Executive Summary
Over the last decade those companies which have managed their core business operations the most efficiently and effectively have gained competitive advantage and garnered a higher percentage of market share. As market leading companies have managed their business processes from a fundamental standpoint, they have also realized that the underlying technology is a key driver of their success—having information flow freely through design, development, and distribution needs a flexible and simplified technology infrastructure.
Companies invest hundreds of thousands to millions of dollars in core infrastructure technologies to control and support operations: ERP supports the heart beat of a company--fundamental operational processes such as sales & distribution, materials management, production planning, and financials. However, these applications need information from outside the firewall to generate the highest levels of return on investment.
Business to Business (B2B) Integration technology is needed to provide this information from customers and back through the extended supply chain. As companies expand into global marketplaces, as products become more complex, as consumers demand quality products in a shorter time frame, the ability for an organization to manage the flow of information becomes extremely important. For example, automotive OEM’s have found that they can no longer pass on expenses to a frugal and knowledgeable consumer. They must reorganize and squeeze efficiency out of their Supply Chain which is constantly adjusting to market demands as can be seen by the number of new models which are launched each year at auto shows around the globe.
In order to generate efficiency, a company must be able to manage the scheduling, development, and the distribution of its products. Companies which are able to provide time critical data in an automated fashion will see the following results:
· Shorter lead times with its suppliers equals shorter order fulfillment to consumers
Integration gateways are necessary to connect the vast spider web of participants in a supply chain; however, the technology must be able to cope with all sizes of companies: not just those that can cope with EDI and XML transactions. Today, technology exists which can connect both highly sophisticated suppliers and smaller and less technically astute partners. But, technology is only effective if organizations utilize it. For years, many organizations in a number of industries have taken advantage of Business to Business Integration in the form of EDI. Now with the addition of XML, Hub & Spoke data distribution, Web-based portals, Fax integration, and newer Internet communication protocols, the cost barrier which inhibited much of the extended supply chain to become involved in electronic collaboration has been eliminated. Extending the reach of E-Business and automating the entire demand and supply chain can move from vision to reality. The question now is: Where to start?
Step One: Understanding The Global Business Issues
As companies review their internal architectures and external processes, it is important to keep in mind the following issues when selecting a vendor. In today’s competitive economy, solutions need to keep up with evolving business requirements, handle all trading partner capabilities, and simplify current IT infrastructures.
Issue 1: Evolving Business Requirements
· Global Markets – Today more than ever, organizations are expanding their operational and sales capabilities to all parts of the world. This expansion has generated hundreds of new customers and suppliers. The technical issue is that every geography and culture has different business processes, data formats, and communication protocols.
· Supply Chain Complexity & Increased Business Process Outsourcing – The complexity of the supply chain has increased as organizations focus on their core business. Many organizations are outsourcing specific business processes that were once handled in-house. These functions can range from manufacturing and warehousing to distribution and transportation. All trading partners must be integrated as if they were in the four walls of the company.
· Time To Market – In a competitive market with so many more competitors, it is more critical than ever to get products to market in a timely fashion. This will only increase as companies expand into new markets.
· Reductions in Inventory Levels – Both the Automotive industry and the Retail industry have taken leading positions on the reduction of inventory throughout their supply chain. It is about real-time production. Why you ask? Inventory is money. When an organization doesn’t have their cash flow tied up in Inventory On Hand, that money is free for expansion and growth.
· Removal of Manual & Paper Intensive Processes – Even after the introduction of the Internet, the majority of business transactions are still done via paper, fax, and manual processes. Organizations that want to continue their competitive advantage must implement solutions which can automate these current processes and remove error prone manual data entry.
Issue 2: Trading Partner Capabilities
Organizations have always been challenged when trying to integrate 100% of their trading partners. Smaller organizations faced technical and economic barriers to enter this collaborative environment in the past; however, newer technology solutions are now available to the market. Unfortunately, many larger organizations have not implemented these offerings for their smaller trading partners, so inefficiency and manual process gaps still exist through much of the extended supply chain. To close these gaps, a lasting integration solution should go far beyond traditional EDI and XML and provide flexibility.
A lasting solution must provide the capability to handle data from or distribute data via:
· Electronic formats such as EDI, XML, and Web Services
· Hub and Spoke architectures for those partners that desire but can’t afford end to end integration via electronic formats
· Web Forms and Portals for those that don’t have the IT staff to support a technology infrastructure but want to move away from paper processes
· And, advanced Artificial Intelligence to handle Paper or Faxes as the overwhelming majority of transactions are done via paper. It is critical that solutions provide more than just simple Optical Character Recognition (OCR). To truly make a difference, this type of solution must be able to read data from an image, capture data, and translate data into a usable application format.
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Issue 3: IT Infrastructure Reality
You often hear the term, Integration “Spaghetti”, and the truth is that most organizations implemented a multitude of solutions to meet customer and business demands. Why do most organizations have this environment?
- First, many of the point to point connections were created prior to the decision of investing in an integration broker.
- Second, most organizations had multiple requirements that were not covered by one solution at the time of purchase.
- Third, when a company goes through a Merger or Acquisition, the existing IT infrastructure must be merged. They are typically patched together rather than transitioned.
- And finally, in many organizations the decision to purchase these solutions was not done centrally—each division or business unit brought in a different tool.
