Interview: Oracle senior vice president Sonny Singh foresees an open-link, high-visibility supply chain network revolution.

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Oracle Corporation

ASCET interviews Sonny Singh, Senior VP, a 15-year veteran at Oracle, discussing what RFID is going to be to supply chain management.

ASCET: What are the obstacles to achieving the level of visibility and integration in the supply chain that companies are working to achieve?

Sonny Singh (SS): The three that are the most common are standards, technology and culture. Visibility brings a lot of benefits, but it requires standards. Rosetta Net, for example, works to promote the ability to exchange information in formats or in terms that are well understood by both the transmitting party and the receiving party. We are on the journey to better standards of collaboration, but we really have a way to go.

The second obstacle is technology. While we’ve made tremendous leaps in recent years in the area of technology that supports supply chain visibility, it requires very well-articulated business processes, both within the enterprise and between enterprises. However, the quest for fully integrated processes has been mired with inefficiencies due to uncoupled systems and inefficient transfer of information between various groups within the company’s functions such as procurement, sales, manufacturing and distribution. When you extend that outside the supply chain, it becomes even more complicated because we don’t have standards. Additionally, some companies might have legacy sytems that aren’t conducive to good collaboration.

ASCET: Is it that the technology isn’t quite there yet, or that there are a lot of legacy systems around?

Sonny Singh (SS): It’s mostly the latter. There have been strides in adoption and connectivity; people have optimized business processes within departments or even across departments within the enterprise, but they haven’t really adopted better optimization across enterprises. Some have extended themselves beyond and are reaping the benefits. Dell is a classic example of a company that has a lot of connectivity to external suppliers and as a result, has a fulfillment model that is second to none.

The third point in regards to visibility is basically cultural. Supply chain visibility, especially when you go outside the four walls of the enterprise, requires cultural openness. Supply chains are not just within the borders of a single country; it’s really a global concept, and there are cultural differences in the way information is shared. Moreover, there are issues around the fact that when you share all the information, you can’t hide your mistakes. When you can’t hide your mistakes, you might end up actually reducing visibility, so that mistakes are not evident to people in your customer and supplier base and in different parts of your organizatio

ASCET: What is the biggest concern for companies requiring extensive global visibility?

Sonny Singh (SS): One of the things that companies have to be most careful about are changes in demand signal such as canceled customer orders. These changes ripple all the way through multiple tiers of the supply chain. So, when your dependence on the extended supply chain increases, one of the things that happens is you end up being separated from the demand signal.

The second concern, I would say, is the pace of product innovation. As product life cycles continue to get shorter, the risks that exist for companies around visibility and around timeliness of information are very high. If you have a product with a short life cycle, and that product has components that have a long lead time, you might find that new products end up being released and cannibalizing existing product sales. There have been many cases where economic cycles have lots of excess or obsolete inventory, in some cases in the billions of dollars.

ASCET: What’s your take on RFID technology as one way to control inventory?

Sonny Singh (SS): I am very bullish on RFID, but it’s clearly something that has a little time until maturity. I feel that RFID is going to be to supply chain management what the Internet was to business-to-consumer commerce. There was a complete revolution when it finally caught up. But maturity came with standards and with the ability to do financial transactions in a secure fashion on the Internet.

With RFID, we’ll go through the curiosity phase, where the criticality of change will be the driver, such as Wal-Mart driving key suppliers into compliance. Then we’ll get into the typical phase of very heavy investment and hyper-adoption, where people will really start to drive RFID as a means for improving all the elements of the supply chain. Finally, it’ll get to a point where it’s ubiquitous.

The economies, however, are still being worked through. It’s not only just in the tags and readers; RFID is going to generate terabytes of data – every movement, every piece of data that goes into the tags is going to be information, and we’ll not only need the ability to store, manipulate and handle that kind of information, but we’ll also need tools to analyze it and to make decisions based on that level of information.

