Integrating technology for an Enhanced Supply Chain
Q:
Achieving Supply Chain Excellence
through Technology has been described as a "top down" strategy. What would you
say to senior decision makers to describe the upside potential for re-engineering
the way they do business?
A: By utilizing technology to re-engineer business processes, a company stands to improve customer service, increase revenues and decrease operating costs. All the tangibles are there. In addition, a company can become more agile and respond to changing business conditions more quickly, making them increasingly efficient and providing them with a competitive advantage.
These improvements can be made by integrating various computer systems. By linking disparate applications which are like "islands of information" to create what we call "digital nervous systems," companies can streamline their processes and utilize information in new and innovative ways. Unfortunately, many computer systems and software offerings were never designed to work together, which makes this integration difficult and costly for most companies.
Many organizations are beginning to integrate their internal applications and systems for streamlined processes, but a vastly untapped gold mine lies within the supply chain. Although some have done wonders internally, few have effectively linked with their external trading partners in the supply chain. Companies can greatly accelerate and improve their everyday interactions with their suppliers, business partners and customers by using technology to integrate processes and even cultures. Again, this can save massive amounts of time and money, and makes them more efficient than their competitors.
Q: How is Microsoft helping build the electronic community of the future?
A: Well, if a lack of integration between computer systems and trading partners is the problem and technology integration is a major component of the solution, we're trying to be a part of that solution. We're trying to be a technology enabler as customers look to achieve this vision of supply chain technology interoperability. However, we know we can't do it ourselves nor would we wish to. We're a platform company and we want to provide the software platform that companies can use to start reaping these benefits in a cost-effective way. We don't want to create supply chain applications or reinvent the wheel by developing new standards.
Instead, we're collaborating with various application developers and standards bodies because we realize the applications and standards they're developing are just as important as the platform. Without involving them in the picture, true interoperability will never become a reality. Therefore, we're working with independent software vendors (ISVs) that are creating line-of-business solutions in various industries to make sure those solutions work well on our platform and are suiting the needs of specific customers in specific industries. We're also working with industry standards bodies that are creating new business processes and standards, and helping ISVs implement those standards on our platform.
What this work has turned into is a collaborative effort between Microsoft, ISVs, standards bodies and customers in various industries to develop technical "plumbing" for software solutions, which will allow them to work well together. We feel that by bringing these industry players together in cooperation, not competition, we can solve some very tough industry problems, such as software integration.
In the supply chain space, we have developed a program called the Value Chain Initiative (VCI), a consortium of supply chain ISVs, customers and standards bodies coming together to develop a common framework that companies can utilize to link with their trading partners.
Q: The Value Chain Initiative was early to recognize the importance of strategic partnerships willing to share real-time information across the Net. What steps need to be taken now to make this a reality?
A: First of all, let me give a little background on the initiative. The VCI was developed in September 1996 as a consortium of ISVs and other companies seeking to enhance supply-chain efficiencies both domestically and globally. We saw the benefits of electronic data interchange (EDI), but also realized its drawbacks. Not everyone could utilize it because of its cost and the technology was oftentimes batch-driven rather than real time, which limits the potential of widespread integration and cost savings. We also realized that the Internet opened up new possibilities to involve the smaller and midrange companies for a fraction of the cost.
Microsoft brought this group together to begin developing an end-to-end supply-chain framework that would allow companies to integrate applications, link with entire value chains of their trading partners regardless of size, and share dynamic information in real time.
The goal for the VCI is to enable the sharing of dynamic business information between new and existing trading partners and thereby improve supply-chain proficiencies from raw materials to consumers' hands. Companies that utilize these technologies have the opportunity to extend application integration internally and then beyond the enterprise to incorporate their suppliers, business partners and customers. This integration can increase the speed, accuracy and productivity of everyday business practices while dramatically lowering costs.
