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Back to front: integrating the supply chain

Good integration of an external supply chain can help improve customer service as well as reduce costs. Philip Hunter looks at ways to ensure your Web bone's connected to your back bone

Pretty Web sites often disguise a multiplicity of ills, manifesting themselves to customers in the form of poor service, late delivery and lack of information about orders and products. The problem lies with integration, or lack of it, of the various systems and applications involved in the processing of orders and provision of information both with each other and with the new Web server front-ends.

Such problems are clearly most severe for "legacy" companies for which e-commerce is just a new, albeit, important channel to market, but greenfield sites are not immune. The new dotcom companies have the advantage of having no legacy systems to integrate, but the disadvantage of lacking such systems in the first place. They, therefore, have to build them from scratch, and this has not always been done adequately.

With e-commerce suppliers of CDs and books, Boxman.com being an example, it is often difficult to find out the status of an order when delivery is running late. In other cases the links are there but have not been scaled properly and fail to cope with peaks in demand. The problems of Egg have been well documented, and still the company's back-end systems, which provide details of customer statements for example, are frequently unavailable or at least unacceptably slow. In this particular case the gamble of coming out early with immature systems in order to steal market share has probably paid off, but for legacy companies with well- established brands to protect, there is more to lose and less to gain by such a move.

It is not a simple question of to integrate, or not to integrate. It has to be the right sort and level of integration. "The first issue is that often the business processes are not integrated anyway, inside the organisation," says Stuart Curley, senior technical architect at the systems house Cap Gemini.

"The next issue, assuming you have got some internal integration, is how do you then integrate with the Internet in such a way that it's useful to people coming in over the Web," says Curley. The point here is that existing order processing and stock control systems, which have the potential to serve external customers, are often specialised idiosyncratic applications based on old green screens with set procedures and require user training. Given that external customers expect much more intuitive access with help to navigate the system, such applications need to be re-engineered for the Web.

Given these facts, it is not surprising that the cost of the relevant back-end integration and re-engineering exceeds by a large margin the actual Web servers themselves. ICL's ERP business development manager Mike Tawezowski estimates that for an average legacy enterprise, the ratio between these two figures is as great as 40. Small wonder then that there is a temptation to put the Web site up first and worry about the integration afterwards.

The consequences for service are various. It is common to be able to place an order but be unable to ascertain whether the specified item is in stock for example, because of lack of integration between the order processing and stock control systems. Such integration is particularly important for supermarkets given that home shopping customers may want to know in advance whether or not particular food items are available. Neither Sainsbury's nor Tesco can yet provide this information with their fledgling Internet shopping services.

This particular example illustrates how the integration issue is not just about IT systems, but also about business processes. The fact is that the two retailers mentioned take orders centrally, but have them dispatched from stores local to the customer. There is no flow of information back from the stores to the order processing centre. However, Sainsbury's looks like it is moving towards a model where goods ordered over the Internet are dispatched from picking centres providing full visibility of stock levels to the order processing centre. There is then the potential to flag items as unavailable and list alternatives to customers placing an order. Currently Sainsbury's is building a new picking centre in Park Royal to serve customers within the M25, and with two new e-commerce directors just appointed, the situation for the rest of the countryisbeing reviewed.

The motive for trading over the Web is often not just to find a new channel to market, but also to save money bycutting people out of the whole order/ supply/ delivery chain. This is, of course, the primary motive for business-to-business commerce, but also can be important even in consumer markets, particularly for delivering services. The issue here is organising the workflow effectively so that as many tasks as possible are automated, and processes that have to remain manual are tied in efficiently.

A good example of a service where money can be saved through partial automation of the workflow is the taking and processing of online loan applications. At present this process cannot be entirely automated because digital signatures are not yet legally binding, and so the customer's handwritten signature has to be obtained on a form before the money can be issued. For this reason there are few online loan services.

But an interesting demonstra-tion of the workflow and integration processes involved has just been launched by the systems integrator and solutions provider Keane. The demonstration features workflow software from Staffware, and integration software called Roma Workflow Access from Candle.