I think the biggest impact that we’ll have is in traceability, which is one of the fundamentals of supply chain; i.e., to know what something is, where it is today and where it has been. All of those pieces of information are very critical in things like better customer service and compliant manufacturing.

Lastly, I think the most unique area of RFID is the area of security. We are already starting to see customs and other types of regulatory organizations asking for advanced information about what’s coming in packages so they can start making decisions on what type of inspections different levels of packages have to go through.

ASCET: Can you talk about Oracle’s work in developing demand-driven networks?

Sonny Singh (SS): Demand-driven networks are central to our supply chain strategy. They facilitate your supply chain collaboration, information transparency and most importantly, they do it in real time, so there’s no real lag between when you forecasted something and when you are required to take action on it. It creates a sense-and-respond capability to let companies manage virtually any customer demand, market opportunity, threat or change in conditions such as yield, ramp or bust.

At Oracle, in our supply chain applications, we’ve focused on multiple areas, but I’ll highlight a few. The first is demand planning. The area around collaborative demand planning and connectivity between component suppliers, the original equipment manufacturers, as well as the end customers, is a big driver, because it helps in forecasting accuracy. Another area is fulfillment, which included both manufacturing and logistics. So the concept of flow manufacturing, which is connecting the scheduling or releasing of work orders based on demand signals, is a critical capability because it’s helping companies tightly manage inventory. They only add additional value to components or subassemblies to other inventory when there is a real demand signal, and that way they can better optimize inventory levels.

The same thing applies to logistics. Customers are increasingly insisting on complete shipments, since partial shipments are basically a source of variability. If they are subsequently moving material beyond their own boundaries, they then want as minimal a variability as possible in how they receive goods. So once again, the demand-driven networks enable both reduction in inventory and more accurate shipments, reducing both inventory and logistics costs. The idea is to make investments that you can collaboratively agree to with various parts of your supply chain, so that you have complete visibility to all the decision parameters that you will need in order to do better sales and operation planning.

ASCET: What’s on the horizon at Oracle in terms of procurement performance?

Sonny Singh (SS): In terms of how the industry’s progressed, there’s been significant evolution beyond transaction automation. The first set of procurement applications were about automating the purchase and RFQ process, managing the purchase orders and providing good approval hierarchies and workflow. Since then, there’s been evolution similar to other areas, such as from transaction automation to optimization; from optimization to better analytics; and from analytics to better collaboration.

At Oracle, we’ve made a lot of investments in the last few years in optimization analytics and collaboration. An example of optimization are the advances we have made in sourcing capabilities. We provide tools to identify cost drivers and hidden expenses.

Another area is analytics. The unique thing about Oracle’s solution is that the analytics are co-resident in the transaction system. What that does is it gives you the ability to compute in real time all the key metrics that you’re interested in, removes any latency and provides drill down capabilities. So once I see a given metric, like a supplier performance has deteriorated, I can go back and check root causes, e.g., whether it was because of late shipments or not meeting certain levels of build schedules, etc. I can go down to individual transactions and really understand why a given supplier may be performing at a given level or why a supplier is replacing another supplier as the recommended supplier. The drill-down capabilities and the lack of latency are things that a warehouse approach just cannot deliver. We ship a lot of predefined metrics as part of our procurement solutions.

In the area of collaboration, the relationship between you and your supplier is actually one of your core capabilities; it’s actually a primary asset that a company has. We’ve released a lot of capability around a supplier portal that allows suppliers to manage their relationship with the buyers in a self-service format. They can manage their vendor profiles, they can track changes to either forecast, they can provide changes on purchase order delivery and even manage some of the financial information where invoices have been submitted. This improves the relationship and enhances their ability to work together.

ASCET: How will location devices, such as Oracle’s Spatial, impact supply chain?

