Event Management: Hype Or Hope?

Dec. 21, 2004
Demand is increasing for software that warns of -- and helps solve -- exceptions in orders, inventory levels and logistics.

Event management, one of the hottest buzzwords in software, sounds great. Being able to detect, report and solve exceptions in processes before they spiral out of hand is a goal to which all manufacturers can aspire. But very few manufacturers are using software that promises to help them do that. Supporters of event management say a clear case can be made for the business value of software packages that promise to smooth out a business' bumps before they wallop its shock absorbers. Skeptics, on the other hand, view event management as merely the current hype from software vendors. In their eyes, these new software packages -- often called "supply-chain event management" (SCEM) -- are the latest in a line of enterprise systems that promise more than they actually deliver. Undeniably, a key factor spurring the adoption of event management is the increase in variability that has become a fact of life for many manufacturers. "Companies are trying to manage that variability by rooting out these exceptions," observes Razat Gaurav, director of solutions marketing for transportation and distribution at i2 Technologies, a leading supply- chain software firm based in Dallas. Few in industry would dispute the idea that what you don't know about your operations -- and your suppliers -- can hurt you. While exception management in the past was largely handled manually -- assuming that the problem was detected before it got out of hand -- these new software packages can be configured to embrace a particular company's alarm thresholds and either recommends solutions or automatically enacts standard fixes. One manufacturer that is trying event-management technology is CGR Valley Products Inc., which is using a software package called Movex from Intentia Americas, Schaumberg, Ill. According to Steve Bartlett, production control manager at the privately held Greensboro, N.C., firm, which fabricates all kinds of rubber products, the company had no way of seeing trouble in the making on the plant floor. Orders that were likely to ship late, or those for which materials were unavailable, plugged along without anyone realizing anything was wrong until it was often too late. "Our visibility with our past system was not good in our production area," Bartlett says. "We wanted to know where our products are on the floor." CGR, which builds some 8,000 different items including many custom parts, found the flexibility of the system's Advanced Production Planning module attractive. "You can set up the screen to see how many items are late," Bartlett says. By seeing where incipient problems are well before they become full-blown ones, Bartlett says the company is better able to react. "It will tell you that you don't have the material for an item, and you're going to be a week late getting it," he explains. "If you know you are behind schedule, it allows you to be more proactive." Adds Ray Katz, CGR's IT director, "This really assists us in reacting more quickly than in the past." And CGR is not alone. Generally, manufacturers that are using event management think it's great. For example, Rob van Herk, IT manager at Luxn, a Sunnyvale, Calif., manufacturer of fiber optic equipment, makes a simple yet persuasive case for the technology. "We use it to focus on exception situations," says van Herk. "You don't want your people spending time going through page after page of backlogs, looking for problems. Instead, you want them to focus on just those three orders that, for whatever reason, are not conforming to the process." Luxn, which uses Categoric Software's event-management package, employs the system to help it adjust to changes in the business. Without it, van Herk says, the company would have a tough time of it. "With build-to-order, it's very hard to adjust to the small changes in the business without this software," he says. "Within a year, you benefit in very specific ways, by not having to make additional investments in people, and by not losing customers. It enables you to focus on the necessities of your business." Even so, Luxn does not use any of the software's automated response capability. Instead, says van Herk, "An alert goes out, and the information is e-mailed to a user and put into a database. If the user doesn't respond, then we take other actions." Another manufacturer weighing in on the plus side of event management is Belden Brick Co. The brick maker, which churns out about 500 million bricks per year at 11 plants, uses Interbiz' BizWorks software. At Belden Brick, based in Canton, Ohio, event management comes into play when BizWorks notifies sales managers when certain thresholds are exceeded, such as order levels or size of orders. "When these alerts happen, the information is forwarded to the necessary people," says Jeff Adams, IT director. "Our primary reason for using it is customer service. It has helped reduce the call volume coming into our customer service department." Of course, many manufacturers are benefiting from a form of event management when they implement automated replenishment of inventory. When inventory on a certain part falls too low, an order is placed to fill the shortfall. Now some event management software vendors want to extend this capability to other parts of the company. For example, when the status of a major account is noticed to be going south in a hurry, the sales director -- or even the CEO -- would not only receive notification, but certain actions could be initiated as a result. For instance, a meeting could be requested with the customer or prospective client. "The next logical step is for computer systems to make the decisions for us automatically," Adams says. "As long as there is a purchase order number, there is no reason it couldn't be paid automatically. This will let the human beings do the more important stuff." Adams says this is the difference between what he calls the "simple side" of event management and the more complex next phase. "The simple side is when you set a threshold and when it is crossed, the system tells somebody. The next natural phase is for the computer to go through the logic on its own, and based on the business rules you've defined, take action as needed. A person would only be notified when a problem exceeds the system's capabilities." In many cases, of course, the so-called "event" might be something simple, such as a shipment that is a day or two late, that may not even warrant any special action on the part of a person. "The system has to be able to assess, 'What are the ramifications of a truck being late?' " says Belden Brick's Adams. "Will it affect a major customer, say, one representing more than 5% of sales? And you need to decide, if the shipment is