Candle's product manager John Knutson says, "Workflow engines like Staffware are very good at managing the flow of processes and making sure the right resources get brought in at the right time, but are not very good at linking the workflow process with the enterprise applications."

This is where Candle Workflow for Access comes in. The Internet loan application in the demonstration begins with a credit check, which if positive allows the automated process to continue with access to the underwriting system. The latter then generates a loan offer based on the credit score and the amount asked for.

At this stage the whole process is suspended while the form is sent out for the applicant to sign, but when this comes back automation resumes with the most critical integration step, involving the Candle software. This involves access to the system that actually releases the money. This link must be highly secure and robust, and in future when the whole process is automated, needs to scale to the required volumes. Also important, according to Tony Lynock, workflow and imaging practice manager at Keane, is that changes to the processes involving integration can be made later, and he praises Candle's Roma Workflow Access on this count.

But a more widespread solution to the problem of distributed and integrated workflow over the Internet is coming from Microsoft with its XML-based Biztalk server. "I think Biztalk will totally revolutionise the e-commerce market," says Curley. It would, he adds, commoditise Internet workflow and bring down the price substantially. But the current first version of Biztalk only prepares the ground for distributed workflow by providing routing of XML messages. Version two, due for release in September, will introduce the full support for rules-based workflow with XML merely being the underlying message structure.

Some enterprises though are already working with Biztalk in anticipation of the full second version. Marks & Spencer sees Biztalk as a powerful framework for more efficient integration of its supply chain, moving towards just-in-time delivery, lowering costs and improving customer service. For example, perishable goods such as strawberries could be ordered automatically at short notice when the point of sale system at a particular branch indicates that stock has fallen dangerously low. This would avoid dependence on often inaccurate demand prediction models based largely on weather forecasts. Of course this could make the poor suppliers even more enslaved to their large supermarket customers than they are now. But M&S itself sees Biztalk as a likely aid to recovery from the retailer's current slump.

For some companies, good integration of an external supply chain can also help improve customer service as well as reduce costs. This is obviously the case for brokers of financial services, and applies to Volt Europe, the IT contract recruitment business featured in the mini case study. Volt is an agency of agencies, linking IT employers to multiple sources of contractors, and the challenge is to provide effective Internet access to the service for its customers, the agencies as well as the contractors themselves.

Volt at least avoided the trap of going onto the Web without having its internal systems in order.

Case study: Volt Europe implements extranet solution

Volt Europe is a leading provider of IT contractors, but differs from other agencies in offering a brokerage service. It is, therefore, a sales outlet for other agencies, with the raison d'etre being to provide IT employers with access to a much bigger pool of staff and skills than any one recruitment agency could.

The IT challenge facing the company was to exploit the Internet effectively to distribute its services and give customers access to relevant information such as contractors' CVs and progress in fulfilling a particular request. A customer might, for example, want to recruit a whole project team and ascertain how Volt was progressing with this task.

Volt faced two choices, according to its manager of IT support services, Mike Blomfield. The problem was in allowing external people not subject to the company's security procedures access to confidential information such as CVs. "One option was to re-assess our whole architecture and either get someone to host it for us or create some demilitarised zone," says Blomfield.

But the company found a far simpler and less expensive way to provide access - to do it via an extranet managed by some external provider. Volt chose the Aventail extranet Centre to provide access to its Web-based services. According to Blomfield, the total solution cost £100,000, whereas the alternative of re-organising internal systems would have cost several times more.

An extranet enables existing systems to be used without compromising security. Responsibility for enforcing access control for external users resides with the extranet rather than having to be added to existing internal systems. So with the latest version of the Aventail extranet software, which became available on 1 May, external users can be provided with access from standard Web browsers without additional client software.

The extranet service authenticates them on the basis of username, password and digital signature, and then allows them access to the Volt Web service. However, to access more secure internal services, Volt insists on a second security factor, the Security Dynamics SecurID tokens that generate one-time passwords. At present these are used just by internal staff for accessing more secure information via the corporate Lan.

In future, recruitment agencies will be given access to the network to update details of vacancies, and contractors themselves for filling in timesheets, a task currently done manually.

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