Using BizTalk Server to Help Solve Supply Chain Challenges
Adding value to goods and services as they move through the supply chain requires effective transfer of information among both suppliers and customers. Without such information sharing, supply chain management—efforts employed to improve time to market, lower costs, effectively manage existing resources, and accurately forecast future demand—will be hit and miss. Microsoft BizTalk Server supports two critical supply chain goals:
| • | Integrating applications both within your organization and among your supply chain partners |
| • | Providing the core infrastructure for automating and managing business processes across the supply chain |
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Connecting Applications
Your organization’s line of business applications—for customer relationship management, purchasing and other mission critical functions—contain valuable business information. However, most line of business applications are so specialized that most staff are unable to effectively access and extract useful information. The key to unlocking this critical data and making it available across departments is to integrate across systems, processes and people.
Just like large companies, midsize organizations need real-time information about the flow of products, information and financials between links in the supply chain; however, obtaining such information is extremely difficult when applications and systems are incompatible across company boundaries.
Automate and Manage Supply Chain Processes
How much visibility does your organization have into its supply chain? Enough to know your organization is partnering with the upstream supplier that best meets your needs? Enough that your organization’s ability to produce the product or service is a strong match to customer demand?
To grow your business, cut costs, increase throughput, and improve the quality of the goods or services you produce, it is critical to have visibility into the supply chain, from end to end—hat means effectively tracking information and managing supply chain processes.
Meet Industry Challenges
Although the issues of integration and business process automation and management is central to all supply chains, your industry is defined by a unique set of challenges that make the focus of supply chain improvement a little different from another industry’s. Follow the links for supply chain challenges specific to your industry.
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Break Down Interdepartmental Information Barriers
How effectively is your organization able to transfer information among key functional areas? If data transfer between departments results in any number of inefficiencies (from long lag time between the request and delivery of information, to the introduction of errors into the information or loss of data to the need for manual re-keying of data), then decision making—whether day-to-day or long-term—can be compromised.
When you consider the degree to which many business processes are interrelated and interdependent, it is clear why effective information transfer is so critical to organizational effectiveness. The specific design and features of each product impact choices about raw materials procurement and delivery, about the production schedule, and about retail distribution and demand management.
Many line of business application solutions are built using custom code and proprietary technologies, making the task of sharing data across functional areas complex and time-consuming. That’s not the only problem: business rules and policies have been coded into the application, and changing the rules requires recoding the application—an inherently inflexible and time consuming task. Despite these difficulties, it is the exception that scrapping these technologies is an option; rather, a solution that is able to use the data from these systems and tie in with other systems is the way to go.
The solution to this problem for larger organizations has been to use enterprise application integration (EAI) systems to move information between complex legacy systems; however, these systems can come with a high price tag. In fact, depending on the industry, the costs can be in excess of $1 million.
In contrast, Microsoft BizTalk Server provides the infrastructure solution to obtain seamless connectivity with line of business applications in any industry sector, enabling the sharing of information among heterogeneous platforms, systems and applications—and BizTalk Server does so while delivering the best return on investment to customers. (See the Nucleus Research studies for a comparison of ROI between BizTalk and other integration servers.) BizTalk Server doesn’t just provide an application connectivity solution for within the enterprise—it also provides the application connectivity solution between businesses (see Break Down Business to Business Information Barriers), making the return on investment even higher.
But it’s in the insight that BizTalk Server helps to deliver that business users realize the real value of the product. Using familiar Microsoft toolsets, BizTalk Server enables users to monitor business processes in real-time. Whether you are trying to reconcile financial transactions, or to speed the time in which pricing is refreshed in a retail environment, or to accelerate insight into the status of customer orders, or, for that matter, accomplish any number of other processes that rely on fast, reliable information about product status, BizTalk Server can provide you with the tailored alerts and status reports that provide real-time visibility into business processes.
BizTalk Server offers a number of services designed to make application, system and platform integration within your organization a more effective process, whether your industry focus is manufacturing, finance, healthcare or retail.
| • | Internal Application Integration Services |
| • | Vertical Solutions and Industry Accelerators |
| • | Document Transport and Routing Services |
| • | Data Transformation Services |
| • | Data Analysis Services |
| • | Configuration and Management Services |
| • | Microsoft Windows Platform Integration Services |
| • | Scalability Services |
| • | Security Integration Services |
For information on how BizTalk Server can help you integrate across your supply chain, see Break Down Business to Business Information Barriers.
