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W H I T E P A P E R

David E. Olson

January, 2011

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Business Transformation through Real-time Response

> OPERATIONAL RESPONSIVENESSIN TRANSPORT AND LOGISTICS

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TABLE OF CONTENTS

Summary 2The State of The Market 2

Consolidation 3Cost Savings 3Greening 4Performance-based Logistics 5

The Technology Approach 6The Foundation: Events, Transactions and Processes 6

Events 6Transactions and Processes 7The Event/Process Relationship 7

Technology for Managing Response 8Real-time Visibility 9Immediate Sense and Respond 9Continuous Improvement 9The Progress Control Tower 10

Summary 10

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SUMMARY

There will be continuing challenges ahead for the transport and logistics market With rough times predicted, there is increased pressure to find new efficiencies in operations, as well as shore up revenue by adding new products and services All modes of transportation (air, land and sea) must arrive on time; and the customer still expects the right product at the right time and in the right condition A heightened awareness for reducing cycle time, improving asset utilization and servicing new markets is the key to providing the immediate response necessary for today’s market demands

There’s no slowing down the supply chain; the speed of business needs to be maintained now more than ever Logistics service providers (LSPs) need to find ways to deliver new levels of service as well as collaborate with other service partners while ensuring an efficient operation

The transformation of the industry from “deliver and bill” to one that is more service-oriented will require new levels of awareness, orchestration and response to real-time operations That’s possible today with Responsive Process Management (RPM) RPM provides a heightened awareness of business processes, events and transactions across the enterprise and enables you to deliver “in the moment” response

THE STATE OF THE MARKET

Air, road, rail and sea are the lifeline of any economy The connection between buyers and sellers is complex with many critical points in the supply chain Borders, rules and regulations, and technology all contribute to the complexity, which makes it difficult for LSPs to get the right level of intelligence Yet success will be heavily influenced on the ability to sense and respond to operational events and act on threats or opportunities before it’s too late

There are four trends that deserve attention because they are where managing business events can have an impact: consolidation, cost savings, greening, and performance-based logistics

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CONSOLIDATION

While there’s probably more consolidation due to the current economic conditions, it was happening before the current crisis started There are actually two trends that fall under consolidation: LSPs joining forces and LSPs acquiring software vendors

LSPs are either buying themselves into larger, more global markets or adding to their portfolio to provide a broader spectrum of solutions The goal of LSPs is to have more control and visibility over the supply chain and to provide full lifecycle solutions In this case, the move is to become a leading logistics provider that can deliver a greater level of service since inbound, outbound and reverse logistics processes can be fully managed This strategy gives customers “one stop shopping” for services

Software acquisitions allow more domain control Certainly, there are major vendors that will continue to provide value-added services—and they’ll surely thrive The general feeling widely documented by industry analysts is that some of the major LSPs may take the leap into the software space, venture beyond managing logistics, and offer complementary software services such as supply chain visibility and warehouse management

For either case, as in any acquisition or consolidation, there will be complexity The supply chain is a living, virtual entity and managing it is complicated due to boundaries, application silos, data formats and varying rules and regulations The challenge for transport and logistics companies is to be able to effectively (and efficiently) act on opportunities or threats in and out of the supply chain—whether they own, manage or simply contribute to it They need to take corrective action before it’s too late and to ensure they’re living up to performance expectations

COST SAVINGS

Cost savings is certainly not a new trend, but by today’s standards it is critical There’s more focus on better managing inefficiencies in the supply chain Responsiveness is becoming a competitive advantage for companies that can manage logistics flow in a cost- and time-critical manner Time is probably the most significant factor in logistics costs savings, and it can be managed on two fronts: visibility and action

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First, you need to efficiently manage the time it takes to move inventory You’ve got to ensure that the ships, cars or trucks are full, as well as leaving and arriving on time Ultimate efficiency can be achieved only by full operational visibility in real-time By monitoring the movement of ships, cars or trucks in real-time, you can more precisely manage dock space and the resources to manage the inventory flow There are visibility solutions out there, but they tend to focus only on specific links in the supply chain In addition, standard business intelligence tactics rely on yesterday’s data and provide yesterday’s results Managing yesterday’s efficiency is too late You have to act “in the moment ”

Second, you need to act on conditions as they change Visibility solves only part of the problem Acting on business conditions, whether positive or negative, needs to happen before it’s too late to seize the opportunity or mitigate the risk You need to put rules in place that allow you to actively monitor conditions and take appropriate action These real-time rules can be modeled based on key performance indicators (KPIs) or other performance metrics In this case, actions can be taken based on the metrics that define your business

