ENTERPRISE APPLICATION INTEGRATION:

AN EMERGING TECHNOLOGY FOR INTEGRATING

ERP AND SUPPLY CHAINS

Marinos Themistocleous1, Zahir Irani1 and Peter E.D. Love2

1
Information Systems Evaluation and Integration Group (ISEIG)
Department of Information Systems and Computing
Brunel University, Uxbridge,
Middlesex, UB8 3PH, UK
2
School of Management Information Systems
Edith Cowan University
Perth, Australia.

ABSTRACT
During the last decade, the adoption of ebusiness applications and practices has transformed
enterprises and changed the way of doing business. As a result, the competition among companies has
increased and organisations are focusing on supply chain co-ordination and collaboration to increase
their business benefits. For many years, Enterprise Resource Planning (ERP) systems supported
supply chain management. However, the limitations of ERP systems on integrating disparate systems
have led organisations to seek for new approaches to integrate their systems and supply chains. Thus,
the intention of this paper is to explain why ERP systems have failed to support integrated supply
chains and to introduce a new approach on systems integration, which can be adopted by
organisations to overcome their integration problems.

Keywords: ERP, Enterprise Application Integration, Supply Chain Management, eBusiness,

1. INTRODUCTION

Christopher (1992) suggests that future competition will not be company against company but rather,
supply chain against supply chain. Nonetheless, this presents interesting challenges when it comes to
the integration of intra and inter-organisational supply chain systems. As companies strengthen their
relationships and collaborate at an inter-organisational level, the chain itself gains more links and
therefore, increases management and co-ordination efforts. An enterprise is no longer viewed as a
single corporation; it is a loose collection of trading partners that can contract with manufacturers,
logistics companies, and distribution organisations (Kalakota, 2000; Kalakota and Robinson, 1999).
Therefore, a comprehensive integration of business processes and both intra and inter-organisational
applications is needed to support long-term co-ordination, survival and growth. Such integration
increases the automation of business processes and significantly reduces manual tasks, redundancy of
data and functionality. Also an integrated inter-organisational IT infrastructure reduces costs (e.g.
maintenance, management, operational) and supports the achievement of competitive advantages
through improving real-time response.

1
Corresponding Author: Marinos Themistocleous
E-mail: [email protected]

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The integration of Information Systems (IS) is an obstacle to many businesses, as supply chain
partners consist of independent systems that in some cases cannot communicate one another. These
autonomous and in many cases heterogeneous systems are historically not designed to collaborate with
other applications, as supply chain partners have tended to develop their systems independently and
without any co-ordination. This may result in a lack of enterprise architecture, common definitions,
structures, protocols and business concepts (Duke et al., 1999). There is also the complexity of
existing information systems, which in many cases have fixed and rigid structures for messages,
interfaces and databases. As a result the integration of applications along a supply chain is a difficult
and complex task.
In recent years, Enterprise Resource Planning (ERP) systems have been seen as more than resources
that support various business processes. It has been recognized that ERP have the potential to act as a
force that can be used by companies to integrate their supply chains and gain significant advantages
over competitors. In this context, the genesis of organisations supply chain often lies within ERP
systems. Interest in the integration of supply chains through ERP has steadily increased since the late
1980s, when the benefits of collaborative relationships with suppliers started to surface. As companies
work together in extended enterprises, the chain itself tends to gain more links and become more
complex to manage. Such complexity requires a shift in corporate thinking across this form of
business network. An enterprise is now no longer a single corporation; it is a loose collection of
trading partners that can contract with manufacturers, logistics companies, and distribution
organisations. The supply chain has to have end-to-end enterprise application integration to survive in
the dynamic and customer-driven digital economy, i.e. the plan, source, make, and move concept.
The benefits of adopting an ERP system impact the supply chain with an outward process
conformance view of the supply chain. The reasoning is that ERP requires an organization to be
process orientated and for all internal business units to conform to the same precise process. As a
result, providing the organization with an infrastructure that is built around value adding activities
through efficiency and effectiveness. Such infrastructure has the scope to reach out into the supply
chain and thus, impact customers and suppliers.

