A Well-designed Solution for Sourcing: Its Technological Foundation and How It Works
P.J. Jakovljevic - August 1, 2006

The Technological Foundation Explained

TradeStone Software, Inc. (www.TradeStoneSoftware.com) has displayed consummate perseverance in becoming a provider of collaborative e-sourcing solutions for Global 2000 companies. The vendor offers what is possibly the first composite application to the retail global sourcing market that leverages an organization’s information technology (IT) infrastructure. This application operates either on a stand-alone basis, or as a layer into an application mix to cover any global sourcing functional gaps. Built on modern technology and conveniently accessed through simply a web browser, TradeStone’s offering, initially named SteppingStones (and recently renamed TradeStone Suite), supports most of the key functional areas of international buying and selling, such as the request for quote (RFQ) pre-buy process, ongoing order management, sourcing logistics, track-and-trace visibility, government-related compliance processes, and payment processing. It also provides underlying event management and alerting. It works across currencies, languages, and countries, without necessarily invoking the need to train users, even if they have lower levels of computer literacy.

Part Two of the series Collaborative Sourcing Solution Vendor Leaves No Stone Unturned.

For information on TradeStone’s history, see Collaborative Sourcing Solution Vendor Leaves No Stone Unturned.

For an extensive discussion of global retail sourcing, see The Gain and Pain of Global Retail Sourcing, The Intricacies of Global Retail Sourcing, and The Fashion and Apparel Retailers’ Conundrum.

In order to foster rapid widespread adoption with an intuitive “zero training” environment, and also to leverage and enhance current IT investments, all with rapid phased deployments that would ideally deliver return on investment (ROI) in 90 to 120 days, the TradeStone Suite architecture had to espouse several design principles. For one, it features global access by leveraging web browsers and the Internet using hypertext markup language (HTML). The application can be easily accessed not only by users within the client enterprise, but also by users (such as trading partners) via extranet. Furthermore, the application is accessible to other programs through the power and flexibility of integration via Web services (see Understanding SOA, Web Services, BPM, BPEL, and More). This brings us to the ability to leverage existing applications (with data views and extraction from several disparate source systems) such as order management systems, warehouse management systems (WMS), item master, vendor master, and so on; and the ability to aggregate them on a single screen, thus minimizing traditional “hard-coded” integration costs.

The product was also designed for collaboration from the ground up, to leverage e-mail alerting and workflows, so as to reducce dependency on pesky and tardy phone and fax communications. With a built-in security infrastructure, the application manages and tracks the users’ workflows, whereby the screens are not meant simply for data entry, but rather have a built-in logic. The product suite is configurable via available system tools and rules-driven logic, and is also expandable, with the ability to add new functionality—not just by customizing, but by downloading from the hosted site, thus minimizing upgrade and implementation costs.

The TradeStone Suite is also a scalable, multi-tiered, server-based enterprise application built on the standards-based Java 2 Enterprise Edition (J2EE) development model, with support for Web services and extensible markup language (XML) leveraged for integrations (see Understand J2EE and .NET Environments Before You Choose).

On the database tier, the product supports IBM DB2 and Oracle, and IBM WebSphere as the application server. The Web server (which can be Microsoft Internet Information Server [IIS] or Apache Tomcat) has bidirectional communication with the Microsoft Internet Explorer (IE) browser via the hypertext transfer protocol (HTTP)/secure socket layer (SSL) combination. The application security consists of user authentication, network security (via firewalls and SSL), and the application security per se, which is role-based and also data-based (to provide transaction- and field-level security).

The Apache Tomcat open source web servlet container complements TradeStone’s own model-based “data anywhere” architecture spanning multiple systems, thus leveraging an organization’s current IT investment. It also aims at driving down IT costs by eliminating the need for redundant databases, replication and continual reimplementation, and retraining of employees and trading partners. With this architecture, the TradeStone Suite accesses data from multiple applications without copying or replicating the data, and ultimately eliminates the need for modifying existing applications. The “data anywhere” architecture can accept data from a variety of data sources and formats, and allows an application to provide a unified view of a transaction even if its constituent data is located in several different databases.

Rather than a traditional costly database-to-database integration approach, TradeStone’s integration approach consists of a user interface (UI) engine, a model-based application logic independent of the database, and a dynamic data mapping integration engine. XML is used for data mapping and process definitions to Web services, legacy systems, and databases, or to any other third-party system. Data channels to data sources like databases, enterprise resource planning (ERP) systems, legacy applications, and so on, can go via Java database connectivity (JDBC), Web services, and messaging.

