Hate Surprises? SCEM Tech Helps You Deal With Them

By Kurt C. Hoffman, Global Logistics & Supply Chain Strategies — February, 2002

Unplanned events in the supply chain can cost a business lost time and a lot of money. New software can manage these occurrences while alerts are issued to need-to-know parties. Were there such a thing as a supply-chain prayer, it might go like this: Please, let there be no surprises. Unplanned occurrences, where supply chains are concerned, can cost companies a great deal in time and money. Fortunately, supply-chain event management (SCEM) software helps cushion the effect of those unwanted but inevitable surprises — and it is fast becoming ubiquitous.

Vendors of most warehouse management systems as well as enterprise application integrators (EAI) now have some element of SCEM in their solution packages, and many companies already have programs up and running. Phillips Consumer Communications, for example, uses SCEM capability from Viewlocity; 3PL Exel serves Unilever with the help of SCEM technology from Manugistics; and Manhattan Associates, EXE Technologies and Catalyst International are among many vendors that offer sophisticated monitoring, notification and events-control capabilities for the warehouse environment.

Why is SCEM so prevalent? Simple: it provides real-time visibility, improves customer service and reduces cost. AMR Research says smart companies will “adopt a coordinated strategy for supply-chain event management and assign a senior-level manager to identify and enhance extended-enterprise SCEM.”

“We’re getting to the stage where the gap that existed between planning and execution processes is really shrinking,” says Razat Gaurav, director of i2 Technologies’ transportation solutions product marketing. “Supply-chain event management is causing the disappearance of that gap.”

Supply-chain event management, or process management as it sometimes is called, involves identifying and monitoring specific events across the supply chain. A series of increasingly urgent alerts automatically inform appropriate parties when a threshold event occurs or is missed. Customized business rules attached to the event also can trigger the system to automatically suggest or initiate remedial action. It is a tool that allows companies to focus their attention on the exceptions and to trust that everything else is proceeding according to plan.

Easy Configuration

HighJump Software of Eden Prairie, Minn., primarily targets its Event Advantage, the event management module packed in its Warehouse Advantage Suite, toward mid-market companies that have revenue between $50m and $500m. Designed as a stand-alone module, Event Advantage “provides intelligent notification, control and collaborative resolution of specific events occurring — or about to occur — within the extended supply chain before they become problematic,” says Chris Heim, HighJump president and CEO.

A key feature of Event Advantage and other SCEM products is that it can easily be configured without custom coding. “There are a lot of technologies that may be only available to the Fortune 500 because of the total cost of ownership — the software price plus the service price,” says Leo Schmidt, senior product and marketing strategist at HighJump. “Once you cross over into custom-code land, things start to get very expensive ... We’re trying to build a flexible enough software so we can target both the mid-market and the Tier I market players that don’t necessarily want to pay so much for total cost of ownership for these solutions.”

Cardinal Glass, a HighJump customer, supplies glass to Andersen Window on a just-in-time basis. Before, Cardinal was having trouble balancing production scheduling with incoming orders and still responding to Andersen’s short lead times. Now when Andersen places an order, the event management system checks that there is inventory available to make the items ordered. If not, an e-mail response immediately is zapped to Andersen, warning that there’s a chance Cardinal won’t be able to meet Andersen’s request for a particular item. If the missing inventory item is already scheduled to be received or produced and there is an estimated time of arrival, Andersen receives that ETA. If the item is still unavailable when the order is actually picked, Andersen receives an alert that the item will not be part of the shipment. “That gives Andersen time to recover and potentially modify their synchronized manufacturing process,” says Schmidt.

Overstock.com uses elements of the same software to provide a more internally focused messaging system. A privately held company in Salt Lake City, Utah, Overstock.com acquires excess inventory through closeout purchases and bankruptcy sales and liquidates it through internet sales. According to Overstock.com’s Jim Hyde, the company uses logic within Event Advantage to trigger a cycle count — a physical check — when item inventories dip below predetermined levels. “As we get down to those lower numbers, we want to make sure we have the right quantity of an item to sell on our web site. In the past, we occasionally ran out of items because there was a discrepancy in our inventory, and that was frustrating the customers.”

