A framework for collaborative applications J.M. Moonen Erasmus University Rotterdam, Rotterdam, Netherlands

A.J.R. Zwegers Baan Development, Barneveld, Netherlands

J. van Hillegersberg Erasmus University Rotterdam, Rotterdam, Netherlands

ABSTRACT: Nowadays, enterprises cooperate more extensively with other enterprises during the entire product life cycle. Temporary alliances between various enterprises emerge such as those in Virtual Enterprises. Collaborative applications are demanded that enable enterprises to engage in such endeavors. This paper aims to present a framework with which collaborative applications can be characterized and positioned towards each other. The framework is based on research in the Electronics industry. It consists of three dimensions, namely the company strategy, the business functions a company or its partners need to fulfill, and the application’s planning level. The example of collaborative order fulfillment planning is used to illustrate the framework. 1 INTRODUCTION One of the trends in the global market is the increasing collaboration among enterprises during the entire product life cycle. This is related to business drivers, such as the need for cost reduction, flexibility, focus on core competencies, and so on. The resulting collaboration form is anything from a rather stable alliance between partners as in a supply chain to a more transitory cooperation as in a virtual enterprise. As a result, enterprises demand applications that enable them to engage in such collaboration endeavors. Enterprise application solution vendors increasingly start to provide such applications, either by adapting their current enterprise-centric applications or by developing new, network-centric applications from scratch. The objective of this paper is to present a framework with which collaborative applications can be characterized and positioned towards each other. As such, it aims to support both end users and technology providers. The paper elaborates on the authors’ previous research on collaboration in the Electronics industry (Moonen 2002, Moonen & Zwegers 2002). The paper is organized as follows. The next section describes collaboration, collaborative business, and supporting collaborative applications. Section 3 introduces the framework for collaborative applications. An illustration of the framework via the example of collaborative order fulfillment planning is given in Section 4. Finally, a discussion concludes this paper.

2 COLLABORATION BETWEEN ENTERPRISES 2.1 Collaboration Globalization, technological innovation, customization, and fierce competition are among the issues on the agendas of many of today’s executives. Over the years, companies have continuously been busy reshaping themselves, and have now turned back to a sole focus on their core competences. This has led to increased outsourcing of activities that were not considered as core activities. Many tasks that used to be performed by the company itself, are now performed by specialized partners. There is a true need for collaboration between specialized enterprises. Not being able to co-operate with other specialists jeopardizes the attractiveness of an enterprise’s products or services. Interorganizational collaboration could limit the risks in dynamic environments, and should therefore be seen as part of the organization’s strategy, not as a choice to be made at an operational level (Kornelius 1999). In this paper, collaboration is defined as “the process of working together toward a common purpose or goal in which the participants are committed and interdependent, with individual and collective accountability for the results of the collaboration, and each of the participants shares a common benefit” (Light et al. 2001)

2.2 Collaborative business

vendors. In practice, however, collaborative business often focuses only on the technology aspect of collaboration initiatives. Collaborative business benefits an enterprise by extending the enterprise’s visibility and cooperation throughout the value chain, thereby contributing to the realization of virtual enterprises. Perhaps the most essential element of c-business is the extension of an enterprise’s knowledge assets to include those outside the enterprise. When intellectual capital is leveraged across enterprises, the benefits of cbusiness can be realized. Sharing intellectual capital and combining core competencies with partners are the major ingredients of collaboration.

Collaboration can be performed in different ways. Figure 1 gives an overview of areas that could be interesting to deploy collaborative initiatives (Moonen 2002). Area one is about internal collaboration, within the same enterprise and same plant. Although it was the focus of research for many years, it turns out that much could still be improved here. The second area also includes collaboration within the same enterprise, but over and between different plants and locations – often referred to as multi-site. The third area is about collaboration with external partners, in this case a partner at the supply side. Number four shows collaboration with a customer. Number five is slightly different, since it does not contact the own company, or a partner, but the final customer of the supply chain. This kind of collaboration can improve the (customer-) service orientation of the supply chain. Number six shows collaboration over the supply chain with all pre-defined relationships. The seventh form extends the previous form, makes it more dynamic, and could include all possible partners in the collaborative initiative, rather than the current partners only. It actively searches and monitors for new relationships, and enables them, where option six is more pre-defined. Theoretically, this is the ultimate mode. In this paper, the emphasis is on collaboration between multiple enterprises. Supply chains are expected to become even more complex and dynamic than they are today. They will eventually be transformed into supply networks. Whereas in supply chains merely linear, fixed relations between enterprises can be identified, an enterprise in a supply network has relations with many other enterprises, and these relationships might change over time. Therefore, enterprises turn to strategies such as collaborative business (sometimes also referred to as ‘c-business’, ‘collaborative commerce’ or ‘ccommerce’). It should be considered as a business model rather than a solution that can be offered by