Break Down Business to Business Information Barriers
Without effective exchange of data with both upstream and downstream trading partners, each link in the supply chain is blind to changes upstream and downstream. There are a number of negative consequences of this, including lack of supplier insight into customer requirements and the need to maintain excessive inventory.
Worse, as second-hand and often distorted information travels throughout the supply chain, suppliers, distributors and manufacturers overreact or react ineffectively. The result can be a severe perturbation in the supply chain, resulting in massive financial costs.1
But breaking down barriers that exist between businesses is a substantial challenge. At the heart of this challenge lies a new paradigm in which members of the supply chain regard one another as trading partners whose collective efforts contribute to the success of the chain as a whole. This is very different from the traditional approach of regarding information as a competitive asset to be hoarded rather than shared among suppliers and customers.
Nevertheless, even if trading partners in the supply chain do recognize the value of the free flow of supply and demand information, many may hesitate to embark on a path to sharing that information, and for good reason. Committing to a technical solution with one trading partner carries with it the risk of facing a completely different solution with another partner whose technological inclinations suggest an alternate integration pathway.
The solution is to find an interface that adheres to standards for information transfer among diverse applications, systems, and platforms, while also providing a robust toolset and functional capability for managing communications and business process across supply chains.
BizTalk Server builds on industry standards to help companies easily exchange business documents and achieve more effective supply chain management, no matter what their underlying technologies are. BizTalk does this through:
| • | Trading Partner Deployment and Management Services |
| • | Internal Application Integration Services |
| • | Vertical Solutions and Industry Accelerators |
| • | Document Transport and Routing Services |
| • | Data Transformation Services |
| • | Configuration and Management Services |
| • | Microsoft Windows Platform Integration Services |
| • | Scalability Services |
| • | Security Integration Services |
Since the critical process of planning, forecasting, and replenishing inventory along the supply-chain is built on a foundation of collaboration between supply chain partners, BizTalk Server integrates with other Microsoft technologies such as Exchange Server and SharePoint Portal Server, thereby enabling partners to easily communicate and effectively access the data they need. The result is a more improved ability to make critical, timely adjustments to inventory production and distribution.
And because BizTalk Server supports important industry standard technologies such as radio frequency identification (RFID), supplychain partners can employ the Microsoft platform to create a visibility portal. Using RFID, individual products can be uniquely identified during the manufacturing process, creating an audit trail that includes information on the product’s creation, storage, transportation, and maintenance. This enables manufacturers and suppliers to gain immediate inventory metrics for supply chain management.
For further information on gaining visibility into the supply chain, see Automating and Managing Supply Chain Business Processes.
Automating and Managing Supply Chain Business Processes
The ultimate goal of business process automation (BPA) is to gain visibility into the supply chain. Visibility enables both effective process improvement, as well as ensuring that short and long term business decisions are based on accurate, up-to-date information.
Visibility into the supply chain is gained by replacing, wherever possible, manual processes with automated ones. This does more than simply reduce manual errors and inefficiencies; it provides a means of integrating applications and sharing information among them such that business processes can be viewed end-to-end, in real time. At the same time, integration and automation opens the way to shift the business process controls out of the hands of the IT professional into those of the business decision maker.
As visibility is gained, the business user can see problems such as redundancies, errors or bottlenecks in a process. With integration, the business user has the ability to interact with business processes, making improvements as needed or changing policies without the need for IT involvement. And frequently executed user processes, both within the company and across the supply chain, can be automated to accelerate efficiencies; from these, key performance indicators (critical metrics) about various processes can be delivered to business users to provide real-time insight before problems arise or become critical.
BizTalk Server provides business users with the tools and capabilities to connect across various systems and applications, and to gain insight into multiple business processes in order to optimize how the business is run.
| • | Business Activity Monitoring |
| • | Comprehensive Rules Engine |
| • | Process Automation and Management Services |
Financial Services
Managing the supply chain means managing product, information and financial flows. As a critical third of the supply chain, until recently, management of financial flows has not received the same attention as product and information flow management have. This is true not only with regard to making payments between most businesses, but also in the financial service industry itself.
That’s changing, however. Among banking, brokering, and insurance companies (for whom product differentiation is more difficult than, say, in manufacturing), increased competition necessitates greater attention to customer demands for improved pricing and service levels. And among these same organizations, there is increasing internal pressure to meet regulatory requirements without sacrificing other business initiatives—continuing to incorporate lean business practices while at the same time finding new ways to achieve corporate growth.
Management of financial flow in business-to-business transactions is also under intense scrutiny.
