Promotion and Education The Business in e-Business An

Promotion and Education The “Business” in “e-Business” An Introduction

Promotion and Education Objectives PART I Define “business process” Impact of standards on business process Impact of business process on standards Back-end Integration Part II Examples of process frameworks for e. Business Describe business process frameworks for computing and electronics industry © 2002 Computing Technology Industry Association, All rights reserved 2

Promotion and Education Additional Material PART III Overview of some “core” business processes Replenishment Scenarios Order Component Models Forecast Component Models Part IV - Addendum Consignment Scenarios © 2002 Computing Technology Industry Association, All rights reserved 3

Promotion and Education The “Business” in “e-Business” Part I: Defining “Business Process” Macro and Micro Levels, and the Impact of and on Standards

Promotion and Education Partners in the Supply Chain Infrastructure: Movement of Data • Solution Providers • Exchanges and Marketplaces Electronics Distributor Channel Assemble r Materials Distributor Basic Supply Chain End Consumer Software Provider Reseller OEM Contract Manufacturer © 2002 Computing Technology Industry Association, All rights reserved Componen t Supplier Raw Material Supplier Infrastructure - Movement of Products and Money • Logistics Providers • Warehouses • Financial Institutions • Service Providers, Repair Centers • Customs 5

Promotion and Education What do we mean by “business process? ” What’s the most common reason that business processes are hard to model? Lexical Ambiguity “ … the 'I call it the same name … but mean something completely different‘ or the 'I call it something different but actually semantically it is exactly the same thing' confusion which is widespread between trading partners. ” Sue Probert, Commerce. One © 2002 Computing Technology Industry Association, All rights reserved 6

Promotion and Education “Business Process” – Multiple Usages for Term Definition: A set of logically related tasks performed to achieve a defined business outcome Macro level - fundamental, technology/applicationindependent (public process) Micro level - implementable, standard-specific process (impacts private process/back-end) Observation: Data level or Business Process Issue? Macro business process Application Requirements Data Requirements “Implementable” = Public Business Process Chunks Standards change back-end hooks changes “implementable chunks” © 2002 Computing Technology Industry Association, All rights reserved 7

Promotion and Education Public and Private Processes Partner A Back-End Gateway Micro – Implementable Chunk (e. g. EIDX Component Business Model, PIP™, OAG BOD) Private Process Public Process Partner B Back-End Lots of “micro” business processes (historically) Private Process Macro – Business Process Scenario © 2002 Computing Technology Industry Association, All rights reserved 8

Promotion and Education Internet Commerce Model Self Study: See EIDX web site - Internet Commerce Model * Business Discovery and Negotiation Model Business Content Model Business Integration Model Messaging (with Transport, Security) * http: //www. eidx. org/publications/tech_info/tech_icm. html © 2002 Computing Technology Industry Association, All rights reserved 9

Promotion and Education Business Discovery and Negotiation Model Registry/Repository UDDI eb. XML manual Self Study: See EIDX web site Internet Commerce Model * TP Management manual eb. XML CPP Business Content Model Used to build collaborations, business transactions* and business documents Used to build business transactions* and business documents Collaborative Protocol Agreement (Trading Partner Arrangement) Bus. Process eb. BPSS Bus. Models Data/Message/BP Guidelines Data Dictionary (Semantic Layer) ASC X 12 EDIFACT Rosetta. Net eb. XML OAGI UBL EIDX/ECSB EDIFICE Rosetta. Net Schemas and DTDs Core XML Standards (W 3 C Schema spec, DTD spec, etc. ) * Transaction here is per eb. XML usage: an exchange of business documents – e. g. a purchase order and a purchase order acknowledgment/acceptance are both needed for a complete purchase order transaction. Business Integration Presentation/User Interface XHTML XSL Back-end Integration Proprietary Messaging (with Transport, Security)** Business Application Gateway / Message Broker Used to transport business messages** ** A business message is a business document plus its enveloping/wrapping. © 2002 Computing Technology Industry Association, All rights reserved 10

Promotion and Education Definitions of Business Processes are Iterative Macro Micro Refines Macro (technologyindependent, applicationindependent) business process Refines Technology- and data standardspecific business processes Foundation for Drives changes to Drives requirements for Define data requirements Constrains Application-specific business process Drives requirements for Influences or Modifies © 2002 Computing Technology Industry Association, All rights reserved 11