2.3 Collaborative applications Collaborative business needs to be supported by appropriate applications. Collaboration between business partners is valuable in those areas where decisions need to be taken and where exceptions and problems need to be resolved. Information plays a vital role here, both within the organization, as with (external) supply network partners. Collaborative commerce therefore is not only limited to the exchange of information with partners; a solid integrated information environment in the own enterprise is an essential element to success as well. Business is supported by ICT, e.g. in cost minimization and optimal decision making, in informationsharing, decision-sharing, process-sharing and resource-sharing (Whang 2002). Enterprise applications are developed to support companies in executing their business. In order to answer the questions on how to design such applications and what elements are essential in there, one needs to know what factors influence collaborative processes and the corresponding software. For this, the framework for collaborative applications has been designed.

6 7

2 3

4

5

1

Supplier

Focal company

Figure 1. Various areas of collaboration

Customer

Final Customer

3 COLLABORATIVE APPLICATION FRAMEWORK 3.1 Introduction This section presents a framework with which collaborative applications can be characterized and positioned towards each other. The framework addresses the critical factors in collaborative environments, and is illustrated in Figure 2. It shows that collaborative applications depend on three different factors: the company strategy (value discipline), the business functions a company or its partners need to fulfill, and the application’s planning level. 3.2 Value Disciplines The first axis of the framework is the value discipline axis. Today’s companies can excel and gain competitive differentiation through three different value disciplines, namely customer intimacy, product leadership, and operational excellence (Porter 2001, Treacy & Wiersema 1993, 1995). A value discipline is a company’s ability to allow operations, structure, systems and culture to contribute to a set of clearly related business objectives. Objectives are either customer-related, product-related or processrelated. Bundling all three value disciplines into a single company inevitably forces management to compromise the performance of each process in ways that no amount of reengineering can overcome, simply because the economics of the disciplines conflict. Therefore, combining all areas in one single company seems to be really difficult. It is suggested to excel in one discipline, and to meet industry standards in the others. A company that focuses on customer intimacy offers its customers tailored products and services. Customer intimacy requires an intensely serviceoriented culture. It stands for segmenting and targeting markets precisely and then tailoring offerings to match exactly the demands of those niches. For a company where product leadership is the key competitive differentiator, speed rather than scope drives the economics. Innovation is rewarded and administration is minimized. The company offers its customers leading-edge products or services that consistently enhance the customer’s use or apValue Discipline

Planning Level Business Function

Figure 2. Framework dimensions

plication of the product or service, thereby making rivals’ goods obsolete. Such a company constantly pushes the boundaries of product performance. If a company wants to focus on operational excellence, it tries to use its operational facilities as optimal as possible, based on its high fixed costs and its capital-intensive facilities. The focus is on delivering its customers reliable products or services with minimal difficulty or inconvenience. These companies do the same as their competitors, but their costs are lower. 3.3 Business Functions The second axis in the framework is about business functions. Business functions are the functions companies perform in their process of adding value to a product or service. Collaborative initiatives depend largely upon these (classical) business functions. To help identify the business functions, various supply chain models can be considered. For instance, the Supply Chain Operations Reference (SCOR) model is a process reference model which consists of multiple layers (from high-level to very detailed) and with corresponding process performance benchmarks (Anon 2001). Although the SCOR model is well-known and widely-used, its current version (5.0) lacks inter-company collaborative processes, which are on the agenda for its next version. In this paper, the supply chain model as introduced by Mentzer et al (2001) is used in a slightly adjusted version (see Figure 3). A typical characteristic of the model is that it takes the supply chain as the basis, whereas more traditional supply chain models only look at each of the various companies. Therefore, this model also includes a company’s trading partners. Nine functions are placed in the center of the model, which need to be fulfilled by the supply chain as a whole. Note that design is part of the research & development function, and that the term “logistics” includes both distribution and inventory management. Part of this supply chain model is an overview of the enablers for inter-functional coordination, such as trust, commitment and behaviors. The supply chain flows (such as products, services, financial resources, and information) are there, as well as the benefits the supply chain brings. In the end, it is all about customer satisfaction, value creation, profitability and competitive advantage over other supply chains. Information systems, human resources, and plants, equipment & facilities are positioned in a separate part of the model. These aspects support the operation of the different functions by the individual companies and by the supply chain as a whole.

