Global Supply Chain

It is clear that SaaS as a delivery mechanism for software solutions is here to stay.  As a matter of fact, we at Blinco Systems are about to deploy our 3rdwave solution in a SaaS model.  When discussing the benefits of SaaS for the end user, and particularly the issue of Total Cost of Ownership, I think that our position is neutral.

There is much literature now being published on SaaS and LCO and one can easily draw the conclusion that a SaaS solution, if it can work for you, will bring you a lower cost solution than a traditional licensed model would.  My view is a firm – Yes and No.

There are strongly stated underlying assumptions in favor of the SaaS solution as the LCO option.  The first assumption is that the SaaS solution fits the business requirements of the client organization.  The second assumption is that the SaaS solution can be easily configured to support the business processes of the client organization.  The third assumption is that once implemented, the SaaS solution will continue to accommodate changes in the client.  The fourth assumption is that the sum of the costs (subscription, implementation and data conversion costs) of the SaaS solution(s) implemented at the client will be less than the cost of a more traditional solution (whether licensed or subscription – plus maintenance costs) that is supported with client-centric modification and/or customization.

For many small and mid-size businesses whose business model doesn’t change over time and who can adjust their processes to the software solution, the SaaS delivery mechanism can fit very well.  However, for companies that are in environments that experience change, whether internal or external, the SaaS model needs to be seriously questioned.  Change manifests itself in business requirements imposed or necessary business processes change.  If an organization want its software applications to change to support the new process requirements, then the SaaS solution may prove inadequate and limiting.

With respect to LCO, the numbers have to be examined very carefully.  Questions about the net present value of the software over a 3-5 year period should be questioned.  It might be that the traditional license model with upfront license fees and annual service and maintenance may actually be less expensive over a 3 year period than a SaaS subscription and significantly less expensive over a greater period of time.

If a company changes or requires additional software to support changed business processes or requirements, questions around the additional costs of other SaaS solutions should be considered and compared to the cost of modifications to a licensed application.

There are many costs to consider when moving forward with a solution – whether SaaS or traditional license.  Like any major investment, consideration of both the obvious and hidden costs is imperative.  Care should be taken when evaluating the SaaS model as to whether the savings are as real as the current press reports or more of an illusion.

Some questions to consider when deciding on whether a SaaS solution is right for you:

1. Does my business neatly fit into the SaaS solution offering – today and in the future?
2. Will my business be required to change to meet the requirements of external forces – i.e. customers, suppliers, government regulations in the foreseeable future?
3. Will my business processes be required to change over the next 2-5 years due to growth opportunities?
4. Does the SaaS solution address my business requirements or will I have to look at additional solutions to round out my IT environment?
5. If I need additional software how will it be integrated into my SaaS solutions?  What will be the cost of integration?
6. What is the break even point between SaaS and a more traditional License model?
7. If I need the software to “flex” to my business processes will the SaaS provider be able to support me?
8. What is the Total Cost of Ownership of a multi-SaaS environment when compared to a software solution that can be modified to meet on-going business needs?

In many instances, 25-40% of an organization’s business is transacted internationally. This number has risen dramatically over the past five years and is predicted to reach anywhere from 35% to greater than 50% within the next decade.

With this continuing seismic transformation to a global economy, the complexity of a company’s supply chains increases geometrically if not exponentially. The ability to manage inventory, costs, and compliance effectively and efficiently across a network of global supply chains is being severely compromised when using traditional processes and technologies. Rising levels of inventory, misunderstood total cost of product ownership, increased regulatory business compliance and the risks associated with international business have brought an unprecedented level of awareness to the C-level executives.

With this growing percentage of global activity in a company’s product mix, the way a company constructs and manages its global supply chain has a significant and growing impact on its financial results and strategic competitiveness. The inability to effectively manage these complex supply chain networks, places organizations at significant risk. Whereas the ability to command, streamline and control the global supply chain environment brings with it incredible opportunity and strategic advantage.

