail selling floors and hospitals are relatively chaotic process environments, compared with a factory floor or a disciplined warehouse. This is a key factor that determines whether inventory-based passive RFID projects will be successful.
Business Impact: This technology offers organizations the opportunity to extend control over business processes that were invisible to the enterprise. By 2017, at least one Global 2000 enterprise will exploit sensory-based inventory management to reshape its business operations and dominate its industry. For others, this technology will provide an early warning into supply chain or operations issues, and allow proactive responses. However, this type of business case is difficult to access.
Sales and Operations Planning Analysis By: Tim Payne
Definition: Sales and operations planning (S&OP) means different things to different people. Gartner defines S&OP as a performance-based, cross-functional business process that harmonizes operational plans across sales, marketing, procurement, manufacturing, distribution, product development and finance. It requires technology that supports the harmonization of operational plans, such as demand, supply, production and new product launch plans; is linked to capable performance management technology, such as dashboards and scorecards; and is able to support the process aspects of running an S&OP process. The reality is that what most users implement as S&OP falls significantly short of this definition, and, as such, in this Hype Cycle we are analyzing what has been adopted.
Position and Adoption Speed Justification: The concept of S&OP has been around for many years, and is particularly well-known in manufacturing organizations. S&OP should harmonize business strategies and operational plans. However, the strategic dimension is now mostly missed, and S&OP is mainly focused on operational reconciliation using supply chain planning as the basis. The strategic dimensions are starting to be incorporated into overlay capabilities to S&OP — integrated business planning (IBP). Successful adoption of S&OP has been limited by organizational issues, as well as the inability of technology solutions to support a truly cross-functional processes with integrated what-if and execution capability. Supply chain planning (SCP) and ERP vendors are focusing on providing some S&OP capability, as well as pure-play S&OP solutions. Specific S&OP solutions (as opposed to using existing SCP applications) are maturing, and some are starting to move their solutions toward providing basic IBP capabilities. During the recent turbulent market conditions, we have seen a significant interest in S&OP. Users are re-examining their S&OP processes and trying to figure out how to make them more effective.
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This increase in interest is driven by the need for better visibility and scenario management into the supply chain, to help evaluate different potential outcomes and effects arising from increased uncertainty on the supply side and the demand side.
User Advice: To support your S&OP initiatives, evaluate the S&OP tools on the market. Pay attention to how these tools support the business processes of S&OP, not just the data aggregation and representation requirements. Understand that demand planning, sales pipeline planning solutions, or product and distribution planning that have been extended with S&OP screens and reports will not necessarily support all the process requirements and financial impact analyses of best-practice S&OP. Sources of S&OP functionality and data used in specific S&OP tools include SCP applications, ERP suites, business intelligence suites and best-of-breed applications.
Business Impact: These applications enable companies to make better use of resources by helping to balance supply and demand. Additionally, they deliver improved collaboration throughout the organization, as well as what-if and scenario management capabilities to help in the evaluation of alternate operational options.
Benefit Rating: Moderate
Market Penetration: More than 50% of target audience
Recommended Reading: "MarketScope for Sales and Operations Planning, 2008"
"Assessing the Maturity of Your Sales and Operations Planning Process"
Multienterprise Supply Chain Collaboration Analysis By: Andrew White; Tim Payne
Definition: Multienterprise supply chain collaboration supports the unique set of requirements that come from:
• Multiple stakeholders that share a common objective (promotion, business plan, product launch or development)
• A high degree of data integration (needed to synchronize stakeholder systems and applications)
• A flexible, scalable and real-time business process that enables all stakeholders to participate effectively (business process design, workflow, business activity monitoring, business intelligence)
Multienterprise collaboration solutions are formulated business processes defined by a business process management engine or represented by a business application. The applications are sourced on business process networks (BPNs), business process hubs (BPHs) and the emerging multienterprise business process platforms (ME-BPP). Such forms of collaboration are structured and can use industry-specific data and/or process standards, such as collaborative planning, forecasting and replenishment (CPFR), or follow other standards that generally follow industry orientation. Other forms of collaboration exploit technology standards for data interchange, although the business processes for which collaboration occurs are uniquely supported by custom applications.
