Slide Presentation
Technology Enabled Supply Chain Management A Breakthrough Opportunity Draft October 25, 2001
Discussion Topics
The Supply Chain Imperative − Current Environment − Breakthrough Opportunities
Case Study: North Shore Long Island Jewish Health System − Vision − Experience to Date − Lessons Learned
Building the Foundation − World Class Operations − Technology Requirements
Question and Answer
1
The Supply Chain Imperative
The Supply Chain Imperative – Provider Challenges Health care provider operating margins continue to be challenged in spite of aggressive cost reduction efforts.
Non-salary costs are growing rapidly and now represent over 50% of operating costs for many provider organizations
Pharmaceutical costs alone are projected to grow by more than 18% per year
New supply chain management technologies proliferate, but few have delivered measurable value; some solutions have actually driven up total cost due to transaction fees and/or increased use of non-contracted supplies and services
Vendor consolidations continue to reduce both purchasing power and trading partner options
In In this this environment, environment, optimizing optimizing the the supply supply chain chain can can yield yield dramatic dramatic financial financial and and operating operating improvements. improvements.
3
The Supply Chain Imperative – Provider Challenges Given the magnitude of supply chain expenditures, it is imperative that IDNs focus on minimizing both acquisition and operating costs.
Typical Provider Cost Structure
Other Costs 50 - 60%
Other Supplies 7% Drugs 18%
Supplies & Purchased Services
Lab Supplies 5%
Food Supplies 3%
Diag Imaging Supplies 3% Maintenance/ Equip/ Services 21%
40 – 50%
Med/Surg Supplies 27%
4
Insurance 1%
Fees Travel 5% 2%
Purchased Services 8%
A Breakthrough Opportunity Technology is fundamentally changing the manufacturer-to-provider value chain, creating unprecedented opportunities to reduce supply chain expense through redefined trading partner relationships.
Future Marketplace Characteristics
−− Open Open exchange exchange of of information information (real-time, (real-time, standards standards based) based) −− Collaborative Collaborative relationships relationships around around inventory inventory planning planning and and utilization utilization management management
Health Care Dynamic Trading Community Supplier
−− Dynamic Dynamic relationships relationships with with fewer fewer long-term long-term contracts contracts
Provider
Exchange
Exchange Provider
GPO
−− Each Each party party focus focus on on mission mission critical critical activities activities and and areas areas of of expertise expertise –– outsourcing outsourcing
Provider Exchange Supplier
−− Reduced Reduced reliance reliance on on GPOs GPOs for for contracting; contracting; increased increased focus focus on on leveraging leveraging GPO’s GPO’s ability ability to to facilitate exchange of information facilitate exchange of information
GPO
−− Disintermediation, Disintermediation, fewer fewer transaction transaction costs costs −− Blurring Blurring lines lines between between organizations organizations and and roles roles
5
A Breakthrough Opportunity In this evolving marketplace, providers must focus immediately on several key activities in order to ensure that they are well positioned to take advantage of the value that will be created. These include:
Develop a holistic supply chain strategy that focuses on value creation, not materials management
Identify key vendors for consideration in collaboration strategies
Develop standardized and enforceable policies and procedures with an eye toward user self service
Automate to the extent possible and streamline operations to facilitate assessment of cost/benefit for new technologies
Clean up master files and create meaningful, sourceable categorization methodologies
Develop data warehouses to enable access to real time data and reporting (enhance decisionmaking, contracting efforts, compliance assessment, sourcing)
Create effective, clinician driven standardization/utilization management approaches
Consider outsourcing non-mission critical activities to reduce costs and to focus supply chain efforts around core competencies (e.g., clinical evaluation of new/alternative products)
6
Case Study: North Shore Long Island Jewish Health System
Case Study - Supply Chain Vision North Shore Long Island Jewish Health System (NSLIJ) has developed a vision for Supply Chain Management that will further both the short- and long-term needs of the health system.