The type of customers in the forefront of the SCEM adoption curve are multinational companies with a high degree of outsourcing that are involved with high-value goods, such as high-tech and electronics retailers, says Thorgeir Einarssen, CEO of Categoric Software. These companies stand to reap the most gains — and the quickest return on investment — from SCEM capability, he says.

Though it has made direct sales to corporations, Categoric prefers to sell its SCEM technology to business process software vendors and developers. “We work an indirect model with execution system vendors, who then build templates and go back to their existing customers with a new layer that goes on top of their execution system,” Einarssen says.

He thinks of event management not as an application, but “as a layer in infrastructure technology that cuts across every baseline system, whether it’s a planning or execution or a financial system — anything that is helping to manage a company’s assets, whether they be people, money or goods.”

Monitoring KPIs

The event-management infrastructure, he explains, sits on top of these various systems and monitors key performance indicators, looking for broken business rules — instances where performance exceeds the agreed limits. He notes that messages are personalized so that people receive them in the way they prefer, whether by pager, e-mail or cell phone. The software also triggers other actions and/or applications in accord with the applicable business rules programmed into the system, such as contacting a back-up carrier, re-picking an order damaged en route, or initiating a purchase order. The execution of that activity is monitored as well, says Einarssen.

LuxN, a provider of network platforms, uses Categoric’s Xalerts product to help manage time-sensitive business issues as they occur. LuxN uses Xalerts to notify managers via e-mail about orders entered and shipped as well as any exceptions to the orders, a capability that has allowed LuxN to reduce warehouse inventory, cut costs and achieve a positive return on investment. Additionally, LuxN can respond more quickly to fluctuations in the number of orders, helping it better manage customers’ needs. “Xalerts is an easy-to-use yet sophisticated technology that pushes important and time-sensitive information to the right person exactly when he needs it, which is far superior to having to monitor and pull data several times a day,” says Rob van Herk, manager of information systems for LuxN. “The alerting technology has streamlined our supply chain, improved the bottom line, and paid for itself many times over.”

When NYK Lines’ Scandinavian office needed a visibility and alert system to keep staff members and customers up-to-date on shipments in transit and changing customer requirements, it selected the Categoric solution to deliver critical business information to key management staff and external customers. The Categoric solution also is being incorporated into the warehouse management systems and execution systems marketed by LIS, Europe’s largest supplier of warehouse management systems. Third-party logistics providers are heavy users of SCEM technology. Kuehne & Nagel International AG, Schindelligi, Switzerland, sees i2’s SCEM solution, which it uses primarily in Europe, as a market differentiator. The logistics provider already has a number of key customers on the system, including Apple Computer. Apple uses the technology to monitor shipments from manufacturing centers in the U.S. Midwest to distribution centers across Europe, and then from those DCs to stores or customer locations.

Similarly, a large, name-brand retailer in the U.S. uses the i2 solution to track inbound shipments from Southeast Asia to its distribution centers and then to individual stores. It plans to integrate SCEM capability with i2’s Freight Matrix network, which the retailer presently uses for transportation planning and execution on all inbound freight movements.

“The potency of your event management is really predicated on an in-depth understanding and domain expertise into the underlying planning and execution processes,” says Andy De, i2’s director of product marketing for supply-chain management. With its history in supply-chain management, he says, i2 “has the necessary underlying expertise in demand planning, supply planning, procurement planning, transportation and warehousing management, that enables us not only to be right about the underlying processes but also come to up with intelligent workflows for proactive monitoring and exception management across those planning and execution processes.”

“The types of companies we find interested in employing this type of solution are those that have outsourced most of their manufacturing, outsourced their logistics, and are focusing on product design and marketing and sales,” says John Davies, vice president of product marketing for Optum, a supply-chain execution vendor. “The way we see it, an SCEM solution is an application and service that allows multiple companies to act together like one, so you have the brand-holder or channel master who is the face to the customer, and then you have all these other players — contract manufacturers, 3PLs and lead logistics providers — who are acting in the background, all focused on meeting that customer’s requirements.”

In its Tradestream product, Optum offers a hosted solution for multiple companies to exchange data and act together. It is accessible to Fortune Fortune 500 companies as well as mom-and-pop operations, he says, since the minimum equipment requirement to use the technology is a server and a browser. Consequently, the technology is well suited for private trading networks.