2. THE INSUFFICIENT NATURE OF ERP SYSTEMS

To support efficient and flexible supply chains organisations need to integrate their applications on
enterprise and cross-enterprise level. Through the integration of internal and external business
activities, companies are continuing to find ways to further improve their efficiency and streamline
key business processes. To accomplish this, organisations have not only coordinated functional staff
and business processes but have sought to integrate enterprise applications into systems that can link
members of the supply chain together via data, information and knowledge.
Internal ERP enterprise systems are often implemented in a way as to focus on standard data, business
processes and re-engineered business logic. Thus, ERP systems have become a great integration
challenge, as they are possible to reuse common services through common applications, and share
business processes and services (Linthicum, 1999). Despite ERP systems being introduced as
“integrated suites”, they have failed to achieve application integration and supply chain integration
(Makey, 1998; Themistocleous et al., 2001). This can be attributed to (a) ERP do not cover all IT
requirements; (b) they can not meet all business processes and (c) according to Korzeniowsky (2000),
ERP will never meet them. Chung and Snyder (2000) claim that ERP systems support generic
processes and best practices with organisations attempting to parameterise ERP packages to better
support their business processes and strategy. However, customisation is a difficult task that causes
serious integration problems as ERP systems are complex, non-flexible and often not designed to
collaborate with other autonomous applications (Glass and Vessey, 1999; Sumner, 1999).
Linthicum (1999) and Zahavi (1999) characterise ERP systems as monolithic solutions that are not
designed to co-operate with other applications. As a result, enterprise integration can be achieved

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when organisations abandon existing applications and develop a complete ERP solution. Therefore,
the more ERP modules adopted, the more incorporation is achieved. Nevertheless, Makey (1998),
Markus and Tanis (1999) and Themistocleous et al. (2001a) indicate that companies do not adopt all
ERP modules but a subset of them. Even in cases where organisations purchase all ERP modules from
a single vendor, ERP packages can not automate more than 30% of company’s application (Seeley,
1999; Stefanou, 2000). In contrast, Makey (1998), Holland and Light (1999) and Kelly et al. (1999)
report that ERP systems cover up to 70-80% of IT requirements. Regardless, organisations do not
abandon all their existing systems when adopting ERP packages, several applications (e.g. legacy
systems) often co-exist alongside enterprise systems (Makey, 1998; Themistocleous et al., 2001).
The amount of legacy systems in use remains high as they provide reliable solutions (Lloyd et al.,
1999). In support of this, Themistocleous et al. (2001a) report that 38% of companies do not replace
their legacy systems when adopting Enterprise Resource Planning (ERP) solutions. In addition, Ring
and Ward-Dutton (1999) suggests there is often no time to replace legacy systems and Ruh et al.
(2000) explain that replacement is a high risk process. O'Callaghan (1999) supports the claim that the
replacement of legacy systems is too expensive with Brodie and Stonebraker (1995) explaining that it
takes too long to realise the benefits. Apart from the incorporation of existing systems, organisations
have to integrate new applications (e.g. e-business solutions, supply chain applications) with ERP
package.
All observations discussed in this section indicate that ERP systems can be considered as a partial
solution to enterprise and cross enterprise integration as other applications co-exist along-side ERP
packages. Yet, what has been lacking in the continuing development of ERP systems, is a robust
contextual architecture to support the supply chain concepts (accessible and accountable data and
information), and the supply chain process (business relationships through business logic) (Loos,
2000; Schonefeld and Vering, 2000). Indeed, it is widely recognised that firms can no longer
effectively compete in isolation to their suppliers, and as a result are beginning to interact and support
their supply chains to achieve a competitive advantage. Consequently IT/IS is being used as an enabler
in an attempt to enhance organizational efficiency, by integrating disparate enterprise business
applications into highly functional and dynamic application networks (Holland 1995; Lin 2000). There
is a growing number of IT/IS architectures that are beginning to represent the development of ERP as
well as enabling ebusiness technologies. In exploring this, subsequent sections will discusses a new
technology for integrating systems and supply chains. This new technology is called Enterprise
Application Integration (EAI).