Promotion and Education Impact of “business process” decisions Business process decisions drive application and interface design Drive criteria for application down to data element level … … and vice-versa … application functionality drives business process decisions Business process decisions may be used to drive how standards are developed … and vice versa … standards functionality drives business process decisions © 2002 Computing Technology Industry Association, All rights reserved 12

Promotion and Education Macro-level “business process” Macro-level Technology-independent business process example: A buyer orders goods or services by sending a PO, a seller accepts the order for goods and services by sending a response; changes may occur Purchase Order PO Response BUYER © 2002 Computing Technology Industry Association, All rights reserved SELLER 13

Promotion and Education VAN EDI File Still the same if EDI w/ supplier retrieves order XML from buyer’s web site Internet Wrapper (buyer is “sending” Still the same if buyer order to supplier’s orders via form on Rosetta. Net desktop) supplier’s web site or Other XMLis “sending” XML (buyer order from his/her desktop to seller’s if buyer Still the same Buyer’s system) Hub seller sends EDI PO and or EDI w/ XML Wrapper XML or proprietary Interface File Application Web sends EDI Application acknowledgment XML or proprietary Interface File Application Seller’s Hub or Web Application Extranet Fundamental definition applies regardless of technology © 2002 Computing Technology Industry Association, All rights reserved 14

Promotion and Education Impact of “business process” decisions Fundamental business processes are impacted less by technology and more by strategy and policy Next slide: Difference in business process driven by identification/status of the trading partner, not technology. Technology influences business process Define fundamental business process first Apply technology Assess impact of technology on how the business process is implemented © 2002 Computing Technology Industry Association, All rights reserved 15

Source: EIDX Internet Task Force, August 1994 Promotion and Education Trading Partner Conditions Self-study slide - you may study the details on your own. Not Authorized to Buy Known Trading Partner (Registered environment) Buyer Seller Unknown Trading Partner Buyer Seller Order Placement Request Bid Info Quote Response SHTTP, EDI • On Account • Credit Card • SHTTP Verify Credit Confirmation Order Placement Buyer Authorized to Buy SHTTP, EDI Seller Request Bid Info Quote Response Buyer Seller Order Placement • Credit Card • HTTP/SHTTP? Verify Credit Fax, e-Mail, Paper Order Placement Confirmation © 2002 Computing Technology Industry Association, All rights reserved • Fax, e-Mail, Paper 16

Promotion and Education Impact of “business process” decisions at the data level Example 1 - Relationship between PO and ship-to location : Customer A: One ship-to per order System based on legacy accounting processes Continued … Locatio n 1 Locatio n 2 Customer A PO 12345 Ship to Location 1 1 P/N 2435 A Quantity 750 Gateway PO 12346 Ship to Location 4 . . . 1 P/N 2345 A Quantity 500 . . . Locatio n. N PO 12363 Ship to Location 21 1 P/N 2345 A Quantity 200 © 2002 Computing Technology Industry Association, All rights reserved 17

Promotion and Education Impact of “business process” decisions at the data level Example 1 continued – PO and Ship-to Customer B: Centralized purchasing organizations Consolidated purchases; multiple Ship-to addresses on PO Continued … Customer A Locatio n 1 Central Purchasing Locatio n 2. . . Locatio n. N Gatewa y PO 12345 1 P/N 33572 A Quantity 1000 Ship to Location 1 2 P/N 33572 A Quantity 500 Ship to Location 4 …. 15 P/N 33572 A Quantity 250 Ship to Location 34 © 2002 Computing Technology Industry Association, All rights reserved 18

Promotion and Education Impact of “business process” decisions at the data level Example 1 continued – PO and Ship-to Supplier X, of course, must support both Customer A’s business process and Customer B’s business process, or risk loss of business. Customer A Supplier X © 2002 Computing Technology Industry Association, All rights reserved Customer B 19

Promotion and Education Impact of “business process” decisions at the data level Example 2 - Setting SMI min/max inventory levels Customer A: One file – snapshot of un-netted demand inventory Min/max expressed as discrete quantities Buyer sends receipts data; supplier expected to calculate in-transit quantity Continued … © 2002 Computing Technology Industry Association, All rights reserved 20