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Position and Adoption Speed Justification: Formalized enterprise-to-enterprise business collaboration (which differs from multienterprise) has been available for more than 12 years, since the original Voluntary Interindustry Commerce Solutions CPFR standard, but has rarely been deployed outside channel master or brand owner efforts in a scalable, repeatable or sustainable manner. However, this is far simpler than large-scale multienterprise collaboration. Multienterprise collaboration is taking place in numerous industries, such as retail, consumer goods, automotive, industrial, chemical, oil and gas, and utilities. Gartner continues to see multienterprise collaboration evolve and re-emerge with newer related technologies — such as master data management (to ensure data consistency in processes) and global data synchronization (to synchronize data and ensure data semantics in the B2B sphere) — to remove technical barriers to large-scale integration, which is a precursor to multienterprise collaboration.
The technology is slowly pulling itself out of the Trough of Disillusionment, but it is hard going. Extensive collaboration takes place, often informally, between buyers and sellers, even to the point where no formal structure and/or application is recognized as supporting the process. As such, there is often the comment that "you never hear about CPFR" or "you don't see much collaboration these days." The technology has a bad reputation, even if it is the users who fail to organize properly for effective collaboration. The technology is not the barrier anymore.
User Advice: Look for business applications that embed collaboration technology in the business process. Apply collaboration technology outside the business process and application as a last resort. Focus collaboration programs on developing shared risk and reward measures for all stakeholders.
Business Impact: This technology affects complex multienterprise business processes. It is a source of competitive differentiation when enterprise-centric business processes can no longer be squeezed for cost savings. It is common in initiatives such as distributed order fulfillment, CPFR and vendor-managed inventory.
Recommended Reading: "Best Practices: Checklist for Issues to Consider in Multienterprise Collaboration"
"The Emergence of the Multienterprise Business Process Platform"
Voice-Directed Picking in Warehouse Management Analysis By: Dwight Klappich
Definition: Voice-directed picking in warehouse management involves the use of voice recognition and speech synthesis technology to drive activity in warehouse operations. This enables hands-free and eyes-free operations. Here, we refer broadly to voice-directed activity in the warehouse, regardless of implementation style. Most implementations take place via a proprietary interface and proprietary hardware. However, there is an industry move to an open-standards technology implementation of voice-directed picking. Typically, this is a third-party subsystem, rather than an integral part of the warehouse management system (WMS).
The major consideration for this technology has been where to perform voice processing and synthesis; however, this has been largely resolved, and the portable unit receives machine
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instructions that are translated into speech synthesis or recorded voice instructions to the warehouse operator. Speech feedback and confirmations from the user are interpreted on the machine (rather than by passing the sound file over the network), and a confirmation is passed to the host system. In the case of speech recognition for multilingual workers, some systems have the ability to translate instructions into the worker's native language, which can broaden the workforce and eliminate errors. Hands-free speech recognition solutions can be used to replace pick-to-light anywhere in the warehouse or distribution centers, with return on investment (ROI) for speech often achieved from reductions in service and maintenance costs alone.
Most warehouse management applications focus on voice-directed picking activities. However, some enterprises are considering the technology to direct other activities, such as put-away or replenishment. Although high-speed picking applications are the most common use of this technology, additional implementations of the same model include convenience stores (many small items in a single location), as well as liquor and cigarette distributors.
Speech recognition can be used in a multimodal capability (such as voice plus bar code) with many handheld platforms. In this implementation, speech recognition can be used for only the operations or inputs that require eyes-free and hands-free operations, where other processes can be implemented via bar code or keyboard, as needed. Additionally, the availability of a screen and keyboard provides not only a backup input capability for speech recognition operations when the voice recognizer has difficulty (for example, because of an accent), but also the ability to address more-complex activities, such as exceptions.
Position and Adoption Speed Justification: After several years of competing designs and styles, the industry has settled on the design and use of the system outlined above.
