PipeChain Adds Pragmatism Onto Simplicity

PipeChain Adds Pragmatism Onto SimplicityP.J. Jakovljevic & L. Talarico - January 1, 2002

Event Summary

PipeChain, a Swedish provider of Internet-based supply chain execution (SCE) solutions (http://www.pipechain.com), recently announced that the new version of its product suite, PipeChain 2.0, will be launched by the end of 2001 and will also contain some eagerly awaited new features.

1. Ordering over the Internet will be supported by the new version, which will also allow users to access their customers' or suppliers' PipeChain Suite instances over the Internet without having their own license. The PipeChain Supply core module was initially based on the idea that the customer should not have to place orders at all, since the supplier will automatically deliver them when the customer needs them. While the idea was both bright and simple, and although it works well in most cases, there are times when automated VMI (Vendor Managed Inventory) is not the best solution. For instance, automated VMI is not an appropriate solution if the volumes are very small, or if the product is being phased in or out. For those practical reasons, orders can now be manually placed in PipeChain Supply. The feature adapts the product even more to the realities of the business and takes away the need for other network links, such as EDI (Electronic Data Interchange). 

2. Another new feature of possibly a great importance to small companies is a new module that will be sold separately, PipeChain WebAccess. A small company delivering only a limited number of items to a customer does not really need a license. Instead, the supplier merely accesses the customer's PipeChain Supply over the Internet to confirm deliveries and perform other critical PipeChain Supply functions. Similarly, a customer with no license can access his supplier's PipeChain Supply. This new feature might also reduce the startup time for PipeChain implementations, since the software does not need to be installed at the sites of all the parties. Also, for companies already using PipeChain, it is an opportunity to link to all their customers and suppliers, even very small ones.

3. In the new version, PipeChain Analyzer, an analysis tool based on data warehousing technology, which has long been a part of the suite will include additional key performance indicators (KPI) making it more business-oriented. Using KPIs such as duration times statistics and service level, users can perform advanced analyses that help them steer their business.

Market Impact

Manufacturing and distribution companies continue their effort to meet high customer expectations for on-time delivery by achieving general responsiveness, speed and agility. While ERP systems have traditionally excelled at planning and financial integration functions, they have not, however, provided much return on investment (ROI) in warehousing, distribution network planning, or transportation/logistics management. Supply chain execution (SCE) is therefore gaining increasing awareness among companies that have been increasingly realizing that the planning can do only so much without the ability to make the right and timely decisions at the shop floor and/or in the warehouses. 

PipeChain is one of a handful of nimble start-up vendors such as SupplyPoint, WorldChain, SupplySolution, and SCMdialtone that provide multi-partner supply chain planning and execution (SCP/E) functionality, primarily in a hosted environment. These vendors are mostly targeting midsize businesses that are under pressure to compete in the fast-moving e-business economy, or to react to a channel network's need for speed and agility by putting their own supply chain online, but are either unable to afford the participation within consortium and/or private trade exchanges (CTX/PTX) or have been deterred from doing it by the bad publicity from already disillusioned market places' users.

PipeChain controls flows of goods and information through its own interpretation of Just-In-Time (JIT) and lean manufacturing concepts, and is suitable for lean enterprises that wish to base their operations on real-time data instead of long-range forecasts. PipeChain functions as an "information peer-to-peer (P2P) overlay" that links together companies with different business systems (ERP or legacy-based) using a principle called 'water supply'. Namely, the flow of goods in a supply chain should emulate the flow of water in a water pipeline - the supplier delivers goods only and as soon as the customer places an order (opens the faucet). 

The result is a single supply system with automatic ordering procedures (agreements) between customers and suppliers. Each participant always has the latest data, and misunderstandings are avoided because everyone works with the same picture of reality and the same self-explanatory icons on their computer screens. Without this overall view, which is still a prevailing case in day-to-day practices between business partners, each link in the chain acts according to its distorted interpretation of reality; these sub-optimal decisions accumulate in a cascading manner up- and/or downstream the supply chain.

Company Background

PipeChain, is beginning to make a name for itself in the expanding collaborative SCE market. It was founded in 1999, as a spin-off from its parent company, MA-System, a 25 year old Swedish WMS vendor (http://www.masystem.com). The company started its US operations in 2000 owing to the expansion of its high-profile European-based users, which currently encompass renowned global corporations like Ericsson, Volvo, ABB, Ikea, SKF and the Absolut Company. With the functionality available in the new PipeChain version 2.0 release such as extended web collaboration, demand planning, integrated warehouse management system (WMS) and transport management, company stands the chance of further expanding its customer base.

The PipeChain suite is a highly configurable software solution, that was developed from an inside perspective, in collaboration with customers, by true logistics experts. Practical experience and down-to-earth thinking have led to traditional approaches being replaced by own innovative solutions based on common sense of simplicity (e.g., JIT, kanban, VMI, and supply-on-demand principles). 

Company Strategy

PipeChain has developed a product and service strategy that offers businesses a more affordable business-to-business (B2B) e-commerce alternative for building their own supply chain network integration. Rather than taking on an excruciating multi-year implementation to build supply chain integration through extensive middleware tools, trade exchange platform technology, and significant IT resources, the company offers a number of applications based on easily understood concepts that can be implemented rather quickly, in a matter of days or weeks. More importantly, PipeChain provides a number of SCE functionalities that may eventually evolve into a PTX-based community. The company offers a comprehensive set of tools across the spectrum of extended supply chain visibility, workflow alerts/exception management, and process coordination in joint requirements planning and execution via production, inventory, logistics, and transportation.