The Supply Chain

Supply Chain Flows

Inter-Corporate Coordination (Functional Shifting, Third-Party Providers, Relationship Management, Supply Chain Structures) Marketing Research & Development

Products

Forecasting Procurement

Inter-Functional Coordination

Services Production

(Trust, Commitment, Risk, Dependence, Behaviors)

Logistics

Information

Sales

Customer Satisfaction / Value / Profitability/ Competitive Advantage

Financial resources

Service Finance

Information Systems

Forecasts

Human Resources Demand

Plants, Equipment & Facilities Supplier's Supplier

Supplier

Focal Firm

Customer

Customer's Customer

Figure 3. Supply chain model (adapted from (Mentzer et al. 2001))

3.4 Planning levels

4 EXAMPLE

The framework’s third axis is about planning levels. In an organization as well as a supply network, decisions are usually classified as strategic, tactical, or operational. Strategic decisions are typically linked to the company’s corporate strategy, and guide the design of the supply network. They are generally taken over a long period of time (2-5 years, or even more). Tactical decisions are taken on a monthly to annual basis, whereas operational decisions are short-term, and directly affect day-to-day activities. Kornelius et al. (1992) suggest a layered information exchange in order to communicate with suppliers in the procurement area. However, so far this idea was never combined with further supply chain management thinking, and assembled into a conceptual framework. Companies face decisions to make in different domains, such as marketing, R&D, and forecasting. The decisions need to be made at different planning levels. Different planning levels ask for different optimization approaches. Generally speaking, the characteristics of the different optimization decisions are as follows: − At the strategic level, the complete design (of product, network or relationships) can be optimized. − At the tactical level, the optimization takes place between the boundaries as set in strategic decisions. − At the operational level, time lacks for real optimization, and therefore optimization is focused on optimal resolution of (emergency) operations when they occur.

4.1 Introduction The framework can be used to analyze collaborative applications and processes, and to position applications towards each other. For instance, in (Moonen 2002) a simplified version of the framework is used to identify five different ‘hotspots’ or solution areas, where collaboration can be beneficial for manufacturers in the Electronics industry. One of these hotspots is collaborative order fulfillment planning. In this paper, collaborative order fulfillment planning is taken as an example to show the usage of the framework. 4.2 Collaborative order fulfillment planning The planning of the order fulfillment process is in today’s industries a fairly disconnected process. Sales, procurement, production and logistics are separate domains, and are treated like that in daily practice. Generally, order-promising processes do not use real-time information from the production, logistics and procurement functions earlier in the supply chain; neither do they use this information for optimization purposes. Not being able to plan and optimize the procurement, production and logistics functions in the order-promising process inevitably results in (extra) inventories, a rather inflexible supply chain (e.g. not being able to shift capacities), and relatively long lead-times for customer specific products. Different authors have identified these problems, for example (Kornelius 1999, Bovett & Martha 2000, Kambil 2002, Maynard 2002).