To To develop develop aa supply supply chain chain management management paradigm paradigm for for NSLIJ NSLIJ that that emphasizes emphasizes user user simplicity simplicity in in its its operation, operation, scalability scalability as as the the system system requirements requirements expand, expand, and and valuable valuable information information management management in in order order to to increase increase operational operational efficiency efficiency and and maximize maximize purchasing purchasing leverage. leverage. The The solution solution must must achieve achieve financial financial value value for for both both business business partners partners and and NSLIJ. NSLIJ.
8
Case Study - Strategic Objectives NSLIJ’s long-term objectives are aggressive, but achievable through a methodical, staged implementation that will result in a sustainable return on investment…
Long-Term Objectives Significant Significant operating operating and and acquisition acquisition cost cost reduction reduction Single Single internet internet portal portal for for formulary formulary management/service management/service purchases purchases “One “One Stop” Stop” requisitioning requisitioning and and vendor vendor payment payment Closed Closed loop loop supply supply chain chain management management utilizing utilizing point point of of use use technology technology Commerce Commerce partnerships partnerships independent independent of of manufacturer manufacturer obligations obligations World World class class supply supply chain chain infrastructure infrastructure
9
Case Study - Strategic Objectives …of at least $28 million.
Acquisition Cost
Process Cost
Significant Reduction in Supply Management Process Cost
10
Utilization Cost
Case Study - Activities and Results to Date NSLIJ is currently beginning its second year of implementation. Activities and results to date include: Major Major Activities Activities
Results Results to to Date Date •• Internal Internal efforts efforts to to achieve achieve vision vision are are on-going. on-going.
Developed Developed vision vision for for “virtual” “virtual” sole sole source source medical/drug medical/drug supply relationship with national supplier supply relationship with national supplier
•• Suppliers Suppliers have have been been unable unable to to develop develop aa cost cost effective effective model model that that creates creates significant significant value value •• $100 $100 million million ordered ordered electronically. electronically.
Contracted Contracted for for sole sole source source drug drug distribution distribution with with one one supplier supplier across across all all NSLIJHS NSLIJHS facilities facilities
•• Detailed Detailed reports reports available available to to all all users users to to validate validate pricing, monitor utilization and identify standardization pricing, monitor utilization and identify standardization opportunities opportunities
Entered Entered development development relationship relationship with with GHX GHX to to identify identify and and implement implement e-commerce e-commerce
•• Utilizing Utilizing GHX GHX as as centralized centralized EDI EDI portal portal for for 20 20 manufacturers manufacturers
Develop Develop e-invoicing e-invoicing interface interface with with legacy legacy ERP ERP vendor vendor
•• 89% 89% of of $150 $150 million million in in annual annual supply supply purchases purchases are are placed electronically placed electronically •• 45,000 45,000 annual annual invoices invoices now now submitted submitted electronically electronically
Entered Entered development development relationship relationship with with GHX GHX to to identify identify and and implement e-commerce implement e-commerce
•• Achieved Achieved operating operating cost cost reduction reduction targets targets •• Completed Completed both both Scoping Scoping and and Planning, Planning, and and Visioning Visioning and and Targeting Targeting Phases Phases
Develop Develop e-invoicing e-invoicing interface interface with with legacy legacy ERP ERP vendor vendor
•• Anticipated Anticipated $28 $28 million million ROI ROI from from supply supply chain chain component component by by optimizing optimizing industry industry best best practices practices
11
Case Study - Next Steps
Maximize benefits of ERP implementation − Integrate operations across system and develop common processes − EDI and other forms of electronic commerce − Integration with third party software and point of use technologies
Optimize point of use technology
Develop/adopt standards for catalog/vendor management to facilitate sourcing and decision making
Centralize data repositories to support remote processing and distributed decisionmaking
Develop reporting capabilities that empower managers and end users to make strategic, realtime decisions
Build a streamlined operating platform, incorporating industry best practices, that will: − Support increasingly sophisticated supply chain strategies − Facilitate cost/benefit analysis of new technologies and approaches
12
Case Study - Lessons Learned
Integrated Delivery Networks cannot rely on the vendor community to provide all of the desired solutions for world class operations
Many e-commerce initiatives are more conceptual than proven, and do not yet create significant value
It is important to identify the market leaders, and focus development efforts on selected technology vendors and solutions
Good data is critical for strategic decision-making, although often difficult to obtain
Integrate best practices into internal operations and establish a clean platform to build on
13
Building the Foundation
Building the Foundation – Essential Elements The Supply Chain must be managed strategically and holistically Supply Chain Strategy (including network design, supply chain partnerships, eMarketplace and consortium strategy)
Strategize
Product Innovation & Lifecycle Management
Logistics Operations (including warehouse management and transportation)
(including Collaborative Product Commerce Solutions)
Integrated Delivery Network
Design
Fulfill
Produce
Source
Strategic Supply Management
Operations Excellence
(Including e-Procurement)
(including customer service levels and operational efficiency)
Plan
Supply Chain Planning, Collaboration & Optimization (including e-Supply Chain Solutions)
15
Building the Foundation – Promise vs Reality A critical part of this overall strategy will be to critically evaluate both the procurement/supply chain processes and current or planned technology partner relationships to ensure maximum value creation.