Promotion and Education Impact of “business process” decisions at the data level Example 2 continued – SMI data Customer B: Data sent in multiple files – demand file, inventory file, etc. Min/max expressed as weeks-of-supply, supplier calculates to derive discrete quantities Supplier must send ship notices real-time; buyer calculates and sends in-transit quantity Continued … © 2002 Computing Technology Industry Association, All rights reserved 21

Promotion and Education Impact of “business process” decisions at the data level Example 2 continued – SMI data Supplier X, of course, must support both Customer A’s requirements and Customer B’s requirements, or lose business … } … continued … Supplier X © 2002 Computing Technology Industry Association, All rights reserved 22

Promotion and Education Impact of “business process” decisions at the data level … which wouldn’t be a problem if. . . Supplier X knew all min/max calculation methods at system design time Had parameterized stuff instead of hard-coding Supplier X is willing to continually customize … and the off-the-shelf ERP system is customizable … and can handle all variations of the business process © 2002 Computing Technology Industry Association, All rights reserved 23

Promotion and Education Impact of Standards on Business Processes Some standards bodies build standard process flows for transactions/messages, including Rosetta. Net, OAGI. e. g. : Rosetta. Net PIP 3 A 4: Buyer sends Purchase Order and Seller Responds with Order Acceptance. Business Process Standard = PO Document + PO Acceptance Document (cannot be separated). © 2002 Computing Technology Industry Association, All rights reserved 24

Promotion and Education Impact of Standards on Business Processes Some standards bodies may allow for more than one process flow e. g. Order acceptance methods- depends on lead time. Order acknowledgment with shipment or delivery date Shipment notification if goods shipped immediately PO Document + PO Response or Ship Notice User or industry defined business process © 2002 Computing Technology Industry Association, All rights reserved 25

Promotion and Education Impact of Standards on Business Processes For example … What would your company do if the standards body says that an order response message must be issued for every order, even if it means receiving redundant messages? What would your company do if the standards body says that order changes are exceptions that should be handled manually? © 2002 Computing Technology Industry Association, All rights reserved 26

Promotion and Education Impact of Standards on Business Processes ‘Standard’ message definitions with similar functions and contents Partners disagree on which message should be used e. g. Do you send release against a blanket PO in: Purchase Order (850/ORDERS/3 A 4)? Change Order (860/ORDCHG/3 A 8)? Delivery/Ship Schedule (862/DELJIT/4 D 1)? “Embedded” in Forecast Schedule (830/DELFOR/4 A 1)? All “valid” in their respective standards. © 2002 Computing Technology Industry Association, All rights reserved 27

Promotion and Education Impact of Standards on Business Processes Another example of the problem … an order is a type of contract. What’s the relationship between: Purchasing agreement Blanket PO (BPO) Discrete PO? How should BPO be established? Use: Contract/purchasing agreement with discrete PO for each release? Discrete PO with ‘discrete release’ for each release? © 2002 Computing Technology Industry Association, All rights reserved 28

Promotion and Education Impact of Business Process on Standards Should the standard be more flexible in order to accommodate multiple ways of doing business … or should it be less flexible in order to force member companies to converge towards one way of doing business? © 2002 Computing Technology Industry Association, All rights reserved 29

Promotion and Education Business Process and Standards More flexibility: § Accommodates more process Interoperability variation; faster adoption § Reduces business process interoperability, increases negotiation time and speed of implementing new partners Flexibility Less flexibility: § Slower adoptions - partners must change processes, back-end systems §Fewer interoperability roadblocks © 2002 Computing Technology Industry Association, All rights reserved 30

Promotion and Education Back-end Integration Many interpretations of the term "integration“ Definition: Connecting hardware and/or software components from more than one system together so that they operate as if part of a single system In B 2 B, components from more than one company or organization One common mistake: Partners fail to discuss “degree” of integration © 2002 Computing Technology Industry Association, All rights reserved 31

Promotion and Education To what Degree can a Ship Notice/Manifest be integrated? Ship Notice 1 Display or Print 2 Link to Open PO 3 » View 10 9 Create Receivable » Supplier Managed Inventory » Receive against ASN 11 8 12 13 Non-Integrated Link to Rec’vg System 4 Link to AP System » Pay on Receipt » Pay on Ship Link to Inventory System 7 6 Link to 3 P Whse » Buyer-controlled » Seller-controlled © 2002 Computing Technology Industry Association, All rights reserved 5 » Consignment » Pay on Consumption Integrated 32

