YOUR BUSINESS OPERATING SYSTEM REQUIRES A DUAL PLATFORM STRATEGY
Networks enable a dual platform strategy to embrace your ERP and maximize supply chain management capabilities.
A Business Operating System (BOS) has traditionally been viewed as an enterprise-wide set of business processes and related decision-making capabilities. Usually the BOS extends across the enterprise structure, principles, and practices necessary to drive the organization to success – both strategically and tactically. Historically, all this has been built from the perspective of a single enterprise – yours. Today, this no longer works. Continue in that fashion, and you’ll be left behind by today’s business networks. In this paper, we explain how network approaches expand your competitive advantage, and how a dual platform strategy makes it achievable on a realistic timescale.
In today’s competitive marketplace, companies in all industries need to find new leverage beyond the enterprise in order to both compete and deliver results. This new leverage point is real today for many companies, and is being delivered through their Network of trading partners, both inbound from supply and outbound to customers. It is through these trade relationships that business results can be significantly enhanced. Major industry and analyst groups like McKinsey, Gartner and IDC have recently published reports on the business advantages of Supply Chain Networks.
The business potential of a network-based approach to supply chain management is significant as recent case studies have proven. Some companies are already achieving forecast accuracy in the 95% range, driving order fill rates/OTIF to 99% and reducing inventories by 50%. Some other radical improvements that have been achieved include:
- Reducing supplier expediting costs by 60%
- Reducing premium transportation by 50%
- Reducing COGS by 3%
- Reducing volume purchasing cost by 10 to 20%
- Reducing planning and execution effort by over 40%
Unfortunately, most companies find themselves unable to generate these Network-based results because their BOS was designed at the enterprise level and thus over the years all the technology supporting the related business processes and decision-making was also designed to be enterprise based. The immutable truth is that an enterprise-based technology platform is not capable of enabling a Network-based Business Operating System. Those that have tried ended up with a customized monolith that was expensive to build/maintain and only delivered partial results. And even worse, in most cases this monolith is now highly inflexible.
The Downfall of Enterprise-Centric Technology
Think about what happens at the workflow level when using enterprise-centric rather than Network-centric technology to run a Network BOS.
The planning-to-execution workflow both within the enterprise and across the Network tiers employs multiple disconnected algorithms and optimization engines. This requires armies of planners to cover all the touch points. These planners implement inventory buffers to cushion and absorb the obvious conflicts that will arise between trading partners.
Thus, the potential value realization is trapped within the Network due to sub-optimization. And even worse, the stale data that is used for decision-making across trading partners is never addressed, given the technology being used isn’t capable of leveraging real time or multi-tier data anyway.
This all results in a set of over-simplified, aggregate and gross average level decision-making capabilities that generate today’s poor performance. This is because increased inventory, capacity, transportation and logistics costs are required to buffer for all variances. And even with all these costly buffers, the result is still poor order fill rates and associated customer service levels.
A New Business Operating System: Built for Performance
What’s required for success is a network-based approach. The Network BOS must be supported by a purpose-built cloud-based Network Platform that enables business processes and decision-making through codified industry best practices. It must also enable business process improvement methodologies through an SDK-based developer environment. This becomes a real differentiator for shareholders and drives job satisfaction for employees. In market terms, this means the Network BOS needs to be enabled through both software-as-a-service (SaaS) as well as platform-as-a-service (PaaS).
And given that a Network BOS runs a single version of the truth (SVOT) across the Network from a demand and data perspective, the Dual Platform approach does not create additional system and infrastructure overhead. This overhead is the norm for environments with multiple ERP systems that result from expansion, acquisition, or localization.
In fact, if you find yourself in this multi-ERP situation, the Network Platform provides a new business process environment across all lines of business and can federate the financials across your multiple ERP installations.
Central to this is the multi-enterprise Master Data Management or MDM capability that runs through the Network. This level of federation can also be a big help supporting the internal audit and controls functions which are a nightmare in multi-ERP situations.
Another issue this type of Dual Platform approach addresses is when your company wants to make a major or even a minor change in one ERP instance when there are multiple instances in play or multiple ERP systems. In addition to the normal amount of time it takes for development (which is too long to begin with), companies may first have to stop and consider how the change will affect all the other ERP systems they’re running, depending on how deeply the systems are linked.