The B2B marketplace is still in flux with players struggling to prove their value
No single B2B player has obtained the critical mass to operate as a true marketplace
Suppliers continue to struggle with product description standardization, as well as trading partner connectivity
Suppliers are continuing to consolidate – with resources focused away from e-health solutions
Providers are in various states of e-readiness and often require much system customization
Middleware providers (Netfish, webMethods, etc.) are continuing to partner with major ERP systems to ease transition to marketplaces
16
Building the Foundation - Application Evolution Traditional supply chain applications are internally focused, creating opportunities for ERP-based B2B initiatives. Fin
Mkting
Department-specific applications with hard-coded interfaces
R&D
ERP suites allow enterprises to connect systems internally.
Spaghetti Spaghetti integration integration
Silo
ERP
Approach Supply Chain
Web
s onns uuttiio l l o sso eeaall m m e ce PPiieec
CRM
Internet
Internet Gateway
Legacy Apps CRM
B2B
ERP
Need Need for for integrated integrated information information
Web Portal
Information Bus
Supply Chain Web
CRM
Bolt-on applications
Middleware applications/info bus for end-to-end Supply Chain integration. 17
ERP
Building the Foundation – New Solutions for MultiEnterprise View The “extended enterprise” offers numerous solutions beyond the current organization. e-Procurement S
Private Marketplace S S
S S
B
B exchange
S
S
S S
Vertical e-Market
Horizontal e-Market
BB SS BB B2B B2B SS BB SS
SS BB BB B2B B2B SS BB SS
Sell-Side Web Portal B B
S Web portal
B B
Note: Could be supplier owned
Reason for Model
Create tighter integration with suppliers for req-topay processes, usually indirect material only
Create tighter integration with strategic partners for direct materials and product development
Create tighter integration along direct materials value chain
Create tighter integration along indirect materials supply chain
Services
M2M connections with suppliers through a supplier network or marketplace
Feed design planning Strategic mat’l purchases Capability for VMI Supply chain visibility
M2M Order Placement Data Mining Application Hosting Benchmarking
M2M Order Placement Data Mining Benchmarking “Outsourcing” Non-core processes
Benefits
Reduce transaction costs Control maverick spend Leverage spend Decrease error rates Increased speed Decreased Inventory
Reduce transaction costs Strategic sourcing Material visibility Speed to market Lower R&D costs
Reduce transactions costs Excess/shortage orders Spend reporting Material visibility Transaction aggregation
Reduce transaction costs Control maverick spend Leverage spend Decrease error rates Increased speed Decreased Inventory
Create tighter integration with customers
Product information Promotions 1-to-1 marketing Feed from POS Channel mgmt Grow customer base Support dist. channels Reduce cost of sales Increase revenue
Ultimately, each of these B2B solutions extends an organization’s “four walls” creating multi-organization trading communities. 18
Technology Requirements
Building the Foundation – Approaching the B2B Solution Developing machine-to-machine processing capabilities creates a complex technology environment…
Manual transactions allow maximum flexibility – humans automatically “process” the differences.
