SCM Automation: Opportunities and Challenges

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Copyright
©

2002 Intel Corporation

Page
1

SCM Automation:

Opportunities and Challenges

K. Srinivasan

Distributed Systems Laboratory (DSL)

Intel Corporation

January 24, 2002

Copyright
©

2002 Intel Corporation

Page
2

Agenda


Opportunities & challenges


Why web service standards?


The new IT


Role of academic institutions

Copyright
©

2002 Intel Corporation

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3

Primary

SCM Curriculum Objective

“…relatively easy to find technical
professionals eager to ‘come to Intel and
build the biggest e
-
Business engine in the
world’.

.. Difficult to find employees... with
deep
knowledge of what e
-
Business technology
can and cannot … do
.”

Source: Graduate School of Business, Stanford
University
Intel and e
-
Markets

Case Study 10/00


Vision + Pragmatism

Copyright
©

2002 Intel Corporation

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4

How important is SCM?

The company with the most efficient supply
chain was able to weather this (September
11
th
) the best

-

Michael S. Dell

Every business will be an e
-
Business

-

Andrew S. Grove

Copyright
©

2002 Intel Corporation

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5

Some SCM Successes



Raw materials inventory as a percent of cost of sales is
down 67 percent from two years ago.


Without the E
-
business systems … to track demand and
cost of inventory, Intel would have had to take write
-
downs
of anywhere from $500

million to $1

billion. “During the
worst downturn the semiconductor industry has ever seen,
you haven't seen a lot of write
-
downs coming from Intel …
in stark contrast to substantial write
-
downs taken by
almost 80 percent of the companies...”

…knowing customer
-
demand inventories on a real
-
time
basis is really critical. If we decided the economy was
going soft, we needed 35 days to replan our factories.
Today, Intel can replan a factory in 5 days… eliminated a
month of building the wrong stuff.


Andy Bryant, CFO, Intel

CFO, December 9, 2001

Copyright
©

2002 Intel Corporation

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6

Some More SCM Successes

DuPont* expects to save $400 million a year buying supplies online.
The initiative's total cost: just $15 million over three years.

The British arm of Fisher Scientific* is investing less than $50,000
in online invoice processing. The project should pay for itself in
six months, and within two years should cut 80% of the $370,000
Fisher spends annually to process bills from suppliers.

For Otis,* elevators with remote monitoring require only one
-
third

the number of visits as those without the system

Business Week,* October 29, 2001

*Other names and brands may be claimed as the property of others.
Copyright
©

2002 Intel Corporation

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7

A B2B Challenge: Adoption Rate

GE's* B2B Retreat

GE* has realized only 5% of its revenue through the Internet, far short of its goal
of 30%. Its suppliers wouldn't readily convert their formats and methods to fit
GE's* systems.


ComputerWorld,* July 2, 2001

So far, Intel has a RosettaNet* Connection with about 20 customers and
suppliers.

… there are 1,000 customers and suppliers that might benefit from doing
business with Intel through RosettaNet,* though many customers will still be
working with Intel through existing EDI systems or browser
-
based interfaces
in three to five years.

ComputerWorld,* July 2, 2001

Using SAP,* it took Bristol
-
Myers Squibb* two years to connect with only 10
suppliers.

Forrester,* December 2001

*Other names and brands may be claimed as the property of others.
Copyright
©

2002 Intel Corporation

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8

The B2B Logjam

Significant benefits from

custom implementations

High
-
volume adoption


Gulf between the haves and the have
-
nots could
increase significantly


Concern for SMEs, developing nations and LEs

Copyright
©

2002 Intel Corporation

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9

Cost is the key barrier

# of Business Partners

Cost of

forming

Partnership

(per partner)

Current

Cost Curve

B2B is not riding the Metcalf’s law

Copyright
©

2002 Intel Corporation

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10

SCM Automation and
Standards


Currently, B2B automation over the
Internet requires custom
implementations


Standards can reduce TTM
significantly


We need technical as well as business
standards

Copyright
©

2002 Intel Corporation

Page
11

A danger we must guard against in creating
a free and fair global economy:

The inability of agriculture and the old
economy sectors to keep pace with
technology and innovation.


Hon. S.M. Krishna, Chief Minister, Karnataka, India

8
th

CII Partnership Summit, January 5
th

2002

Source: The Hindu, January 6
th

2002

Copyright
©

2002 Intel Corporation

Page
12

China’s Proactive Stance


We recognize

the PC, XML and open standards

are
extremely important for China to enter into the
international supply chain.


The international standards sometime assume the
perfect environment of enterprises in the developed
countries.


But China still is a developing country
and our companies are mostly small

with a limited
infrastructure and with a limited need for the
informatization. Such China's characteristics need
to be understood.


At MOST (Ministry of Science and Technology),
XML is already a program and will receive a
significant attention, resource and funding.