Merge-in Transit Center

Optum’s longstanding relationship with Lucent Technologies was strengthened with the addition of Tradestream event-management capability. For example, when Lucent receives an order from a company like AT&T or Verizon, that telephone equipment order, known as a TEO in the telecom world, could have as many as 200 line items on it that will be sourced from various companies within the Lucent network. When the sales order comes in, Lucent takes it apart and creates multiple purchase orders, some for its own equipment, some for equipment to be purchased through Lucent’s key suppliers, Anixter and Graybar, and some items occasionally purchased from small shops that may specialize, for example, in bending metal.

“Lucent sends those purchase orders out to all those companies, and each of those companies translates that purchase order into their own internal system sales order,” says Davies. A variety of identities are assigned to the order as it becomes a pick-list, an actual shipment, a bill of lading, a carton content list — numerous things before it reaches a merge-in-transit center operated by a 3PL. The merge-in-transit center operator collects these different parts from different suppliers and delivers them together to an installer at the job site.

“Throughout that whole sequence of events — the genealogy of that order — some orders may get a new name 11 different times,” says Davies. “And with so many different hand-offs and so many different numbers, visibility into that order is a lot more complicated than signing onto the UPS web site to check the status of a book you bought at Amazon.com. You have to actually understand how those orders transform as they come to you. SCEM technology allows us to aggregate all that data and provide that complete visibility of that order through all those names changes.”

Order visibility has become increasingly critical as order patterns have changed, “requiring warehouse operations to migrate from full-pallet, loose-case picking and shipping, to small parcel picking and packing operations,” says Rod Gifford, logistics product manager at interBiz. “Increased customer service demands are dictating new approaches to order management that require commitments to inventory availability and delivery dates,” he says. That trend is a key driver behind adoption of SCEM technology. Without it, he says, the accelerated speed of business could only be managed by substantial increases in staff.”

Generating Alerts

SCEM capabilities are integrated within BizWorks, the company’s e-business process suite. In addition to event management, it includes business rule and workflow management, monitoring of key performance indicators, personalized information portals, and the ability to generate alerts through any number of wireless devices.

BizWorks is supported by Neugents technology, an artificial intelligence capability that can predict an event, Gifford says. One interBiz customer, for example, found that its high-pressure plastic injection molding machines were going out of tolerance and producing parts of questionable quality, creating waste and machine downtime. By implementing BizWorks and feeding it with key performance indicators gathered on a real-time basis from the individual machines, the system eventually “learned” how to predict when a particular machine was likely to exceed its tolerances. Based on rules developed by the customer, that information was used to trigger appropriate workflow orders and notification procedures.

While SCEM sales and marketing efforts generally target organizations with high-volume transactions and rapid business velocity, elements of supply-chain event management can apply to most organizations, says Gifford. “Whether someone in the low tier, $25m or less in annual revenue, can afford the tools and capability to do this is probably another question. But in terms of the capabilities itself, it’s applicable to manufacturers, distributors ... anybody that is really dealing in the supply chain these days, particularly if they are interested in collaborating with their trading partners and trying to foster that kind of partnership through real-time communications,” he says.

Optum’s Davies sees a day when the price tag to participate in supply chains that practice event management will be far closer to the reach of Tier III businesses. “In the future it will become more of a service like America Online,” he predicts. “For example, Lucent has approximately 10,000 installers around the country, and one of the primary elements of this application is serving those installers so they always know where everything is in the pipeline and they can then plan their work more effectively. However, there are a lot of six-man companies that do installations as well and aren’t going to pay today’s rates for a subscription to an event management service.

“But we really see that over the next couple of years, it will come down to a subscription rate and a reasonable business cost for these small guys to have all their orders flowing through this network and have available all the status, alerting and reporting functionality,” Davies adds. “That’s one of the reasons we approached this as an infrastructure, a hosted application.”

A hundred years ago, Henry Ford relied on vertical integration — down to the rubber plantations — to automotive manufacturing, Davies points out. “Today people are seeking virtual vertical integration. They want the control benefits that Henry Ford had, but they don’t want the capital-intensive costs associated with that kind of vertical integration. They want all their suppliers, vendors and other trading partners to act as a part of their company without actually being a part of it. Event management is one of the tools that will bring that capability.”

The original article can be viewed at http://www.supplychainebusiness.com/archives/02.02.scem.htm?adcode=35

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