Technology is not as intelligent – standards and rules must be set to enable communication and data synchronization.
Technology Technology Challenges Challenges •• Multiple Multiple data data and and communication communication standards standards •• Different Different application application systems systems at at each each end-point end-point •• Nature Nature of of transactions transactions (confidentiality, (confidentiality, non-repudiation) non-repudiation) •• Guaranteed Guaranteed delivery delivery of of messages messages •• Visibility Visibility of of all all message message interactions interactions •• Complexity Complexity of of routing routing messages messages to to right right destination(s) destination(s)
19
Integration Architecture Framework
Building the Foundation - The “New” Challenges …and increases the resources required for activities related to building, deploying and managing an integrated network. Build Build •• •• •• •• •• •• •• ••
Time Time & & resources resources Special Special requirements requirements per organization per organization Numerous Numerous systems systems Various Various data data standards standards Tools Tools for for flexibility, flexibility, reuse reuse & & speed speed Partner Partner software software agents agents Limitless Limitless testing testing scenarios scenarios Integration Integration testing testing
Deploy Deploy •• Code Code releases releases for for partners partners •• Infrastructure Infrastructure requirement requirement •• Implementation Implementation methodology methodology •• Non-technical Non-technical deployment deployment issues issues •• Integration Integration testing testing across across enterprises enterprises •• Partner Partner certification certification •• Creation Creation of of new new security security profiles profiles
20
Manage Manage •• Transaction Transaction visibility visibility in in the network the network •• Re-initiate Re-initiate aa stalled stalled transaction transaction •• Release Release bug bug fixes fixes and and upgrades upgrades •• Security Security admin, admin, detection detection & & avoidance avoidance •• Help Help desk desk administration administration •• License License management management •• Monitoring Monitoring and and tuning tuning
Building the Foundation – Keys to Success Consequently, organizational readiness to accept the change takes on a higher level of importance than in traditional technology deployments. Ultimate Ultimate Readiness Readiness
Common Common State State of of Readiness Readiness
ILL-Equipped ILL-Equipped
Technology
Centralized, global systems: ERP, app integration, connectivity
ERP suite, some legacy applications, limited app integration, good connectivity
Legacy systems, limited connectivity
Process
Standardized touch-points; automated and streamlined processes; centralized processes
Limited standards; Partial streamlined processes, mostly manual; some centralized processes
No standards; sparse, manual processes; decentralized processes with layers of jurisdiction
People
Proactive employees engaged in corecompetency tasks; e-Business organization and leadership
Change accepting employees engaged primarily in “fire-fighting” tasks and daily business, some value-added activity
Error prone, xenophobic employees engaged in menial, daily tasks
Strategy
Several e-business initiatives; significant e-business budget
Some investment in e-business; currently in exploratory phase of e-business initiatives
No experience with the Internet; little interest in e-business
IfIf an an organization organization can can develop develop aa thorough thorough approach, approach, creating creating deep deep connections connections with with Trading Trading Partners, Partners, itit can can maximize maximize the the benefits benefits of of B2B B2B integration. integration.
21
Building the Foundation – Getting Started
Assess organizational state of readiness • Review current supply chain processes and determine what must be improved and/or standardized before any integration begins, and begin improvements
Assess current skill sets • Review IT skill sets and compare to required knowledge • Determine strategies to address gaps (training, outsourcing, etc.)