Initial uses were grocery-oriented, because the systems were so complicated and training requirements were high. This meant that only large warehouses, such as those for grocery facilities, could afford the upfront investment. However, the technology has matured to the point that most facilities with meaningful picking volumes can afford to use voice technology.
User Advice: All users with intensive picking requirements, such as case-picking operations, should evaluate voice picking as an addition to a warehouse management environment. It's possible to go directly from paper-based picking to voice picking, so there is no need to step through radio frequency picking before implementing voice picking. Users will need to ensure that the warehouse has good wireless network coverage. Additionally, users need to consider whether they should upgrade their WMSs as part of the project to ensure that voice picking is implemented on top of modern business practices, although business benefits can be had without upgrading the underlying WMS.
Business Impact: Voice-directed picking can improve the productivity of order selectors, especially in situations where both hands are required to perform picking operations, such as case picking for pallet building. The use of voice direction can improve safety in the warehouse, because employees are not distracted by reading a screen for instructions. In hands-free operations, the productivity improvement can exceed 30%, and the ROI is less than one year, in comparison to the paper-based systems that they often replace. Productivity improvements will be lower when integrating with a more-modern WMS with radio frequency picking and integrated task management. This is because many of the productivity improvements cited when moving from paper picking to voice picking result from the use of task management technology, which would have been implemented in a modern WMS.
Benefit Rating: Moderate
Market Penetration: 1% to 5% of target audience
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Recommended Reading: "Magic Quadrant for Warehouse Management Systems, 2007"
Integration as a Service Analysis By: Benoit Lheureux; Paolo Malinverno
Definition: There is a market for business-to-business (B2B) integration capabilities that are hosted in a multitenant environment and delivered as a service, rather than as software (see "Taxonomy and Definitions for the Multienterprise/B2B Infrastructure Market"). Traditionally known as electronic data interchange (EDI) value-added networks (VANs), we now refer to these hosted offerings as integration as a service (IaaS), and we call the vendors that offer such services (usually in one role relative to other roles) integration service providers.
IaaS involves the combination of several categories of functionality:
• Communication services — Multiprotocol support with EDI, FTP, Applicability Statement 2 (AS2), RosettaNet and Web services; the ability to connect to cloud-computing application programming interfaces (APIs), such as those from salesforce.com or Google.
• Community management services — At one time, these consisted largely of online electronic transaction tracking and reporting tools; however, they now increasingly include collaboration tools to facilitate the collection of community member profile information, the provisioning of electronic connections and managing certificates for security.
• Integration and interoperability services — In-line translation and back-end system integration; online development tools for implementing services-based choreography and data translation; governance mechanisms to define and manage distributed service policies; and dashboards and reporting mechanisms for monitoring B2B connections, messages and transactions, etc.
• Optional application services — These include order visibility, data validation and compliance management. Such functionality is delivered as software as a service (SaaS) and ranges from lightweight ERP capabilities (such as order management for small suppliers), which is tightly integrated with an IaaS offering, to more full-featured forms of e-commerce SaaS (such as vendor management inventory), which are sold separately from (but often enabled by) IaaS.
In many cases, IaaS is only one component of a vendor's overall IT solution portfolio. Thus, rather than simply categorizing all such vendors as integration service providers, it is more accurate to say that many vendors offer IaaS in one role, while offering other IT products and services (such as SaaS) in another. To qualify as an IaaS provider, according to this definition, a vendor must market and support IaaS as a stand-alone offering, which is separate from its other IT products and services. Vendors that bundle hosted integration services into their overall IT portfolios may be offering IaaS and doing what they need to do to address their customers' B2B integration requirements, but Gartner does not consider them direct competitors in the IaaS market segment.
Position and Adoption Speed Justification: Many IaaS providers that were primarily supporting only EDI mailbox-based B2B projects have substantially expanded their services during the past five years, and new IaaS providers have entered the market. For example, in
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addition to their continued support for more-traditional approaches to B2B — such as EDI, FTP (still widely used), and async and bisync dial-up (which are still being used, but are in decline) — the more well-established providers of IaaS (such as GXS, Sterling Commerce and Inovis) now support modern B2B data formats and protocols, such as XML, AS2, Web services, RosettaNet and new forms of multienterprise collaboration, as well as near-real-time multienterprise process and compliance monitoring. Meanwhile, new IaaS providers (such as Boomi, Cast Iron and Pervasive Software) have entered the market, primarily targeting cloud-computing/SaaS integration scenarios.