Synchronizing Your Supply Chains

The key challenge to developing a comprehensive 21st century global commerce management capability (the management and synchronization of international physical, financial and information supply chains) is rooted in the basic architecture of information systems that are poorly integrated across functional business silos and units. Lack of synchronization limits the ability to predict and respond to events across the supply chain, resulting in sub-optimal results. With many activities across the global supply chain being outsourced to contract suppliers and service providers, the level of direct control over results is limited. To achieve and assure high levels of performance in this less controlled environment, companies must have the appropriate tools in place to influence partners and service providers to deliver the highest levels of compliance to contracts and commitments. To achieve a best-in-class global supply chain capability requires integrated solutions that synchronize activities and information across multiple participants in the supply chain.

The synchronization of global supply chains is comprised of four elements, each of which is critical to effectively managing your global supply chains. This synchronization is imperative if superior supply chain and organizational performance is to be achieved:
1. Developing a global network of suppliers and service providers
2. Retaining people with the right level of expertise to manage the global environment
3. Creating the right processes
4. Providing the information infrastructure that enables controlled global supply chain execution and management

Integrating the Physical and Financial Supply Chains

Within an organization, operations handles the physical supply chain while finance manages the financial supply chain. Whereas management’s focus is on setting strategic goals and overseeing the activities to ensure these goals are met or even exceeded. Virtually all see their world through the presentation of tangible assets in digital format. In a perfect world, information represents the physical and fiscal worlds as they are, in as close to real-time as possible. Accurate and real-time information that is available for collaboration across an organization’s supply network (internal or external) and that supports timely execution of tasks and responsibilities, tactical problem solving, and strategic decision-making, is the fundamental underpinning of optimal global commerce management.

Information and visibility, while important in and of themselves, are limited in their potential unless put into meaningful context. Contextualized information allows users to understand the implications of an action within the supply chain and its effect on a specific activity. It empowers users to make optimal decisions.

Contextualized supply chain information enables users to see where an item is in its supply chain life-cycle and understand its effect on distribution or manufacturing. Contextualized financial information allows users to see the impact a physical event has on the cash and asset position of the company, and to optimize financial asset allocation and execution. With intelligent contextualized supply chain information, management has 100% visibility into where any department, business unit or organization is at any point in time.

Last week my reading brought me to this article “Managing The Basic Supply Chain Functions“ .  In the article Professor Paul Dittman from the University of Tennessee outlines what he considers are the Five Pillars of Supply Chain Excellence:

1. Talent is the first of the five pillars driving supply chain excellence. If you don’t have the right people in place, you can’t build an appropriate strategy – and you certainly can’t execute it. Finding talent for supply chain positions has unique challenges due in large part to the cross-functional and cross-company pressures supply chain executives face today.
2. Technology is always critical, but the real key is making sure you choose the right supply chain technology and successfully implement it. Improperly understood or implemented technology can cause severe damage rather than improvement. You must be careful in how you select and apply the latest supply chain technologies, especially given the extremely complex nature of today’s global supply chains.
3. Internal collaboration means that each function in your firm plays a critical role in building a successful supply chain. Effective internal collaboration will help you develop a clear vision for how all the functions can work together to achieve supply chain excellence. The New Supply Chain Agenda includes a self-assessment worksheet you can complete to honestly evaluate your process for aligning the demand and supply sides of the firm.
4. External collaboration focuses on how your company can achieve breakthrough results by collaborating externally with both your suppliers and your customers. Best practices for collaboration exist and are being applied by more and more firms.
5. Managing supply chain change is the last but equally critical pillar of a supply chain excellence strategy. If you don’t execute change successfully, everything else is for naught. You need to learn how to increase your chances of success on the path to supply chain excellence. Because of their cross-functional, cross-company nature, supply chain projects are more difficult to implement than those in other functional areas.

While it can be argued that five other components could be considered equally important, these five points are undoubtedly critical to achieving Supply Chain excellence.