Review current technology structure • Assess state of technology systems – are any upgrades planned? Is additional hardware needed? • Review security issues
Assess current state of data • Determine cleanup needed for item master and vendor files
Assess ability to leverage existing solutions • Review available solutions and implementation requirements • Determine amount of customization required and resource implications
Evaluate and select technology partners
Plan the integration • Determine short-term and long-term integration approaches • Plan and communicate workplans, committed resources, dependencies and timelines
22
Question and Answer
Discussion Topics
The Supply Chain Imperative − Current Environment − Breakthrough Opportunities
Case Study: North Shore Long Island Jewish Health System − Vision − Experience to Date − Lessons Learned
Building the Foundation − World Class Operations − Technology Requirements
Question and Answer
1
The Supply Chain Imperative
The Supply Chain Imperative – Provider Challenges Health care provider operating margins continue to be challenged in spite of aggressive cost reduction efforts.
Non-salary costs are growing rapidly and now represent over 50% of operating costs for many provider organizations
Pharmaceutical costs alone are projected to grow by more than 18% per year
New supply chain management technologies proliferate, but few have delivered measurable value; some solutions have actually driven up total cost due to transaction fees and/or increased use of non-contracted supplies and services
Vendor consolidations continue to reduce both purchasing power and trading partner options
In In this this environment, environment, optimizing optimizing the the supply supply chain chain can can yield yield dramatic dramatic financial financial and and operating operating improvements. improvements.
3
The Supply Chain Imperative – Provider Challenges Given the magnitude of supply chain expenditures, it is imperative that IDNs focus on minimizing both acquisition and operating costs.
Typical Provider Cost Structure
Other Costs 50 - 60%
Other Supplies 7% Drugs 18%
Supplies & Purchased Services
Lab Supplies 5%
Food Supplies 3%
Diag Imaging Supplies 3% Maintenance/ Equip/ Services 21%
40 – 50%
Med/Surg Supplies 27%
4
Insurance 1%
Fees Travel 5% 2%
Purchased Services 8%
A Breakthrough Opportunity Technology is fundamentally changing the manufacturer-to-provider value chain, creating unprecedented opportunities to reduce supply chain expense through redefined trading partner relationships.
Future Marketplace Characteristics
−− Open Open exchange exchange of of information information (real-time, (real-time, standards standards based) based) −− Collaborative Collaborative relationships relationships around around inventory inventory planning planning and and utilization utilization management management
Health Care Dynamic Trading Community Supplier
−− Dynamic Dynamic relationships relationships with with fewer fewer long-term long-term contracts contracts
Provider
Exchange
Exchange Provider
GPO
−− Each Each party party focus focus on on mission mission critical critical activities activities and and areas areas of of expertise expertise –– outsourcing outsourcing
Provider Exchange Supplier
−− Reduced Reduced reliance reliance on on GPOs GPOs for for contracting; contracting; increased increased focus focus on on leveraging leveraging GPO’s GPO’s ability ability to to facilitate exchange of information facilitate exchange of information
GPO
−− Disintermediation, Disintermediation, fewer fewer transaction transaction costs costs −− Blurring Blurring lines lines between between organizations organizations and and roles roles
5
A Breakthrough Opportunity In this evolving marketplace, providers must focus immediately on several key activities in order to ensure that they are well positioned to take advantage of the value that will be created. These include:
Develop a holistic supply chain strategy that focuses on value creation, not materials management
Identify key vendors for consideration in collaboration strategies
Develop standardized and enforceable policies and procedures with an eye toward user self service
Automate to the extent possible and streamline operations to facilitate assessment of cost/benefit for new technologies
Clean up master files and create meaningful, sourceable categorization methodologies
Develop data warehouses to enable access to real time data and reporting (enhance decisionmaking, contracting efforts, compliance assessment, sourcing)
Create effective, clinician driven standardization/utilization management approaches
Consider outsourcing non-mission critical activities to reduce costs and to focus supply chain efforts around core competencies (e.g., clinical evaluation of new/alternative products)
6
Case Study: North Shore Long Island Jewish Health System
Case Study - Supply Chain Vision North Shore Long Island Jewish Health System (NSLIJ) has developed a vision for Supply Chain Management that will further both the short- and long-term needs of the health system.