There are two sectors in the B2B market. One is focused on traditional e-commerce, and the other involves cloud-computing/SaaS integration. They are highly segregated; however, we already see users implementing projects that blend these B2B project scenarios. For example, companies implementing CRM functionality on salesforce.com are increasingly integrating sales orders with on-premises order management applications and related e-commerce projects (see "SaaS Integration: How to Choose the Best Approach").
The widespread use of IaaS for traditional e-commerce projects has been pulling IaaS steadily up the slope toward the Plateau of Productivity, and the fast-growing adoption of IaaS for multienterprise SOA projects and cloud-computing/SaaS integration projects will help drive IaaS momentum up the slope and ultimately into the Plateau of Productivity during the next few years. IaaS is being offered by a wide range of providers, ranging from vendors that are primarily focused on traditional e-commerce projects (such as GXS) and those focused primarily on cloud-computing/SaaS integration projects (such as Boomi).
Although the Trough of Disillusionment is several years past, IaaS is traveling up the slope to the Plateau of Productivity slowly. Vendors continue to expand and refine their IaaS offerings to incorporate new capabilities, including more-programmatic APIs to access IaaS services and support automated provisioning. Vendors are also implementing Web-based IaaS development in support of IT end-user and independent software vendor (ISV) self-provisioning of IaaS functionality; adding better Web services and governance support to support multienterprise service-oriented architecture (SOA) projects; expanding operations, including multisite regional data centers to more effectively support international B2B projects; and improving community management tools to enable self-service IaaS and drive down costs for hubs managing large multienterprise communities.
User Advice:
• Companies that don't want to unilaterally manage their own B2B infrastructures should consider IaaS.
• Multinational IaaS capabilities are maturing, but prospects should always verify whether a potential IaaS provider can meet their particular country-by-country requirements, including local-language support and in-country IaaS network points of presence (see "The Status of B2B in Europe, 1Q09").
• When negotiating an agreement with providers, look for transparent and predictable pricing. Customers are increasingly signing deals with "bundled" B2B integration features, such as a tiered number of external business partners and volume, fixed-price in-line translation, and process visibility that associates relevant B2B documents (for example, purchase orders, advanced shipment notices and invoices for order to cash).
• Refer to the "Gartner Magic Quadrant for Integration Service Providers" and "Who's Who in Cloud-Computing/SaaS Integration, Volume 1" to gain an understanding of the highly diversified IaaS vendor landscape.
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• Integration projects can be deceptively complex, and, by itself, IaaS doesn't always sufficiently address customer requirements. Determine whether your IaaS provider also offers such services as B2B project outsourcing (see "Taxonomy and Definitions for the Multienterprise/B2B Infrastructure Market").
Business Impact: IaaS has been widely deployed worldwide for more than a decade. In 2008, it generated more than $1 billion in IT revenue worldwide (see "Forecast: Sizing the Cloud; Understanding the Opportunities in Cloud Services"). This makes IaaS one of the most widely adopted and well-established forms of application infrastructure delivered as SaaS (see "Application Infrastructure for Cloud Computing: An Emerging Market"). Although many companies still implement B2B projects themselves, leveraging a combination of in-house integration middleware and B2B standards or Web APIs, companies of all sizes, in all industries and in most well-developed regions have the option to outsource their B2B infrastructures, rather than licensing and deploying some form of in-house B2B integration software.
Multienterprise projects are typically mission-critical, but the increased modernization, reliability and scale provided by most providers of IaaS mean that companies have a viable alternative to B2B software and in-house B2B infrastructure projects. Hence, from a sourcing point of view, they should treat B2B infrastructure investments like any other IT investment when choosing between implementing an in-house B2B infrastructure or relying on IaaS.