Promotion and Education Back-end Integration Each partner needs to evaluate what degree of integration to implement Decision points include: What to develop in house vs. what to have solution provider develop Is there more than one way? What makes sense? © 2002 Computing Technology Industry Association, All rights reserved 33

Promotion and Education Back-end Integration – Common mistakes What’s good for one is good for all. ” Small company - one ship notice a day – not a good candidate for integration; 1 st degree may be sufficient Mid-tier company - may better off integrating to a smaller degree than a large gorilla company; orangutans and gorillas don’t need exact same habitat “We’ll automate X and Y but not Z” Large company - may create more complexity for users and cost by only partially integrating a business process or scenario 1 or 2 more degrees of integration could make a big difference © 2002 Computing Technology Industry Association, All rights reserved 34

Promotion and Education Back-end Integration Another common mistake: Evaluating business processes out of context. Just about every business process flows to or from some other business process To avoid shifting cost from one process to another, evaluate adjacent processes when automating/integrating a business process © 2002 Computing Technology Industry Association, All rights reserved 35

Promotion and Education Web Services Same issues as Integration, plus Current cost models for services are often based on the assumption that the 24 x 7 need is universal The small company doesn’t necessarily need 24 x 7 up time and support, or nor the associated costs Models assume that services are available 24 x 7 Models assume that it’s a good idea to select the provider of a mission critical service on the fly © 2002 Computing Technology Industry Association, All rights reserved 36

Promotion and Education Another Example: Forecast Self-study slide - you may study the details on your own. 20 Degrees of Integration Fcst Display 2 1 or Print 5 Link to Order System 3 7 6 Separate by Process 8 9 13 20 Link to Whse 14 15 Link to Shipping System 4 Link to A/R System 10 Link to Planning System 12 Trend Analysis 11 Supplier Managed Inventory Process 17 16 18 Link to Inventory System 19 Non-Integrated © 2002 Computing Technology Industry Association, All rights reserved Integrated 37

Promotion and Education The “Business” in “e-Business” Part II: e. Business Process Frameworks Ways of Categorizing or Organizing Business Processes

Promotion and Education Processes in An Enterprise Self-study slide - you may study the details on your own. Generate Business Plan • Perform Business Planning • Perform Strategic procurement planning • Perform Strategic demand planning • Perform Financial planning • Design Supply chain • Perform Master planning • Plan product lifecycle Manage Support Services Manage Human Resources • Plan & manage employee resources • Develop & train workforce • Perform employee data & salary administration • Perform employee benefit event maintenance & open enrollment • Administer employee benefits • Manage payroll • Monitor employee health & safety • Manage employee separation process • Manage corporate communications • Ensure employee communications • Provide legal services • Plan & manage environmental safety programs • Provide risk management • Provide security Manage Tax, Customs & License • Manage Import/Export Compliance • Classify Materials & Products • Recover / Avoid Duty • Manage Transaction Tax Manage IT • Develop IT Strategy • Evolve IT Architecture • Develop & manage IT vendor relationships • Develop & deploy IT products & services • Enhance & maintain IT products & services • Manage operations of IT environment • Support & train users • Develop & manage user relationships • Plan annual IT business • Manage IT business unit • Manage technical infrastructure • Manage data communications • Support desktop services • Provide user help • Manage application portfolio • Manage software development lifecycle • Provide operational system support Manage Finances • Perform transaction processing • Manage general ledger • Perform closing • Perform asset accounting • Perform project accounting • Manage taxes • Perform overhead accounting & allocation • Manage capital structure • Manage financial risk • Manage Asset & Income Tax Reporting • Manage financial accounting policies & procedures • Perform internal & external audits • Support product costing • Perform profitability analysis • Process & maintain financial reports/statements • Analyze financial results • Perform financial forecasting © 2002 Computing Technology Industry Association, All rights reserved Manage Facilities • Maintain maintenance data & documentation • Identify & plan maintenance requirements • Schedule plant maintenance • Execute maintenance activities Manage Customers • Manage Customer Relationship • Manage Customer Information • Negotiate & Manage Contract Terms • Collect Customer Feedback/ Respond • Manage replenishment terms. 39