To To develop develop aa supply supply chain chain management management paradigm paradigm for for NSLIJ NSLIJ that that emphasizes emphasizes user user simplicity simplicity in in its its operation, operation, scalability scalability as as the the system system requirements requirements expand, expand, and and valuable valuable information information management management in in order order to to increase increase operational operational efficiency efficiency and and maximize maximize purchasing purchasing leverage. leverage. The The solution solution must must achieve achieve financial financial value value for for both both business business partners partners and and NSLIJ. NSLIJ.
8
Case Study - Strategic Objectives NSLIJ’s long-term objectives are aggressive, but achievable through a methodical, staged implementation that will result in a sustainable return on investment…
Long-Term Objectives Significant Significant operating operating and and acquisition acquisition cost cost reduction reduction Single Single internet internet portal portal for for formulary formulary management/service management/service purchases purchases “One “One Stop” Stop” requisitioning requisitioning and and vendor vendor payment payment Closed Closed loop loop supply supply chain chain management management utilizing utilizing point point of of use use technology technology Commerce Commerce partnerships partnerships independent independent of of manufacturer manufacturer obligations obligations World World class class supply supply chain chain infrastructure infrastructure
9
Case Study - Strategic Objectives …of at least $28 million.
Acquisition Cost
Process Cost
Significant Reduction in Supply Management Process Cost
10
Utilization Cost
Case Study - Activities and Results to Date NSLIJ is currently beginning its second year of implementation. Activities and results to date include: Major Major Activities Activities
Results Results to to Date Date •• Internal Internal efforts efforts to to achieve achieve vision vision are are on-going. on-going.
Developed Developed vision vision for for “virtual” “virtual” sole sole source source medical/drug medical/drug supply relationship with national supplier supply relationship with national supplier
•• Suppliers Suppliers have have been been unable unable to to develop develop aa cost cost effective effective model model that that creates creates significant significant value value •• $100 $100 million million ordered ordered electronically. electronically.
Contracted Contracted for for sole sole source source drug drug distribution distribution with with one one supplier supplier across across all all NSLIJHS NSLIJHS facilities facilities
•• Detailed Detailed reports reports available available to to all all users users to to validate validate pricing, monitor utilization and identify standardization pricing, monitor utilization and identify standardization opportunities opportunities
Entered Entered development development relationship relationship with with GHX GHX to to identify identify and and implement implement e-commerce e-commerce
•• Utilizing Utilizing GHX GHX as as centralized centralized EDI EDI portal portal for for 20 20 manufacturers manufacturers
Develop Develop e-invoicing e-invoicing interface interface with with legacy legacy ERP ERP vendor vendor
•• 89% 89% of of $150 $150 million million in in annual annual supply supply purchases purchases are are placed electronically placed electronically •• 45,000 45,000 annual annual invoices invoices now now submitted submitted electronically electronically
Entered Entered development development relationship relationship with with GHX GHX to to identify identify and and implement e-commerce implement e-commerce
•• Achieved Achieved operating operating cost cost reduction reduction targets targets •• Completed Completed both both Scoping Scoping and and Planning, Planning, and and Visioning Visioning and and Targeting Targeting Phases Phases
Develop Develop e-invoicing e-invoicing interface interface with with legacy legacy ERP ERP vendor vendor
•• Anticipated Anticipated $28 $28 million million ROI ROI from from supply supply chain chain component component by by optimizing optimizing industry industry best best practices practices
11
Case Study - Next Steps
Maximize benefits of ERP implementation − Integrate operations across system and develop common processes − EDI and other forms of electronic commerce − Integration with third party software and point of use technologies
Optimize point of use technology
Develop/adopt standards for catalog/vendor management to facilitate sourcing and decision making
Centralize data repositories to support remote processing and distributed decisionmaking
Develop reporting capabilities that empower managers and end users to make strategic, realtime decisions
Build a streamlined operating platform, incorporating industry best practices, that will: − Support increasingly sophisticated supply chain strategies − Facilitate cost/benefit analysis of new technologies and approaches
12
Case Study - Lessons Learned
Integrated Delivery Networks cannot rely on the vendor community to provide all of the desired solutions for world class operations
Many e-commerce initiatives are more conceptual than proven, and do not yet create significant value
It is important to identify the market leaders, and focus development efforts on selected technology vendors and solutions
Good data is critical for strategic decision-making, although often difficult to obtain
Integrate best practices into internal operations and establish a clean platform to build on
13
Building the Foundation
Building the Foundation – Essential Elements The Supply Chain must be managed strategically and holistically Supply Chain Strategy (including network design, supply chain partnerships, eMarketplace and consortium strategy)
Strategize
Product Innovation & Lifecycle Management
Logistics Operations (including warehouse management and transportation)
(including Collaborative Product Commerce Solutions)
Integrated Delivery Network
Design
Fulfill
Produce
Source
Strategic Supply Management
Operations Excellence
(Including e-Procurement)
(including customer service levels and operational efficiency)
Plan
Supply Chain Planning, Collaboration & Optimization (including e-Supply Chain Solutions)
15
Building the Foundation – Promise vs Reality A critical part of this overall strategy will be to critically evaluate both the procurement/supply chain processes and current or planned technology partner relationships to ensure maximum value creation.