The Network BOS: Leveraging Artificial Intelligence and Automation
With clarity across the Network supported by real-time data and collaboration, decision-making can finally hit center stage. Within the Network you can apply two levels of AI capability. The first being RPA or robotic process automation, and the second would be various forms of more quantitative algorithms used in decision-making. This includes rule-based engines like we use to make decisions around alternate sourcing or substitute parts, heuristics like we use for supply/demand netting, algorithms like we use for optimizing to objectives like revenue, cost, or profit, machine learning like we use when extending the data model to include new vectors such as weather and traffic patterns, and finally deep learning for true pattern recognition.
A Network BOS empowers your decision-making capability ten-fold, both to resolve issues before they happen and to address issues once they happen. Due to the scale that needs to be addressed, it requires the application of AI to your Network (which again is a good thing).
AI and Automation enable network operations at global scale. For example, in consumer goods a One Network customer is managing 4,000 SKU’s to over 1.5 million customers, 600 distribution centers, 50 plants, 20 countries and thousands of suppliers. In the military, a customer is handling over a million supply chain events every day. And in grocery, a customer with 2400 stores is using AI to help manage the supply chain across 37 manufacturing plants, 34 distribution centers, and millions of shipments.
You’ve never had to deal with these volumes from a decision-making perspective in an enterprise-centric architecture, because it could never properly represent the Network. Given your newfound ability to address all issues across the Network, both potential issues and those in process, you will need to apply some level of autonomous agents to unlock all the trapped value in your supply chain, given the volumes.
When you look at the Network-based intelligent agents available today, it is easier to understand why the old enterprise-centric operating model needs to step back and focus on financials, and allow the new Network operating models to step forward to run the business.
Network agents available today include AI-based forecast management, supply allocation, replenishment, order forecasting/promising/management/execution, transportation optimization, demand translation across the entire Network in real time, multi-tier order/material/capacity planning and execution, production planning, warehouse optimization and time phased milestone reporting and predictions across the entire Network.
There is also a capability for users to define their own intelligent agents which is very helpful if you have some “secret sauce” that enables competitive advantage in your market. These agents can be kept private while still allowing the SaaS instance to upgrade through the normal release process. And with a Network this can all be managed and executed through an end-to-end Control Tower.
The Logic of a Dual Platform Environment
Essentially this need to modernize will create a Dual Platform environment for your enterprise (which is a good thing). The Network BOS is required to be competitive well into the future, and so the Network Platform must enable that BOS.
The monolithic enterprise platform that supported the obsolete BOS is no longer useful at the process level, but can still play an important role in aggregating and reporting the financial performance of the enterprise, assuming that the finance modules are already configured for this purpose and weren’t corrupted by the attempts to extend the enterprise platform into the Network.
Remember, the Network BOS is operating in the cloud, enabling all planning, operations, orders, and execution across all trading partners. The financially related inputs and outputs of these trading transactions can easily flow from the cloud to the financial modules in the enterprise ERP system. Thus, the Dual Platform approach solves your 3 major problems:
- How to gain competitive advantage in today’s marketplace
- How to eliminate the tremendous costs of maintaining and migrating the current ERP monolith
- How to gain the flexibility required to take advantage of new market opportunities
The Path Forward with a Dual Platform Requires a “Tunable” System
As you evolve from your current state to your Network BOS, you will need the ability to tune what is being processed within each system. One Network’s unique “Tunable System of Control” coordinates business processes across multiple parties and systems, leveraging new technology while empowering legacy systems, to deliver optimal results fast.
This tuning capability enables you to assign system of record responsibility to each state and action in a Network process to either the ONE platform or another application, so the ONE platform manages the end-to-end processes, but designated steps can be processed by your legacy systems. This “tunable” environment will also run across multiple blockchains, so if certain trading partners are using Ethereum of Hyperledger, the ONE Blockchain can provide cross-chain connectivity as it runs on top of both as a multi-party ledger.
The Dual Platform approach ensures that your daily/weekly/monthly work investment is focused on your organization’s most strategic and tactical execution objectives, and is done in the most efficient way. Having your Network BOS fully enabled removes the problem of having to live with running processes the way the monolithic platform would force you to, rather than what would bring the most benefit to the organization.
For example, if you think about enabling a well-known BOS like The Toyota Production System (TPS), you need a capability that supports both how to make cars, as well as how to improve the way cars are made and serviced. TPS was a Network-based approach from its inception given the nature of the keiretsu structure in Japan. Unfortunately, the TPS BOS could only go so far, given it was trying to run across a Network but was stuck on an enterprise-centric technology platform. As a technology leader, today Toyota is rapidly moving toward a Network-based technology platform to better enable their Network BOS. More recent examples of companies running a Network BOS include Uber, Airbnb, and Alibaba.
