Challenges with supply chain integration

Supply chains and supply chain innovation benefit enormously from the great variety of ICT systems that’s available today and that you can use to analyse the current flows and to improve them and to improve the communication with the supply chain partners. This great variety of systems and the powerful functionality that they bring are both a great opportunity for supply chains. But they are also a challenge. Every company over the years has selected its own ERP systems. So the core of their processes are often supported by one or sometimes multiple ERP systems.

And in addition, over the years they have introduced many specialised software systems to help them in improving their supply chain processes like the planning processes, the delivery processes, the sourcing processes, the enabling processes. So you see that each and every company in the supply chain has all these different systems in place. And they try to use them to make their supply chain work together in a more efficient and sustainable way. This is a huge challenge because these systems do not automatically integrate well. You need information from one system to flow into another one. You need coordination to go off a process from one system to the next. But these systems are from multiple vendors.

And they are not always built to be integrated. This is especially challenging for supply chains. Because supply chains deal with interorganizational processes. If you have a single company, it’s already a challenge to integrate your processes. But then, at least you can work on it under a single authority. Let’s say you can start projects to increase the ability you have to integrate your processes. And you can try to run it within your company. But you can imagine if you want to do this for your supply chain– with dozens or sometimes hundreds of companies– such a single control is lacking. So you cannot automatically direct people to use the same system.

You will have to deal with this great variety of systems and all these different flows and processes between the systems. Some companies took a really radical approach, which we call a vertically integrated company. They really try to take control of the activities from the end consumer sales all the way upstream to the source. So they may even own production facilities and own the stores. And in this way they try to really make all the activities flow and use a single IT group of systems to support it. But that’s very, very hard to achieve. And in reality you see that most supply chains are made up of several autonomous companies. And then, you need to integrate your processes.

You need to integrate your systems. You need to integrate all these different solutions to get a good visibility of your supply chain. So business process integration is still a challenge. You can see many of the systems that have been developed over the last decades in place in the different companies, small scale companies, large companies, companies that are really up to speed with the latest technologies, and companies that use very traditional or even still paper-based processes. All of these companies have to work together and integrate their business processes to meet the modern requirements on the supply chain. The current IT systems were not always designed with this in mind.

They were often designed to be a single solution that would support a process. And they were not always architectured to be part of a much larger landscape, and very easy to integrate to. And then, we see that sometimes this leads to a lot of islands– we call them sometimes islands of automation– that are really good in a certain task. But they don’t connect well to other systems. A famous example is, for example, warehouses that are really nicely automated. So if you visit them, you would see a lot of automated activities, robotics, automatic scanning, very impressive. But then, these systems are not always very well-integrated to the transport systems of the companies that are delivering goods to the warehouse.

So these processes may be completely independent. And when there are some events happening in these processes that disrupt their delivery or reliability, for example, the warehouse operation may suffer from that. So these islands of automation can be really useful for such processes but are not achieving an integrated process across company borders. So it’s a challenge now to achieve a more responsive and agile and well-integrated supply chain where all these different systems are integrated and where certain events and changes are automatically communicated and also understood in other companies, in other systems are propagated. And the whole supply chain becomes very responsive to change, becomes really a structure that’s going to be easily analysed and improved.

This goal– we can call it an agile and responsive supply chain– is what we would like to achieve in the coming years. This would require our systems to be integrated and to understand the information, flows between the systems, and really understand the data that they get from other systems. It would be nice if we would have a world where this would really work where we could buy a new component, a new software system that adds value to our supply chain and integrate it seamlessly into our existing landscape of IT systems. Sometimes people call this plug and play integration. But today that is very hard to achieve.

It’s getting a bit easier as some systems have standardised interfaces and as we see that there are some standards coming to the market for integration. But still, it’s more often plug and pray what people say. It’s not always seamless. And it needs a lot of work. And even some systems are designed to prevent this from happening or to make it really hard. They don’t have any interfaces. They just have a screen that you see information on. And you have to re-type it in another system. Let’s go over a few scenarios that you really will see in supply chain if you go and visit companies and see how they are internally automated but also how to communicate with other companies.

I will go over these scenarios. And then, you can use them to analyse supply chains that you work in yourself or that you have to improve. The first scenario is basically, what I can call human integrator. So there’s lots of systems. And they all facilitate a certain part of the supply chain. But they’re not integrated at all. It’s up to the human to see what’s happening and to connect the information. This is still happening a lot today. And the human is basically bothered with all the information overload, redundancy and has to re-type a lot of information.

Obviously, it can lead to a lot of errors, can lead to information overload, and does not give you a lot of tools to really monitor and improve the process. To make a step forward, a lot of companies and software vendors vendors came up with the idea of an internet portal. You may recognise these kind of screens from looking for a cargo or looking for a container or looking for the status of an invoice. Basically, these are web screens where you can go, type in certain numbers, and you get certain information. It’s a step forward. But it was not really built for machine to machine integration.