The B2B marketplace is still in flux with players struggling to prove their value
No single B2B player has obtained the critical mass to operate as a true marketplace
Suppliers continue to struggle with product description standardization, as well as trading partner connectivity
Suppliers are continuing to consolidate – with resources focused away from e-health solutions
Providers are in various states of e-readiness and often require much system customization
Middleware providers (Netfish, webMethods, etc.) are continuing to partner with major ERP systems to ease transition to marketplaces
16
Building the Foundation - Application Evolution Traditional supply chain applications are internally focused, creating opportunities for ERP-based B2B initiatives. Fin
Mkting
Department-specific applications with hard-coded interfaces
R&D
ERP suites allow enterprises to connect systems internally.
Spaghetti Spaghetti integration integration
Silo
ERP
Approach Supply Chain
Web
s onns uuttiio l l o sso eeaall m m e ce PPiieec
CRM
Internet
Internet Gateway
Legacy Apps CRM
B2B
ERP
Need Need for for integrated integrated information information
Web Portal
Information Bus
Supply Chain Web
CRM
Bolt-on applications
Middleware applications/info bus for end-to-end Supply Chain integration. 17
ERP
Building the Foundation – New Solutions for MultiEnterprise View The “extended enterprise” offers numerous solutions beyond the current organization. e-Procurement S
Private Marketplace S S
S S
B
B exchange
S
S
S S
Vertical e-Market
Horizontal e-Market
BB SS BB B2B B2B SS BB SS
SS BB BB B2B B2B SS BB SS
Sell-Side Web Portal B B
S Web portal
B B
Note: Could be supplier owned
Reason for Model
Create tighter integration with suppliers for req-topay processes, usually indirect material only
Create tighter integration with strategic partners for direct materials and product development
Create tighter integration along direct materials value chain
Create tighter integration along indirect materials supply chain
Services
M2M connections with suppliers through a supplier network or marketplace
Feed design planning Strategic mat’l purchases Capability for VMI Supply chain visibility
M2M Order Placement Data Mining Application Hosting Benchmarking
M2M Order Placement Data Mining Benchmarking “Outsourcing” Non-core processes
Benefits
Reduce transaction costs Control maverick spend Leverage spend Decrease error rates Increased speed Decreased Inventory
Reduce transaction costs Strategic sourcing Material visibility Speed to market Lower R&D costs
Reduce transactions costs Excess/shortage orders Spend reporting Material visibility Transaction aggregation
Reduce transaction costs Control maverick spend Leverage spend Decrease error rates Increased speed Decreased Inventory
Create tighter integration with customers
Product information Promotions 1-to-1 marketing Feed from POS Channel mgmt Grow customer base Support dist. channels Reduce cost of sales Increase revenue
Ultimately, each of these B2B solutions extends an organization’s “four walls” creating multi-organization trading communities. 18
Technology Requirements
Building the Foundation – Approaching the B2B Solution Developing machine-to-machine processing capabilities creates a complex technology environment…
Manual transactions allow maximum flexibility – humans automatically “process” the differences.