The two, monitoring and acting, when combined, help drive cost savings by making decision making proactive and real-time With visibility you can see through and across the process points in your operations Acting on conditions in real-time can catch problems before it’s too late When real-time actions affect business processes, responsiveness improves and costs go down

GREENING

Green is “in ” It’s not just a trend, and it makes good business sense There are a lot of sound green principles being initiated, and many are related to cost-cutting measures One significant example is implementing energy savings through fuel efficiency There are at least two ways to optimize fuel efficiency: better route planning and optimization and maintenance

Route planning and optimization are where the biggest gains can be found The best possible route is the one with greatest probability of an on-time arrival In order to accomplish this, you’ll need to know the “condition” of your network Whether it’s trucks, trains, ships or planes, knowing where they are and their proximity to critical delivery points helps define what the

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next steps should be Choosing routes based on traffic patterns is a known science, but can you dynamically re-route deliveries based on traffic, weather, and vehicle condition? Event processing gives you the ability to manage all those business events at one time and optimize routing based on real-time input

Managing maintenance can be a complicated process Anticipating what might go wrong based on history and estimated wear-and-tear is a science that leads to preventative maintenance routines that may not be necessary With advances in telematics, a piece of equipment (truck, forklift, ship, or conveyor) can send events about their current condition to a central location While most of these events are logged for later review, it is possible to monitor these events as they happen and look for patterns of use that could lead to a maintenance issue If a driver consistently speeds, take action If the brakes on a forklift are used while under acceleration by the same driver, alert maintenance

There are many conditions in a logistics operation where efficiently using equipment can support green initiatives and cut costs

PERFORMANCE-BASED LOGISTICS

Performance-based logistics will lead to dramatic changes in the industry Until now, contracts were largely based on volume, distance, time and weight Performance, while important, is usually associated with customer satisfaction As more industries transition from a “service and bill” mode of operation to a greater service orientation, companies are increasingly using service-level agreements (SLAs) to define working relationships Performance-based logistics will require more situational awareness of your operations to live up the requirements in your SLAs The situational awareness you need will come from real-time input from the business events that your agreements are based on

The success of managing performance-based logistics will come from better operational response and proactively managing exceptions before contractual issues arise Traditional means of determining business conditions and situational awareness may not be enough because the analysis is based on historical information Improved response and real-time exception handling come from managing events as they happen If you can automatically trigger

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exception-handling processes from real-time business events, you can reduce the number of steps and latency and take corrective action before it’s too late

The right way to transition to performance-based logistics is by implementing systems that proactively enforce agreements and provide much more predictable planning through real-time inputs

THE TECHNOLOGY APPROACH

Existing technology, while critical from a “run the business” perspective, may not be sufficient for a move towards real-time response Most existing technology and application architectures are not designed for managing real-time response They’re designed for optimizing business processes Their mode of operating—capture data, store data, analyze data and respond—has too much latency for real-time actions In the transport and logistics market where timing is critical, a matter of minutes can make or break a performance-based contract

THE FOUNDATION: EVENTS, TRANSACTIONS AND PROCESSES

In any enterprise, there are events, transactions and processes Events freely flowing through the enterprise can come from anything that emits data Processes define and execute how the business is run Each is individually important, but they become much more powerful when combined Responsive Process Management manages events, transactions and processes as one, recognizing the importance of each, but also the power of the relationship between them

Events

Business is event-driven, and the logistics industry is filled with events emitted from trigger points in business applications or from sensors and devices such as RFID and vehicle telematics An event is data that suddenly exists or indicates a change in state: a door opening, a piece of inventory being scanned, the location of a vehicle changing or the rate of orders increasing Event data is normally used to start some form of business process An inventory item that is scanned will most likely result in an inventory management process “handling” that item

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The transition to real-time response takes events as inputs that are monitored as they happen Instead of just being a component of transactional data, events are analyzed as they flow and then correlated against other event streams where patterns of activity across event sources might indicate an opportunity for action

Transactions and Processes

Processes run the business They define how you take an order, process inventory, perform route planning and manage customer interactions Processes, modeled as a series of steps, work across software and human systems to manage the workflow you’ve established for the various tasks you need to perform to run the business

Improving response from a process perspective requires the ability to model and manage business processes, but also the power to change and improve processes as the business changes

The Event/Process Relationship

In logistics, there is an implicit relationship between many event sources that, if managed in real-time, can lead to a significant improvement in response These events have a direct impact on business processes In essence, events trigger processes and processes trigger events Managing both as related components delivers the heightened awareness that is necessary for improved response

