Logistics turns proactive
SCEM apps watch events, alert users at Allogis, STMicroelectronics to better manage supply chain interactions
By Karen Abramic Dilger, Contributing Editor -- Manufacturing Business Technology, 12/1/2001 12:00:00 AM
Knowing where a shipment is in the supply chain is a precious bit of knowledge many companies yearn for. For Allogis, a Ft. Lauderdale, Fla.-based supplier of international fulfillment and logistics services, shipment status reports are essential to its business, but even more important is the ability to respond to unplanned events before they escalate into major dilemmas.
The affiliate of DHL Worldwide Express uses a supply chain event management (SCEM) software solution to address the complexities of global demand chain execution, such as import/export compliance, denied party screening, and landed cost calculations. The solution features order-related track & trace and alert-messaging functionality, but top executives at Allogis say it essentially makes interactions with trading partners more efficient.
"When we receive a shipment confirmation from our warehouse, the systems alerts custom brokers in Mexico to let them know it's coming," says Jeff Glade, chief operating officer. "We view every event as an opportunity to communicate with trading partners in our network. Alerts are sent to any participant that needs the information in advance to improve efficiency."
The system notifies appropriate personnel of alerts via e-mail or pager. By establishing workflow and business rules, the software can publish data to different systems, allowing events to trigger actions. "When we receive a ship confirmation, the system can alert a broker that an international document has been published to its system, allowing the broker to print out the document before the shipment arrives," says Glade.
Allogis' partner network consists of eight participants, including manufacturers, customs brokers, international transportation carriers, local shippers, and customers—all of which have access to the SCEM system from Yantra, Acton, Mass. SCEM software detects events that are out-of-sync with normal processes, and alerts those who need to take action. This class of software combines elements of supply chain execution (SCE), decision support, business intelligence and analytics, and is perhaps the hottest trend in management applications that support deliver processes.
More than events
Inventory visibility and track & trace functionality have been around for quite a while, but SCEM goes further in scope. According to AMR Research, a Boston-based information technology analyst firm, true SCEM applications should support business processes for monitor, notify, simulate, control, and measure.
ARC Advisory Group, however, does not use the term event management to describe these type systems. The Dedham, Mass.-based analyst firm prefers to think of it as supply chain process management, since it reaches beyond managing events. "These are real-time decision-support systems that use extended supply chain visibility and alert messaging to ensure what is supposed to happen actually does happen," says Steve Banker, ARC's director of supply chain solutions. "When something falls out of range of the given parameters, people should not only be alerted, but the system also should help users decide what to do about the alerts."
Banker says many companies realize that visibility only provides low-level benefit, and there is budding interest in building event management and performance management suites around key performance indicators (KPIs), which are used to identify trends. To do performance management, systems need some type of enterprise application integration (EAI) tools to pull data from various sources, and store it in a data repository. "Systems also need B2B integration to pull data from partners' systems," says Banker.
SCE vendors have the most potential to develop successful SCEM suites since they commonly have the best data models and the domain expertise, says Banker. "All they need to do is build out the decision-support and business intelligence side. Many of the SCEM start-ups won't last because they don't have the EAI tools, data mart, alert infrastructure, and workflow techniques that are critical to an SCEM solution."
Set tolerances
Allogis started using Yantra's PureEcommerce solution last May in a hosted model, extending track & trace to its customers via trade exchanges. "Our customers do not interface directly with Allogis to receive status reports, but we run behind the scenes, pushing relevant data out to other systems," says Glade. "We didn't want to burden customers with having to go multiple sources to determine order status."
The rules and parameters in SCEM systems typically are user-configurable. "A user might need a logical view across documents, or may add a matrix engine to a standard view to say, 'In this lane, all shipments need to be delivered in two days,'" says Jim Papineau, global visibility solutions program director for Descartes Systems Group, an Ontario, Canada-based vendor of SCE and SCEM solutions. Another example of a tolerance, he adds, may be, "All shipments to Sweden," or, "Only look at invoices over $50,000."
Flexibility is an important aspect of any SCEM system because each event means different things to different people. "A salesperson might need to know an order won't be fulfilled because a delivery is late, whereas another user might want production-related information," says Papineau. "When negotiating a service agreement with a customer, a user may need a macro view of the data. Systems should be adaptable enough to manipulate data easily. Someone may want to see what's going on in a transportation lane, while someone else may be interested in where bottlenecks might occur."
Last summer, Descartes released a performance module for KPI modeling using business intelligence tools and a data mining repository from Cognos, Burlington, Mass. "We wanted to represent data in a longer, more strategic view so that users could modify supply chain plans," says Papineau.
The KPI module applies tolerances to "what-if?" analyses to assess what will happen if specific events occur, says Papineau. "Users could say, 'What if we did express shipments, or diverted shipments to another service line?' he says. "Or, they could build a cube to perform analysis with relative dimensions, such as changing service tolerances for a product line from one week to two, or see how costs change when different carriers are used."
Plans and executes
The Leap system from Saltare, San Mateo, Calif.—which incorporates AMR's five characteristics for SCEM—has been deployed initially as a demand replenishment solution for suppliers and their customers. The system's intelligence layer forms recommendations around attributes, and is said to be intuitive enough to learn over time. "Event-driven systems not only know what the exceptions are, but can adjust safety levels based on changing thresholds," says Dennis Woolsey, Saltare's director of product strategy. "Leap is not workflow-driven, but can be thought of as an adaptive supply chain management solution. Our vision is to help multinode supply chains better match supply and demand, and determine how demand is changing in real time."