Dr. Wu of MOST

Copyright
©

2002 Intel Corporation

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13

MII

AQSIQ

MOST

CAS

State

Council

DHNTI

(Director
-

Dr. Ying Jian Wu)

ISCAS

(Director
-
Dr. Yu Lin Feng)

CESI

(Vice Director
-
Ms. Ning Lin)

NISTC

(Chair


Mr. Yang)

China XML

Committee

(Chair


Mr. Yang)

Development

Resource

Review Resource

Proposal

Approval

Academics

Industry

China XML Players

MII


Ministry of Information Industry

AQSIA
-
State Admin for Quality Supervision, Inspection and Quarantine

MOST


Ministry of Science&Technology

CAS


Chinese Academy of Science

SCAS
-

State Commission for Administration of Standardization

NISTC


China National IT Standardization Technical Committee

DHNTI
-
Dept. of High & New Technology Development & Industrialization

ISCAS


Institute of Software Chinese Academy of Science

CESI
-

Chinese Electronics Standardization Institute

Copyright
©

2002 Intel Corporation

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14

Role of the Academia


Drive a national SCM technology strategy


All sectors of the economy, education, health
care, law & order,… must benefit


Continued global IT leadership


Align national strategy with international
standards


Local needs must be met


Drive highly
-
visible pilots, particularly with SMEs


SCM software stack must be better and
and
more cost effective to implement


Automation, simplification, flexibility, reliability,
security, …

Copyright
©

2002 Intel Corporation

Page
15

A Broad View of SCM





Business





Customers





Subcons Suppliers



Benefits,…




Employees

Don’t ignore the B2E:
Significant savings &
employee satisfaction

Copyright
©

2002 Intel Corporation

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16

The New IT:

The Impact of SCM,
Standards and Outsourcing

Copyright
©

2002 Intel Corporation

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17

Why Outsource?



Responses from CIOs and CEOs as to why
they would use an ASP:


Affordable access to technology


Avoid capital investments


Simplify budgeting


Shorter implementation cycle


Lower cost of entry for applications


Improved total cost/performance


One
-
stop shopping/support


Focus more on our primary business


Scalability to meet business growth


Avoidance of IT staff recruitment/retention


IDC* Global 2000 IT Survey: North American Results

*Other names and brands may be claimed as the property of others.
Copyright
©

2002 Intel Corporation

Page
18

Outsourcing

One opinion:

The ASP model makes so much
economic sense, it is going to be the
dominant model in the future.

Another opinion:

The ASPs have failed. Outsourcing
simply is not flexible enough.

Requirement:

Fine
-
grained, low
-
cost outsourcing

Copyright
©

2002 Intel Corporation

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19

A likely outsourcing scenario



Retain functions in
-
house for confidentiality, competitive
-
edge,…


Integrate services from multiple ASPs

Customer

Rating &
Discounts

S&M
SAP*

Business

ASP

CRM
Siebel*

ASP 3

Planning
i2*

ASP 2

*Other names and brands may be claimed as the property of others.
Copyright
©

2002 Intel Corporation

Page
20

Web Service Implications for
Outsourcing


Potential for tremendous reductions in
effort and cost in using services


Run
-
time discovery & integration


Use for a single transaction


More businesses could be
providing

web services


Easier to sell your unique competencies
(e.g., design validation)

Web Services + Outsourcing
-
>

Cost Reduction + Revenue Opportunities

Copyright
©

2002 Intel Corporation

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21

Network/Infrastructure
Capabilities


Reliable messaging


Security (authentication, authorization, encryption,
access control, audits,…)


Detection of new services and devices and
understanding their capabilities


Multiple QoS levels


Bandwidth allocation and management


Smart routing


Content distribution to the edge of the network


For localization, performance,…


Increased automation through capabilities such as
workflow management, multi
-
resource coordination

Copyright
©

2002 Intel Corporation

Page
22

The New CIO


A strategist and entrepreneur


Distinguish needs for parity from needs for competitive
advantage


Build new IT
-
based businesses


A knowledge broker


Pull together diverse expertise from various sources


A relationship manager


Drive inter
-
enterprise IT integration


An industry leader


Understand “coopetition”


Persuade and influence business communities

Adapted from
Your Next IT Strategy

by John Hagel III and John S. Brown,

Harvard Business Review, October 2001



Copyright
©

2002 Intel Corporation

Page
23

Role of the Academia


Drive a national SCM technology strategy


All sectors of the economy, education, health care, law &
order,… must benefit


Continued global IT leadership


Align national strategy with international standards


Local needs must be met


Drive highly
-
visible pilots, particularly with SMEs


SCM software stack must be better and more cost effective
to implement


Automation, simplification, flexibility, reliability, security, …


Train leaders with the vision and pragmatism for
the new IT