Consider the concept of “delivery in-full, on-time,” or DIFOT As a performance metric, it can be a leading indicator of the overall responsiveness of the organization There are many inputs that contribute to the metric as well as several business processes that are influenced by events along the delivery timeline

If “package delivered” is the ultimate objective, managing DIFOT in real-time across the lifetime of that package requires many processes and

Package ScannedPackage Loaded Route Configured Truck Departs Package DeliveredPackage Tracked

Time

Event Streams

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events to come together In order to ensure that the package is delivered, each contributing step is dependent on the other, but is often managed by separate processes and systems RPM can manage this entire timeline holistically, realizing the business objective of delivery in the right time to the right place in the right condition

The state “package scanned and loaded” is influenced by the physical events that are performed when scanning the package In this case, systems such as RFID are emitting events that contribute to the process of creating an invoice or work order The overall rate in which packages are being scanned may have an influence on your ability to manage loading and configuring By monitoring the scanning process in real-time, you know if you are able to prepare for delivery

Configuring routes are processes that need to adapt based on the scanning and loading functions, as well as the available resources for delivery In this case, route planning needs to know the current conditions of order processing and delivery status in order to effectively manage routing

Tracking the package requires event input from vehicle telematics or other en-route systems These events, when managed in real-time, can contribute to dynamic delivery processes to re-route in the case of traffic or other delays and even trigger customer experience processes to contact customers in the event of delays

By recognizing the relationships between the events and processes required to manage DIFOT, it is possible to create a solution to manage DIFOT in real-time

TECHNOLOGY FOR MANAGING RESPONSE

In effect, traditional business systems operate in a past-tense mode This leads to decisions being made from yesterday’s data Immediate response requires input from data occurring in the present By combining historical information and active business processes with real-time events, more precise decisions can be made for future actions Responsive Process Management leverages technology from Business Process Management (BPM), Business Transaction Management (BTM) and Business Event Processing (BEP) systems Instead of managing processes and events as separate solutions,

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RPM combines them to provide real-time visibility, the capability to immediately sense and respond and continuous process improvement in one suite

Real-time Visibility

Visibility comes from interactive interfaces that are connected to the real-time flow of events and transaction across the enterprise and supply chain Real-time visibility gives decision makers the information they need to make in-the-moment decisions

Unlike traditional reporting solutions that rely on past-tense information, real-time visibility delivers the insight to understand current conditions and the ability to make decisions before it’s too late

Immediate Sense and Respond

The result of heightened awareness is the ability to sense and respond to changing conditions Being able to immediately sense and respond starts with the ability to monitor events, transactions and processes in real-time across the enterprise Automated actions, providing immediate response, can then be initiated from your business rules, which are looking for patterns that indicate a potential threat or opportunity

Continuous Improvement

Insight and awareness are valuable, but become much more powerful when used to improve business processes Responsive Process Management provides the ability to improve processes “in-flight”—for continuous improvement

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Processes can be changed while in operation, giving you a faster response to changing conditions Processes are directly influenced by events and transactions

The Progress Control Tower™

A control tower is used to manage the entire system Instead of using multiple, and often poorly integrated, solutions the control tower serves as a single, unified interface for interaction and control

Here, events, transactions and processes are visualized and controlled from a common interface Business and technical users interact with business rules, event processing scenarios and full-featured, real-time visual controls

SUMMARY

How you manage and respond to your business as it runs will define your competitive advantage Improved operational response comes from recognizing the relationship between critical events and the processes that run the business as they happen—but then having the power to adapt as conditions change

The market challenge is to move from a passive mode of decision making to one that is proactive and influenced by real-time business events The infrastructure is mature The technology is ready Are you?

PROGRESS SOFTWARE

Progress Software Corporation (NASDAQ: PRGS) is a global software company that enables enterprises to be operationally responsive to changing conditions and customer interactions as they occur Our goal is to enable our customers to capitalize on new opportunities, drive greater efficiencies, and reduce risk Progress offers a comprehensive portfolio of best-in-class infrastructure software spanning event-driven visibility and real-time response, open integration, data access and integration, and application development and management—all supporting on-premises and SaaS/cloud deployments Progress maximizes the benefits of operational responsiveness while minimizing IT complexity and total cost of ownership

WORLDWIDE HEADQUARTERS

Progress Software Corporation, 14 Oak Park, Bedford, MA 01730 USA Tel: +1 781 280-4000 Fax: +1 781 280-4095 On the Web at: www.progress.com

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Progress, Progress Control Tower and Business Making Progress are trademarks or registered trademarks of Progress Software Corporation or one of its affiliates or subsidiaries in the U S and other countries Any other marks contained herein may be trademarks of their respective owners Specifications subject to change without notice

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