Woolsey describes Leap as the glue between supply chain execution and planning solutions as it combines analytics, optimization, and execution functions. It deploys various engines that use algorithms to formulate replenishment plans, and can match supply and demand in real time. Different engines are used to calculate target inventory for all locations, and demand analysis by product life cycle. Another engine converts demand analysis into component demand based on capacity constraints.
Founded in 1998, Saltare recently brought its first customer live: STMicroelectronics, a Geneva, Switzerland-based semiconductor manufacturer. The system generates plans on a daily basis and watches for exceptions. It sets inventory levels, taking forecast error into consideration, as well as shipping variances. "If there is no inventory at a certain site, the system suggests possible solutions to resolve the problem," says Woolsey. "Users can query the system and accept or deny suggestions."
The Leap system calculates demand daily for four STMicroelectronics sites, as well as the demand impact for a key supplier. "No one can determine demand too often, but if a company doesn't do it often enough, it doesn't take advantage of the systems' ability to pinpoint problems," says Woolsey. Possible alerts at ST include downtime, forecast spikes, or inventory shortages at specific locations.
According to Woolsey, since implementing the system two months ago, STMicroelectronics has reduced stockouts, increased customer service, and has seen a 40-percent reduction in demand variability.
Count on metrics
Integration is seen an essential factor in implementing SCEM applications. The systems pull data from enterprise systems and other applications, and apply rules and parameters against that data. "Data acquisition and translation are key to performing cross-domain monitoring and multisite visibility," says Michael Handley, an executive vice president with Viewlocity, an Atlanta-based vendor of B2B integration and SCEM software.
The company's SCEM solution supports the process of performance analytics by forming a view of the supply chain that users need to compare data. Says Handley, "A user may want to determine the inventory moving average overlaid with on-time shipping, and they can put in other variables, such as cost, to see how their decisions would impact other areas." More examples of KPIs are on-hand inventory, late shipments from a certain supplier, and on-time deliveries to a specific location.
KPIs can be used to evaluate customer service or supplier performance, and allow users to give feedback to all interested parties. "Once companies gather data about supplier performance, they can use it to influence decisions about future exceptions," says Handley. "For instance, if a manufacturer only ships 80-percent on-time to plants, users can factor that information into future decision-makings."
When measuring performance, most companies look for metrics such as cash-to-cash cycle time (i.e., the number of days between paying for raw materials and getting paid for product); order fulfillment lead time; and on-time performance. "Flexibility and reliability are important qualities in an environment where everyone must remain nimble," says Steve Geary, a vice president with Tilion, a Maynard, Mass.-based provider of a hosted SCEM solution. "The supply chain is ripe with exceptions. A best-in-class company only delivers on-time 95 percent of the time, so one time out of 20 it is blowing it."
Tilion's SCEM solution can target different processes, including logistics execution, supply and demand management, and supplier performance management. "It's the same data, but it's a re-analysis of the same issues, like different layers on a cake."
Logistics execution uses advance ship notices to record orders coming off a supplier dock. Before the shipment moves to the manufacturer, the system looks for exceptions on the purchase order, and alerts the appropriate operators of the error before it arrives. "The system is careful not to overstress exception conditions," says Geary. "If there is an exception on a ship-to address, or the ship quantity doesn't match exactly, it may not need to be flagged because you don't want to waste someone's time with something they really don't need to know." For logistics execution functions, the system typically integrates with other SCE systems, including warehouse and transportation management solutions.
Channel performance
Channel management solutions, an evolution of sell-side e-commerce systems that automate interactions between OEMs and their channel partners, represent another quickly evolving application space that's impacting deliver processes. Not surprisingly, channel management vendors are using event management technologies to enhance distribution channel activities.
Chicago-based Click Commerce is one channel management vendor expanding the proactive capabilities of its solution. After hearing feedback from its customer advisory board, the vendor announced a solution called Click Performance.
"When a channel management system logs every screen and transaction, it can add up to a tremendous amount of data," says Steve Cole, a company vice president. "Click Performance filters the data, determines what is important for metrics, and archives it."
Click Performance includes an analytical engine and a set of 40 standard KPIs with each initial installation. The system draws data from Click Commerce's channel management solution to monitor performance of channel partners, analyze warranty claims, and examine visitor activity on the e-commerce site in question. "The system allows users to see what customers are ordering, which suppliers are performing the best, and how long visitors spend looking at Web pages," says Cole.
A company can use the system to identify quality problems if it notices a large number of warranty claims coming from a specific product or failure. "A manufacturer may notice a spike in repairs for a certain part, and then send a note to the supplier informing them of the problem," says Cole. "The company could even give the supplier a list of customers with the problem, as well as suggestions about how to solve the issue."
The range of vendors introducing event-management functions shows how important SCEM has become. And while there is a difference between best-in-class SCEM vendors such as Tilion or SeeCommerce, Palo Alto, Calif., and vendors from other spaces introducing event-management tools, the overall trend is that applications of many types, especially applications for deliver processes, have become more event-driven than ever.
| FOR MORE INFO: | ||
| Click Commerce: www.clickplanet.com | ||
| Descartes Systems: www.descartes.com | ||
| Saltare: www.saltare.com | ||
| SeeCommerce: www.seecommerce.com | ||
| Tilion: www.tilion.com | ||
| Viewlocity: www.viewlocity.com | ||
| Yantra: www.yantra.com | ||