The reality of this environment is that it is extremely costly to maintain. Costs associated with maintaining this environment arise from multiple annual maintenance fees as well as internal support costs every time there is an error and every time there is a new upgrade in any of the systems.
Step Two: Aligning Business Pains with a Road Map to Success
In an environment where information is critical to success, those organizations which are able to communicate and collaborate with their entire supply chain the most efficiently will gain competitive advantage. Although business needs drive the changing requirements, technology is the fundamental foundation for generating success. And, there are four distinct patterns that must be addressed by technology in today’s real-time economy.
Document Exchange & Integration
Organizations must be able to send and receive data in real time. During the 90’s, many organizations invested in both ERP systems and internal integration platforms. This was necessary as companies realized that business processes span multiple application silos. And while it is true that an organization can drive efficiency by aligning their core IT infrastructure, it is also true that an efficient process must include all of the participants. Many organizations still have very few trading partners integrated with their internal processes. Organizations must continually refine how they connect their business systems and how they enable automatic trading with their partners (i.e. customer, suppliers, distributors, financial institutions).
Key Points:
- Refine integration technologies down to one platform over time to reduce bottlenecks, proprietary code, and maintenance costs
- Partner enablement goes beyond EDI and XML. Examine small trading partner solutions including Hub & Spoke Data Distribution, Web Portals, and advanced OCR technologies to enhance current paper processes
Data Transformation & Validation
One area that is often overlooked when designing a successful road map is data transformation. This goes well beyond just translating an internal file format into an acceptable e-business standard. It is more about focusing on the types of data that your organization is sending and receiving. If you are receiving incorrect data from partners or data which doesn’t match with your internal system formats, the amount of pre-processing and error correction becomes a nightmare. Solutions exist today that allow an organization to cross-check and verify both inbound and outbound data.
Key Points:
- Applications must be able to send and receive any type of data regardless of syntax
- Information must be cleansed and continually sent through a cross-checking process to ensure that data is valid since it is much more expensive to track and correct an error than it is to prevent one
Business Process Management
Process management must be continually scrutinized for bottlenecks and manual inefficiencies. Today, many organizations are re-aligning their IT departments to work more closely with the line of business owners. Business Process Management tools of today allow an organization to completely map out processes such as Purchase to Pay from a business analyst view, a technical design view, as well as an administrative view. It is also important to remember that human intervention must also be included in these designs. From a manufacturer’s standpoint, think of your transmission of Advanced Shipping Notices. For just in time environments, it is critical to send accurate and timely notices. One of the repercussions, especially in the automotive industry, if this is not met can be excessive fines or even being dropped from the supplier base.
Key Points:
- Process design and the tools that support them must be able to support the business analyst, technical design team, and the daily administration team.
- Processes must include human intervention and alerting capabilities in order to create an exception based administrative environment.
Visibility & Collaboration
Often companies will look at the flow of data through out the supply chain and forget the valuable information being transmitted can be “liquid gold” to the management team. It is one thing to automate EDI transactions between trading partners, it is another to provide your suppliers and internal decision makers with visibility into your production schedules and current inventory levels. Once a manufacturer has connected application silos and trading partners, verified the data transformation is optimized correctly, and implemented end to end process flows, they must look at how they can gain insight. Today, a manufacturer can provide three critical views of transaction data to all participants: message tracking so all partners know where all of their transactions and data exchanges currently are in the process, vendor managed inventory views so that all partners can adjust stock levels and production schedules to real time demand, and actual product movement with the combination of RFID data management solutions.
Key Points:
- Visibility solutions reduce costly errors in trading partner relationships and allow management to make informed decisions about improvements to the supply chain.
- Collaboration can encompass data views as well as the actual movement and receipt of physical goods if combined with a RFID infrastructure.
Step Three: Implementing A B2B Gateway
Once an organization has fully assessed their current business environment and mapped their standard processes to find current gaps and costs, they must evaluate technology solutions. Today, these solutions go under a new name: B2B Gateways. This solution is an essential component of an organization’s corporate integration strategy and must be evaluated by all organizations that are facing: customer requirements, regulatory compliance, or desire to enable more efficient business processes by reducing cycle times and infrastructure complexity.
Often we see vendors touting newer technologies and acronyms such as Service Oriented Architectures to meet our changing needs. And in the end, these are technologies and methodologies that we will all adopt. However, we have also seen the hype of technologies such as XML in the past. It was once thought that this data format would completely replace the older EDI syntax of the past. The truth is that EDI is not going away just as our IT infrastructure will not adjust to a Service Oriented Architecture overnight. Manufacturer’s that truly want to integrate their internal and external processes must look at refining their underlying integration technology with a true enterprise gateway.
Organizations that don’t actively pursue a consolidated B2B Gateway strategy will without a doubt accidentally build multiple gateway strategies as they continue to adjust their operations to changing business requirements. In order to avoid the continuation of multiple integration technologies and to take advantage of the immediate business benefits, companies should pursue solutions which are provided on one single platform and have the capability to connect, coordinate, and communicate to any internal or external application or business partner.
Mr. Sprague is the Vice President of Product Strategy for SEEBURGER North America. He is a recognized expert and frequent speaker on traditional and emerging B2B initiatives and vertical solutions. He can be reached at s.sprague@seeburger.com
