Seven Ways Business Activity Monitoring (BAM) Makes Your Supply Chain More Efficient

webMethods Optimize for B2B

Business White Paper

November, 2008

INtrOductION
Right now, this minute, can you answer these questions about your supply chain?

cONteNts
BAM Basics Real BAM: webMethods Optimize for B2B BAM in Action: Seven Business Benefits Conclusion 3 5 5 7

Which of your suppliers have the best or worst on-time shipping performance? Where are the bottlenecks in your day-to-day supply chain process? What is the impact of these bottlenecks? What is the quickest way to alleviate the problem? Are orders peaking or plummeting outside of the norm? Why, and what can you do right now? If you dont know these answers, this white paper is for you. The objective of this whitepaper is to provide you with a basic understanding of BAM, its value to the business, how it works, and how it compares to other types of reporting. It also explains how webMethods Trading Networks and BAM technology in the form of Optimize for B2B from Software AG can be used together to achieve valuable new business capabilities.

B A M | O p t i m i ze fo r B 2 B

BAM BAsIcs
webMethods Optimize for B2B offers a set of technology capabilities commonly described as Business Activity Monitoring (BAM). To appreciate the value of Optimize and how it operates in conjunction with webMethods Trading Networks, it is helpful to understand the basic concepts behind BAM and how the technology is applied in a business setting. At its core, BAM helps you understand how well your organization is running in real-time. BAM can be applied to various levels of the business, but for reasons that will become evident further on it is especially suited to transactional business processes where there is a desire to know that the business is working as expected, to be alerted when it isnt, and where immediacy of the information is a priority. In this regard, BAM can be likened to a system that keeps its finger on the pulse of the business, monitoring the health of a specific part of the operations, providing information about the current status, and signaling when circumstances deviate from the expected. Unlike other diagnostic analysis that a company might perform to understand its performance such as financial data BAM emphasizes the current point in time and provides employees, such as front-line workers and managers, with insight into the current condition of the business so they can take the appropriate actions. This approach makes BAM especially suited to B2B-related processes. For instance, companies that rely on distributed supply chains with just-in-time (JIT) inventory practices have a competitive advantage if they are able to monitor their inventory levels and correlate them in real time to the bill of materials and replenishment requests sent to suppliers and logistics partners. In doing so, they can ensure that they have a balanced flow of parts and inventory throughout their supply

chain. Companies that lack this level of right now visibility face a greater risk of disruptions, are slower to respond when there are supply issues, and are unable to react proactively to issues that affect their business.

instance, the time taken to process order exceptions) Presenting intuitive information that is customized to the requirements of different business end-users The diagram below illustrates the basic components and workings of a BAM system.

Components of a BAM system

BAM is more easily understood in terms of the capabilities that it provides. Principally, these include the following: Unobtrusive monitoring of business activities of interest such as the receipt of a purchase order or an acknowledgement as they occur, rather than reporting on them after the fact Providing continuous feedback about business process performance, usually in the form of real-time updates against pre-defined metrics (for example, aggregate order amounts) Permitting real-time decisions in response to situations that require attention, typically business process exceptions or other unanticipated situations (such as, a dramatic falloff in the number of orders received on an hourly basis) Facilitating process improvement by helping organizations pinpoint inefficiencies in their operations (for At the base level are the transactional and operational business applications that support the processes that are of interest from a BAM perspective. These systems could include packaged ERP or CRM applications from SAP, Oracle, or Microsoft, custom-developed applications and databases, mainfraimes or middleware and integration environments such as a B2B gateway. The BAM system collects data from these systems in the form of events, which correlate to business activities occurring within the applications. For example, the receipt of an invoice is an event, which also carries with it details about the event itself (vendor, item details, etc). Typically, the specific events that the BAM system collects, and the applications from which it gathers these events, are pre-configured by users based on the operating variables and key performance indicators (KPIs) that they wish to monitor. An accounts payable manager, for instance,

Figure 1: components and workings of a BAM system could include multiple packaged or custom applications and databases.

B A M | O p t i m i ze fo r B 2 B

might be especially interested in tracking the rate and associated expenses of incoming invoices. Data collection agents can also perform additional duties such as filtering events according to user-defined parameters, performing basic statistical operations such as averaging data over a time series, or retrieving associated event data to pass on through the BAM system. While an agent monitors events in an underlying application, it does not otherwise affect or interfere with the functionality of the application itself.

defined thresholds, the BAM engine can also generate alerts to notify a system or person that a potential issue is developing. This notification can include the context of the situation, and provide users with information to ascertain the rootcause and potential business impact of the situation. For instance, in a call center scenario, a manager might be proactively alerted to intervene and resolve a situation if a customers call with an operator exceeds a threshold resolution time. Most BAM implementations offer custom-

