The “Business” in “e-Business”

1. The “Business” in “e-Business” An Introduction

2. 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 eBusiness • Describe business process frameworks for computing and electronics industry

3. Additional Material • PART III • Overview of some “core” business processes • Replenishment Scenarios • Order Component Models • Forecast Component Models • Part IV - Addendum • Consignment Scenarios

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

5. Partners in the Supply Chain • Infrastructure: -Movement of Data • Solution Providers • Exchanges and Marketplaces Electronics Distributor Materials Distributor Channel Assembler Basic Supply Chain End Consumer OEM Component Supplier Reseller Raw Material Supplier • Infrastructure - Movement of Products and Money • Logistics Providers • Warehouses • Financial Institutions • Service Providers, Repair Centers • Customs Software Provider Contract Manufacturer

6. 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, CommerceOne

7. “Business Process” – Multiple Usages for Term • Definition: A set of logically related tasks performed to achieve a defined business outcome • Macro level - fundamental, technology/application-independent (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”

8. Gateway Gateway Partner A Back-End Partner B Back-End Micro – Implementable Chunk (e.g. EIDX Component Business Model, PIP™, OAG BOD) Lots of “micro” business processes (historically) Private Process Private Process Public Process Macro – Business Process Scenario Public and Private Processes

9. 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

10. Business Discovery and Negotiation Model Self Study: See EIDX web site -Internet Commerce Model * Registry/Repository TP Management UDDI ebXML CPP ebXML manual manual Business Content Model Used to build collaborations, business transactions* and business documents Collaborative Protocol Agreement (Trading Partner Arrangement) Used to build business transactions* and business documents Bus. Process Data Dictionary (Semantic Layer) Data/Message/BP Guidelines ebBPSS Bus. Models ASC X12 EDIFACT RosettaNet ebXML OAGI UBL EIDX/ECSB EDIFICE RosettaNet Schemas and DTDs Core XML Standards (W3C Schema spec, DTD spec, etc.) * Transaction here is per ebXML 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 Back-end Integration Business Application Gateway / Message Broker XHTML XSL Proprietary Messaging (with Transport,Security)** Used to transport business messages** ** A business message is a business document plus its enveloping/wrapping.

11. Refines Constrains Foundation for Drives changes to Drives requirements for Foundation for Drives requirements for Refines Definitions of Business Processes are Iterative Micro Macro Technology- and data standard-specific business processes Macro (technology-independent, application-independent) business process Application-specific business process Define data requirements Influences or Modifies

12. 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

13. 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 SELLER

14. VAN XML or proprietary XML or proprietary Still the same if supplier retrieves order from buyer’s web site (buyer is “sending” order to supplier’s desktop) Interface File Interface File Internet Still the same if buyer orders via form on supplier’s web site (buyer is “sending” order from his/her desktop to seller’s system) Application Application Buyer’s Hub or Web Application Still the same if buyer sends EDI PO and seller sends EDI acknowledgment Seller’s Hub or Web Application EDI File EDI File EDI w/ XML Wrapper EDI w/ XML Wrapper RosettaNet or Other XML RosettaNet or Other XML Extranet Fundamental definition applies regardless of technology

15. 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

16. Source: EIDX Internet Task Force, August 1994 Order Placement Order Placement Order Placement Request Bid Info Order Placement Request Bid Info Confirmation Confirmation Quote Response Quote Response Trading Partner Conditions Self-study slide - you may study the details on your own. Not Authorized to Buy Authorized to Buy Buyer Seller Buyer Seller KnownTrading Partner (Registered environment) • On Account • Credit Card • SHTTP Verify Credit SHTTP, EDI SHTTP, EDI Buyer Seller Buyer Seller UnknownTrading Partner • Credit Card • HTTP/SHTTP? Verify Credit Fax, e-Mail, Paper • Fax, e-Mail, Paper

17. 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 … Customer A • PO 12345 • Ship to Location 1 • 1 P/N 2435A • Quantity 750 Location 1 Gateway • PO 12346 • Ship to Location 4 • 1 P/N 2345A • Quantity 500 Location 2 ... ... Location N • PO 12363 • Ship to Location 21 • 1 P/N 2345A • Quantity 200

18. 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 • PO 12345 • 1 P/N 33572A • Quantity 1000 • Ship to Location 1 • 2 P/N 33572A • Quantity 500 • Ship to Location 4 • …. • 15 P/N 33572A • Quantity 250 • Ship to Location 34 Location 1 Gateway Central Purchasing Location 2 ... Location N

19. Supplier X Customer B Customer A 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.

20. 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 and inventory • Min/max expressed as discrete quantities • Buyer sends receipts data; supplier expected to calculate in-transit quantity • Continued …

21. 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 …

22. Supplier X 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 …

23. 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

24. Impact of Standards on Business Processes • Some standards bodies build standard process flows for transactions/messages, including RosettaNet, OAGI. • e.g.: RosettaNet PIP 3A4: Buyer sends Purchase Order and Seller Responds with Order Acceptance. Business Process Standard = PO Document + PO Acceptance Document (cannot be separated).