3. ENTERPRISE APPLICATION INTEGRATION: AN EMERGING TECHNOLOGY

FOR INTEGRATING ERP AND SUPPLY CHAINS

Enterprise application integration is an emerging generation of integration software that addresses

more effectively the need to integrate both intra and inter-organisational systems. In doing so, it
securely incorporates functionality from disparate applications. It combines traditional integration
technologies (e.g. database-oriented middleware) with new EAI technologies (e.g. adapters, message
brokers) to support the efficient incorporation of information systems. Thus, application integration
results in supporting data, objects and processes incorporation as well as custom applications,
packaged systems and e-business solutions integration.
Numerous approaches were proposed in normative literature to describe application integration. Duke
et al.(1999) among others suggest that a solution based on application integration involves the
transportation and transformation of information between one or more applications. It also supports (a)
the timing and sequencing rules that govern when the transportation and transformation takes place
and (b) the integrity constrains that determine the success or failure of the integration. From a
technical perspective Themistocleous et al.(2000) propose that EAI is achieved at 3 integration layers
namely:

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ƒ Transportation layer, which transfers the information from source application to the integration
infrastructure and from the latter to the target application.
ƒ Transformation layer that translates the information from source application format to target
system structure.
ƒ Process automation layer, which integrates the business processes and controls the integration
mechanism. This is illustrated at Figure 1.

Source Target
Application Application

Transportation 010…1001
Data Data

Objects Objects
Translation abc…xyz
Processes Processes

Applications Applications
Elements Process Automation Elements

Integration Layers
Figure 1: Integration Layers and Application Elements

Figure 1 presents the incorporation of 2 information systems (source and target application) when EAI
is used. Source and target applications are integrated by exchanging their application elements, which
include data, objects and processes. Application elements are transferred from source application to
the target through the integration infrastructure using the transportation layer. Meanwhile, application
elements are translated from source application structure to target application format using the
translation layer. The reason for using the translation layer is that source and target applications are
not based on the same structures (e.g. data structure) or platform. Thus, translation is needed to
transform data into compatible format for target application. At a higher level, elements that are used
for the integration of processes or the integrity of information (e.g. services, business logic, rules,
constrains) are transferred to process automation layer. These elements are used by process
automation layer to audit integration tasks, incorporating and automating business processes and
triggering events. For instance a typical task of this layer could be the following scenario: translate
retailer’s (source application) stocks data using the translation layer. When the retailer’s stocks
availability is equal to limit (e.g. stocks = x units of product P) then notify supplier (target application)
and order z = y-x units of product P (where y is the maximum agreed quantity of product P).

4. CASE DATA

For confidential reasons the name of the organisation been studied can not be published. Therefore,
the authors adopt the name ‘OILCORP’ to refer to this organisation. The OILCORP is a multinational
organisation operating in the chemical sector in more than 135 countries around the globe. It has more
than 100,000 employees and it is organised into five core businesses including (a) oil; (b) chemicals;
(c) gas and power; (d) exploration and production and (e) renewables. A Chief Executive Officer
(CEO) heads each core business with broad overall responsibility. The CEOs report to a committee of
managing directors made up of the executive directors serving on the boards of the parent companies.