What I find particularly interesting is that Dittman puts collaboration as 2 of the 5 major pillars of excellence.  Why does Dittman rank collaboration so highly?

I would argue it is because collaboration is the way work gets done - whether internal or external.  All actors in the supply chain collaborate whether they are conscious of the act or not.  Collaboration takes place at the planning, execution and management levels.  Collaboration is cross-functional and takes place among multiple parties.  Collaboration is both formal and informal.  Collaboration supports both tactical and strategic activity.

Furthermore, I would argue that because collaboration is so basic to doing work, an organization cannot excel at managing change (point 5) if the organization does not have superior collaboration capabilities and infrastructure.

Today, there are different technologies that go to support collaboration.  Obviously some tools are better than others in supporting the flow of information inside  and among organizations  .  However, the effectiveness of a collaboration tool is measured by its uptake in the organization.  In order to be accepted and broadly used by all levels of the user community it must be simple to use and organic to the work process.  It must be designed to facilitate not just the formal requirements of early generation collaborative tools such as document sharing and structured interaction but it must have the added attribute of being extremely flexible and supportive of rapid interaction for common work purpose.

In our blog Supply Chain Execution Convergence – What does it mean?, the ‘What’ of SCE (Supply Chain Execution) Convergence was discussed. Here I’d like to follow with the ‘Why’ of SCE Convergence because of its critical role in achieving global commerce excellence.

Convergence is a critical concept and practical cornerstone of both global commerce management and global supply chain execution.  It is the dynamic connection of information across the global supply chain, providing a singular truth from multiple perspectives.  Convergence fully integrates operations and finance through the synchronization of information across affected functional business units, management levels and 3^rd party suppliers and service providers.  Global commerce management convergence brings together all elements of an organization’s international supply network so they are fully orchestrated to achieve their global sourcing and fulfillment objectives.

The number of parts {activities (stationary and moving), players, and items} to be managed and controlled in the global supply chain is many.  Even in relatively small organizations, the level of detail associated with each part significantly increases the amount of information to organize, which often becomes unmanageable. With global supply chain information convergence, these volumes of information are integrated and synchronized, analyzed, targeted, and distributed to the user community which requires this information in real, or near real time. With convergence, there is only one view of the truth as information provided through the multiplicity of sources is first validated and reconciled for accuracy and then distributed to the user community.  Convergence eliminates information duplication and liberates information from its silos.

There is no doubt that a singular, accurate and timely view of shared information is extremely powerful.  Analysts and consultants have long held that having “one view” is the Holy Grail for supply chain management.  The reasoning behind this belief simply is that one shared view is a critical component to help support business decision making at the operational, tactical and strategic levels.

One example of convergence is in the critical area of Cost Management.  Cost Management is dependent on internal and external cost sources and is essential for multiple constituencies across the organization.  Those required cost elements supporting purchase planning and execution are the same as are required to support customs duty calculation and filing, payment auditing and authorization, financial planning and budgeting.  In many systems, the cost elements required to support each of these functions reside in different internal information silos and in “clouds” of 3^rd party partners.  In order to properly manage and organize this information, a solution is required which can converge data from multiple sources in order to normalize, analyze and report the information in a manner that is easily understood by the targeted user community.

Another dominant example of convergence can be found in Iinventory Optimization.  Inventory Optimization is an organizational quest to ensure the correct amount of product is in the right place to meet customer or consumer demand.  It requires convergence of information from multiple players in multiple disciplines within and external to the organization.  From within, the actors involved are both on the demand side (sales, marketing, ops planning, etc.), and on the supply side (purchasing, inbound logistics, compliance, inventory management, etc.). Externally, suppliers, carriers, DCs, and customers all have an impact on product availability and therefore on the levels of inventory.  Optimizing inventory requires a system that supports the convergence of information from all sides.  Convergence enables the acquisition, maintenance, and analysis of product data from all players across the supply chain, in near real time, so that events affecting either supply or demand can quickly be observed, the impact analysis reviewed and decisions and action plans created, and executed.

