Takeaways from Oracle’s Modern Supply Chain Experience 2018, San Jose CA
Not a company to back away from a challenge, Oracle is taking on several at once:
- harmonising a whole range of on-premise enterprise systems (plus cloud-based NetSuite);
- shifting the whole company strategy – and its customers – to the cloud;
- developing and delivering new technology such as IoT, digital twin, blockchain, AR and VR.
The focus of this conference was the supply chain, and there’s no bigger challenge – or opportunity – to test how Oracle is doing against these challenges.
The move to the cloud
Mark Hurd, CEO of Oracle, explained in his keynote how the last 25 years had opened up the market for ‘databases and management software’ (now ‘enterprise suites’) and application development, thus removing the dominance of IBM. But this led companies into having (or acquiring) many different business systems on various, often incompatible, hardware platforms. In addition, every implementation was bent to the peculiar requirements of each customer. This has caused a massive maintenance overhead – according to Mark Hurd: “80% of IT budget is spent on maintaining 20-year old systems”. One customer presenting at the conference (GE Digital) stated that they have over 500 different enterprise systems operating in 23 countries, while another (World Wide Technology) stated over 40,000 customisations in its ERP systems. Both companies are well into migrating to the new cloud environment.
Oracle has bet the company, and the reputations of its executives, on moving to the cloud and re-developing its enterprise applications to help customers simplify their systems environment and reduce their IT spend and risk. Just why becomes clear when you think about the complexity of managing products through a supply chain when different, separate ERP and logistics systems are used. It’s easy enough if you are a major OEM such as Ford or BMW and you only consider small suppliers; you simply instruct them to use your ERP system and you provide them with suitably-restricted access. But when your suppliers are as big – or bigger – than you, it’s harder to tell them what to do – so multiple, separate ERP systems must be used. Oracle is proposing that if all the suppliers have cloud-based systems then this will be much easier and quicker. Ideally they would like everyone to use Oracle systems – and this will likely be true for their big customers who have ‘internal’ supply chains – but as long as they are in the cloud, this process will be much better. This requires Oracle to develop, re-write or re-architect systems such as ERP Cloud, SCM (Supply Chain Cloud) and PLM (Product Lifecycle Management) Cloud as well as building up their cloud datacentre network – on which they have spent about $US 35 billion in the last five years. Oracle seem to have made good progress with, for example, over 1,800 customers live on SCM Cloud, and according to Rick Jewell, Chief Senior VP Application Development, half of these were new to Oracle and many new customers are in the $US 200 to 1,000 million range – smaller than the majority of existing Oracle applications customers.
Customers also benefit from not having to own and operate numerous datacentres (which often have a mix of hardware environments) to support their many enterprise systems. Mark Hurd predicted that by 2025, the number of corporate-owned datacentres will have decreased by 80%, and only 20% of IT budget will be spent on maintenance (in comparison to 80% today, as stated above). In effect, this shifts a lot of the risk – e.g. installing and verifying updates and ensuring intra-system integrity – to the provider (in this case Oracle).
Industry 4.0 technology
Oracle is also forging ahead in what some may say are ‘purely fashionable’ areas like IoT, digital twin, blockchain, VR (Virtual Reality) and AR (Augmented Reality). One could be forgiven for thinking that taking on these technologies is ‘a step too far’, given the other challenges, or maybe that they are just ‘vanity projects’. But they do actually make sense to the whole strategy, which becomes clear when the entire supply chain is considered:
From digital design to digital twin:
Products have for many years been developed in digital systems – CADCAM, CAE etc. – and managed using PLM. But the digital model remained in the design/engineering department and became out of date. This was because the model was passed on to manufacturing who would make ‘as-built’ changes – e.g. to particular parts due to changing suppliers – and further ‘as-maintained’ changes would be made in the field. The overall result is that the ‘as-designed’ model is not a true picture of reality. With better manufacturing systems integration and better feedback from the field (e.g. using sensors in the product to feed back the exact configuration, as well as other performance information) it is now possible to keep the design model in synch with the real product, wherever it is; i.e. it is a digital twin. This means that potential changes to a product can be tried and tested in a representative, virtual environment before implementing them in manufacturing and sending product to customers.
The growing importance of IoT:
IoT plays an important part in creating a digital twin, as described above.
It is also important in the supply chain, as incoming components can be identified and tracked. For example, when making a delivery, the content can be electronically sensed and reconciled automatically. Each item will ‘know’ where it has to go next, and each process step will understand what parts it needs.
According to Bhagat Nainani, Group VP IoT Product Development, Oracle has so far identified five business application areas where IoT can be beneficially applied and has developed ‘Internet of Things Applications’ to deliver them quickly, namely:
- IoT Asset Monitoring Cloud, which provides real-time insights from connected assets to drive predictive maintenance, optimized SCM, and improved customer experiences.
- IoT Production Monitoring Cloud, which provides best-in-class production monitoring for the factory, products and machines.
- IoT Fleet Monitoring Cloud, which applies predictive analytics to decide when any connected vehicle needs service, adjust logistics operations, and avoid downtime.
- IoT Connected Worker Cloud, which supports health and safety, regulatory compliance, and real-time visibility into worker health, location, and work environment.
- Service Monitoring for Connected Assets Cloud, which can initiate service requests before the customer even knows there is a problem and also support Augmented Reality in the field.
Blockchain can be, and is already, used to carry encrypted information about each component in the supply chain. Not only does this provide the source, but it can carry other information such as whether the component complies with the correct standards, and whether it was unduly stressed in transportation (e.g. through excessive heat or bending). Oracle demonstrated a blockchain supply chain application based on Hyperledger.
Oracle Blockchain Cloud Service is a new offering that is part of Oracle’s comprehensive platform-as-a service (PaaS) portfolio.
VR (Virtual Reality) and AR (Augmented Reality):
VR is often associated with ‘immersion’ and wearing strange goggles, but there are simpler, more practical applications. Benny Yap of Cisco Systems, Inc. presented an ‘MBE’ (Model Based Enterprise) approach to design and manufacture in the supply chain. Cisco has now dispensed with 2-D drawings, issuing only 3-D PDF models to its suppliers, who can then visualise them and use them to manufacture and supply the required parts, knowing that they will fit. This speeds up the supply chain and reduces errors.
A practical use of AR is in maintenance, when it can be used a) for training technicians how to repair dangerous or expensive products without risk of injury or damage, and b) for on-site repairs where the technician can point a phone at a component and see how it should be fitted and any relevant documentation.
So how is Oracle doing on its big adventure?
My observation is that it can demonstrate good progress against each challenge:
- Oracle is harmonising its range of on-premise enterprise systems – by …
- … totally focussing the company strategy on the cloud, which requires integrated, cloud-based enterprise systems.
The evidence shows that its customers are adopting Oracle’s cloud applications and finding value in the process.
- Oracle is developing and delivering practical solutions in the ‘exotic’ areas of IoT, digital twin, blockchain, AR and VR. And the fact that it has identifiable use cases with pre-built applications shows good product maturity.
GE Digital: John Mageropoulus.
World Wide Technology, Inc.: Mukesh Baldua, Enterprise Architect.
Cisco Systems, Inc.: Benny Yap, Senior Technical Leader.
Hyperledger is an open source collaborative effort, hosted by The Linux Foundation and created to advance cross-industry blockchain technologies.
Disclosure: Oracle paid hotel and travel expenses for this event