The VCI is relatively new, but it is based on some very solid and proven technologies. The framework is based on the component object model (COM), which is an open software architecture that forms the foundation for higher-level software services. In many cases, it acts as a sort of translator of information, allowing applications written in different languages to interact as well as differing computer systems to share information. It is the most widely used component software model in the world, with more than 150 million COM-based systems in action today.
The eXtensible Markup Language (XML) is also a key component of the VCI framework. XML is a Web formatting specification. It's like a beefed up HTML Web language that allows online documents and transactions to include structured data in addition to text and design elements.
Other technologies that help form the foundation of the VCI framework are key components of the Microsoft BackOffice platform, including Windows NT, SQL Server 7.0, Microsoft Site Server 3.0, Commerce Edition, Microsoft Transaction Server, Microsoft Message Queue Server and Internet Information Server. However, the VCI isn't an attempt to lock companies into Windows. In fact, we've taken strides to enable VCI-based solutions to interact with legacy and EDI systems.
What needs to happen now is that companies should start deploying these technologies and begin linking with their trading partners. None of this is easy, but it's exponentially easier than it has been in the past, and the returns can be incredible.
Some have already done so with great success. One example is Sainsbury's Supermarkets, one of the largest chains in the UK. Sainsbury's recently launched a supply chain initiative for all its suppliers to boost efficiency and communication. The Internet-based information sharing and collaboration system, which went live in mid-1998, will eventually allow all 4,000 of Sainsbury's suppliers to strive toward the Efficient Consumer Response (ECR) principle of integrated supply and demand. The solution is based on the VCI framework and utilizes ISV solutions from EQOS, and is the first of its kind in Europe. Sainsbury's feels that the initiative has the scope to be dramatically extended in the future to allow for efficient new product introduction in its stores, better product promotion planning, and co-managed forecasting across the supply chain.
Q: What about the investments that have been made in the past two decades? What's left to do and why not just do more of the same? For example, do you see a trend moving away from EDI and towards business across the Net? Can everything now be done on the Net?
A: We're not advocating that companies entirely scrap the systems they have today and implement a completely new computer infrastructure. Past investments are still paying off and will continue to do so in the future. We're talking about enhancing what companies have today, not performing a complete technology overhaul.
As I mentioned, we've made strides to ensure that our technologies will be compatible with legacy and EDI systems. This is precisely so that companies can retain the technology investments they've already made. If integration is the solution, then that includes both new and old technologies.
Also, it's important to note that we're not trying to replace EDI. We think EDI is an important piece of this puzzle, and we're trying to embrace and extend it bring it to the masses rather than just the giants. In addition, some applications will still require EDI/VAN services that are utilized today. The Internet is a big part of the answer, but not the complete solution.
I think the most exciting opportunities are in two areas. First, adding new capability on top of an existing EDI infrastructure. Second, bringing medium and small companies into the fold and providing them with the benefits that the larger companies get from EDI. What these two things do is enhance the systems that are already in place, and bring those capabilities to companies that previously were left out in the cold.
Q: Why do you think Microsoft is in a position to help make these changes?
A: I think we're in a good position because we're doing the right things with our platform and we're working with the right industry players ISVs, standards bodies, customers to develop some very solid technical necessities that enable this integration.
We're constantly striving to make our platform better more powerful, more stable, more scalable, more user friendly. I think a testament to that was last year's release of SQL Server 7.0, which dramatically improved the performance and scalability of our database platform.
Our ISV partners are constantly striving to make their industry-specific line-of-business solutions more robust to suit the numerous needs of their customers. And industry standards bodies are developing more business best practices that can help our offerings as well as our ISV partners' offerings.
Together, along with customer input, we think we can pool our products and resources, and develop common integration frameworks via programs such as the VCI to develop a solid set of interoperable technologies. Customers can then have a greater choice of technology solutions that integrate seamlessly and enhance their current infrastructure to begin developing "digital nervous systems" that dramatically improve business processes and drastically reduce costs.
