SCM Automation:
Opportunities and Challenges
K. Srinivasan
Distributed Systems Laboratory (DSL)
Intel Corporation
January 24, 2002
Copyright © 2002 Intel Corporation
Page 1
Agenda
 Opportunities
& challenges
 Why web service standards?
 The new IT
 Role of academic institutions
Copyright © 2002 Intel Corporation
Page 2
Primary
SCM Curriculum Objective
“…relatively easy to find technical
professionals eager to ‘come to Intel and
build the biggest e-Business engine in the
world’.
.. Difficult to find employees... with deep
knowledge of what e-Business technology
can and cannot … do.”
Source: Graduate School of Business, Stanford
University Intel and e-Markets Case Study 10/00
Vision + Pragmatism
Copyright © 2002 Intel Corporation
Page 3
How important is SCM?
The company with the most efficient supply
chain was able to weather this (September
11th) the best
- Michael S. Dell
Every business will be an e-Business
- Andrew S. Grove
Copyright © 2002 Intel Corporation
Page 4
Some SCM Successes
Raw materials inventory as a percent of cost of sales is
down 67 percent from two years ago.
Without the E-business systems … to track demand and
cost of inventory, Intel would have had to take write-downs
of anywhere from $500 million to $1 billion. “During the
worst downturn the semiconductor industry has ever seen,
you haven't seen a lot of write-downs coming from Intel …
in stark contrast to substantial write-downs taken by
almost 80 percent of the companies...”
…knowing customer-demand inventories on a real-time
basis is really critical. If we decided the economy was
going soft, we needed 35 days to replan our factories.
Today, Intel can replan a factory in 5 days… eliminated a
month of building the wrong stuff.
Andy Bryant, CFO, Intel
CFO, December 9, 2001
Copyright © 2002 Intel Corporation
Page 5
Some More SCM Successes
DuPont* expects to save $400 million a year buying supplies online.
The initiative's total cost: just $15 million over three years.
The British arm of Fisher Scientific* is investing less than $50,000
in online invoice processing. The project should pay for itself in
six months, and within two years should cut 80% of the $370,000
Fisher spends annually to process bills from suppliers.
For Otis,* elevators with remote monitoring require only one-third
the number of visits as those without the system
Business Week,* October 29, 2001
Copyright © 2002 Intel Corporation
Page 6
A B2B Challenge: Adoption Rate
GE's* B2B Retreat
GE* has realized only 5% of its revenue through the Internet, far short of its goal
of 30%. Its suppliers wouldn't readily convert their formats and methods to fit
GE's* systems.
ComputerWorld,* July 2, 2001
So far, Intel has a RosettaNet* Connection with about 20 customers and
suppliers.
… there are 1,000 customers and suppliers that might benefit from doing
business with Intel through RosettaNet,* though many customers will still be
working with Intel through existing EDI systems or browser-based interfaces
in three to five years.
ComputerWorld,* July 2, 2001
Using SAP,* it took Bristol-Myers Squibb* two years to connect with only 10
suppliers.
Forrester,* December 2001
Copyright © 2002 Intel Corporation
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The B2B Logjam
Significant benefits from
custom implementations

High-volume adoption
Gulf between the haves and the have-nots could
increase significantly
– Concern for SMEs, developing nations and LEs
Copyright © 2002 Intel Corporation
Page 8
Cost is the key barrier
Current
Cost Curve
Cost of
forming
Partnership
(per partner)
# of Business Partners
B2B is not riding the Metcalf’s law
Copyright © 2002 Intel Corporation
Page 9
SCM Automation and
Standards
 Currently,
B2B automation over the
Internet requires custom
implementations
 Standards can reduce TTM
significantly
 We need technical as well as business
standards
Copyright © 2002 Intel Corporation
Page 10
A danger we must guard against in creating
a free and fair global economy:
The inability of agriculture and the old
economy sectors to keep pace with
technology and innovation.
Hon. S.M. Krishna, Chief Minister, Karnataka, India
8th CII Partnership Summit, January 5th 2002
Source: The Hindu, January 6th 2002
Copyright © 2002 Intel Corporation
Page 11
China’s Proactive Stance



