As more and more organizations put c-commerce on the table, efficient supply chain management (SCM) is replacing cost-per-unit as the critical success factor. The key term there, however, is "efficient," as it’s often a relative term in relation to SCM.
There’s no doubt that to succeed at collaborative strategies, SCM must be mastered—all partners and processes must be integrated seamlessly. But, in order for that to happen, enterprises must overcome more than a few obstacles to smooth collaborative processes.
How relativity hinders the effort
Most enterprises agree that collaboration is vital. Since the fallout from supply chain disruptions in the wake of 9/11, organizations are looking at the supply chain to see how to prevent massive inventory buildups in the future, especially in a down market.
Only companies operating on a demand-aggregation model will be agile enough to adjust to changes in demand. Downstream companies, such as contract manufacturers, are trying to identify efficiencies and are aiming to enhance and boost vendor-managed inventory. Unfortunately, suppliers aren’t stepping forward. But they have good reason.
"Collaboration," unfortunately, is a very relative term. Few organizations today agree on the ways in which they need to collaborate. Some organizations collaborate on a weekly forecast, whereas others collaborate on a monthly forecast. Some collaborate on multiple states of an order, and others collaborate on a fewer number of states. The result becomes more "relative" when you add standards, according to industry pundits.
“Standards are one of the biggest issues for everyone and every industry,” says Brian Zrimsek, research director at Gartner.
Zrimsek points to past standards issues in the automotive industry, as one example. The automotive industry implemented Electronic Data Interchange (EDI) along with standard message numbers and standard message formats. The problem, however, explains Zrimsek, is that Ford, GM, and Chrysler now all have their own unique systems based on those standards. Thus, when it comes to collaboration, "standard" is also somewhat of a relative term.
Delving into c-commerce, part 5
If you’ve missed any of the previous installments in our series on collaborative commerce, click on the links below to catch up:
"Preparing the enterprise chain for c-commerce"
"ERP: A roadblock en route to collaboration"
"CRM integration strategy is critical to c-commerce success"
"E-procurement: The link to the c-commerce value chain"
Planning plays an important role
Proper planning—establishing a required timeline and timeframe for SCM integration—is also critical to achieving seamless integration. Until recently, real-time visibility across corporate divisions and among manufacturing partners has lagged behind, hindering just-in-time strategies. Current collaboration tools can provide real-time visibility, but suppliers still must give timely responses.
The typical ERP system takes seven days to run a plan and provide that information to suppliers. With collaborative-commerce strategies, suppliers need to commit to that forecast within two hours. The problem, however, is that it takes another seven days to propagate the suppliers’ planning systems and come back with a response. They aren’t able to commit quickly enough, and the link is suddenly broken.
The above issues create a very complicated environment, oftentimes making it difficult for organizations to get suppliers to come on board with collaboration. In addition, collaboration software is often cost-prohibitive for many smaller supply organizations.
But what if organizations could cost-effectively increase demand visibility, extend EDI connectivity to all suppliers, manage real-time pricing updates with approval/audit trails, and manage orders with no additional IT infrastructure? Getting partners on board might prove to be a lot easier.
How vendors are responding to issues
To entice hesitant suppliers, as well as struggling buyers, vendors such as i2 Technologies are providing services on a network basis. For example, the i2 TradeMatrix Open Commerce Network (OCN) is a collaborative network that enables buyers, suppliers, and marketplaces to connect, collaborate, and conduct commerce. TradeMatrix OCN delivers Any-to-Any Connectivity, allowing trading partners to securely communicate using their preferred communication protocol (EDI, XML, etc.). TradeMatrix OCN Connectivity Services consist of translation and mapping, transport and routing, and integration of trading-partner documents.
The network is focused on helping enterprises participate in a range of collaboration processes with minimal implementation costs. Users can log on to the site, use some of the support systems, and pay either on a subscription basis or per use. Buyers have access to an information hub within the network that provides real-time enriched data to enable visibility to inventory positions, order status, and demand plans. Supply management capabilities are provided via visibility to business documents. It’s through investment extensions that buyers can then extend visibility beyond tier-one suppliers and connectivity to non-EDI suppliers.
The benefits of these types of solutions lie in that they include a single point of connectivity, lower customer service costs (by cutting overtime, premium freight, and excess inventory costs), improved order management with visibility to the same business documents as customers, and tighter customer integration.
To ensure value, take small steps
As I noted at the start, positioning SCM for collaborative strategies is not a simple task. For this reason, i2 advises its customers to implement over a period of three to six months to ensure value that will justify a rollout of the solution—rather than jumping in and doing a complete implementation over a five-year period and possibly not seeing any value for the effort due to various issues and unforeseen obstacles.
Enterprises should begin by opening to collaboration only those items that are of the greatest value to the supply chain and then increase that commitment to cover additional suppliers and additional items.
In the final two installments in our series on collaborative commerce, I’ll examine a real-world c-commerce initiative that illustrates a collaborative rollout, and I'll take a look at the issues and obstacles involved in making a product decision.
Involved in c-commerce?
We’re hoping to compile a tipsheet on real-life lessons learned in implementing a collaborative commerce project. If you have any tips to offer, send them to us via e-mail. If we use your tip, we’ll send you a TechRepublic coffee mug.