Key to moving forward with your Dual Platform strategy is the understanding that a single platform isn’t always the best way to address your organization’s business, technology and organizational needs. And as we well know, most companies that tried to focus on a single platform ended up with multiple instances and custom code. Business environments are becoming more competitive, are evolving more quickly, and are striving for differentiation.
Make a Network Platform Your Primary Platform for Supply Chain Planning and Execution
In the past, to extend ERP functionality we would look toward best-of-breed applications like CRM, SFA, HRM, WMS and SCM. What’s different today is that rather than looking at a Network Platform as a bolt-on to ERP, it actually becomes the primary platform enabling the Network-based Business Operating System, and the old ERP monolith becomes the bolt on to the Network for financial processing. With this Dual Platform construct, the operating information/data is in the cloud, is real time, and can flow to the ERP financial modules through the standard Network API’s.
Interestingly, the concept of best-of-breed systems or best-in-class technologies also gets turned on its head in the context of a Network BOS. Today, “best” needs to be defined by what best maximizes overall network performance – costs, time, service levels, scale, and flexibility to adapt to market changes. It is no longer defined by the level of performance within a siloed business function. For example, if you have the Rolls-Royce of WMS systems – every bell and whistle – but run with enormous inventory buffers, have poor carrier communications, long replenishment times, and an inability to forecast demand – does it really matter?
This enterprise would be much better served with a Network BOS where every supply chain participant and function had a single version of the truth, operations were transparent and synchronized, and near-real-time decision making was the norm. These are the attributes that maximize performance in business networks today.
“A business network platform needs to be your operational system-of-record. Let your legacy ERP handle financials.”
Getting Started: Capture Rapid Returns with a Value-Based, Agile Implementation of a Network BOS
The One Network Dual Platform approach delivers benefits to the business in a number of key areas, along with removing the many burdens of current Enterprise Platforms – including being overly expensive, difficult to maintain and upgrade, and unable to keep pace with the current fast-paced business world. It’s the perfect time for the Dual Platform to take center stage and provide a technology environment that enables rather than hinders the enterprise from reaching its full trading potential.
Unlock value quickly. Now, it may seem unlikely for an approach that can generate this much value to actually be more affordable than what you are paying today. However, considering the tremendous migration costs companies face with their ERP systems over the next few years, a Network BOS implementation is significantly more attractive. The implementation can be done in a matter of months through a series of value-focused business releases, causing minimal disruption to the current business environment.
Get out from under ERP silos. For those with multiple ERP instances, with the move to limit ERP to running the financial modules and running the BOS Network in the cloud on the Network Platform, there’s no longer a need for an extensive IT team at each location to maintain and troubleshoot the legacy ERP systems. With full visibility and productivity related metrics maintained at the corporate level, all levels of management have access to real-time data simultaneously, and can monitor daily operations as they happen, addressing issues or errors immediately.
Under the old architecture, lengthy information lead times and related decision-making caused a significant degrading of business performance. In a Network architecture, trading partners can interact and collaborate at will, based on their permissions within the Network, rather than being hard wired to the hub and having to interact with others round trip through the centralized applications or point-to-point through a rigid EDI framework.
Automation offers enormous value. A key part of the opportunity moving to the Dual Platform is around process automation. The market typically refers to this as Robotic Process Automation or RPA. It’s technology that can improve employee performance substantially with little additional effort. Through the implementation of autonomous agents within the Network BOS, it is possible to automate certain repetitive business operations and decision-making, such as the handling of routine supply chain exceptions. In this way your employees can focus on the big impact decisions while decisions that are more procedural in nature can be handled automatically. And it’s the only way to truly operate at scale, given the size of today’s global supply chains.
A Dual Platform Strategy Prepares You for the Future
Flexibility is really brought to the forefront with a Dual Platform architecture. Companies can more easily meet business demands while maintaining the flexibility to implement changes that make the business run smoothly. The Network BOS allows a company to provide its employees the information they need to make better decisions. It provides the automation and decision support capabilities that help your company move toward autonomous supply chain management at global scale. It also provides data to all parties to decrease errors, creates seamless integration between trading partners and corporate business functions, and improves communication among corporate locations and sites.
Configurable roles and permissions within the Network give all elements – people, departments, locations, and trading partners – the ability to drive performance to higher levels. At the Network-level the Enterprise Social Graph (ESG) can unlock significant business potential as a force multiplier as the Network takes effect.
Given the results to date, there is absolutely no doubt that a Dual Platform strategy will provide the competitive edge that most companies are striving to achieve.