The company's recently unveiled product suite consists of the following components: 

  • PipeChain Supply - a core SCE software module that automates the flow of goods between companies

  • PipeChain FlowProduction -- a finite scheduling software module that automates the flow of components and critical information through the manufacturing plant

  • PipeChain Analyzer - a business intelligence software module that monitors the performance (KPIs) of the entire supply chain

  • PipeChain LoadPlanner - a software module that optimizes the load unit and fill rate for the flow of goods between companies

  • PipeChain PTX - a Private Trading eXchange software building tool

  • PipeChain WMS - a Warehouse Management System

In addition to a well-rounded functional product offering, PipeChain has also embarked on some product technology related initiatives, in order to integrate to existing ERP, legacy, or even spreadsheet-based applications, as well as integration capabilities to other trade exchanges, while providing mandatory security and privacy of data (via digital signatures and scrambled data transfer). 

The product features 3-tier architecture, and the support for SQL Server and Oracle databases, and Windows NT/2000 platform. The business logic on server and standard client are built entirely in Java, while the Web client is currently 100% HTML based on Java Server Pages. All the business logic lies in the server, and JDBC (Java Database Connectivity)/ODBC (Open Database Connectivity) is used for communication with the database.

To communicate with the ERP system in place, PipeChain uses number of open interfaces following established standards like XML, Flatfile, EDIFACT, IDOC, ODETTE, X12, Web Services/SOAP; the communication happens via file, Ftp, MQSeries, BMQ, IP socket, SMTP or HTTP/SOAP protocols. To communicate with other PipeChain components in the network, PipeChain uses Java RMI (Remote Method Invocation) over TCP/IP. Also, transaction converter is a framework (a Java-plug-in file or and XSL (eXtensible Style Language) file) that allows users to alter transactions to and from PipeChain. Synchronization of information can happen at determined intervals both via the Internet or a modem connection.


Nonetheless, the company faces a number of challenges. For one, it competes against a slew of established SCM companies with stronger brand recognition and/or financial situations to jump at the window of this SCE opportunity, such as i2, FreeMarkets, Descartes, and Manugistics, although one should expect SAP, Oracle, J.D. Edwards or Baan to jump the bandwagon too. There are also a slew of peer competitors, such as webplan and Effinity to name only a few more beside the ones mentioned earlier in the text. 

Moreover, the company's solution footprint needs improvements in terms of more sophisticated advanced planning & scheduling (APS), collaborative forecasting, and contract management and payment processes. 

The company also acknowledges a nascent channel and/or reference sites (200 in total including the WMS instances, and only 10 in the US), and there are some indications of addressing it through partnerships with leading ERP vendors. The partnership with compatriot vendor IFS in April, one of the fastest growing ERP vendors and a relative newcomer to the North American market, could help PipeChain gain much needed traction in the market. The two companies will integrate PipeChain's SCE software with IFS Applications

The partnership targets repetitive manufacturing industries - such as electronics and automotive - that require automated, highly repetitive supply chain solutions. Therefore, IFS customers should get the full range of VMI products from which to choose, integrating both to their high and low volume customers and suppliers. PipeChain's VMI solutions will be used for the high volume partners, while IFS' portal-based VMI solutions will be used for the low volume partners. IFS will package and sell PipeChain's SCE and VMI solutions as fully integrated components along with IFS Applications, which should offer customers a step-by-step evolution to the true extended enterprise. 

Enabling manual order input in the latest product release should help PipeChain attract the enterprises that are not exactly in the lean operational mindset and the state of affairs, to gradually warm up to the JIT concepts and ideas. Also, while PipeChain can be implemented in various modes for different customer tastes (readiness), from manually without interface (which can be used as a proof of concept first), semi-automatically with Excel/Access interfaces, to full-scale implementation with PipeChain Converter Plug-Ins, the true integration of financial transactions to the back-end, in addition to inventory status and any other information visibility, would help users' acceptance tremendously. To that end, the company should attempt to strike a number of IFS-like partnerships with reputable ERP vendors.

User Recommendations

Mid-market and divisions of large companies, primarily in high volume distribution industries, with limited financial and IT resources, and with a need to protect their investment in ERP or legacy applications, but also with a need to inexpensively extend supply chain planning, synchronization and execution, with a PTX community establishment in the end, should evaluate PipeChain's value proposition. If your business demands a broader set of capabilities, such as content management, e-procurement, or product design collaboration, question vigorously PipeChain capabilities and/or product strategy in these areas, as well as its financial resources and reference sites equivalent to your company profile.

PipeChain is targeting the mid-tier of vertical industries that include High-Tech/Electronics, Furniture, Consumer Products, and Automotive. Current ERP users in these industries should inquiry how ready PipeChain would be to integrate with the system in place, as the company claims experience and ready-made connectors to systems like IBS and SAP. ERP vendors without strong offering in the PipeChain's sweet spot might want to consider partnership as to extend the value proposition to their customer base.

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