late one day, or two, or three, whether it should notify you." Few companies, though, are doing anything with automated response. In a survey of more than 30 North American users of SCEM software, AMR Research didn't come up with a single company that was providing an automated resolution to exceptions or other events. "The most automated functionality was oriented toward tracking the progression of an order from the initial purchase to the final receipt of the goods," the February 2002 report stated. So much for the rah-rah for event management. What about the view from the naysayers' bridge? "This space is so full of hooey," says Mike Nixon, vice president of market strategy at G-Log, a Shelton, Conn., logistics software firm. To him, supply-chain event management is little more than a concoction of software vendors looking to create a fresh market in which to sell. "Nine months ago, supply-chain event management came out of the woodwork," Nixon says. "We think SCEM is not a 'space.' We think these vendors are just selling connectivity tools. We view SCEM as a set of configurable workflow objects in our system." Nixon believes that the activities associated with so-called event management should be "tightly tied to a set of applications, such as manufacturing, planning and ordering." He says that any company trying to implement SCEM as a stand-alone software "will end up paying $50 in integration costs for every $1 of software you license" just trying to make it all work. (He says some of the SCEM vendors are selling their capabilities to be rolled into a larger ERP or other enterprise system.) But even with a successful implementation, merely receiving an electronic notification that a shipment is late "has absolutely no value," Nixon says. "A shipment could be one day late to arrive at the port in Hong Kong, but it could also be that the ship leaves every 72 hours, and that it is not scheduled to sail for two more days. Yet, if you implement this visibility using event management, you will get an 'I am late' message." By contrast, G-Log's logistics system evaluates such messages based on their content to determine whether any action is necessary. Says Nixon, "You want the system to evaluate the relative importance of the event." He also questions whether adding an event-management system is even worth it, given the added layer of complexity that gets spread over what, in many cases, are already very complex enterprise systems. He predicts SCEM will flop like a grade-B film in an $8.75 first-run movie theater. "I don't think the appetite is out there for this kind of nonsense," he says. "We need to be able to demonstrate the business value of these alerts." Despite his criticism, Nixon sees one area, though, where event management could pay off. For instance, the logistics unit of Eastman Chemical, Kingsport, Tenn., is using G-Log to help the company determine if changes in orders are cost-effective or cost-prohibitive. "Freight optimization is very important for chemical companies, because the typical order may be modified several times before the product is shipped," Nixon says. "Event management around this order process could be very important." For instance, the shipper or the customer placing the order can put rules into the system so that they will be notified if certain volumes trigger changes in shipping rates. "Carriers aren't going to call you and tell you this could have been done more cheaply," Nixon adds. What he objects to is the notion that event-management software is useful without carefully thinking through not only the business rules, but the processes they are connected to. "So you know a shipment is going to be late to a customer -- what are you going to do about that?" Nixon asks. "The average point-to-point move in North American trucking is under three days." What if the shipment contains orders for 40 customers, and all are late? "Are you going to notify all of them?" Nixon asks. Instead, G-Log, he says, evaluates each order to determine which, if any, are not only late, but actually violate a customer requirement. "The system has to be linked to an application that can evaluate the context and the implications to the customer," he says. "For some customers, one day late may be okay, because they may plan on a one- to two-day window for receipt of that shipment." Despite the criticism, event management remains hot. "It's getting tougher for an organization to focus on the key issues impacting their business, and event management allows management to focus on those unplanned events and issues," says Rod Gifford, product manager at InterBiz in Lisle, Ill. "If you learn that you have received damaged materials from your supplier, how you react to that and what actions can be taken are very important." The early warning of a problem can mean the difference between an angry customer and a placated one, observers say. "Companies want to know a problem exists before a customer tells them," says AMR Research analyst Kimberly Nickle. "Before a customer complains that it's taking too long to fill an order, the manufacturer can be deciding whether to notify the customer that it's late, or ship the order a faster way." As with most things technological, none of this is as easy as it sounds. Take it from one of the far and away leaders in the use of this technology, the UPS Logistics Group. The $2.4 billion unit manages global supply chains for a number of large companies. "Just getting the visibility into the supply chain is sometimes a feat in itself," Dave Currence, CIO of the unit, says realistically. "You need all the parties in the supply chain to agree to the business rules." Adds Carlos A. Alvarenga, head of the supply-chain practice for the industrial consulting group at KPMG Consulting in McLean, Va., "These systems are very tied to the whole collaboration question." In the visibility area, many software companies are just now bringing new modules to market. For example, Datasweep Inc., a developer of shop-floor controls and other systems, in March launched its Manufacturing Dashboard feature, part of its Advantage 5.0 system. "Dashboard is an event-management system that allows different personnel to subscribe to specific reports," says Vladimir Preysman, president and CEO of the San Jose, Calif., software firm. "Managers can be aware (of exceptions or violations) without having to drill down or do voluminous reporting."

Exceptional Events Following are some examples of exceptional events that would prompt an SCEM notification: Related to inventory:
  • Quality discrepancies
  • Errors in forecast
  • Inconsistent inventory counts Related to orders:
  • Purchase order received/not received/early/missing
  • Cancellation
  • Order amount above threshold
  • Order inconsistent with production schedule requirements
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