Collaborative order fulfillment planning is the concept of planning the procurement, production, and logistical operations (near) real-time, in an integral manner with a focus on optimization, during the sales process (Moonen 2002). It was introduced to tackle the problems mentioned above. In practice, the manufacturing routing is planned during the sales process. An order does not follow a predefined route, but is planned and optimized at the moment it is captured. Order fulfillment is optimized based on capacity, costs, profits, speed, and other constraints. At the same time, it needs to take into account constraints such as capacities, utilization rates, costs, distances, and durations of the entire supply network. The process starts with a request from the customer. Based upon this request the collaborative order fulfillment planning solution checks the different ways the product can be built and routed. Sometimes the same end-product can be assembled through different bill-of-materials (BOMs). Making the right decisions here, in respect to costs and availability, can result in huge financial savings. Furthermore, it can be beneficial to plan the fulfillment process network-wide. Choices for the different suppliers, delivery terms, and production locations can be based upon issues related to capacity, related costs, utilization rates, distances, time related issues, etcetera. Enterprise application solution vendors sell advanced planning and scheduling solutions, which include order promising functionality. Order promising is the sales process where an order is promised to a customer with a real-time verification of the delivery date. Collaborative order fulfillment planning goes beyond more traditional concepts such as ‘available-to-promise (ATP)’, ‘capable-to-promise (CTP)’ and even ‘profitable-to-Promise (PTP)’. Profitable-to-Promise optimizes on profits, includes distribution aspects (realizing an ‘available-tocustomer (ATC)’ or ‘capable-to-deliver (CTD)’ quote), and also takes alternative Bills of Materials into account. A next step for PTP would be to adopt a supply network-wide view rather than the current enterprise-centric view. As such, collaborative order fulfillment planning integrates networkorchestrating concepts in the order promising process. These concepts have proved to be highly effective in different industries already (Margretta 1998, Bovett 2000). Related to PTP is the term ‘Enterprise Profit Optimization (EPO)’, which is used to describe solutions that perform profitable supply-demand matching (Brown 2001). The basic idea here is that each customer order is ‘steered’ to appropriate configurations using pricing in such a way that overall company (or network) profits are maximized. It starts from the assumption that different customers need to be treated differently. In this, pricing is a control instrument. A supplier may not want to meet a cus-

tomer’s requested delivery date and quantity even when supply is available, but prefers to wait for a customer who is willing to pay a higher price for that supply. 4.3 Collaborative order fulfillment planning in the framework for collaborative applications Company strategy will explain if there is a need for a process such as collaborative order fulfillment planning. If a company has adopted the value discipline of operational excellence, the process could bring some real value. Operational excellent companies try to squeeze out costs wherever possible; a process of constant evaluation and optimization performed on lowest costs – executed in an integral manner from material to delivery –could be helpful. Customer intimate companies can gain from collaborative order fulfillment planning processes as well. Nevertheless, their objectives will be different, since they concentrate on fulfilling the customer’s wishes. These companies might want to have more flexible processes, which are focused on the interaction with the customer. The application dynamically gives the customer choices, and makes its decisions upon customer feedback, or previous experiences (and not solely on lowest total costs). Product leaders are not very likely to adopt the described process. They focus on a short time-tomarket of innovative products, work with dedicated partners and are not really focused on cost minimization. Speed is the only thing that counts, and so they are not very likely to focus too much on the opportunities for middle-long term order fulfillment optimization, since that inevitably consumes time. Traditionally, companies only look at the optimization of one business function. The example of collaborative order fulfillment planning shows that it could be beneficial to abandon this tradition and to connect previously separate business functions with each other, which provides the opportunity of optimizing them in an integral manner. Most logical is to first connect business functions within an enterprise, and than try to hook up external partners. Business functions directly translate into the collaborative process under design. In the example, the business functions of procurement, production, logistics and sales are integrated and used in the new order promising process (which previously only looked at sales and production). Making a difference between processes at the different planning levels is quite obvious. The planning level already locks the (financial or organizational) impact that decisions can have. For example, a decision at the strategic level is capable of optimizing many factors, whereas operational decisions can either be taken right or wrong. Collaborative order fulfillment planning is a good example of linking different business functions for a certain purpose (the