Technology is not as intelligent – standards and rules must be set to enable communication and data synchronization.
Technology Technology Challenges Challenges •• Multiple Multiple data data and and communication communication standards standards •• Different Different application application systems systems at at each each end-point end-point •• Nature Nature of of transactions transactions (confidentiality, (confidentiality, non-repudiation) non-repudiation) •• Guaranteed Guaranteed delivery delivery of of messages messages •• Visibility Visibility of of all all message message interactions interactions •• Complexity Complexity of of routing routing messages messages to to right right destination(s) destination(s)
19
Integration Architecture Framework
Building the Foundation - The “New” Challenges …and increases the resources required for activities related to building, deploying and managing an integrated network. Build Build •• •• •• •• •• •• •• ••
Time Time & & resources resources Special Special requirements requirements per organization per organization Numerous Numerous systems systems Various Various data data standards standards Tools Tools for for flexibility, flexibility, reuse reuse & & speed speed Partner Partner software software agents agents Limitless Limitless testing testing scenarios scenarios Integration Integration testing testing
Deploy Deploy •• Code Code releases releases for for partners partners •• Infrastructure Infrastructure requirement requirement •• Implementation Implementation methodology methodology •• Non-technical Non-technical deployment deployment issues issues •• Integration Integration testing testing across across enterprises enterprises •• Partner Partner certification certification •• Creation Creation of of new new security security profiles profiles
20
Manage Manage •• Transaction Transaction visibility visibility in in the network the network •• Re-initiate Re-initiate aa stalled stalled transaction transaction •• Release Release bug bug fixes fixes and and upgrades upgrades •• Security Security admin, admin, detection detection & & avoidance avoidance •• Help Help desk desk administration administration •• License License management management •• Monitoring Monitoring and and tuning tuning
Building the Foundation – Keys to Success Consequently, organizational readiness to accept the change takes on a higher level of importance than in traditional technology deployments. Ultimate Ultimate Readiness Readiness
Common Common State State of of Readiness Readiness
ILL-Equipped ILL-Equipped
Technology
Centralized, global systems: ERP, app integration, connectivity
ERP suite, some legacy applications, limited app integration, good connectivity
Legacy systems, limited connectivity
Process
Standardized touch-points; automated and streamlined processes; centralized processes
Limited standards; Partial streamlined processes, mostly manual; some centralized processes
No standards; sparse, manual processes; decentralized processes with layers of jurisdiction
People
Proactive employees engaged in corecompetency tasks; e-Business organization and leadership
Change accepting employees engaged primarily in “fire-fighting” tasks and daily business, some value-added activity
Error prone, xenophobic employees engaged in menial, daily tasks
Strategy
Several e-business initiatives; significant e-business budget
Some investment in e-business; currently in exploratory phase of e-business initiatives
No experience with the Internet; little interest in e-business
IfIf an an organization organization can can develop develop aa thorough thorough approach, approach, creating creating deep deep connections connections with with Trading Trading Partners, Partners, itit can can maximize maximize the the benefits benefits of of B2B B2B integration. integration.
21
Building the Foundation – Getting Started
Assess organizational state of readiness • Review current supply chain processes and determine what must be improved and/or standardized before any integration begins, and begin improvements
Assess current skill sets • Review IT skill sets and compare to required knowledge • Determine strategies to address gaps (training, outsourcing, etc.)
Review current technology structure • Assess state of technology systems – are any upgrades planned? Is additional hardware needed? • Review security issues
Assess current state of data • Determine cleanup needed for item master and vendor files
Assess ability to leverage existing solutions • Review available solutions and implementation requirements • Determine amount of customization required and resource implications
Evaluate and select technology partners
Plan the integration • Determine short-term and long-term integration approaches • Plan and communicate workplans, committed resources, dependencies and timelines
22
Question and Answer
