Web Services Application in Information Sharing of Supply Chain in SMB ZHU Weiping 1, SHAO Liangshan 1.College of Management, China Institute of Metrology, Hangzhou, Zhejiang 310018, China. Liaoning Technical University, Fuxin 13000, China Abstract: Recent years have witnessed a rapid growth of interest in the study of alleviating the Bullwhip Effect and realizing the information sharing of supply chain in SMB. Aiming for two typical supply chains concentrated and separated demand information in SMB the paper analyzes the influence of demand information to Bullwhip Effect. Based on the above content, the value of information sharing is explained. Then, the paper analyses the defect of EDI which realizes information sharing among enterprises of supply chain, proposes the use of latest Web Services technology realizing information sharing among them, and sums up the concept structure of its realization and two typical business mode client demand information sharing and manufacturing and stocking information sharing. Keywords: Web Services; Supply Chain; Information Sharing 1. The value of information sharing in SMB supply chain 1.1 Introduction According to statistics, 90% enterprises in China are SMB, which provide 70% wealth and have become an important part of our national economy. Along with the rising of economy globalization and e-business, competition among SMB turns to competition among supply chains step by step, and net supply chain among enterprises will take the place of traditional hierarchy supply chain. As a main way to enhance the performance of SMB supply chain, information sharing is paid more and more attention to. In present high performance supply chain, it is through information sharing among upriver and downriver enterprises to achieve inosculation between goods logistics and information flow, realize effective management of supply chain and improve system s whole performance. This kind of change will result in lower stock level and higher service level. It provides a great chance to ameliorate management and operational performance of supply chain that related information about stock level, order, production and delivery etc is shared among a whole supply chain. Its value is materialized in the following aspects: (1) It lends itself to decrease demand fluctuation from a supply chain s downriver parts to its upriver parts. () It could help suppliers to make better forecast and explain sales promotion and market change. (3) To harmonize manufacturing and marketing systems and their strategies. (4) To make suppliers respond to supply problems and adapt to them more quickly. (5) To shorten lead time (especially information lead time). 1. Quantitative description about the value of information sharing Bullwhip effect Consider a simplified four-stage supply chain that is shown in the following figure. This supply chain has one retailer, one wholesaler, one distributor and one manufacturer. 100
Outer demand Retailer Order lead time Delivery lead time Wholesaler Order lead time Delivery lead time Distributor Order lead time Delivery lead time In the research of supply chain management, suppliers and retailers have noticed a kind of phenomenon: although the costumer demand for a specific product doesn t change much, its stock and postponed delivery level fluctuate greatly in supply chain. This phenomenon is called bullwhip effect in which demand change extend increases as it heads for supply chain s upriver parts. Bullwhip effect could be analyzed quantitatively. A retailer s order change (Q)) to supply chain s upriver parts and costumer s demand change (D)) observed by the retailer fulfill: Q) L L >= 1+ + D) p p L represents lead time, and p represents observed quantity of costumer demand. Aiming at two supply chains with different types, the following expounds the influence of concentrated demand information on bullwhip effect: (1) supply chain with concentrated demand information; () supply chain with separated demand information. 1.3 Supply chain with concentrated demand information In this kind of supply chain, a retailer (1 st stage of supply chain) obverses costumers demand, adopts P observed demand values to forecast average demand with SMA (Simple Moving Average) method, and finds target stock level according to forecast results. Then he gives his order to wholesaler. Wholesaler ( nd stage of supply chain) receives order and average demand data forecasted by retailer, confirms his target stock level with this forecasted value and send his order to distributor. In the same way, distributor (3 rd stage of supply chain) receives order and average demand data forecasted by retailer, confirms his target stock level with this forecasted value and send his order to manufacturer (4 th stage of supply chain). In this supply chain of concentrated type, each stage shares costumers average demand information that is forecasted by retailer and confirms stock strategy depending on it. Based on the above analysis and the quantitative function of Bullwhip effect, the relation between order s variance k Var ( Q ) sent out by K stage and costumers demand variance Var (D) can be concluded as: k 1 k 1 k Q ) L Li i 1 i ( ) = i= i 1+ + D) p p L Represents lead-time between I stage and i+1 stage. i Manufacturer Figure 1 Manufacturing lead-time 1.4 Supply chain with separated demand information In this type of supply chain, average demand data forecasted by retailer is not shared by supply chain s upriver parts. Adversely, wholesaler estimates average demand depending on orders sent by 1003