BAM and BI are targeted at different levels of management control. With BAM, the value is to facilitate management by exception at an operational level. With BI, the benefit is providing managers with the ability to analyze data to identify patterns and understand trends that affect the business. Whereas BAM has a strong business process orientation, BI is more often used to understand the performance at a business unit level. BAM enables process improvement at a discrete level by providing insight into business process performance, such as the time it takes certain steps within a process. BI complements this with information that helps to drive broader change. Analyzing sales and operations and identifying opportunities for revenue increases and costs savings are areas where BI tools are useful. BAM processes discrete amounts of data at a time. BI is best for analyzing large amounts of data. While a BAM dashboard might provide the ability to drill down from a KPI to the underlying hierarchy of data points, BI allows complete ad hoc analysis of the data and representation in different forms. Working in concert, a BAM engine can make use of historical facts from a BI system to determine appropriate thresholds for the KPIs that it monitors. BAM dashboards are usually directed at operational workers, whereas BI tools are more often used by business and financial analysts. Going back to the earlier medical analogy, BAM is like a vital signs monitor that provides information about a patients immediate condition, while BI is like an X-ray machine that provides deeper views into specific areas of interest to the medical team. The value of BAM stems from its real-time component and the ability to automatically identify normal conditions from the abnormal. The power of BI, on the other hand, is enabling sophisticated analysis, usually based on after-the-fact information.
B A M | O p t i m i ze fo r B 2 B

As events occur, they are intercepted by the data collection agents and then passed on through a data communications layer for example, an Enterprise Service Bus or some form of messageoriented middleware that is typically designed to support the efficient transmittal of messages across a network on a real-time basis. Depending on the scenario, the BAM system might be collecting hundreds of events per second from a dozen different applications, so the scalability of the communications infrastructure is an import consideration. On the receiving end of the data communications bus is an analytical engine, where the real-time processing of events and event data occurs. The role of the analytical engine is to summarize and analyze events as they arrive, and to present status information that is of interest to business users. A database stores the event data and is used by the analytical engine when there is a requirement to compare current levels of business activity with historical trends. For example, the analytical engine might monitor the number of purchase orders received on a given day, and present a chart showing the present figures alongside a moving trend-line, so that an order entry manager has visibility into whether orders are being received at the usual rate. By comparing the current situation with historical business activity or against user-

ized dashboards usually presented in a browser via a portal that are tailored to the informational needs of various endusers. Typically, the interface makes use of charts and summary reports to relate pre-defined business KPIs to the underlying business events.

BAM vs. Business Intelligence

From the preceding description, it should be apparent that BAM represents a form of operational intelligence. A BAM solution monitors multiple aspects of business activity to provide a single, holistic view of the current operational situation and to deliver information that is customized to specific users. Nevertheless, as a form of business reporting, companies looking at adopting BAM solutions often wish to understand the difference between BAM and traditional Business Intelligence (BI) tools. At a basic level, BAM and BI facilitate two different and complementary forms of business understanding. Both offer value to organizations and, while they might provide information using some of the same underlying data, they fill different needs. Specifically: BAM can be viewed as a real-time, even-driven extension of BI. BI products typically operate on historical data gathered into data warehouses from operational systems, whereas BAM provides real-time analytics using data that comes directly from the transactional systems.

The ability to predict and respond to trends in real time, rather than react to isolated events or a set of events that have already occurred, is a significant competitive differentiator. Thus, for most businesses, there is a benefit to deploying a combination of BI and BAM technologies.

or other categorizations. To measure business data, a KPI specifies a metric, which includes a unit of measure (such as dollars or minutes), and a calculation, which determines how to aggregate the data. Data is collected at a specified interval, which can range from minutes to hours. Allows KPIs to be further grouped into dimensions, which provide a way to analyze business data by dividing it into meaningful categories. You define dimensions that are useful to your requirements, such as Customer, Supplier, Region, and Product. This allows you to answer questions such as the percentage of trading partners that are in 100% compliance with order processing response time expectations. Enables the definition of rules, which identify a significant condition under which a monitored attribute becomes problematic, requires attention, or is of interest. A rule can be configured to alert users or take programmatic action when the condition occurs. Rules can also be configured to send alerts when the process resource returns to compliancy (i.e., a back to normal notification). Enables users to predict and correct issues before they impact their business by continuously comparing current KPI performance with previously observed trends. As data is collected, Optimize can automatically identify recurring trends in metrics by applying statistical baselining algorithms. For example, it can automatically learn the normal volume of orders and dollar amounts associated with a supplier for a given certain hour of the day, or day of the week, including consideration for working days and holidays. Any deviation from the normal pattern gives Optimize the ability to anticipate problems and alert the user to take proactive action. This capability is based on a patented prediction engine within Optimize. Provides role-based dashboards that can be deployed to different users based on their requirements. These dashboards offer display, visualization, reporting and drill-down

