RosettaNet E-Business Standards Provide Better Supply Chain Collaboration and Efficiency
Introduction
In today's competitive world, well-oiled and responsive extended supply chains are increasingly becoming a foundation for competitive advantage. No longer can companies restrict their focus on increasing supply chain efficiencies within the four walls of the enterprise. Increasingly, the supply chain beyond the organizational boundaries determines a company's effectiveness.
There is a growing dependence on "collaboration" to bridge the boundaries - not only within the enterprise, but also between enterprises and across industry boundaries. A collaborative supply chain is one that is able to eliminate intercompany bottlenecks while maintaining security and trust between trading partners. Partners have employed slow, expensive, manual collaboration tools (e.g., phone and fax) to exchange information and process transactions.
Enabling an automated collaborative supply chain poses several challenges. First, it requires supply chain partners to agree to a standard protocol for exchanging information and executing transactions. Second, it requires a reliable and secure data exchange medium. Third, it requires an understanding of the "lost-value" due to uncoordinated decision-making. Fourth, supply chain partners need to identify what information needs to be shared as well as the information exchange process flow to facilitate decision-making. Finally, trading partners must determine how the generated value will be shared between the enterprises so that both have the incentive to participate in the changed process and make the more intelligent collaborative decision.
Many early attempts at collaboration never grew beyond automating existing processes and communication between trading partners. Initial attempts to introduce data standards revolved around electronic data interchange (EDI). Standards bodies, such as the American National Standards Institute (ANSI), defined standards formats for common business documents to allow electronic exchange of these documents over private value-added networks (VANs). While EDI is an obvious improvement over manual techniques, it has seen limited adoption due to complexity and cost of the software required to interface internal systems to VANs, in addition to the high transaction-based costs of the VAN itself.
These solutions did not come close to integrating the decision-making processes of a company with its trading partners. Users complained about the inflexibility of EDI in representing their business processes. EDI's penetration remained limited to only the largest 20 percent of trading partners. Small- and medium-sized companies found it difficult to justify the investment in EDI. Information hubs published data directly from ERP systems, but trading partners were concerned about the quality and correctness of the data, and received no decision support capabilities. Phone, fax and email were too error-prone and simply not scalable. Finally, none of these approaches completely addressed the costs of developing, managing, and maintaining the infrastructure to support truly collaborative relationships.
Many of these solutions had only limited success, because they did not unlock the new source of efficiency that companies were after: making better decisions through collaborative inputs from trading partners.
With the advent of the Internet, business documents could now be quickly and easily exchanged. This eliminated the need for expensive connectivity, but still required step-by-step processes for information exchange and transactions. To eliminate the need for bilateral negotiation between trading partners, RosettaNet focused mainly on intercompany processes, and developed standards and guidelines for automatic system-to-system exchange of information and transactions.
Breaking Enterprise Silos
Some forward-looking companies have initiated collaborative efforts, but have failed to generate the expected results. Some cross-enterprise efforts provided a means for information exchange that revealed the resulting uncoordinated decision-making, but then failed to provide a collaborative process to address this problem. Others did provide a mechanism for collaborative decision-making, but very few provided the incentives to initiate it. Without incentives, too often the primary beneficiary was left with reluctant trading partners who were not really making the necessary decisions, although they were begrudgingly participating in the process.
For example, supplier companies obtain forecast information from their customers. However, there is nothing binding those customers to the forecasts. There is no incentive for the customer to stick to those numbers; invariably, they will change the numbers as required at the last minute due to their own inefficient planning processes, and/or last-minute changes from their customers. In fact, the customer is motivated to over-forecast in order to raise the likelihood that the supplier will have enough material should the customer find that more is needed. Suppliers, therefore, still have to guess customer behavior and position inventory to protect against the variation in customer behavior. Suppliers need to encourage customers to abide by their decisions as well as share them.
Similarly, customer companies have some collaborative processes in place where they get information on allocations from suppliers. However, there is nothing binding the suppliers to those allocations. If the supplier's situation changes, it could change the allocation at the last minute. To protect against this unreliability of supply, customers must position higher inventory of component parts to protect their own throughput. To drive suppliers to provide reliable allocations at the right prices and abide by them, customers must provide them with value for such behavior.
Therefore, the very basis for cross-enterprise collaboration is resident in the understanding between supply chain partners that there could be lost value in uncoordinated decisions. The decision process in need of coordination should be identified, as well as the information that needs to be shared to enable those decisions to be made intelligently. Finally, both trading partners should have a vested interest in the process. These include joint incentives and penalties to participate and share the value generated by collaborative decision-making.
Collaboration: Myth and Reality
The term collaboration has been misused in the marketplace. It has been applied to anything that involves communication. This dilutes the significance of collaboration. Collaboration is any process by which two or more separate authority domains coordinate their decisions, resulting in plans that are superior to the plans they would have likely made without coordinating their decisions. Coordinating decisions is the essence of collaboration. If there is no coordination of decisions, there is no collaboration. It may still be a useful process, but it is not collaboration.
A decision is made by one partner, and that decision is published to another partner, who may make a different decision than it would have otherwise. As a result, it responds with a different decision to the first partner. The process continues until both partners are satisfied with their collective decisions, or until one of them decides to execute according to the best decision yet reached.