Promotion and Education Processes in An Enterprise Self-study slide - you may study the details on your own. Generate Products • Conduct research & development • Develop & design products • Implement Products and Services • Qualify products and services • Perform Test capacity planning • Manage Change Orders • Manage Alpha/Beta Product Releases • Launch Products and Services Source • Develop Sourcing Strategy • Perform Tactical procurement planning • Establish New Material • Establish New Source • Manage Vendor Agreement • Maintain Source Planning & Execution Data • Manage Vendor Certification • Manage Source Business Rules • Determine Emerging Supplier Technologies • Manage Supply • Obtain Material / Resources • Receive Material / Resources • Inspect Material/Resources • Hold Material • Issue Material Fulfill Demand • Generate Quote • Generate Order / Demand Event • Authorize Reserve / Commit • Authorize Delivery • Create invoice / A/R • Close/Renew Manage Logistics • Manage Traffic & Freight • Manage In-Transit Inventory • Monitor Delivery Performance • Manage returns • Settle Freight Charges Manage Warehouse • Receive Resources • Track Inventory • Pick/Pack Products • Consolidate Order Manufacture • Perform tactical capacity planning • Perform manufacturing execution planning • Create/manage site recipes/process plans • Manage engineering / recipe changes • Maintain equipment / facilities • Control production processes • Manage production materials • Monitor production status • Monitor equipment status • Manage production quality policies • Manage short-term capacity • Schedule manufacturing activities • Issue material • Manufacture and Test • Package • Stage product © 2002 Computing Technology Industry Association, All rights reserved Market/Sell • Develop marketing & sales strategy • Perform sales and demand supply planning • Manage portfolio • Perform Channel replenishment planning • Manage Pricing, Advertising, Promotions • Forecast Demand • Manage customer & segment relationships • Manage channel partners • Measure marketing sales performance Service & Support • Manage Service Delivery • Profile / Identify Customer • Provide Point Of contact • Exchange / Return Products • Perform Remote Support • Provide Field Installation / Service • Perform System Repair • Manage Quality Information (Warranty) 40

Promotion and Education e. Business Process Frameworks e. Business frameworks are the subset of enterprise processes that involve exchanges of documents and information with parties outside one’s own enterprise B 2 B = Business-to-Business … from one business to another business More and more processes that used to be contained inside one enterprise are becoming “extended” enterprise processes. Extended enterprise = using e. Business technologies to enable networking of multiple enterprises so that they act as if they are one enterprise; also called “virtual enterprise”. © 2002 Computing Technology Industry Association, All rights reserved 41

Promotion and Education Supply Chain e. Business Processes - Many Frameworks Self-study slide - you may study the details on your own. Many organizations focus on defining business process standards for exchanges between enterprises; some are industry-specific (vertical), some are industry-neutral (horizontal) + + + Aerospace Industries Association (AIA): Acquire Business, Develop & Design, Produce & Deliver, Support Retail and Grocery: Setup Business, Align Data, Order, Deliver, Pay Universities, Certification, and Consulting Firms also operate with a starting framework + + Cross-industry consortia + + + Ernst and Young: Plan, Buy, Make, Move, Sell University of Toronto: Demand Management, Distribution, Manufacturing, Materials APICS: Inventory Management, Just-in-Time, Master Planning, Material and Capacity Requirements Planning, Production Activity Control, Systems and Technologies SCOR (1997): Plan, Source, Make, Deliver EIDX (1990): Design, Plan, Source, Make, Deliver, Support (SCOR +2) Rosetta. Net (1998): Partner/Product Review, Product Introduction, Order Management, Inventory Management, Marketing Information Management, Service and Support © 2002 Computing Technology Industry Association, All rights reserved 42

Promotion and Education Different Focuses, Common Core to most e. Business frameworks are processes related to inventory management (planning, ordering, fulfillment) Mantra: Increase Revenues, Decrease costs; Increase revenues, Decrease costs. . . Inventory is a major cost factor; everyone wants to maximize ability to fulfill customer demand instantly while minimizing the amount of inventory on hand © 2002 Computing Technology Industry Association, All rights reserved 43