reAl BAM: weBMethOds OptIMIze FOr B2B

webMethods Optimize for B2B is a sophisticated BAM solution for webMethods Trading Networks that enables enterprises to monitor and analyze key business data from the business documents flowing through Trading Networks. Optimize for B2B implements the highlevel BAM architecture described in this white paper. Specifically, it provides users of Trading Networks with the following capabilities: Gives business managers real-time visibility into their B2B integration processes, enabling them to quickly identify and respond to problems and exceptions as they occur. For instance, within a procurement process, Optimize can provide information about purchase orders, acknowledgments, receipts, advance shipping notices and settlements. Enables users to gather, measure, and analyze data from any type of B2B document, including EDI, XML, or flat files. Optimize provides the ability to monitor and filter B2B messages and data, including information about transactions, acknowledgements, errors, and cycle-times. Enables the definition of Key Performance Indicators (KPIs), which are quantifiable measurements that relate to business success of an organization. Optimize uses KPIs to monitor data for exceptions and trends. For example, in an order management process, you might define KPIs for how many orders are received, their dollar amounts, and whether they are processed successfully. You can also define KPIs that compare order volumes by channel, customer type,
B A M | O p t i m i ze fo r B 2 B

capabilities. They enable multidimensional analysis that can be used to conduct comparative analysis, for example, comparing interactions with one trading partner against the other. Through the dashboard, Optimize provides users with insight into their trading partner transactions, enabling them to make informed decisions to increase operational efficiency over time. In summary, Optimize for B2B filters, captures, and analyzes information from Trading Networks. Business events are correlated and presented to users to provide a real-time, full life-cycle B2B transaction view. Through the My webMethods user interface, Optimize displays real-time and historical data about B2B processes based on a users profile and permissions, and provides them with information to manage the operational health of the business.

BAM IN ActION: seveN BusINess BeNeFIts FOr B2B

The business insight provided by Optimize for B2B offers a powerful and efficient way to leverage the supply chain data passing through Trading Networks. Specifically, Optimize for B2B offers Trading Networks customers the following significant benefits:

1. Business visibility
Optimize allows you to monitor the flow of business through Trading Networks in real-time. By tracking key data from business documents using a simple meta-data based approach and linking it to business KPIs, you can quickly and easily get a contextual business view into the companys trading partner activity. Simply knowing whats happening within the flow of business (and knowing it when you want to know it) is increasingly difficult as business networks and processes become more complex. Optimize is the solution for countering this lack of visibility. With Optimize, you can answer questions like which of your suppliers have the best or

worst on-time shipment performance, or where are there slowdowns in a particular B2B process. Visibility in this form is a competitive differentiator.

of their time you can rely on Optimize to notify you only when something of relevance occurs; otherwise the system operates unobtrusively in the background.

to generate an alert before the situation actually escalates into a full-blown issue, such as an inability to fulfill customer needs. This ability to predict potential issues allows you to investigate and resolve problems before there is a business impact, keep customers happy, and safeguard revenue streams.

2. Operational productivity
With Optimize, users can go about their normal course of duties, confident that the system will alert them when something requires their attention. A feature called automatic baselining allows Optimize to automatically learn the normal ranges of operating metrics by applying statistical algorithms. Rather, than requiring users to enter hard-wired limits or thresholds for example, to be alerted when the rate of orders drops below 20 a day Optimize is able to determine the typical range for a KPI and then automatically generate alerts when a value exceeds the normal range. Instead of monitoring a display all day or spotting an issue in a report an unproductive use

3. risk avoidance
A patented capability within Optimize allows it to take a snapshot of the circumstances leading to an exception condition for example, a slowdown from a particular supplier jeopardizing the ability to fulfill orders within the expected service levels and to save these snapshots, or fingerprints to its database. Then, as it continues to monitor Trading Networks activity, Optimize continuously compares what it sees with the library of snapshots. When it detects the same set of conditions that previously lead to a problem a gradual slowdown in acknowledgements from the troublesome supplier, for instance Optimize is able

4. Business continuity
The proactive alerts that Optimize generates allows you to respond quickly to B2B-related issues. Exceptions, error and anomalies can be dealt with as they are detected by Optimize, rather than later downstream when the impact to the business, supplier, or customer might be significantly greater. The benefit is reduced impact to operations and less business disruption, both of which translate to bottom line cost savings to your organization.

Figure 2: BAM is like a vital signs monitor that provides information about your supply chain condition.