Even the simplest in-house, single-server B2B infrastructure project may require off-site hosting, high-availability server configurations, disaster-recovery capabilities, monitoring tools and a well-trained staff. Service providers with well-established, multitenant infrastructures can generally achieve economies of scale to deliver such capabilities. For common integration scenarios, they often provide some form of configurable or customizable prepackaged integration solutions. This means they have the opportunity to save companies 10% to 30% on the cost of implementing B2B infrastructure themselves, in-house, by leveraging their packaged integration, as well as fault-tolerant and disaster recovery capabilities across multiple B2B communities.
Benefit Rating: High
Market Penetration: More than 50% of target audience
Definition: Supply chain analytics refers to the methodologies, metrics, processes and systems used to monitor and manage the performance of a portion of a supply chain, including portals, dashboards, key performance indicators, industry templates and business activity monitoring solutions.
Position and Adoption Speed Justification: Supply chain analytics are the tools needed to support supply chain performance management (SCPM) at a departmental or functional level, and are key to monitoring and measuring a supply chain's activities and performance. Most enterprises have some, although often rudimentary, measurement systems. It will be several years, however, for use to reach expectations and for solutions to mature, because it takes time to develop the measurement strategies and then deploy the necessary processes and integrated systems. Basic supply chain analytics will devolve into tactical departmental analytics, while a more-strategic use of supply-chain-oriented performance management will likely replace it with a more end-to-end view of supply chain management (SCM) and product performance management.
User Advice: Enterprises should look first at analytic solutions that are seamlessly integrated with their core SCM applications. Consider stand-alone systems only if:
• You have extreme SCM application heterogeneity, then focus on the SCPM solutions.
• You are looking for a consolidated view of SCM metrics where underlying data may reside in multiple applications, then, again, focus on SCPM solutions.
• You find it impossible to choose a single solution from a single application vendor.
Business Impact: Supply chain analytics bring about proactive and intelligent management of an enterprise's supply chain functions by using ongoing monitoring and feedback to adjust and fine-tune processes and activities.
Benefit Rating: Moderate
Market Penetration: 20% to 50% of target audience
Maturity: Early mainstream
Sample Vendors: i2 Technologies; IBM Cognos; Informatica; JDA Software; Manhattan Associates; Oracle; RedPrairie; SAP; SAP (Business Objects); SAS; Teradata
Recommended Reading: "Top KPIs for Supply Chain Management"
"Confusion Escalates in SCM Demand Planning Market"
"SCM Requires the Alignment of Decision-Making Solutions"
"Predicts 2009: How ERP and the Supply Chain Are Adapting to a Changing Economy"
"A Roundup of Supply Chain Planning Research"
"Use the Gartner SCM Maturity Model to Show the Business Benefits of SCM Investments"
"Roundup of Supply Chain Execution Research, 2008"
"The Four Technologies Most Used to Aid in Strategic Decision Making"
Business Process Hubs Analysis By: Andrew White; Debbie Wilson
Definition: A business process hub (BPH) is a process-specific instance of multienterprise applications between two or more companies. A BPH is not a category of IT vendor — it is what emerges from an alignment of technology supporting private communities for specific business processes. From the business process point of view, a BPH arranges the design, orchestration and execution of a specific business process, such as order to cash, claims adjudication, procure to pay, demand forecasting collaboration, product planning/design and sourcing between trading partners. Many BPHs leverage an integrated business process network (BPN) to provide detailed, transaction-level integration. The multienterprise applications can leverage business-to-business (B2B), such as RosettaNet; business process, such as Voluntary Interindustry Commerce Standards (VICS) collaborative planning, forecasting and replenishment (CPFR) standards; or proprietary specifications. The BPH also often supports community management services, where it provides technical and user help desk services to all participants (running campaigns to enroll business partners).
From the multienterprise community point of view, the scope of a BPH can be "one to many" or "many to many." BPHs that are implemented only between an enterprise and its private external business partners are effectively hosted (or even managed) partner-facing portals. Many BPHs are evolving by offering technology to integrate the B2B transactions that underpin the BPH applications, known as BPNs. Other BPHs are beginning to adapt beyond supporting a BPN, and are evolving toward multienterprise business process platforms (ME-BPPs). As ME-BPPs emerge, BPHs will become marginalized and become more niche and more focused — therefore, less relevant.