In other words, by leveraging the integration capabilities of standards-based Web services technologies, TradeStone has been able to put together an application that can be relatively quickly configured to shift data in and out of traditional enterprise planning systems. This should allow buying organizations to more easily intertwine the basic procurement information these systems typically store, with crucial sourcing data such as specifications, schedules, and statuses.

More on the Design Principles

Also, to tackle the aforementioned global sourcing issues, the product can be sliced into several logical layers that cater to data and content management, embedded intelligence, dynamic processing, and industry engines (such as costing, planning, order batch sizing, and event management). For now, it suffices to say that the functional layer caters to the overall product design-to-delivery process (with underlying critical path and event management capabilities), logically grouped into five major modules: Design & Planning, Sourcing, Order, Logistics, and Finance, which will all be detailed later in this series. The collaborative layer is to help establish the nature of a collaborative process, as well as the roles and responsibilities to leverage trading partners’ assets for mutual benefit. This is provided via shared data, alerts, automated emails, shared business processes, authorizations, and approvals, and is independent of the underlying data source, which should result in fewer delays in the critical steps in the supply chain.

Given that functionality alone is not sufficient if it is not guided by the business process context, the process layer is where the data is interpreted, both in terms of the functionality it calls upon, and the process it fits within (for example, the role of shipment details). The layer provides the tools that allow the application to be configured to support well-oiled business processes, rather than to be shoehorned (see Business Process Management: A Crash Course on What It Entails and Why to Use It). Closely related to this is the intelligence layer, where the system inherently understands how to process tasks, and where the complexities of international and domestic trade are masked from the user to let them focus on their particular job. The intelligence layer provides content as well as functionality, such as harmonized tariff schedule (HTS) data.

To bolster these two layers, in mid-2004 TradeStone Software and ILOG announced that ILOG JRules, a key offering in ILOG's Business Rule Management System (BRMS) product line, would enhance TradeStone’s flagship product. The combination of TradeStone’s global sourcing software and ILOG JRules has been enabling manufacturers, retailers, and other businesses involved in global trade to configure, maintain, and change their business processes with increased agility in response to business growth and other dynamic business demands.

Electronic sourcing refers to the ability to bring together different trading partners over the Web into a supply chain network that responds to changing market demands. ILOG JRules, which allows the business logic embedded in business applications to be represented as rules that can be managed by business analysts, supply chain planners, and other business users, enables businesses to automate business policies, procedures, and best practices, improving resource management and accelerating investment in business process management (BPM). As a key component of the TradeStone Suite, ILOG JRules has enhanced supply chain usability for IT and business users, helping to ensure that the suite is scalable to the needs of TradeStone’s customers. Compliance solutions powered by ILOG JRules monitor high volumes of data in real time, enabling the immediate detection and reporting of faulty or fraudulent information. By embedding this industry-recognized business rules engine, TradeStone believes that the suite is deployed more rapidly, while the best practices are available too.

Last but not least, the underlying tools layer supports all of the layers of the application to reasonably rapidly bring together, configure, implement, and maintain a solution. It consists of features like the Query Builder, Model Builder, Composite Screen Builder, Step Builder, Business Rules Builder, Collaboration Tools, Integration Mapper, Application Configuration, and so on.

Recap

To recap, graphical UI and workflows that require hardly any user training per se promote more rapid adoption rates (user buy-in) throughout buyers, merchants, finance, logistics, and suppliers. The model-based “data anywhere” architecture means that the solution layers across legacy systems, dynamically tapping only key data, while concurrently filling in any functional gaps and providing one view of the data and one working environment for all users. As for exception-based workflows, they keep each trading partner focused on critical issues, and promote collaboration to resolve issues. Finally, a single view of the truth, which means one view of transactional data, regardless of legacy systems in place (or central repository for all commitment and contractual data), should eliminate redundancy by making it unnecessary to update multiple spreadsheets, hunt desperately for e-mail strings, or constantly re-key information in multiple systems.

In addition to a broad and focused sourcing functionality, backed up with a well-devised technology blueprint, TradeStone espouses the implementation approach, with the flexibility of either a tailored implementation or a straightforward out-of-the box deployment. In either case, the first step would be information gathering with key stakeholders within the business and IT organizations, so as to determine key business drivers, identify pain points and impediments, and identify opportunities for improvement. The next phase would be to develop a “scope document” that articulates, at a high level, the key business opportunities (in order to quantify a potential ROI), and for which one has to determine high level “as is” processes. Then the team would configure a prototype of the TradeStone solution based on the scope document, review the prototype with key stakeholders, and secure agreement on next steps for the functionality demonstrated in the prototype.