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Each of OILCORP subsidiaries complies with the same set of business principles but operates
independently. Service companies provide a range of specialist advice and resources, and the
principles ensure that all companies perform to the same high level in the economic, environmental
and social domains. Each company has its own Information Technology (IT) infrastructure, which in
many cases includes complex, heterogeneous and incompatible systems and clearly presenting an
integration challenge. The diversity of Information Systems (IS) causes delays in giving information
as applications are not integrated, and a lot of work has to be done manually. For instance, data from
one system has to be printed out and then re-entered in a different format to a target system. The
reasoning is that the target system has its own data structure and it is based on a different operating
system. Other technical problems include:
x Difficulties in getting data from legacy as the OILCORP is consisted of 1500 different legacy
systems with heterogeneous and incompatible data format. Restrictions of existing and ERP
systems as they are not able to manipulate all types of data,
x Incompatible ERP systems. The organisation has 90 different ERP systems provided mainly by 2
ERP vendors. However, there are many problems in retrieving data from one system that is
running for instance on a mainframe and processing them in another ERP system running on
different platform or having a different version. The existence of all these systems (ERP’s, legacy
and ebusiness) support the claim reported in sections 1 and 2 that ERP systems do not efficiently
support the integration of IS.
Among others, this situation causes significant obstacles to OILCORP regarding the integration,
automation and coordination of its supply chains. Customers and suppliers demanded a closer
collaboration with OILCORP and thus the latter started examining possible approaches to integrate its
internal and external supply chains. The first approach focused on developing manual point-to-point
connections to interconnect applications. In this case programmers write low-level communication
code between 2 applications to exchange messages and data. However, such approach leads to
applications spaghetti, which increases the complexity of the integration solution as the number of
interconnected applications rises. Themistocleous et al.(2000) suggest that for x applications a total of:
x*(x-1)/2 connections are required, to piece together all x applications. This means that for 10
applications 45 connections are needed to interconnect these 10 applications. In addition each
connection requires 2 interfaces (one for each interconnected application). Clearly, maintenance costs
are an issue, with IT becoming ineffective to maintain these interconnected applications. Moreover,
interconnectivity has other problems since point-to-point connections have an invasive nature, which
requires changes to applications (Duke et al., 1999; Serain, 1999; Themistocleous and Irani, 2002;
Wijegunarate and Fernandez, 1998). In doing so, new subroutines that support interconnections by
mapping all interconnected applications are added and thus, applications code is extended. After
interconnecting applications if a system requires changes, all interconnected applications have also to
be altered. As the number of applications and the connections between them proliferate, an
organisation ends up with a non-flexible, unmanageable jumble of code holding the business system
together (Markus, 2000; Wijegunarate and Fernandez, 1998).
In contrast, application integration addresses integration problems more effectively by developing a
central integration infrastructure (Linthicum, 2000; Puschmann and Alt, 2001; Zahavi, 1999). In doing
so, point-to-point interconnections are eliminated, since each application is connected with the
integration infrastructure. In many cases, the integration infrastructure follows a hub and spoke
communication mechanism (Bernus et al., 1996), which is often based on a message broker (Ruh et
al., 2000; Themistocleous and Irani, 2001). In EAI solutions, when an application requires changes the
rest of the system is rarely affected, as it is not interconnected with the application that requires
changes. Therefore, only the application that requires changes and its connection to the central
integration infrastructure are altered. The cost of a solution based on EAI technology is much less with
OILCORP estimating that EAI solution costs approximately the 2/5 of a point-to-point solution.

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Even in case of adopting EAI technology, the cost of global integration at OILCORP was extremely
high (more than €161 millions). Thus, OILCORP took the decision to implement a pilot project to
demonstrate the integration of a supply chain and evaluate the benefits of EAI. The projected lasted
for 9 months and was aiming at integrating custom, packaged and ebusiness applications so that
integrate a supply chain among the mother company and 2 subsidiaries. As illustrated in figure 2
disparate applications such as ERP systems, supply chain management applications and other systems
that are used for the co-ordination of a supply chain are incorporated into a single integrated
infrastructure. These applications are pieced together based on application integration technology,
which integrates not only applications but also business processes. The central integrated
infrastructure receives application elements from one application and translates/formats it into a
compatible format for the target solution. In addition, the integration infrastructure synchronises and
routes the data to the appropriate applications. The integration achieved is non-invasive and thus
limited (or no) changes to existing applications code are needed. As a result, the integration solution is
manageable, flexible and maintainable as the altering of one application does require changes to the
code of other solutions that collaborate with it.