company’s strategy or value discipline), at a similar planning level. Order promising processes are typical examples of tactical decisions; the boundaries (in capacities, costs, logistical environment, etc.) have been set, and optimization needs to take place within these boundaries. Nevertheless, order fulfillment planning has ties with both operational and strategic processes; exception handling due to changes in the environment is an example where a link to more operational processes can be seen. A connection with strategic processes can be expected where business intelligence from the order fulfillment environment is used for further network optimization. 5 DISCUSSION The essential point of this paper is that collaborative processes vary according to – at least – three dimensions, namely the company strategy, the different business functions, and the conversion from business functions into business processes at different planning levels. The exact elements on the axes is subordinate to the dimensions themselves, and different authors have different opinions. For example, Bitici et al. (2002) mention six different value disciplines. The framework obtains its validity from a study on collaborative applications in the Electronics industry (Moonen 2002). Different players in this industry typically focus on different collaboration aspects, e.g. OEMs focus more on product innovation and EMS companies typically focus on costs. The framework aims to cover for such differences. However, different industries might require different dimensions and/or values, and the validation of the framework in other industries besides the Electronics industry is therefore a topic for further research. New business models might also lead to changes in the current framework. For example, network orchestration might be seen as a fourth value discipline. It is quite likely that business models based on network orchestration, brokerage, acting as trusted third party, etc. will eventually lead to new requirements for collaborative applications. Furthermore, the move towards collaborative business is enabled through modern information technology, and has a large impact on the supporting enterprise information systems infrastructure. Not only the applications will change, but the underlying infrastructure will need to be adapted as well. From this perspective, five major areas can be expected to go through a change: − connection or integration technology, such as enterprise application integration tools, XML standards, broker platforms, etc.; − open enterprise information systems, including enterprise modeling tools, and workflow and orchestration tools;

− smart tools, such as agent technology, artificial intelligence, business intelligence, event management, etc.; − pervasive computing – computing power, everywhere, at any time; − security aspects, becoming even more important than they are today. These areas would make interesting topics for further research by software vendors, universities, and end users. 6 REFERENCES Anon. 2001. Supply-Chain Operations Reference-model – Overview of SCOR version 5.0, Supply-Chain Council, November 2001 Bitici, U.S., Martinez, V., Albores, P. 2002. Creating and sustaining competitive advantage through collaborative systems: the what? and the how?. In H. Jagdev, H.J. Pels & J.C. Wortmann (eds) Collaborative systems for production management: 175-182. Amsterdam: Elsevier Science Publishers. Bovett, D., Martha, J. 2000. Value Nets – Breaking the supply chain to unlock hidden profits. John Wiley & Sons, Inc. Brown A. 2001. Enterprise Profit Optimization: Using Price to Better Manage Your Supply Chain. The Supply Chain Connection 7(4). Kambil, A., Dik, R.W. 2002. This is not your father’s supply chain. Supply Chain Excellence (Issue 9, March 14, 2002) Kornelius, L., Kreuwels, C.M.A., Vlist, P. van der. 1992. Aspects of the External Integration of Production Management Systems with EDI. In H.J. Pels & J.C. Wortmann (eds) Integration in Production Management Systems: 175182. Amsterdam: Elsevier Science Publishers. Kornelius, L. 1999. Inter-organisational infrastructures for competitive advantage : strategic alignment in virtual corporations. Eindhoven: Eindhoven University of Technology. Light, M., Bell, M. & Halpern, M. 2001. What is collaboration? Virtual team success factors. Gartner Group, COM14-4302. Margretta, J. 1998. Fast, global and entrepreneurial: supply chain management, Hong Kong style. Harvard Business Review Maynard, C. 2002. Making collaborative commerce work: Strategic Imperatives for Round 2. Whitepaper Symbius Corp. Mentzer, J.T., DeWitt, W., Keebler, J.S., Min, S., Nix, N.W., Smith, C.D., Zacharia, Z.G. 2001. Defining Supply Chain Management. Journal of Business Logistics 22(2). Moonen, H.M. 2002. Collaboration in the Electronics Industry - Perspectives on business issues, processes and software. Eindhoven: Eindhoven University of Technology. Moonen, H., Zwegers, A. 2002. Collaborative Software Needs for Contract Manufacturers. In H. Jagdev, H. Wortmann, H.J. Pels & A. Hirnschall (eds) Pre-prints of APMS ’02: 392-403. Eindhoven: Eindhoven University of Technology. Porter, M.E. 2001. Strategy and the Internet. Harvard Business Review, March 2001. Treacy, M. & Wiersema, F. 1993. Customer intimacy and other value disciplines. Harvard Business Review, January 1993. Treacy, M. & Wiersema, F. 1995. The discipline of Market Leaders. Addison-Wesley Publishing. Whang, J. 2002. On e-Collaboration. The Supply Chain Connection – Newsletter of the Stanford Global Supply Chain Management Forum 8(3).