In case of the user opting for the “out of the box, from day one” implementation scenario, they would have to use standard business processes and workflows, standard screen interfaces, standard reports, and standard business form layouts. Since the touted “no training” environment provides intuitive workflows for all users, the vendor would merely provide the admin or user guide.

In the case of a more involved tailored implementation, though, the team would have to design, among other things, detailed business processes with associated business rules; custom interfaces (including the look and feel of transactional screens); custom reports; and custom requirements for business forms (such as requests for proposal [RFPs], bids, purchase orders, invoices, and so on). It would also have to develop custom training programs (for administrators, super users, end users, and the like), and customized documentation and “quick reference” materials. This type of customer still reports the TCO as being well under seven figures, and a hosted service was recently launched to accommodate IT budget-constrained customers. TradeStone is also developing a program that will allow even the “littlest guys” to pay per transaction.

A Simple Illustration of How It Works

To illustrate how the solution works, one scenario would be that a user company wants to extend an RFQ to several small manufacturers in the Far East to make a batch of polo shirts. The buyer would input the specifications in a preset form designed to support retail purchases, with fields for necessary data like size, fabric, or color. The buyer would also have to provide the e-mail contact addresses of the suppliers he or she desires to engage, and then would initiate the quote process. Currently, TradeStone does not help with finding prospective vendors in these faraway regions—this is in the long-term development plan—but for the time being, the retailers have to know their roster of suppliers and contractors beforehand.

The suppliers would then receive the e-mail invitations containing the RFQ, along with instructions to follow a hyperlink to a web page (hosted by TradeStone) to provide their bids. Once all the bids are in, the buyer would use TradeStone to compare them based on projected landed costs, using the HTS codes to determine the duties (with the system normalizing and synching all the data in the background, so as to avoid any awkward “apples to oranges” comparisons. When the buyer eventually decides to award an order, the data already in the system can be leveraged to generate a purchase order, transmit it to the supplier, and even apply for a letter of credit (LoC).

Through a Web services-based architecture that fosters loosely decoupled connections between the buyer’s enterprise resource planning (ERP) system and TradeStone, the purchase order data would be written into the back-office system automatically, thereby obviating the need to re-enter the information to create an official order. Since TradeStone is tailored to the needs of the global sourcing process, it presents fields for the supplier to detail important milestones such as the expected production start date and expected ship date. When those dates come close, the solution can automatically remind the supplier to provide an update on status and any changes, and should the supplier forget or ignore the reminder, the system will repeatedly send reminders via e-mail (or escalate with higher frequency) until the required crucial information is received. There is also the ability to collaboratively discuss, online, back and forth, details of the order before the purchase is finalized. The system also has an online change order request, so that buyer can select a still outstanding purchase order and send it to the supplier with a proposed change.

When production is complete, the supplier can once again leverage the data (without ever re-keying the information) to create appropriate, accurate shipping documents such as the bill of lading (BOL) and the commercial invoice. If equipped with electronic data interchange (EDI), the supplier can even upload EDI-formatted documents such as advanced shipping notices (ASNs) into the buyer’s TradeStone system. When a purchase order is complete (landed and duty paid [LDP]), the system offers the ability to compare actual to estimated landed costs, so that the buying company can adjust its formulas as needed for the future. For well-established, recurring relationships, the buying company can even upload inventory and point of sale (POS) information into TradeStone, so that the trusted suppliers can actively plan production and ship replenishment orders.

Different Stokes For Different Folks

The year 2004 was a time of controlled expansion, with three more development partners/customers signed (The Children’s Place Retail Stores [US], American Eagle [AE] Outfitters [US], and Deutsche Woolworth [Germany]), and more staff of similar experience and heritage added. More former RockPort staffers joined the fold in their familiar Gloucester, Massachusetts (US) facilities, and former QRS moved out (literally and symbolically), while TradeStone moved in. The four first high-profile customers may also demonstrate the versatility and applicability of the solution to cater to differing customers’ sourcing needs (à la “different strokes for different folks”). Still, the common theme for all of them would be that TradeStone has streamlined their entire purchase order management processes, allowed merchants to understand and analyze their businesses better, eliminated errors caused by piles of spreadsheets, and ultimately reduced data entry and training hours.