Company

ERP eSCM Custom System

Application Integration: Integrated Supply Chain Infrastructure

Sold to party: C100

10 6301
20 6412
30 1507
eProcurement Legacy System ERP eSCM

Company Company

Figure 2: Integrating ERP and Supply Chain Solutions through Application Integration

The selection of appropriate EAI products and technologies was a significant issue for OILCORP,
since there is a technological confusion surrounding EAI. The reasoning is that a diversity of products
and technologies address integration problems but there is no single technology or EAI product
solving all integration issues (Ring and Ward-Dutton, 1999). Thus a combination of integration
technologies is needed. To address this issue, the OILCORP assess various EAI products using an
evaluation framework. Evaluation criteria test integration requirements such as maintainability,
flexibility etc. Some of the criteria focus on vendor and test (a) whether the vendor has a global
presence; (b) collaborates with OILCORP; (c) is reliable etc. This set of criteria affects somehow the
selection of EAI products since the OILCORP selected products from its existing vendors (e.g. IBM)
or from collaborators of its vendors (e.g. CrossWorld is SAP partner for EAI). Nonetheless, the
adopted solutions supported the majority of evaluation criteria. CrossWorld’s software complied with
the majority of evaluation criteria set by OILCORP and it can collaborate with other software
solutions to achieve process integration. Based on these, an expert group made the decision that

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CrossWorld’s integration software could be adopted for development. Also, OILCORP adopted IBM’s
Message Queuing Series Integrator (MQSI) as message brokering software. Both software solutions
can collaborate and provide a reliable platform for integrating OILCORP applications. Apart from
these products a variety of other tools were adopted such as Tibco middleware, screen wrappers etc.
This proves that there is no single EAI product solving all integration problems.
Another important issue came out from this case study is that the OILCORP spent around the 60% of
overall time to redesign its business processes. In doing so, OILCORP maximises the benefits from
EAI adoption, as data and application redundancy was significant reduced. Due to business process
reengineering the 90% of custom systems and the 96.4% of ERP systems that used for the automation
of the specific supply chain were phased out. As a result, OILCORP reduces the operational cost from
running these systems and shorten the business cycle. However, this has an impact on employees as
the operators and the users of those systems that were phased out resisted in change. At a technical
level the integration of packaged, custom and ebusiness solutions was achieved as described below:
Legacy Integration: Most legacy systems follow a monolithic model (Zahavi, 1999) in which data,
processes and interfaces are not separated but are built together (Bernus et al., 1996). As such, legacy
systems have limited number of interfaces that can be used for integration with other applications. In
most cases, user interfaces are used to access the data and the logic of legacy systems (Andrew, 1998).
In the case of OILCORP screen wrapping tools were used to capture data from a legacy systems
screen, or map them as objects. Data or objects were then sent to the message broker, which translates
the data into an appropriate format and forward them to target application.
ERP Integration: Data extracted from ERP’s database can be transformed into XML format and then
transmitted to the target application. In addition, a message broker was used to support the distribution
of XML messages (in cases of ebusiness applications). Apart from XML technology, data integration
was achieved through traditional database middleware such as Open Database Connectivity (ODBC).
Message based technologies such as IBM MQSI were also used to transfer the data from source
application to the target using the integration infrastructure.
At interface level, Application Programming Interfaces (API) are provided by ERP systems to allow
other applications to access ERPs functionality or data (Zahavi, 1999). In the case of OILCORP
applications communicate with APIs and gain access to the data or the processes they demand. As a
result, applications send or retrieve data through APIs or invoke an ERP service to obtain some value
in order to integrate their functionality. In many cases, information extracted from one API needs to be
mapped so as to be compatible to target application. For that reason, adapters and/or message brokers
were invoked to map the data and interconnect the ERP system with the target application.
In many cases Distributed Object Technologies (DOT) such as Microsoft’s COM/DCOM, CORBA
and Enterprise Java Beans collaborate with ERP systems through APIs. ERP systems are attempting to
perform like distributed object applications by supporting APIs that provide access to ERP data,
processes, services and objects. As a result the integration of objects is easier as DOT technologies can
communicate, share data and reuse ERP objects and services through APIs. Such technologies were
also used in the case of OILCORP to support objects integration.
Ebusiness Integration: ebusiness solutions are often integrated more easily than the rest of
applications due to the fact that are designed to collaborate with other systems and are based on more
flexible and open architectures (Kalakota and Robinson, 1999). In the case of OILCORP data, objects,
semantics and logic were extracted from e-business applications using database technologies, DOT,
XML, application servers etc. Data, objects and logic were extracted from legacy systems and ERP
applications (as described above) and sent to the message broker. The latter, maps, translates and
routes the information to the target application.
The implementation of the pilot EAI project provided advanced capabilities to the OILCORP and
increased the functionality and efficiency of their IS. A number of business processes related with
internal and external supply chains were redesigned, automated and integrated. The IT department