Promotion and Education Different Focuses, Common Core Next priorities vary by industry Aerospace & Automotive: Core + Quality, Development and Design, Engineering Changes “IT” Supply Chain - OEM’s and their resellers, distributors: Core + Product Introduction, Sales Data, Service and Support Electronic Component Supply Chain: Core + Advanced replenishment processes, Pre-Order processes (pricing, purchasing agreements) © 2002 Computing Technology Industry Association, All rights reserved 44

Promotion and Education Different Focuses, Common Core In some industries, processes other than “core” are highest priority Health Care: Enrollment , insurance claims, determination of entitlement But, the priority for the industry may be for processes that are like the “core” processes Insurance policy = a type of contract for services Insurance claim = a type of “order” for services specified on the contract © 2002 Computing Technology Industry Association, All rights reserved 45

Promotion and Education e. Business Process Model CLUSTER 1 Partner & Product Review Establish Relationship CLUSTER 2 Product Introduction Release Product Rosetta. Net has attracted widespread interest in our industry and is being adopted by many of our companies. CLUSTER 5 Marketing Info Management Fulfill Demand Stimulate Market and Create Demand CLUSTER 7 Manufacturing CLUSTER 3 Order Management Produce Product CLUSTER 4 Inventory Management CLUSTER 6 Service and Support Provide Post-Sales Support © 2002 Computing Technology Industry Association, All rights reserved 46

Process Overview Promotion and Education Clusters, Segments and PIPs™ Self-study slide - you may study the details on your own. Partner & Product Review Manage Profile Subscriptions Request Profile Data Profile Change Notification Profile Process Request Product Introduction Preparation for Distribution Product Change Notification Product Design Information Collaborative Design Marketing Information Management Design Transfer Manage Manufacturing WO and WIP Distribute Manufacturing Information (Genealogy and Quality) Order Management Inventory Management Service and Support Quote & Order Entry Collaborative Forecasting Transportation & Distribution Inventory Allocation Provide Warranty, Service Package & Contract Management Returns & Finance Product Configuration, Assembly, Fabrication Ship from Stock & Debit/Credit Inventory Reporting Inventory Replenishment Technical Support & Services Management Sales Reporting Price Protection LEGEND ü Released Standard Ø Standard in Development § Development Backlog © 2002 Computing Technology Industry Association, All rights reserved 47

Promotion and Education Cluster 3 Order Management Self-study slide - you may study the details on your own. Partner & Product Review Product Introduction Marketing Information Management Quote & Order Entry Request Quote Query Price & Availability Transfer Shopping Cart Manage Purchase Order Query Order Status Distribute Order Status Notify of Purchase Order Acceptance Change Purchase Order Cancel Purchase Order Seller-Initiated Change (proposed) Transportation & Distribution Distribute Transportation Projection Notify of Advance Shipment Notify of Shipment Status Query Shipment Status Change Shipment Notify of Delivery Exception Create Delivery Appointment Notify of Shipment Receipt Manage Transportation Claim Returns & Finance Return Product Obtain Financing Approval Reconcile Invoice Process Payment Inventory Management Service and Support Order Management Product Configuration Distribute Risk Analysis Notify of Solution Configuration Notify of Manufacturing Specification Request Build Authorization Distribute Material Status Distribute Build Readiness Request Deviation or Waiver Distribute/Query Work in Process Distribute Test Result Request Product Acceptance Distribute Engineering Change Request Distribute Engineering Change Response Request Engineering Change Order Approval Notify Engineering Change Order Notify Engineering Change Implementation Plan Ship from Stock and Debit/Credit Request Ship from Stock and Debt Authorization Notify of Blank Ship from Stock and Debt Authorization Distribute Open Ship from Stock and Debt Authorization Query Ship from Stock and Debt Authorization Create Ship from Stock and Debt Claim Notify of Ship from Stock and Debt Claim Status © 2002 Computing Technology Industry Association, All rights reserved 48

Promotion and Education EIDX e. Business Process Framework Self Study: See EIDX web site - Clickable Business Models * Historical Priorities * http: //www. eidx. org/publications/business_models/ © 2002 Computing Technology Industry Association, All rights reserved 49

Promotion and Education Questions? Comments? Feedback is welcome!