For example, the very first customer, Ocean State Job Lot, sells off-price electronics, housewares, lawn and garden items, stationery supplies, gourmet foods, sporting goods, toys, pet supplies, home decor, computer supplies, and seasonal items. With a chain of about 70 stores in New England (US), a typical Ocean State store stocks more than 4,000 items, many of them imported from a wide array of small offshore suppliers. Because the retailer provides “opportunistic” merchandise—which changes frequently based on availability—it was vital that the retailer have a global sourcing system that would enable it to move more quickly while dealing with a large variety of small suppliers. Opportunistic buying assumes little or no training at all for neither internal employees nor casual suppliers, although deep and rapid collaboration and global visibility certainly had to be deployed with vendors.

On the other hand, The Children’s Place is a specialty retailer of high quality, value-priced apparel and accessories for children (newborn to age ten), and designs, contracts to manufacture, and sells its products under the “The Children’s Place” brand name. It operates about 700 stores, with the vast majority of stores in the US, and about 40 stores in Canada. It also sells merchandise through its virtual store located at www.childrensplace.com. The Children’s Place selected TradeStone’s suite hoping to more effectively collaborate with global suppliers, and improve its production tracking and global visibility into the pre- and post-shipment supply chain. TradeStone also replaced some legacy sourcing systems (such as product costing, vendor self invoicing, and so on) in a “fill-in-the-gaps” manner, to create a single global order management infrastructure for sourcing of domestic, international, direct, and indirect materials. Using TradeStone Suite has allowed the company to notably reduce the cost of merchandise and transportation, improve its back-office productivity, and reduce markdowns.

At AE Outfitters, TradeStone provided a global order management composite layer over the mix of existing legacy systems, as a great example of composite applications in action. For example, the existing systems have thus been integrated via TradeStone’s overlay. These systems include product development (via Gerber WebPDM, which provides data such as item characteristics, attributes, and images), merchandizing (via JDA Software’s Arthur Allocation, which provides data such as seasons, master data, merchandise hierarchies, and the like), sourcing (via Inovis Sourcing, which provides data such as item collaboration, RFQ, costing, event management, item characteristics, sell channels, size and color flows, and packing), and planning (via Island Pacific’s order management system). AE Outfitters is a lifestyle retailer which designs, markets, and sells its own brand of relaxed, casual clothing for 15- to 25-year-olds, providing high-quality merchandise at affordable prices. Its collection includes modern basics like jeans, cargo pants, and graphic t-shirts, as well as a stylish assortment of cool accessories, outerwear, and footwear. Its Canadian subsidiary, Bluenotes/Thriftys, offers a more urban-suburban, denim-driven collection for 12- to 22-year-olds.

AE Outfitters currently operates about 750 stores in 49 US states, the District of Columbia, and Puerto Rico; 64 AE stores in Canada; and over 100 Bluenotes/Thriftys stores in Canada. The retailer also operates via its Web storefront business, www.ae.com, which offers additional sizes and styles of AE merchandise. TradeStone’s solution has allowed AE to leverage its current investment in software, while strategically expanding functionality such as vendor collaboration, ASNs, packing lists, self-invoicing, and so on. The idea is also to expand the suite’s capabilities for all parties to better define products, collaborate, and manage purchases across the global supply chain.

Finally, in 2004, German retail group Deutsche Woolworth (operating more than 330 outlets in Germany and Austria, with 14,700 employees and revenues of approximately $1.4 billion [USD]) tapped the global sourcing solution from TradeStone Software to purchase global merchandise for its own stores and to offer a service bureau environment to smaller retailers who buy through Woolworth. This agreement marked TradeStone's entry into the European market, and the vendor has worked with Deutsche Woolworth and implementation partner IBM to tailor its global order management functionality (which replaced the legacy one) to meet the unique requirements of the European market, such as the need to be integrated with the planning system at the product category level to drive global sourcing. The resulting solution supports Woolworth’s global order management requirements with sourcing and order management collaboration across its supplier base. Having been embraced by the merchandisers, this capability has gradually been expanded to the company’s customer base, which should then be able to use the software to source goods from Woolworth, its suppliers, and its service providers. Deutsche Woolworth recently garnered two prestigious awards for its TradeStone implementation: Computerwoche’s IT User of the Year, and Retail System’s Global Retail Achievement Award.