retailer. For the sake of simpleness, we assume that wholesaler adopts P observed values to forecast average demand with SMA (Simple Moving Average) method, and the P observed values are retailer s recent p orders. In the same way, distributor uses P observed order values sent by wholesaler to forecast demand s average value and standard deviation with SMA, and confirms target stock level by these observed values. Distributor sends order to manufacturer depending on his target stock level. As a result, k in this kind of supply chain, the relation between order s variance Var ( Q ) sent by k stage and customers demand variance Var (D) fulfills the following function: k k 1 Q ) Li L i 1+ + D) i= 1 p p L represents lead time between I stage and i+1 stage. i 1.5 Value analysis for information sharing By comparing the bullwhip effect analysis about the above two supply chain types, we see clearly that in supply chain of concentrated demand order s fluctuation extent increases from supply chain s downriver parts to upriver parts in the way of summation, and in supply chain of separated demand it increases in the way of product. When demand information is concentrated, every stage of supply chain can use actual customer demand information to forecast average demand. Adversely, as demand information is not shared, each stage has to use order sent by its previous stage to forecast average demand. As shown by Bullwhip effect, these orders have bigger fluctuation extent than actual costumer demand data. Therefore, average demand forecasted by these orders has bigger fluctuation extent, which results in more fluctuation in orders of next stage. Consequently, we know that Bullwhip effect can be decreased remarkably by sharing demand information among enterprises in a whole supply chain.. How to realize information sharing in SMB supply chain For the core business of a supply chain, it is very important to enhance its competitive power whether it could realize information sharing in greatest extent with key partners, decrease Bullwhip effect, and reduce information lead time (time for handling order) in supply chain and achieve better operational performance. Therefore, it becomes the focus point of core business and IT manufacturer to look for a solution which is relatively cheaper and acceptable and also could fully satisfy information communication..1 Defect of traditional EDI Traditional e-business began at the end of 1960s. In order to transfer business files automatically from one information system to another without fax, telegraph and manual input, American TDCC (Transportation Data Coordinating Committee) tried to establish data protocol that was oriented to business rule and based on EDP, so as to realize auto-transfer of business data among different trade partners computer systems. This is EDI (Electronic Data Interchange) called today. Now EDI has become a protocol system with computer software and hardware technology, business rules and security and secrecy. Although EDI matures in technology day by day, it is not applied to SMB widely. This shows that as main protocol of data exchange, EDI has its inherent defect for SMB: (1)Expensive. Specific VAN should be rented and one to one exchange system should be customized. Thus information handling cost is increased for an enterprise. ()Its coverage is small. It adopts special close VAN (value-added network) which only connects with limited trade partners. (3)The structure of its protocol has poor agility, and could not synchronize with the change of its corresponding business environment. (4)Transmission of EDI message has a lot of limitation, and could only use appointed network and security protocols. (5)EDI protocols are based on traditional business rules. Because of economic development and rule 1004
change, many business applications can not use early EDI protocols to denote themselves normatively. Therefore, either from technical aspect or economic aspect, it is hard for EDI to bear the important task of information sharing among SMB supply chain s nodes.. Electronic data interchange solution based on XML&Web Service The naissance of XML provides electronic data interchange with brand-new idea. Defects of EDI are just advantages of XML application. XML could easily and flexibly show new business rules by customizing DTD/Schema. It is easier to become popularly either from technology angle or cost. XML itself is data definition protocols with no relation to specific application. Thus, common network infrastructure, communication protocols and encryption protocols could be combined with XML, and consist multiple BB solutions. XML can realize data interchange among enterprises with independent platforms. it s the information sharing way of enhancing business cooperation efficiency and the best choice for BB data interchange to use XML which is based on internet and with uniform protocols. XML is a data interchange way for different platforms, equipment and languages. Nonetheless we need realization mechanism of data interchange. Because the transfer and return results of Web Services are XML document formats, its XML application is data interchange model and mechanism for e-business. 