Table 1: SOA Framework Results by Area of KPI Measurement
Areas of Measurement
Baseline: What to Measure
SOA Performance Evidence
Company-specific
Project costs and expenses
Use as a baseline for defining ROI
Number of orders per year
Determine configuration's impact on inventory turns
Current inventory and costs
Inventory turn savings
Customer Data
Lifetime cost per customer; avg. deal size by customer
Sales
Order cycle time
Order cycle times reduction of 65% or more recorded with mftrs contacted
Cost of Sales
Days Sales Outstanding reduction from 60 to 29 days on average
Cross-sell and up-sell revenue
Increase of 33% on aggregate
Average sales price per order
Increase from 9% to 26%
Quoting and Ordering
Average costs to complete an order
95% reduction in cost per order
Special Pricing Requests
Over 100% ROI on automating Special Pricing Requests
Bad or incomplete orders
Incomplete order reductions of 20%
Customer Service
Number of customer complaints
98% reduction in cost of simple requests
Revenue lost to churn
60% when cross-selling is used with quote-to-order
Number of calls on order status
Median level of 500 per week to 70
Warranty and Returns
Reduction in warranty cost on customized products
10% reduction at a minimum
Labor cost reductions
Decrease order re-work from 15% to 2%
Evaluation of SOA in Manufacturing
Based on an analysis of the secondary research used for the completion of this paper, approximately 40% of all companies today with SOA frameworks which serve as the foundation of their strategies are actively tracking the ROI of these activities according to Gaughan, Gannon and Swanton (2006). The development of transaction-based APIs is necessary for many manufacturers, as their order management systems are significantly different than their trading partners, distribution channel partners, service and support third-party organizations as well. This aspect of SOA adoption in manufacturing is comparable to the development of transaction-based private trading exchanges (PTX), where transactions were the only element everyone could agree on (AMR Research 2001). The use of these APIs to enable transactions has however become much more pervasive and agile compared to their previous-era PTX counterparts. Transaction-based APIs require the use of XML to ensure pervasive synchronization of all systems using the communication protocol according to Alonso, Kuno, Casati, and Machiraju, (2004). Abrams and Andrews (2005) also make the point that ERP system integration is increasingly be completed to ensure real-time transaction data as a result of XML's growth and the use of transaction-based APIs. The highly transaction-oriented approach to integration is a catalyst for the adoption of Web Services throughout manufacturing today, as the majority has multiple sourcing, production and fulfillment locations, and further increasing adoption of SOA frameworks throughout manufacturing companies. SOA's reliance on XML, EDA, and Web Services in conjunction with composite applications is what makes this strategy differentiated and agile, according to Andrews (2005).
From the research completed within this paper, there is evidence on the greater the maturity of the SOA framework within a manufacturer the more precisely Web Services align to customer-facing strategies. In the case of the objective of Increasing Revenues for example, it's clear that to attain the metrics defined in Figure 3 there must be tight process integration across, Sales, Engineering, Manufacturing, Pricing, Service and Management. This is also supported by the extensive work of Austvold, Carrillo, Preslan (2003).
Sources: LWC Research Study on the Quote-to-Order Process; Siemens NEMA Quote-to-Cash Process; Results from AMR Research Surveys (2003-2006)
Based on the research completed to define the KPis and their results in Figure 3 it was found that a manufacturer's ability to capture and re-define processes is just as important as the build-out of an SOA architecture including its many components. The results of Forrester's Business Technographics Survey (2005) also support this assertion. For those manufacturers that has started measuring the financial impact of their SOA strategies, the role of business process re-engineering in conjunction with EDA and the selective use of Web Services has made this task more aligned with business objectives, supported by research by Gibbins, Nicholas and Harris, Stephen and Shadbolt, Nigel (2003).
Order capture, one of the critical steps in the overall quote-to-order process profiled in this paper, has seen significant improvements through the use of SOA frameworks. This specific research finding is supported by research from the Aberdeen Group, AMR Research, Gartner Group and others who have quantified the gains of SOA integration in the context of order capture. These research and advisory firms report that the net effect has been a drop of order cycle times from, worst case 33 hours, to less than 1 hour, also supported by research by Baghdadi (2005). In aggregate the order cycle times dropped significantly as a result of the combined effects of integration, creating an EDA-based structure...
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