We recognize the PC, XML and open standards are
extremely important for China to enter into the
international supply chain.
The international standards sometime assume the
perfect environment of enterprises in the developed
countries. But China still is a developing country
and our companies are mostly small with a limited
infrastructure and with a limited need for the
informatization. Such China's characteristics need
to be understood.
At MOST (Ministry of Science and Technology),
XML is already a program and will receive a
significant attention, resource and funding.
Dr. Wu of MOST
Copyright © 2002 Intel Corporation
Page 12
China XML Players
CESI
(Vice Director-Ms. Ning Lin)
NISTC
MII
State
Council
CAS
Academics
(Chair – Mr. Yang)
Proposal
Approval
AQSIQ
MOST
Industry
DHNTI
Review Resource
China XML
Committee
(Chair – Mr. Yang)
(Director- Dr. Ying Jian Wu)
ISCAS
(Director-Dr. Yu Lin Feng)
Development
Resource
MII – Ministry of Information Industry
AQSIA-State Admin for Quality Supervision, Inspection and Quarantine
MOST – Ministry of Science&Technology
CAS – Chinese Academy of Science
SCAS - State Commission for Administration of Standardization
NISTC – China National IT Standardization Technical Committee
DHNTI-Dept. of High & New Technology Development & Industrialization
ISCAS – Institute of Software Chinese Academy of Science
CESI - Chinese Electronics Standardization Institute
Copyright © 2002 Intel Corporation
Page 13
Role of the Academia

Drive a national SCM technology strategy
– All sectors of the economy, education, health
care, law & order,… must benefit
– Continued global IT leadership

Align national strategy with international
standards
– Local needs must be met
– Drive highly-visible pilots, particularly with SMEs
– SCM software stack must be better and and
more cost effective to implement
– Automation, simplification, flexibility, reliability,
security, …
Copyright © 2002 Intel Corporation
Page 14
A Broad View of SCM
Don’t ignore the B2E:
Significant savings &
employee satisfaction
Subcons Suppliers
Employees
Business
Benefits,…
Copyright © 2002 Intel Corporation
Page 15
Customers
The New IT:
The Impact of SCM,
Standards and Outsourcing
Copyright © 2002 Intel Corporation
Page 16
Why Outsource?

Responses from CIOs and CEOs as to why
they would use an ASP:
– Affordable access to technology
– Avoid capital investments
– Simplify budgeting
– Shorter implementation cycle
– Lower cost of entry for applications
– Improved total cost/performance
– One-stop shopping/support
– Focus more on our primary business
– Scalability to meet business growth
– Avoidance of IT staff recruitment/retention
IDC* Global 2000 IT Survey: North American Results
Copyright © 2002 Intel Corporation
Page 17
Outsourcing
One opinion:
The ASP model makes so much
economic sense, it is going to be the
dominant model in the future.
Another opinion:
The ASPs have failed. Outsourcing
simply is not flexible enough.
Requirement:
Fine-grained, low-cost outsourcing
Copyright © 2002 Intel Corporation
Page 18
A likely outsourcing scenario
S&M
SAP*
Planning
i2*
Business
Customer
Rating &
Discounts
CRM
Siebel*
ASP
ASP 2
ASP 3


Retain functions in-house for confidentiality, competitive-edge,…
Integrate services from multiple ASPs
Copyright © 2002 Intel Corporation
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Web Service Implications for
Outsourcing
 Potential
for tremendous reductions in
effort and cost in using services
–Run-time discovery & integration
–Use for a single transaction
 More
businesses could be providing
web services
–Easier to sell your unique competencies
(e.g., design validation)
Web Services + Outsourcing ->
Cost Reduction + Revenue Opportunities
Copyright © 2002 Intel Corporation
Page 20
Network/Infrastructure
Capabilities




Reliable messaging
Security (authentication, authorization, encryption,
access control, audits,…)
Detection of new services and devices and
understanding their capabilities
Multiple QoS levels
– Bandwidth allocation and management


Smart routing
Content distribution to the edge of the network
– For localization, performance,…

Increased automation through capabilities such as
workflow management, multi-resource coordination
Copyright © 2002 Intel Corporation
Page 21
The New CIO

A strategist and entrepreneur
– Distinguish needs for parity from needs for competitive
advantage
– Build new IT-based businesses

A knowledge broker
– Pull together diverse expertise from various sources

A relationship manager
– Drive inter-enterprise IT integration

An industry leader
– Understand “coopetition”
– Persuade and influence business communities
Adapted from Your Next IT Strategy by John Hagel III and John S. Brown,
Harvard Business Review, October 2001
Copyright © 2002 Intel Corporation
Page 22
Role of the Academia

Drive a national SCM technology strategy
– All sectors of the economy, education, health care, law &
order,… must benefit
– Continued global IT leadership

Align national strategy with international standards
– Local needs must be met
– Drive highly-visible pilots, particularly with SMEs
– SCM software stack must be better and more cost effective
to implement
– Automation, simplification, flexibility, reliability, security, …

Train leaders with the vision and pragmatism for
the new IT
Copyright © 2002 Intel Corporation
Page 23