Sonny Singh (SS): Any time location data is required, there’s a tremendous opportunity to leverage our database’s native spatial capability. If you look at our transportation management capabilities in our transportation planning products, which are a part of our supply chain suite, we use our spatial capabilities. There are spatial APIs that basically render location data into a map that provides information to optimize a transportation route and also provide visualization capabilities for someone who’s managing a dashboard. Even in a field service application in general, the spatial options are going to be very useful.

ASCET: Can you talk about what new technologies or processes in supply chain are exciting to you lately?

Sonny Singh (SS): In terms of supply chain, there are at least three that I am looking forward to with anticipation. The first is the ongoing convergence of the supply chain and the design chain. Historically, we started out by outsourcing the manufacturing of components. Over time, people progressed to outsourcing finished goods and the logistics associated with getting those finished goods to a point of use. The next chapter here is really the current trend of outsourced design and the emergence of ODMs. Design is also a function that can be outsourced to take advantage of the economies of scale. But what’s really in evolution are the capabilities and tools that create fluidity and connectivity between design chains and supply chains.

Another area I think that’s very exciting is much better integration of logistics, especially outgoing logistics, with customer relationship management. So far, we’ve always looked at the supply chain as the ability to create something that a customer wants, but the last mile of that supply chain is basically logistics, because that’s when you bring something to the customer. Industry-leading customers are driving toward fully integrated logistics and logistic execution practices. These companies are leveraging the value of marrying customer relationship management processes with logistics execution processes.

For example, a window manufacturer has something like 20,000 SKUs in its distribution network because of all the different sizes, configurations, colors, materials and so forth. The ideal solution is for the company to have the ability to deliver the perfect order every day; that is, to take an order, verify that the product is in stock, determine which warehouse to ship from or whether it needs to be custom-manufactured, set a delivery date and a specific carrier, and deliver at a service level that is not just reserved for their best customers. That capability is still emerging, and I think it’s going to transform the way we do business.

Finally, the networked supply chain with eventbased planning is everything that I talked about. It’s when we are able to truly understand a signal at any tier of the supply chain, and transfer its impact to all the relevant tiers of that supply chain at an event level; that’s when the true power of a seamless global and transparent supply chain emerges. We will have to deal with some of the obstacles around standards, technology and culture, and this will stretch every process technology and standards capability we have today. But in my mind, that is really the driver of the next industrial revolution. To truly leverage the power of a global environment, this is what we need.

ASCET: What would that revolution look like? What’s really going to change?

Sonny Singh (SS): Imagine that you are launching a new product, and you could very quickly determine the best place to source for components, sub-assemblies or end products; maybe even understand how the design elements of various components of that end product could be solved. Imagine that you can on an open market and enter those orders.

Compare that to what happens today. If I am making a personal computer, I have to make sure that I can get the monitor from an ODM in Taiwan. I have to make sure that I’m getting the CPUs from Intel, and they’re the right spec, and we understand the lead time. I have to go out and do individual contracts with each one of them. If I have a product configuration that makes perfect sense for a given market, it’s probably a sevenweek market for a particular type of application, and I have to take advantage of that in a completely rapid fashion. I should be able to go on some network and find out who has this technology available for the CPU; the monitor for this set of specifications; the ability to assemble this; the ability to do the outbound logistics to the seven customer nodes that I have, within a threeweek window, end to end. Today, it’s almost impossible to take advantage of those micro-environments, and hence we are using the traditional approach, where we forecast how things are going to change.

Today, for example, if we get a sudden surge, we have to scramble around the world to see if we can get someone who has a standard process of manufacturing that is compatible with our product, buy some capacity and guarantee a certain level of production through contract. That’s a fairly long process, and some of the costs associated with the process get passed on to the consumer. In a truly new industrial revolution, one will be able to access a very open network environment and understand the best place to source logistics capabilities, etc., and this openness will not require excessive, timeconsuming, contractual requirements and obligations. It’s all about how open and how visible you can make the global supply chain network.