Position and Adoption Speed Justification: Historically known as "e-marketplaces," BPHs never created their expected value, because many focused on business processes that were not founded on how enterprises behaved or were willing to behave. For the most part, those that have survived have shifted their focus to catalog and item-part data content synchronization, the hosting of traditional applications and Web-based collaboration to support transaction cost reduction, supply chain visibility and performance analytics, as well as multienterprise collaboration. Some BPHs are reinvesting in e-marketplace functionality, particularly in support of excess inventory liquidation and the leveraging of memberships to enable participants to find new suppliers. A few offer group contracts. Some are transitioning their focus to hosted application services, looking more like BPNs as they strengthen and, in some cases (such as Elemica), even emphasize the value of their hosted integration services (BPN capability) relative to their hosted application services.
User Advice: Source business applications, analytics and services according to criteria that measure process complexity and value to the business. Consider BPHs that function in your industry as strong candidates for procurement applications and supplier collaboration. Enterprises that are already engaged with a BPH should insist that charges be broken out among the solutions they consume from the BPH. They should exercise due diligence periodically to ensure that the cost for the use of those tools is in line with the market and is price-competitive (via economies of scale) versus what it would cost to implement the same functionality themselves.
Business Impact: BPHs can offer value to their customers by providing industry-specific hosted applications, or multienterprise applications that are often procurement-related and supply-chain-related functionality and services for "one-stop shopping." These vendors exist in only a limited number of industries. Their value often depends on the level of standardized communication among members of the same industry and the maturity of supply chain management business processes operating in them.
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Recommended Reading: "The Role of Procurement Networks in EIPP"
"The Emergence of the Multienterprise Business Process Platform"
"A Tectonic Shift in the Business Process Center of Gravity"
Warehouse Labor Management Systems Analysis By: Dwight Klappich
Definition: In this system, the best work patterns are employed to construct goal times for the performance of each discrete task in the warehouse. These are called "engineered labor standards." This is done at a detailed level and can be based on a library of best work standards that specialist implementers and vendors have developed. For example, the difference in time that it takes to reach the top shelf of a warehouse rack is incorporated versus what is required at eye level. One of the most important components of this system is the incorporation of travel times into the goal time. Thus, it's important to pay attention to how the travel paths are constructed in the system.
Once these parameters are determined, each pick task is analyzed by the warehouse management system (WMS) or labor management system (LMS) to determine its goal time based on the individual elements of that task, such as beginning and ending zone, person assigned the task and time on shift (to account for things such as fatigue). Then, the actual time is compared to the goal time for the specific task, and achievement is evaluated. This is superior to productivity management systems that evaluate only the completion of an aggregate number of tasks during a work period (such as picks per hour). This is because the more-precise specifications of goals and performance enable the manager to properly evaluate work, counsel for improvement and fairly compensate good performance. However, most vendors have not completed the technology projects to enable the systems to fully comply with restrictive labor laws outside the U.S. In addition, there are still few reference customers on these systems outside the U.S., although some European companies use them at the aggregate level.
These systems are being extended to labor-scheduling systems, so that the activities of the warehouse can be projected over a time frame, and labor requirements can be more-accurately forecast and scheduled. Some of these systems advertise the ability to calculate gross pay and, potentially, to obviate the need for third-party, time-and-attendance systems.
Position and Adoption Speed Justification: This technology has been used primarily in large grocery facilities, because they require fewer tasks than other types of warehouses. However, the technology and engineering standards have expanded during the past three to five years. This has made the technology and labor management processes applicable to most warehouse facilities. The LMS commercial offerings from some vendors are somewhat antiquated and are undergoing technical modernization as the focus on the system expands to more users. They once were specialized systems, but, with general use, there's more emphasis on the technical fit and finish of the systems.
