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Notes From the Oracle Value Chain Summit

Some random themes and thoughts to emerge from Oracle Corp.'s Value Chain Summit in San Jose, Calif. last week:

Notes From the Oracle Value Chain Summit

The future of the cloud. Clear skies, with a caveat. There’s no question that the software-as-a-service (SaaS) model is driving technological innovation in the supply chain. In 2011, 21 percent of supply-chain applications were being offered in the cloud, according to Oracle executive adviser Richard Toole. He expects that share to climb to 36 percent by 2017.

Look for expanded reliance on the cloud for supply-chain planning, procurement and, most of all, execution. Toole listed six key drivers of cloud growth in those sectors: ease of use; lower up-front expenditures (not necessarily cheaper in the long run, but less investment required at the outset); rapid time to market; the appeal of a subscription, or pay-as-you-go pricing model; a shift by companies away from high capital expenditures to a focus on operating costs; and the cloud’s inherent competitive advantages.

Toole said systems residing in the cloud can speed up new-product development, enable better supplier collaboration, improve data quality and increase overall supply-chain visibility.

Lest you think the cloud will also cure cancer and global warming, consider Toole’s 36-percent prediction of market share by 2017. It means that 64 percent of supply-chain applications will still be residing on premise. The dependence on systems behind the firewall “isn’t going away anytime soon,” he said.

In fact, one of Oracle’s newest products, Fusion Innovation Management, is being offered first in an on-premise model, to be followed by a cloud-based version. A large portion of the vendor’s installed base for product lifecycle management is on-premise, explained Jon Chorley, group vice president for supply-chain management product strategy and PLM. “We’re taking it step by step,” he said.

Rick Jewell, Oracle’s senior vice president of applications development, isn’t surprised to hear that companies will continue to rely on locally hosted software for the next few years. “That said, when it flips, it will flip very, very fast.”

Those darned spreadsheets. Still around, and not disappearing in the foreseeable future. Mike Boland, program manager for supply chain planning with GE Healthcare, said the use of spreadsheets can block efforts to automate and integrate planning across the organization. GE Healthcare’s 50 global manufacturing sites were each using different sets of spreadsheets for managing sourcing and conveying requirements to vendors. That meant 50 different inputs, and a process that took more than 30 days to complete. “By the time a vendor was responding,” said Boland, “we already had a new forecast. To us, that was unacceptable.”

GE Healthcare moved to a more mature planning process that ensured compatible data across multiple organizations, and cut the time for conveying forecasts to vendors to just seven days. Now, the company employs automated data scorecards and “health-check” dashboards – but the information still ends up in spreadsheets. “Excel allows us to change things over time,” Boland said. “It’s fast and flexible.”

“I think there will forever be a role for spreadsheets,” said Jewell, even though the tool doesn’t allow for the easy sharing of accurate data among multiple partners. Chorley added that it encourages “tribal knowledge.” Companies become overly reliant on the individual who developed the spreadsheet. “And that becomes a risk for the business.”

The agony of automating global trade management. Only a small fraction of companies are using state-of-the-art systems to streamline their regulatory-compliance organizations, said Beth Peterson, president of BPE Global. Her firm partners with American Shipper for an annual survey of the global trade-management landscape. The latest version is due out soon.

It’s not uncommon, said Peterson, for companies to employ an automated classification process, then print out the document and e-mail it to another department for manual input into a separate system. “It’s quite shocking,” she said. “There’s a very big need right now for people to actually use their automation.”

Peterson said companies have invested billions in GTM automation, but have yet to use many of the systems they’ve acquired. The disconnect results in customs brokers misclassifying goods and potentially costing the client dearly in terms of penalties and delayed shipments. In one case cited by Peterson, a lack of automation even delayed a major company’s initial public offering, when 80 percent of its classifications were found to be incorrect.

The latest GTM study finds companies failing to integrate compliance functions and day-to-day operations, such as the filling out of basic forms. “Two-thirds of global trade professionals are operating manually,” Peterson said. “Sixty percent of shippers say they have no plan to integrate their GTM and TMS [transportation-management system] functions, or have it, at best, in their five-year plan.” Without automation, she said, true integration simply isn’t possible.

How small can those devices get? There’s no apparent limit to the tech consumer’s love for portability and miniaturization, whether in the form of mobile phones, Google Glass or smartwatches. When it comes to the hardware needed to manage a complex supply chain, however, you can only get so small.

Jewell believes the tablet will be the go-to device for some 80 percent of companies’ supply-chain application needs. But certain capabilities, involving large amounts of critical data, will still require a bigger screen.

“I fail to see how a master planner is ever going to use a tablet,” he said. Managers might rely on mobile phones for specific tasks that require quick interaction, such as gaining approvals for purchase orders or human-resource activities.

Chorley was a bit more bullish on the future of tiny units. “I’m optimistic about our ability to shrink the amount of information that’s needed to make a quality decision,” he said, adding that the smaller form factor “is a wonderful discipline. It encourages you to say what’s important.” As systems become more capable of providing expert guidance, he says, the amount of raw information that needs to be conveyed directly to the user shrinks.

Pain Point Number One. Even at a user conference devoted to the latest in information systems, it has nothing to do with technology. The issue that’s attracting the most attention from top management continues to be the supply-chain talent gap. Where are we going to find the people with the ability to crunch the numbers and operate the software, while forging the human relationships that continue to be at the center of every business relationship? It’s that last requirement that makes up the one true “value chain.”

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