!
B A M | O p t i m i ze fo r B 2 B

5. Business insight
By automatically correlating events with each other and finding patterns that you might not otherwise observe, Optimize provides a mechanism to understand B2B-oriented business processes at a deeper level. Using Optimize, you can perform root cause analysis to understand the factors underlying an exception, understand the business ramification of specific events, and asses how technical issues, such as an overloaded Trading Networks gateway, contribute to business-level problems. By providing you with the tools to get better insight into your business, Optimize helps the organization increase its agility and immunity to problems.

impacting related transactions. The fact that Optimize is easy to deploy and able to derive value from the transactions already flowing your Trading Networks environment means that business payback can be demonstrated almost immediately. Globally, Software AG customers are capitalizing on the ability to gain immediate visibility with Optimize. For example, a customer and major supplier of milk products ships containers of milk all over the world. They leverage webMethods Trading Networks to integrate with their suppliers and their customers, as well as to process customs documents. Using Optimize, the company is able to monitor on-time success rates of shipments and deliveries, allowing them to track that their products are delivered within established service level agreements and guaranteeing freshness.

so where should you go from here? Work with your business partners to identify the top 5-6 pain points when it comes to addressing B2B-related issues. For example, is the ability to answer these questions important to the business? Where is an order stuck in a B2B supply-chain process? What is the average turnaround time for processing a customer order? Which supplier has the worst ontime shipment performance? What is the impact of a breakdown at a given point in a B2B process? Assess and quantify the impact of these issues in economic terms and what they mean to customer satisfaction or the ability to manage supplier relationships. Using this data point, you can build a case around the business value for implementing the Optimize solution. Finally, in addition to the business benefits described in this white paper, a key point to keep in mind is that Optimize for B2B is configured to deliver immediate information and provide immediate value based on the flow of transactions through Trading Networks. If your company is already using Trading Networks, then it is well down the path of benefitting from BAM. Find out how to take the next stepfaster. Visit www.softwareag.com/b2bmonitoring

6. process improvement
Views provided by Optimize enable you to make informed business process improvement decisions. The process analytics view, for example, provides different perspectives on a process, allowing you to view aggregate information such as the number of transactions that have been started and completed, the average cycle time, and the number that had errors as well as information about specific transaction instance. Based on this information, you can compare how current transactions are performing, and drill down to identify specific areas of concern. By providing the measurements needed to make decisions about how to improve consistency and streamline, Optimize can help your company increase its operational excellence.

cONclusION
BAM brings the immediacy of business information to a new level. Until recently, companies have had to make do with retrospective views of their performance. BAM provides the now to decision-making. By applying real-time information, a BAM solution can provide unprecedented business agility. webMethods Optimize for B2B brings the power of BAM to Trading Networks. With this combination, you can support key business priorities, including: Monitoring gaps between business goals and current performance in real time Receiving the right information at the right time to make informed decisions Increasing operational agility by anticipating opportunities and issues Ensuring service levels and customer expectations are met Reducing operational costs

7. rapid return on investment

A compelling reason for implementing Optimize is that it works with the Trading Networks infrastructure that you already have in place. Optimize is non-invasive and places no demands on Trading Networks performance. It performs all of its analysis in its dedicated environment, extracting B2B document properties without

B A M | O p t i m i ze fo r B 2 B

COntentS
Dunt ero odolestrud moloreet2 Lortio core conullu Obor aliquam consenibh 3 3

Dunt ero odolestrud moloreet4 Lortio core conullu Obor aliquam consenibh 4 5

TO FIND THE SOFTWARE AG OFFICE NEAREST YOU, P L EA S E V I S I T W W W. S O F T WA R EAG . CO M

Take the next step to get there faster. ABOUt SOFtWARe AG Software AG is the worlds largest independent provider of Business Infrastructure Software. Our 4,000 global customers achieve business results faster by modernizing, automating and improving their IT systems and processes to rapidly build measurable business value and meet changing business demands. Using our solutions, organizations are able to liberate and govern their data, systems, applications, processes and services achieving new levels of business automation and transparency. Our industry-leading product portfolio includes best-in-class solutions for managing data, developing and modernizing applications, enabling service oriented architecture, and improving business processes. By combining this proven technology with industry expertise and best practices, our customers improve and differentiate their businesses faster. Software AG Get There Faster
Copyright 2008 Software AG, Darmstadt, Germany and/or Software AG USA, Inc., Reston, VA, United States of America, and/or their suppliers. All rights reserved. the name Software AG, webMethods, Adabas, natural, ApplinX, entireX and/or all Software AG product names are either trademarks or registered trademarks of Software AG and/or Software AG USA, Inc. Other company and product names mentioned herein may be trademarks of their respective owners. SAG_BAM_B2B_WP_nov08