Just as it is considered a costly strategy to keep surplus inventory on hand, there is increased awareness of the costs involved in keeping excess cash on hand to meet cash flow needs. The bet-hedging approach of keeping cash on hand stems from poor visibility into payables and receivables on a day-to-day basis. Automating key processes—purchasing, invoicing, payments and the like—will improve operating efficiencies, provide visibility into financial flows to enable process improvement, and will enable the business to improve cash flow strategies.
For information on how BizTalk Server can help improve the financial services supply chain, see Break Down Business to Business Information Barriers.
To learn how BizTalk Server can improve financial flow among businesses, see Break Down Interdepartmental Information Barriers.
Healthcare
The healthcare industry—hospitals, pharmaceutical manufacturers, and manufacturers of medical devices—are only just beginning to recognize the critical importance of supply chain management, which puts healthcare about one to two decades behind other industries that have been working to limit costs and improve visibility into their processes.
It is estimated that nearly a quarter of hospital costs are related to inefficiencies in the supply chain. A number of inefficiencies arise from the fact that the healthcare system is only just beginning to employ the material management and inventory systems that are common to the manufacturing world. Others arise because of a lack of standardized purchasing procedures designed to balance both cost and effectiveness.
Most analysts of the healthcare industry agree that it’s critical to involve health care professionals in the process of choosing the most fiscally responsible and effective treatments and medical technologies. To gain buy-in, more of the health care community needs to understand the impact of supply chain management on healthcare industry wellness. In fact, supply chain management in the healthcare industry is not simply about reducing costs where appropriate; it is also about ensuring that through appropriate information tracking, patients receive correct, safe treatments; as well as ensuring that effective disaster recovery plans are implemented, especially in a market where too many critical pharmaceuticals are produced in a single manufacturing site.
For information on how Microsoft BizTalk Server can help the healthcare industry integrate systems and track information throughout the health care system and the supply chain, see Automating and Managing the Supply Chain Process.
Manufacturing
The manufacturing industry today faces a wide variety of challenges, including the need to improve profitability, reduce business and manufacturing process complexity, and gain better business insight in order to stay on top of their industry. Manufacturers must respond to business events in real-time, make products in response to customer demand, and outsource a wide variety of functions. And depending on the specifics of the manufacturing industry, challenges can get a lot more complex.
Microsoft, in conjunction with industry-leading partners, delivers enterprise solutions to a range of manufacturers including those in vertical industries such as automotive, chemicals, consumer packaged goods, high technology, and oil and gas. These industry-specific solutions provide a flexible, scalable and reliable platform that enables businesses to be more agile and connected. As a result, manufacturers are empowered to shorten product development cycles, integrate operations with partners and suppliers, acquire and share intelligence in real time, and more easily communicate with customers.
For more information on specific manufacturing industry challenges, see the following sections:
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Automotive
The automotive industry leads the manufacturing industry in terms of supply chain management best practices. According to AMR Research, a 6 percent difference in perfect order fulfillment distinguishes the best and worst Tier 1 suppliers in the automotive industry. Such exceptional performance is a result of a number of factors, including high adoption of supply chain software solutions and strong collaboration among various links in the supply chain.
Of course this performance only applies to Tier 1 suppliers. Moreover, many automotive industry analysts believe that success comes as a result of making the most of a sub-optimal approach, namely mass production of the end product, where production specifications are driven by the original equipment manufacturers (OEMs) in the industry, not by the customer. The net result, many argue, is that customer incentives such as discounts and rebates drive sales, in part because the customer is purchasing a product that they don’t really want. The alternative to the "push" supply chain model is the "pull" model, in which production is driven by customer demand.
The pull model requires an unparalleled focus on customer requirements and systems, designed to ensure that customer specifications are translated into appropriate manufacturing requirements at each functional stage of production. In order to meet this goal, it is critical that product design specifications are passed through design, fabrication, and assembly with customer specifications intact. And that means ensuring information from all customer channels—including market studies, sales and distribution, and research and development—are effectively transferred from functional group to group.
Microsoft software and partner solutions help automotive companies reduce time to market, improve collaboration between teams around the world, and increase plant productivity. For information on how BizTalk Server can help break down functional barriers within the organization to help ensure that customer preferences are met during all stages of the manufacturing process, see Break Down Interdepartmental Barriers.
Chemical
The chemical industry supplies just about every other industry with essential materials. Despite this, the chemical manufacturing and distribution industries in the U.S. are low growth, low margin industries. The reasons for this are various—globalization and commoditization have had a considerable impact, as has customer and consumer demand for lower prices.