Collaboration is a decision-making process. While sharing information or creating visibility might support or even facilitate decision-making, it is not by itself decision-making. To achieve collaboration, trading partners must have decision-making on each side of the collaboration, and they must specifically engineer the communication between them such that it facilitates more intelligent decisions.
Collaborative Framework
The key to engineering collaborative solutions is agreeing what information should be shared to influence the decisions made on each side. The information may be more than simple visibility; it could involve other direct incentives. Incentives, however, cannot be ad hoc. It is necessary that both trading partners be prepared for the incentives. The collaborative decision support solutions on each side of a transaction or interaction will need to be engineered together with the collaborative protocol working between them.
RosettaNet partner companies are realizing that, although consortium partner interface processes (PIPs) specify the process only at the point of interface between trading partners, the value is in aligning internal decision systems with the PIP specifications.
The RosettaNet Solution
RosettaNet comprises more than 400 companies worldwide and has technological and corporate support at the highest levels of the technology industry's largest corporations. RosettaNet Partners contribute significantly throughout the standards development process, from concept to implementation, providing technical input, process methodology expertise, technology, best practices, project management, implementation services, support, and solutions. This unique organizational structure ensures that the best minds from the most notable companies in the high technology industry contribute to standards that meet the needs of all. The motivation, expertise and leadership enables RosettaNet to develop and deploy standards with accelerated speed.
Figure 1 - The Rosettanet Solution
Implementation Experience
RosettaNet has taken an important and dramatic lead over other standards initiatives in terms of implementation experience. A case in point: In early 2002, the consortium announced more than 450 documented partner connections using RosettaNet standards worldwide. These were achieved by major information technology, electronic components, semiconductor manufacturing, and solution provider companies. They were the result of the consortium's 2001 Milestone Program, which set aggressive industry-wide implementation goals in key strategic business processes within the high technology supply chain. These programs have served as unifying forces within the industry - driving collaboration to solve critical supply chain challenges, aligning priorities, and speeding development and implementation of PIPs. This record achievement represents aggressive growth in the industry as it relates to XML and e-business standardization across the global trading network. The number of connections are only those RosettaNet has collected from its program partners. The consortium believes that the actual number of connections is greater when all non-programmatic connections are considered.
XML Convergence: A Conceptual Model
RosettaNet has surveyed the XML-related standards space and has developed a conceptual model that enables the comparison of horizontal (universal) and vertical (supply chain- or business model-specific) XML standards efforts. Using a model that identifies nine distinct components required to provide a total e-business process, RosettaNet's goal is to bring clarity to various industry efforts. It is possible to identify efforts that are complementary as well as areas where possible overlap (and thus convergence opportunities) exist. There may be differing views or alternative perspectives to the model.
Solutions for RosettaNet-Supported Supply Chains
In the absence of proven, universally accepted horizontal standards, RosettaNet developed a number of horizontal components. Today, RosettaNet has standards efforts in each of the following areas:
Universal Messaging Service: RosettaNet developed the messaging services component, called the RosettaNet Implementation Framework Core Specifications, to supports its production implementations.
Universal Business Dictionary Structure and Content: RosettaNet has defined a universal business dictionary that is being used across the IT, EC, and SM supply chains.
Universal Technical Dictionary Structure: RosettaNet, working with Silicon Integrated Initiative (Si2), has developed a universal technical dictionary structure for use by the high-technology industry.
Universal Business Processes: RosettaNet is in the process of developing universal business processes that could be used across a wide range of supply chains.
Business Model Processes: RosettaNet is developing a number of business model-specific processes commonly used in the high-tech industry. RosettaNet is also working with the National Electronic Manufacturing Initiative (NEMI), and this joint effort will enhance the development of manufacturing business model business processes.
Technical Dictionary Content: RosettaNet, in conjunction with Si2, International Electrotechnical Commission (IEC) and Japan Electronics and Information Technology Industries Association (JEITA), has developed technical dictionary content, called the RosettaNet Technical Dictionary, which supports the IT, EC, and SM industries.
Supply Chain Business Processes: RosettaNet is currently the only organization focused on supply chain business processes. Many of RosettaNet's PIPs are already in production between trading partners in the IT, EC, and SM supply chains.
Universal Specification Schema and Architecture: RosettaNet has developed a universal specification schema and architecture to support it.
Conclusion
Companies seeking to more closely align their business processes with trading partners are well served by employing RosettaNet e-business standards, which can provide greater visibility to forecasts, inventory levels, order execution, shipments, and content. EDI standards don't work because they are complex and the cost of software is prohibitive. The solution is collaboration. Companies must find improvement beyond their organizational boundaries by coordinating decision-making processes with their trading partners.
Supply chain integration requires both horizontal and vertical XML standards to handle business process complexity and interoperability between supply chains. RosettaNet has developed a conceptual model for identifying the components of business process that allows for the direct comparison of all XML-based standards. Although many XML standards initiatives are complementary, the sheer number of standards initiatives has created confusion among end users. RosettaNet will continue to play a role, but expects to converge efforts with other horizontal standards organizations.
Acknowledgements
Special thanks are due members on the i2, RosettaNet strategy,
product management, development and marketing teams.
