Katrina Roche is the General Manager of Supply Chain Solutions for The Baan Co., supplier of manufacturing software. She is responsible for bringing Baan's leading supply chain and transportation products to market. She was formerly president and CEO of Cygnus Technology, a systems integration consultancy, where she was responsible for worldwide sales and marketing, consulting services, operations, and accounting and finance. She spoke in August with Software Magazine’s Editorial Director John P. Desmond.
This article originally appeared in the September, 1999 issue of Wiesner Publishing's Software Magazine and appears on TechRepublic under a special arrangement with the publisher.
Q: What are the major trends in supply chain management and the Web?
A: We are seeing the emergence of a global playing field, mostly driven by the Internet and other geopolitical events: a reduction in cross-border trading barriers; and the emergence of three main currency blocks—the Euro in Europe, the "dollar block" in North America and South America, and a "yen block" in Asia. This globalization is rewarding scale, so companies are getting bigger and are forced to compete more globally.
In what I call "the death of time and distance," the Internet and technology have led customers to want everything now. The world is becoming a much smaller place. That's not just referring to transportation, but to the access the Internet gives people to purchasing power on a global basis.
To companies, this means a couple of things. Companies are focused on becoming more agile and on having a lot more velocity. Companies are moving from a "big eat small" competitive climate, to a "fast eat slow" environment. And some companies are becoming more and more focused on that knowledge capital. The way we make these new things work is with information. Companies are starting to apply much more sophisticated analytical tools to solve problems, to build more responsive supply chains and more responsive businesses. Information about customers, suppliers, and processes needs to be captured and institutionalized so that the reuse of that becomes automatic in an organization.
We are also seeing the emergence of a lot of virtual companies that don't have a bricks and mortar infrastructure and need to work in an extended supply chain environment. In response, you are seeing bricks and mortar companies also focused on that extended supply chain concept.
We are moving toward a layered network economy, where we are no longer focused on command and control as it was in the 1980s and earlier, but on command and connect: How you can connect people and other enterprises together to solve customer problems.
Q: What is Baan's strategy for competing in this environment?
A: We are evolving to a more extended supply chain management concept. We are looking at embedding collaboration and integrating that into business processes. Today, you should be able to do extended enterprise order promising. For example, when a customer is sitting on your Web site placing an order, if you don't have the material, you should be able to go look at your supplier and at your supplier's supplier.
There are a couple of problems in that, that have nothing to do with technology. If you are making a high-value good, and you're a supplier of a supplier of a supplier, and you are holding that inventory for someone sitting on a Web site three chains up, and you turn down 20 orders in a row, then the customer says, "oh never mind." You will see companies focused on how to bond these types of transactions so that there is some risk management. We need to work with people outside the technology area on that question.
In the collaboration space, we will work on extending collaboration, so we can work hands-off, order promising across an extended supply chain environment.
We have also built an inference engine, which allows people to subscribe to supply chain events they are concerned about. There is a focus on collaboration around document sharing. We think you have to make it more meaningful. You might care about orders of more than $25,000 in profit where the due date slips, or you might want to impress IBM. You can subscribe to related events, and our inference engine monitors those and publishes the ones you might be interested in.
Q: Will you be developing technology or acquiring?
A: We've been developing a collaborative technology framework for the last 18 months. We are allowing companies to plug in standard services, such as IBM's MQSeries, Microsoft's MSMQ, or Tibco's product. We allow people to choose standard messaging. So we don't devote our R&D efforts to developing services; we dedicate our efforts to developing the applications. We are also very focused, in that technical framework, on XML messaging for application-to-application integration, as well as for enterprise-to-enterprise integration. We've built something that's like a bus—the only term we can apply to this concept that will let us think of it correctly—where we can plug in a variety of different enterprises and have software services handle data reconciliation, value mapping, and so on, and then publish the events.
We released the first version of these products, baseline collaboration, in May, and shipped the first product in July, E-Collaboration. We are recruiting customers into the beta program for these more intelligent collaboration types of applications. We're planning on releasing those products at the beginning of the year.
Q: How is Baan's financial health?
A: We turned in a $9 million loss last quarter, which was our goal, to turn in a single-digit loss. The Street knew we would turn in the loss. We've gotten high marks for successfully reining in our cost structure, and for preparing ourselves for weathering this ERP storm over the next six months. The challenge now is to generate strong, positive license growth. We are starting to enter the supply chain management market very aggressively.
We've always been a strong player in customer relationship management, but we've really gone silent on the marketing front over the last six months. The viability question has been put to bed; we don't get asked that anymore mostly because the security analysts have been bullish about our ability to recover. AMR published a report last week saying that Baan's recovery is a question of when, not if.
Q: How are you differentiating from the competition?
A: We are focused on being more than an optimization vendor, and most supply chain vendors today are focused 100 percent on optimization. We think that to compete in an Internet-speed environment, you need tightly integrated optimization all the way through to back-end fulfillment. You can't treat optimization as a standalone, bolt-on type of application. It needs to be tightly integrated.
We started two and one-half years ago at Baan with a project called Common Component Architecture. We were not focused on the Internet; we were focused on working in an environment of heterogeneity, where companies would use Baan and other products. That's really positioned us well to compete in this Internet type of space where you have to be focused on being able to integrate many applications together to successfully compete. A real differentiator for Baan in supply chain is we do allow tight integration to back-end fulfillment, and not just to our own, but to SAP's.
Q: How rapidly are customers adopting the Internet-based applications?
A: Many companies are operating out of fear, throwing up Web sites and not thinking about fulfillment aspects and what they do to your supply chain. Supply chains oriented to the old way of doing business were moving things in bulk. Today, they are focused on moving smaller quantities at a higher velocity. So companies are adopting the Internet quickly, and some are not getting their act together on the supply chain side until they realize they have problems. But over the last six months, we are starting to see some companies realize that having a successful e-commerce strategy requires having an e-supply chain strategy.
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