Virtually every manager and operator requires information that has a source outside their immediate sphere of activity.  With separate information systems in place, information used in one area of an organization is often not in sync with similar information being used in other areas, or across that organization’s extended supply chain.  Convergence geometrically improves synchronization, accuracy and timeliness of delivery of the information.

Why is Convergence critically important to organizational success?   Because a lack of convergence makes it impossible to achieve a holistic view of an organization’s supply chain and therefore reduces optimal organizational performance.

Convergence dramatically improves the flow of information between all actors in the supply chain.

• Convergence improves the quality of information across the supply chain by immediately identifying any inconsistencies in the data
• Convergence improves financial performance by ensuring that subsystems such as inventory control, purchasing, sales, marketing, logistics and finance are all operating from the same page
• Convergence supports practical business collaboration by ensuring that all authorized actors (internal and/or external) share consistent information that is critical for performance enhancement, problem resolution, and planning.  Response times are reduced and decision support increased.

Without convergence, organizations and individuals can only approximate what is really happening across the supply chains.  Unfortunately, without consistent information one could never be certain that the decisions and actions they carry out will be optimal for the organization at that point in time.

While convergence does not guarantee ‘optimal’ supply chain management, an organization without convergence is certain to sub-optimize its performance.

We have just released into alpha testing our new web-based version of 3rdwave GCM (Global Commerce Management).  We haven’t yet selected the official name for the application(s) covered by this new release.

This newly architected version takes full advantage of the web and allows our clients to take full advantage of the browser to access their information while eliminating their service and maintenance, hardware and database costs.  This brings global supply chain control to a new level of mobility – 24 hour access from anywhere without the additional burden of non-core IT infrastructure.

What makes the new release of 3rdwave GCM so exciting is that by redesigning it from the ground up, we have create a very open framework – built in a true Service Oriented Architecture (SOA) – that enables clients to choose the type of global commerce functionality they require for their unique environment.  3rdwave GCM modules are powerful as stand alone point solutions, integrated suites of configured point solutions, or as a tightly integrated end-to-end global supply chain solution.  We have gone to great lengths to insure that our clients can constantly extend the 3rdwave GCM functionality with a framework that quickly integrates to other 3rd party applications or simply synchronizes with additional 3rdwave GCM modules.

The design of the 3rdwave GCM interface is what makes it truly innovative.  Excessive attention has been paid to the user experience and the interface makes operator work truly intuitive.  As one Gartner analyst pointed out during a briefing – this interface is AWESOME.

With the release of this new version of 3rdwave GCM web, we will be offering clients an easy and low-cost entry to manage their global commerce – a way that suits their specific requirements.  It will be offered as a hosted SaaS solution (one version of the application offered to many clients), a dedicated hosted environment (a configured and modified solution unique to the specific client), and a traditional licensed model.  The SaaS and Dedicated Hosted solutions will be offered as a monthly user-based subscription hosted by Blinco Systems Inc in a secure facility with 24/7/365 access and 99+ uptime.

August 31, 2010.  Blinco Systems meets with Gellert Global Group and unveils Blinco’s vision and development roadmap through 2012. At the interactive meeting, discussions included BSI’s new 3rdwave Covergence Eco-System including 3rdwave GCM web apps, extended 3rdwave Visualization Station capability, and 3rdwave Collaboration capabilities.

Executives and management from the Gellert Global Group of companies were excited by the very easy to use UI of the new 3rdwave GCM web solution, its 360 visibility of items across the global supply chain, and its ability to integrate supply chain collaboration and graphical anlytics and dashboard KPIs.  John McLennan, CIO for the GGG stated that the meeting provided a “view forward that enables the GGG to confidently map their technology and solutions requirements with a dynamic browser native enterprise capability while insuring that their client server legacy solutions are maintained and their significant investment protected.”

Blinco Systems emphasized that the roadmap to the future for the Gellert Global Group included protection of their legacy solution and the substantial investment they had made while providing the new, more flexible development model and UI for future development.