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used this pilot system to run various business cases and demonstrate systems functionality and
benefits. The integrated infrastructure resulted from the implementation of this project increases
organisation’s performance and systems efficiency and functionality as it automates business
processes and integrates applications. The integration provides more understanding and control of
business processes, as activities have been improved through reengineering. In addition it supports
better coordination and collaboration among treading partners. The integrated infrastructure reduces
the redundancy of systems, components and data and eliminates manual integration tasks that result in
reduced employees, tasks, and systems that are needed for process fulfilment. The pilot system
provides more reliable data and it is more flexible as integration was achieved with minimum changes
to systems code. Thus, the systems are more manageable and maintainable. The advantages of the pilot
system were so significant that led the managing board to take the decision for a global EAI project.

5. CONCLUSIONS

Supply chains are considered integral to virtual organisations and the delivery of globalised
competitive advantage. Although the concept of enabling a supply chain is fundamental to those
seeking to develop responsive organisations, in reality the implementation and realisation of such a
business entity can be complex and time consuming due to the limitations of existing IS.
Although many organisations have sought to automate and integrate their supply chains through ERP
systems, in reality, such software solutions have proved to be limited in the delivery of benefits and
integration. ERP systems have historically been good at capturing classic business processes like
supply chain functions but only from a process perspective. It is also widely recognised that ERP
systems are very internally focussed within the organisation. The sharing of resource planning data
with business partners and suppliers is typically seen as a complex and traditionally verbose process,
and not one that naturally lends itself well to the monolithic architecture of ERP. In addition, ERP
systems have problems in exchanging and integrating data and processes from other applications that
co-exist alongside such enterprise systems.
However, to support the linkages in supply chains, application-level integration is required to
automate and integrate key business processes. Such integration is required internally, within an
organisation as well as externally within business partners. The emergence of application integration
technology is gaining pace as a means of incorporating information systems that automate parts of a
supply chain (e.g. legacy systems, ebusiness solutions) and to establish a common information
infrastructure along a whole supply chain.
This paper has discussed the need for integrating supply chain and explained why ERP systems have
failed to integrate supply chains. In addition, the authors of this paper have presented a new approach
on integrating the supply chain based on application integration technology. The case study presented
in this paper focuses on explaining how EAI technology efficiently integrates custom, packaged and
ebusiness solutions and thus, resulting in integrated supply chains. Based on the case study analysis a
number of interesting issues have been highlighted and summarised below:
ƒ There is a technological confusion surrounding EAI, which forms a barrier to the adoption of
EAI. Disparate integration technologies and products exist in marketplace with no single tool
addressing all integration problems. As a result a combination of integration technologies is
required to support applications integration. It could be argued by the authors, that a
framework that evaluates EAI solutions and technologies will support organisations in
selecting and combine appropriate EAI technologies.
ƒ When integrating applications there is a need to pay attention on process reengineering since,
the purpose of integration is to integrate and automate business processes and applications. In
the case study presented in this paper, it is estimated the redesigning business processes takes

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up to 60% of the overall integrated solution. Such, redesigning has resulted in phasing out the
majority of existing systems (90% of legacy and 96.4% of ERP systems). This means that EAI
solutions and reengineering reduces operational cost and shorten and improve business
processes. However, this had an adverse impact on employees, which manifested itself in the
form of resistance to the change initiative.

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