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Most LMS implementations have been in the U.S.; European companies have generally resisted this technology because of local labor laws or perceived cultural constraints. In parts of Europe, unions or work councils restrict detailed worker oversight from the use of tools such as labor management; therefore, LMSs are used only at the aggregate resource management level. Some vendors have begun focusing on deployments outside the U.S., and are amending systems to meet local conditions. Gartner expects these changes, as well as real-world experience in other countries, to accelerate adoption by users outside the U.S. LMS can be an add-on to established WMSs.
User Advice: Most users in the U.S. should be evaluating or implementing an LMS based on engineered standards. However, it isn't enough to just install the system. Users must be willing to incorporate best work practices, as well as build a program of worker training and rewards based on the system. This requires a high degree of change management. Users that work with labor unions should employ a consultant with specialized expertise in working with labor unions regarding the deployment of labor management systems to ensure that a win-win business case and business process are developed. Users outside the U.S. should begin evaluating LMSs to determine whether there are real or perceived issues with cultural fit and legal regulations.
Business Impact: A typical warehouse might be performing at 50% to 70% of optimal performance through the use of productivity management tools and a good WMS. The implementation of an LMS can bring a warehouse to 90% to 100% of optimal performance. The deployment of pay-for-performance schemes based on engineered labor standard goal times can move a warehouse to 110% to 120% of "optimal" levels for true best-in-class performance. Sometimes, these systems can be used to evaluate temporary labor to determine whether a full-time offer should be extended based on performance.
The scheduling components can be used to forecast labor requirements and reduce overtime expenditures. The time-and-attendance systems can reduce the need for costly third-party systems.
Service Parts Planning Analysis By: Dwight Klappich
Definition: Service parts planning (SPP) applications optimize the forecasting, stock-locating and replenishment-planning of service parts, and balance customer service with inventory and supply chain costs. These applications are specialized versions of supply chain planning (SCP) applications that focus on the unique characteristics of service parts management, such as part failure/demand uncertainty, asset and part population planning, reverse logistics, and large-part inventories. SCP solutions have additional features to support SPP, including modeling of returns, support for erratic and irregular demand planning, and multiechelon inventory optimization.
Position and Adoption Speed Justification: Core SPP, which includes parts forecasting and basic inventory and replenishment planning, is a mature application category, and there is minimal innovation in core SPP functionality. Innovation continues in multiechelon inventory optimization (MEIO) and other specialized capabilities, but these are typically targeted at the most sophisticated environments (such as complex high technology or aerospace and defense). There is a widening gap between the most sophisticated users of SPP in the aforementioned industries, who are looking for very advanced applications, and less-demanding enterprises that lack the understanding of the value of more-advanced SPP capabilities. Therefore, they make do with traditional SCP technology. A large and growing number of vendors are targeting SPP, including specialized SPP-only vendors, SCP vendors with some SPP capabilities and some ERP vendors. ERP vendors have deepened their SPP offerings, and so competition in this market segment across suite and best-of-breed vendors is high. With ERP vendors adding some SPP into their suites, this will further legitimize SPP for the less-sophisticated user, and shift the value proposition from pure depth of functionality to other factors, such as integration, single-vendor offering and breadth of offering.
Given the maturity level, we now find some users considering second- and third-generation SPP solutions where their level of sophistication warrants more-advanced capabilities, but the prime driver is technical obsolescence of previous-generation systems. Most large and complex SPP operations have some form of SPP solution today, while the small or midsize business (SMB) market is less penetrated. However, the small and midsize business (SMB) market is less likely to value or exploit the more sophisticated and specialized SPP offerings.
User Advice: Service parts operations can achieve better inventory asset utilization through more-specific functionality from SPP technology vendors. When aftermarket inventory management is a critical business issue, look to vendors that specialize in SPP solutions over generic best-of-breed SCP or ERP/suite offerings.
Business Impact: These tools can help improve parts availability while reducing inventory carrying costs for holding large populations of parts, and they can help improve service reliability and cost by having the right parts available when needed. In addition, they can enable enterprises to share supply and demand data, internally and externally. The business impact of core SPP capabilities like forecasting and inventory replenishment is strong, and when advanced capabilities like MEIO are added, the value grows significantly because inventories can be reduced even more than with just core SPP.