3. Adopt Web Services to realize information sharing of SMB supply chain 3.1 Introduction of Web Services technology As a burgeoning technology, Web Services may bring great change to supply chain BBi. Simply speaking, Web Services are interface that describe some operations which could be visited through network with standardized XML message delivery mechanism. It conceals details used to realize services, and supplies platforms that are independent from hardware and software on which services realize and program languages used. This permits and supports an integrated application that is based on Web Services to become a multiplatform realization that is incompact coupled and oriented to components. Web Services are established on a group of standard protocols, including TCP/IP, XML, SOAP, WSDL and UDDI etc (the followed figure can be referenced). (1) Network transfer protocols, TCP/IP; () Extensible Markup Language,XML is a kind of data description rule. SOAP and WSDL are all established on it. (3) Simple Object Access Protocol,SOAP is a simple and light-weighted message transfer mechanism that based on XML. It is used to interchange structural data among web application programs. (4) Web Service Description Language,WSDL itself is XML file. It defines Web Services descriptions as a group of services visiting points, by which clients could visit services including files oriented information and procedure oriented call (like remote procedure call). (5) Universal Description Discovery and Integration,UDDI. Figure Web Services notional protocol stacks 1005
3. How do Web Services share information to reduce Bullwhip Effect? The initial purpose of Web Services is to provide applications with interfaces which could be used to visit network by XML messages. Since by Web Services data integration s effect to existed system could be minimized and data integration among enterprises could be carried out flexibly and efficiently, Web Services application in information integration of supply chain enterprises is paid more and more attention to by enterprises and application integrated services suppliers. By rebuilding an old application and unveiling its function as Web Services, using WSDL to describe its function and transfer way and using SOAP to transfer (request/corresponding mechanism), a 3 rd business partner could transfer these Web Services and realize information sharing of supply chain, so as to achieve real multi-platform application program data integration among enterprises that is incompact coupled and with stronger adaptability. The following figure shows the logic structure of how to use Web Service to realize application data integration. Figure 3 the logic structure of how to use Web Service to realize application data integration As for the simple 4-stage supply chain we discussed above, there are two typical business modes to realize application program data s integration of supply chain s every stage. Their application logic structure is alike (as shown in the above figure): (1) Customer demand information sharing The most common way to reduce Bullwhip effect is to concentrate customer demand information in a supply chain. Namely, retailers in downriver part of a supply chain provide data for distributor and manufacturer in upriver part to realize customer demand information sharing in the whole supply chain. Retailers encapsulate some function of their system as Web Services, and business systems in upriver can use SOAP (a standard protocol) to transfer them from internet, and get customers average demand information in XML flies form. Then upriver business in a supply chain can adopt real customer demand information, not orders of downriver business to forecast average demand. Depends on the above analysis about information sharing value, we know that in this way Bullwhip effect can be decreased remarkably and manufacturer can respond better to order demand of downriver members. () manufacture and stock information sharing In another aspect, manufacturer encapsulates some function of its system as Web Services, and downriver member (retailer, distributor) of the supply chain can use Web Services provided by upriver manufacturer to get stock and manufacture information. This make them quote order lead time well and truly for their clients. Besides, through manufacture and stock information sharing retailer and distributor can know and trust manufacturer s capability. This confidence makes distributor and retailer decrease their secure stock level, which they hold to prevent manufacture problems. Web Service can be used to encapsulate an enterprise s existed application and uncover their function as Web Service. Thus existed investment is effectively protected. So it is a potent technology used to integrate data and application among enterprises. In addition, Web Services is developing rapidly. For example, BPEL (Business Procedure Executive Language), WS-Transaction and WS-Coordination provide an all-around business procedure automation infrastructure, on which a company can adopt the power and advantage of Web Service to establish business and make them auto, so as to realize hundred-percent cooperation and information sharing of supply chain and concentrate business procedure among enterprises, reach the purpose of decrease stock level and shorten lead time, and finally realize the target of best customer service in lowest cost. 1006
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