One of the unfortunate side effects of this economic situation is that innovation in the chemical industry is shrinking—R&D investment has dropped off dramatically, which of course means that there are fewer products entering the market to drive up profits. Recognizing the long term impact of these and other problems, technical and business leaders in the industry began a research directive, the Technology Vision 2020. Now a decade into a 25-year vision, the directive’s aims are to understand the factors contributing to the ongoing economic difficulties, and to provide solutions designed to move the US chemical industry back to a position of growth and competitive advantage.
According to Technology Vision 2020 research2, a number of key factors must be addressed. At the top of the list are improving operations though a focus on better supply chain management. How much impact does poor supply chain management have? Domestically, estimated costs are 10 percent of the sales value of the final product; internationally, as high as 40 percent.
Managing the supply chain effectively is especially challenging for the chemical industry, where the quality of the raw materials is critical not only to final product quality and shelf life, but also to its safety. Not only must supplied raw materials meet various potency, grade and stability standards, but quality information must be managed and tracked across the supply chain in order to catch and prevent costly and potentially dangerous recalls, not to mention meeting governmental regulations.
For this reason, Technology Vision 2020 also identified information systems and information management processes—the ways in which data is collected, managed, and used—as critical to the industry’s ability to compete. And in the area of manufacturing, information and process control, improved supply chain management, and customer focus (as well as production capability and global expansion), emerged as critical areas to focus on for improved competitiveness.
Microsoft is an active member of the Chemical Industry Data Exchange and provides BizTalk Server solutions that support Elemica. For information on how BizTalk Server can help to provide visibility into information management across complex business processes throughout the chemical supply chain, see Automating and Managing the Supply Chain.
Electronics
In part due to a strong outsourcing effort that includes product assembly and repair services, the U.S. electronics industry has been able to hold on to a slender but significant profit margin. Increasingly, however, that’s being challenged by the need to meet regulatory standards. July 1, 2006 looms as a critical deadline—the time by which U.S. electronics manufacturers must meet European restrictions on hazardous material substances, most notable among them, lead.
Meeting such regulations requires that the hazardous material parts are swapped out of the inventory, which requires efficient management of an enormous number of parts. In fact it’s the tracking of component parts up and down the supply chain which makes adherence to this and other regulations so difficult. Manufacturers have the responsibility to ensure that their suppliers are aware of regulatory and reporting issues, and must be able to track and demonstrate compliance of all components.
And while outsourcing helps to keep costs down, it introduces its own set of regulatory complications—namely, the Sarbanes-Oxley requirement to document asset ownership across what is a very complex supply chain of service providers to the supply chain. There is an upside to this regulatory pressure. Gaining the visibility into shared processes enables providers along the electronics supply chain much needed insight into the manufacturing process, enabling them to make demand-based changes to variables such as production volumes and deliveries.
Microsoft and its partners are committed to providing manufacturers in the high tech and electronics industry with tools that help reduce time to market and decrease costs, while increasing revenues with a new product stream. For information on how BizTalk Server can help provide insight into the business-to-business supply chain process, see Break Down Business Barriers.
Retail
One of the biggest challenges to the retail industry is to incorporate customer demand into the product planning and replenishment processes, and to do so in an integrated fashion across the supply chain so that suppliers work with one another to meet customer demands. While the benefits to this approach are fairly clear—increased customer satisfaction, decreased costs, and the reduction of inventory overstock—meeting the challenge is far more complex.
Critically important to the process of transitioning the retail industry from a product-centric to customer-centric approach are IT systems that perform in two key areas: 1) providing customers with a variety of channels through which to gain product information, buy, and return products, and 2) tracking individual customer behavior in order to both improve customer relationship management and turn raw data into information to further drive product planning and sales.
Improving visibility into customer demand will help in the process of managing product life cycles, aiding all players in the supply chain—from suppliers to manufacturers to distributors to the retailer and the customer.
Microsoft is committed to helping the retail industry to fundamentally improve their supply chain. For information on how BizTalk Server can help integrate systems and gain visibility into the most effective way to manage product life cycles, see Automating and Managing the Supply Chain.
| 1 | This so-called bullwhip effect, as documented by researchers at Stanford, can cause severe perturbations to the supply chain, and can result in significant revenue losses. See http://www.gsb.stanford.edu/news/headlines/leewhang_bullwhipeffect.shtml |
| 2 | Technology Vision 2020 (1996), http://www.ccrhq.org/vision/index/contents/esum.html |