25. PO Document PO Response Ship Notice + or 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 User or industry defined business process

26. 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?

27. 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/3A4)? • Change Order (860/ORDCHG/3A8)? • Delivery/Ship Schedule (862/DELJIT/4D1)? • “Embedded” in Forecast Schedule (830/DELFOR/4A1)? • All “valid” in their respective standards.

28. 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?

29. 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?

30. Interoperability Flexibility Business Process and Standards More flexibility: • Accommodates more process variation; faster adoption • Reduces business process interoperability, increases negotiation time and speed of implementing new partners Less flexibility: • Slower adoptions - partners must change processes, back-end systems • Fewer interoperability roadblocks

31. 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 B2B, components from more than one company or organization • One common mistake: Partners fail to discuss “degree” of integration

32. Display or Print Link to Open PO Link to Rec’vg System Link to AP System 4 2 3 1 • Pay on Receipt • Pay on Ship • View • Receive against ASN 10 11 Create Receiv-able 8 Link to Inventory System 9 5 7 12 • Supplier Managed Inventory 6 • Consignment • Pay on Consumption Link to 3P Whse 13 • Buyer-controlled • Seller-controlled To what Degree can a Ship Notice/Manifest be integrated? Ship Notice Non-Integrated Integrated

33. 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?

34. 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; 1st 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

35. 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

36. Web Services • Same issues as Integration, plus • Current cost models for services are often based on the assumption that the 24x7 need is universal • The small company doesn’t necessarily need 24x7 up time and support, or nor the associated costs • Models assume that services are available 24x7 • Models assume that it’s a good idea to select the provider of a mission critical service on the fly

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

38. The “Business” in “e-Business” Part II:eBusiness Process Frameworks Ways of Categorizing or Organizing Business Processes

39. 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 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 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 • 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. • Manage Support Services • 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

40. Processes in An Enterprise Self-study slide - you may study the details on your own. • 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 • 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 • 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 • Manage Logistics • Manage Traffic & Freight • Manage In-Transit Inventory • Monitor Delivery Performance • Manage returns • Settle Freight Charges • 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) • Manage Warehouse • Receive Resources • Track Inventory • Pick/Pack Products • Consolidate Order

41. eBusiness Process Frameworks • eBusiness frameworks are the subset of enterprise processes that involve exchanges of documents and information with parties outside one’s own enterprise • B2B = 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 eBusiness technologies to enable networking of multiple enterprises so that they act as if they are one enterprise; also called “virtual enterprise”.

42. Supply Chain eBusiness 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 • 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 • Cross-industry consortia • SCOR (1997): Plan, Source, Make, Deliver • EIDX (1990):Design, Plan, Source, Make, Deliver, Support (SCOR +2) • RosettaNet (1998):Partner/Product Review, Product Introduction, Order Management, Inventory Management, Marketing Information Management, Service and Support

43. Different Focuses, Common Core • Core to most eBusiness 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

44. 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)

45. 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

46. eBusiness Process Model Establish Relationship CLUSTER 1 Partner & Product Review RosettaNet has attracted widespread interest in our industry and is being adopted by many of our companies. Release Product CLUSTER 2 Product Introduction CLUSTER 5 Marketing Info Management Fulfill Demand Stimulate Market and Create Demand CLUSTER 3 Order Management CLUSTER 4 Inventory Management CLUSTER 7 Manufacturing Produce Product CLUSTER 6 Service and Support Provide Post-Sales Support

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

48. Cluster 3Order Management Self-study slide - you may study the details on your own. Partner & Product Review Product Introduction Marketing Information Management Inventory Management Service and Support Order 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 • 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

49. EIDX eBusiness Process Framework Self Study: See EIDX web site -Clickable Business Models * Historical Priorities * http://www.eidx.org/publications/business_models/

50. Questions? Comments? Feedback is welcome!