Benefit Rating: High
Market Penetration: More than 50% of target audience
Recommended Reading: "MarketScope for Service Parts Planning, 4Q07"
"Supply Chain Planning Market Is Bifurcating Into Process Automation and Process Innovation Markets"
Entering the Plateau Supply Chain Planning for Process Automation Analysis By: Tim Payne
Definition: Users focused on supply chain planning (SCP) for process automation are more interested in "doing SCP" more efficiently than "how they do SCP." To that end, a focus on supply chain efficiency, best practices (repeatable and standardized) and competitive parity characterizes SCP for process automation. This contrasts with process innovation, which includes areas such as inventory strategy optimization, multienterprise collaboration, causal forecasting, and service parts planning, and where the focus is on the effectiveness of the supply chain, and using it for competitive advantage.
SCP refers to applications that optimize the delivery of goods and services, balancing supply and demand. An SCP suite integrates with a transaction system to provide planning and analysis of "what if" scenarios. We have seen a split in the SCP market between SCP for process automation and SCP for process innovation. SCP for process automation is where more users and vendors are focusing their efforts and solutions. The core features of SCP for process automation include demand planning, inventory planning, replenishment planning, available to promise, manufacturing planning and scheduling, and collaborative planning (mainly internally focused), without support for industry specialization or process innovation.
Position and Adoption Speed Justification: Most users are focused on SCP for process automation, as are most vendors in terms of the solutions they provide to the market, because this is the biggest part of the SCP market. Products are now more robust and scalable, and can do more, with expanding functional footprints and the addition of capabilities such as supply chain analytics. Improved implementation frameworks ensure a higher likelihood of success, as well as a greater and faster return on investment.
User Advice: When supply chains are an asset to be optimized, or a source of cost savings or efficiency, use SCP for process automation technology to help manage decision making. It's widely available from ERP suite vendors, as well as from stand-alone best-of-breed providers.
Business Impact: These applications enable enterprises to make better use of resources by coordinating supply and demand, and by using business activity monitoring to identify anomalies in demand/supply conditions.
Benefit Rating: Moderate
Market Penetration: More than 50% of target audience
Maturity: Mature mainstream
Sample Vendors: Infor; JDA Software; Logility; OM Partners; Oracle; SAP
Recommended Reading: "MarketScope for Supply Chain Planning: Process Automation, 2009"
"Supply Chain Planning Market: Process Automation Characteristics"
"Supply Chain Planning Market Is Bifurcating Into Process Automation and Process Innovation Markets"
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Hype Cycle Phases, Benefit Ratings and Maturity Levels
Table 1. Hype Cycle Phases
Phase Definition
Technology Trigger A breakthrough, public demonstration, product launch or other event generates significant press and industry interest.
Peak of Inflated Expectations During this phase of overenthusiasm and unrealistic projections, a flurry of well-publicized activity by technology leaders results in some successes, but more failures, as the technology is pushed to its limits. The only enterprises making money are conference organizers and magazine publishers.
Trough of Disillusionment Because the technology does not live up to its overinflated expectations, it rapidly becomes unfashionable. Media interest wanes, except for a few cautionary tales.
Slope of Enlightenment Focused experimentation and solid hard work by an increasingly diverse range of organizations lead to a true understanding of the technology's applicability, risks and benefits. Commercial off-the-shelf methodologies and tools ease the development process.
Plateau of Productivity The real-world benefits of the technology are demonstrated and accepted. Tools and methodologies are increasingly stable as they enter their second and third generations. Growing numbers of organizations feel comfortable with the reduced level of risk; the rapid growth phase of adoption begins. Approximately 20% of the technology's target audience has adopted or is adopting the technology as it enters this phase.
Years to Mainstream Adoption The time required for the technology to reach the Plateau of Productivity.
Source: Gartner (July 2009)
Table 2. Benefit Ratings
Benefit Rating Definition
Transformational Enables new ways of doing business across industries that will result in major shifts in industry dynamics
High Enables new ways of performing horizontal or vertical processes that will result in significantly increased revenue or cost savings for an enterprise
Moderate Provides incremental improvements to established processes that will result in increased revenue or cost savings for an enterprise
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