The era of do-it-yourself supply chain integration - its costs, its risks and its drain on your IT resources - is coming to an end. Help has arrived
Nine months. That's how long it typically took Agere Systems' IT staff to set up an electronic trading connection to a major supplier or customer.
Nine months for each and every one.
"We did every bit of integration ourselves, and every supplier's connection had to be different," says Chris Morris, the director of IT infrastructure and operations at the semiconductor maker.
Worse, those connections - whether via e-mail, the Web or more complex linkages like electronic data interchange (EDI) or the high-tech industry's own electronic lingua franca, RosettaNet - were all supported by different and ultimately inefficient processes inside Agere. Procurement staffers had to chase down orders via phone, fax or e-mail, and manually key in EDI data into Agere's Oracle ERP system. And Oracle could do little to help. Morris says Oracle's supply chain tool had neither the external-facing, automated service capabilities nor the reporting, metrics and error-handling features that Agere wanted and Morris felt the company needed.
There had to be a better way to make the connections.
The Trail of Broken Links
Morris, of course, isn't alone. Plenty of today's supply chains are slowed and even crippled by entrenched manual processes and disconnected enterprise systems. Right now, says Noha Tohamy, a supply chain and pricing solutions analyst at Forrester Research, "there's no significant integration between manufacturers and their suppliers' and customers' enterprise systems". Supporting her claim, more than 60 percent of companies responding to an April 2006 Aberdeen Group survey described their current supply chain processes as manual, spreadsheet-intensive, only partially automated and dependent upon different software systems within their own companies.
In short, the current state of the supply chain is not too good.
The reasons for the disconnects with supply chain partners are many, beginning with the fact that CIOs are still struggling to integrate their own ERP applications with their own supply chains, never mind connecting to and integrating with their partners'. Indeed, 60 percent of the respondents to a 2005 Aberdeen Group survey said complete internal integration would give them a competitive advantage - if only they could manage to do it.
The back-office enterprise systems in most companies weren't designed to support the multi-application, external-facing services that real-time supply chains require. They're too inflexible. "When you want to make a change [to your legacy ERP or SCM system], it's basically like ripping up concrete," says Beth Enslow, senior VP of enterprise research at Aberdeen Group.
But whether they realize it or not, the era is over of CIOs thinking that they can connect multiple, external systems, that they'll have the money and staff expertise to do it, and that communications protocols like EDI and RosettaNet will somehow magically integrate their supply chain information for them. Done. Finished. Why? Because that thinking has rarely produced any value for the enterprise. In one Forrester report, nearly 60 percent of the companies surveyed said they did not achieve the expected ROI from their supply chain management technology solutions.
"Traditional electronic data interchange, value-added networks are dead," says Benoit Lheureux, a research director in Gartner's application development, integration and Web technologies group.
For many CIOs, this is very bad news indeed.
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