So it still requires the human to do a lot of typing and often also, re-typing to enter again this information in another system. Well, we see today that more and more advanced tools automate this tasks of the human. So they scrape the information out of the screen. We call them screen scrapers. But it’s not a very effective way. Because if these companies change the portal or they made some other update, again, these systems may stop working. And again, you will get errors. What we also see– and I call this scenario the export and attach scenario– is that companies work together by sending each other information by email. Very often these are documents.

In a worse case, they are like documents that have no structure at all. But sometimes they have structure like a structured text document or a spreadsheet or a CSV file or some delimited file. But it’s still very error–prone because it’s basically built on email communication. And this communication, people to people communication where the people have the responsibility to organise it, to handle changes, to get this information and import and export it into the systems. This is happening a lot because it’s, of course, very easy to set up, fast to set up. But it’s not very, very ideal still. So we see more advanced integrations scenarios. A popular one is the hub.

A third party or a group of companies can come together and set up a joint system. And they can call it a hub. And this system is literally a hub because it collects information about the supply chain from various actors. And if these actors update statuses and connect their systems to the hub, then other companies can benefit from this information, not just one tier up in the supply chain but also many tiers up. This is really popular to start this kind of projects over the last decade. And they can be really, very helpful. Another scenario that we see over the last decade is the API-based integration.

API is a term that used to be very technical and really the domain of programmers. But now managers, supply chain managers, realise that APIs are really important to connect all these systems, not only within their own company but also across companies. APIs allow you to open up your services that you are– open up your functionality of your systems to other partners in your supply chain and makes it really easy for others to connect their process to your system.

Today we see more and more companies that open up to API, put the interface of the system on the web, document it, explain to you how you can use it, and really make it easy to integrate the service of that company in your supply chain. You should really check if your supply chain partners are working on this or have it in place. Because it makes your integration a lot easier. And it has a lot of benefits. The idea of API-based services, sometimes web services they’re also sometimes called, is facilitated further by the emergence of cloud-based integration software. This means, actually, that you, as a company, you can integrate processes in the cloud.

And the cloud means these integration buses, they’re sometimes called, integration layers where you can define a joint process based on the different services that companies offer are now becoming available as a sort of pay per use service. So you don’t need to buy this complex software integrated in a company and then integrate all the different supply chain partners to it. But you can jointly do that. And you can let a third technology partner manage this integration software. This is a really interesting possibility as these kind of cloud-based integration layers come with all kinds of standard adapters to standards services to standard software like SAP as a standard integration or logistic services that are standard adapters are in place.

So it makes it a lot easier than, let’s say, 10 years ago and in the reach of smaller companies that have a limited budget to do this kind of integration as well. Another very interesting and more recent scenario is the use of open data. Open data standards are becoming much more accessible and allow you to manage a data pool that you can update and query and that other companies can use. So you basically, instead of have all these message flows automated, you just give access to important data sets in a standardised way to your supply chain partners. Open does not always mean free.

It just means that the protocols that you use to publish and to retrieve the data are standard and are part of a semantic web standards. So you just define what’s in the data and how you can access it. And then other companies can make use of it. It’s a very powerful set of technologies that are increasingly being used to share data and that data can be shared across the supply chain. And it’s another, really an alternative for this message-based scenario. So it’s important to realise that the supply chain can really benefit from more intelligent software as well.

If you manage to integrate information and make sure that the information is accurate and timely and at the right place and also accessible to software, to software, not just on screens readable by humans but also accessible to software. You can introduce a whole new class of intelligent software systems. We can refer to them as intelligent software agents. These agents sit on top of the supply chain data infrastructure and make all kinds of analysis about, for example, improvement possibilities, exceptions, smarter ways to procure things, production capacity that is sitting idle. They can do that for the human. Instead of let the human dive through all these kind of massive amounts of information. Again, this technology is not entirely new.

It has been around for decades. But it was always suffering from a lack of a good information architecture. So this would really be a good next step if we managed to get information more at the right place and better integrated. So I put these different integration scenarios in the sort of growth part that you see here. Basically, the human integrator, the export and attach, and the portals, that’s what you see a lot today. You see also an immersion of the more advanced integration scenarios like the API-based, the service-based integration, the hubs, and also the linked open data.

And what is needed is that we actually move the important processes from the basic and inefficient scenarios to the more advanced ones so that we can really facilitate supply chain innovation and remove a lot of waste and errors and mistakes from the supply chain. So this shows how important ICT integration is. Not just buying all kinds of advanced software to optimise a little part of your supply chain but also carefully integrate across the company borders all these different systems so that you can actually really do supply chain management.