BUSINESS CHALLENGES: WHY IS THIS IMPORTANT?
Customers are demanding instant information gratification, and so are their customers. Current information flow velocity across the business community is often too
slow. Market change is not slowing down, and market differentiation requires innovative business processes. Applications to support these new business processes will always be required, and integration of the applications will be a fact of life as long as change is. Failure to perform this integration can degrade even the best-of-breed systems.
BENEFITS OF INTEGRATED SYSTEMS
The objective of integrating is to perform as one organization, across all links, in order to serve the end user or customer. This type of borderless business process becomes a win-win situation for all involved, as time and inventory are minimized through the supply chain, improving flexibility and profitability. An integrated supply chain is a business opportunity as it can provide the following benefits to an organization:
• Provide an enterprise view throughout the organization.
• Facilitate removal of functional barriers.
• Provide knowledge sharing and synchronized infor
mation across the organization.
• Allow for customer-centric planning.
• Provide global supply chain optimization, by mini
mizing uncertainty and cost.
• Lower total cost of ownership.
Integrated supply chains drive benefits that contribute to the effectiveness and optimization of ERP systems by providing information and efficiency through the following (see Figure 2):
• Common demand plan
• Time-phased supply plan
• Constrained production plan and schedules
• Enterprise shipment plan
• Knowledge sharing
• Focus on planning vs. expediting.
Some of the benchmark improvements that have been seen to date include the following:
• 20 to 30 percent fill rate improvement
• 10 to 30 percent fulfillment cycle time improvement
• 20 to SO percent network-wide inventory reduction
• 20 to 60 percent improved forecast accuracy
• 5 to 15 percent supply chain cost reduction.
BUILDING AN INTEGRATED SYSTEM: EAI
Integrating various applications, both internal and external to the foundational ERP system, is becoming the mechanism organizations are using as the means to develop a truly integrated supply chain. "It is estimated
:hat 40 percent of ERP implementation efforts consist of integrating these applications." (Dain Rauscher Wessels)
Supplier partnerships are extending beyond the walls of purchasing and customer service, and are permeating the IT departments. The challenge arises in uniting disparate yet complementary applications. This is achieved through enterprise application integration (EAI).
EAI is the unrestricted sharing of data and business processes among any connected applications or data sources in the enterprise. The primary focus is integrating diverse applications that have often been developed by different people at different times on different platforms and using different technology. For example, demands from customers are automatically integrated and translated into the manufacturer's ERP system, and then integrated and translated again into a communication of requirements for suppliers.
Much of this activity is occurring in organizations today. Legacy systems are being interfaced with other systems, both formally and informally, but these usually result in high developtnent and maintenance costs, and because they are not designed for reuse, produce much pain when change is required.
According to the Gartner Group, "Thirty-five to 40 percent of all programming efforts are devoted to developing and maintaining programs to transfer information between databases." Translated into a cost element, "building, maintaining and supporting application integration accounts for 30 percent of all IT spending.-.equating to a yearly cost of $82.5 billion" (Forrester Research).
Leveraging current technology and tools available, EAI now provides a formal structured approach, resulting in agility and reusability when system changes do occur. EAI software automates many key integration functions, ranging from interfacing with multiple applications, to translating data structures, to intelligently routing messages, to creating vital business processes.
The EAI market is being driven by new technology in a software category called middleware. Various types of middleware currently exist, all with the same objective: to sit between different applications and intelligently translate and route data between them. Figure 3 illustrates the difference between traditional integration points, and integration using EAI.
Why use EAI? Because application life cycles are shortening and IT organizations are being driven to reuse existing applications and application services, rather than creating the same business processes and data repositories repeatedly. This integration of applications saves development dollars and provides a competitive advantage to corporations who needto share application information either within the corporation or among other trading partners.
EAI adds value to the enterprise by bundling business processes into pre-built interfaces and easily linking non-compatible systems to provide for the accelerated implementation of new technologies, compressing the effort into weeks instead of months.
EAI solutions create more dynamic IT infrastructures that are able to evolve with an organization, providing it with benefits such as
• Leveraged and enhanced application value
• Lower development costs
• Lower deployment costs
• Lower conversion costs
• Lower maintenance costs.
To Be Continued