“We have to do the global standards,” said Procter & Gamble Co. CIO Stephen N. David during his keynote address at this year’s Frontline Solutions Supply Chain Week Conferences & Expo, held in Chicago Sept. 23-26. When the vast majority of presenters at supply chain industry-related conferences continue to sing the same “consolidate the standards” tune, and not much consolidation actually happens, during Q&A sessions conference attendees tend to wonder aloud what’s going on.
Addressing this dichotomy at the Frontline Solutions show, Arizona State University professor of supply chain management Larry Smeltzer said, “If you listen to all the presentations at conferences like this, you would think that we’ve just about got the world’s problems solved. Then you go back and sit at your desk, and you find out that we don’t even know where the restrooms are half the time; we’re that far away from really solving the problems.”
Start all over
So where do we start? Lately, there has been major progress in supply chain standards consolidation. In August, the Uniform Code Council, which sets standards for 23 major industries, and RosettaNet, a high-tech industry standards consortium, announced a merger that made RosettaNet an independent subsidiary of the UCC.
Then Redwood City, CA-based enterprise software giant Oracle Corp. announced in October that it would lead RosettaNet’s Interoperability Program, which aims to increase the adoption of RosettaNet standards throughout the high-tech supply chain. Jonathan Oomrigar, Oracle’s vice president for high-technology business solutions, says that now that these standards have been brought together under one umbrella, Oracle can focus on a single enterprise integration standard that works across many industries.
Two to tango
Oomrigar says that Oracle was approached back in early 2000 by the automotive and retail industries asking for ways to adopt a standard like RosettaNet to help manage costs and set the “choreography” behind the sending and acknowledgement of purchase orders (POs) and other information up and down the supply chain. In the traditional, yet highly exclusive and prohibitively expensive batch-oriented EDI system, any vendor along the supply chain that sends out a purchase order has to wait for a response, Oomrigar says. If the purchase order does not come back, “you don’t know if they want to reply to that PO or not. In RosettaNet, you’ll know, because it’s a choreography of messaging going back and forth.”
Oomrigar adds that the drive toward outsourcing evident in retail is also occurring in the high-tech industry, which produces microchips that have a life cycle as short as 28 days. “Lucent, Sun Microsystems, Cisco, they build very little of their final product. They do some final assembly, and that’s it. The rest of it is all elsewhere now,” Oomrigar says.
According to Oomrigar, a standard microchip will travel 20,000 miles on average between the time it is first built and the time it reaches its final destination, not including the time it actually takes to get from a vendor into a consumer’s hands. “The supply chain is very intricate that way.”
These days, of course, everything comes down to the bottom line. The heart of the standards debate lies in the choice between information exchange using closed and more costly EDI, or standardizing communication on an open XML-based system like RosettaNet. The choice seems clear to Oomrigar. “EDI is expensive, you have to lease lines, it’s all batch-oriented — things like that. You come to RosettaNet because the backbone is the Internet; it can drive costs down because all you need at the most basic level is a Web site.”