E-business is arriving so fast that manufacturing businesses are already finding they do not have the option of sitting back and waiting for developments. Frank Booty reports.
It’s all about take-up of the totally integrated virtual supply chain (or rather network) concept. And the most vital component in this process is fulfilling on the electronic transactions – making the delivery right and on time – e-fulfilment.
There is a quote from management business guru Peter Drucker that’s most apt here. Successful companies will “sell what they can deliver” rather than the hitherto oft-aired view of success devolving to companies who “sell what they make”. It’s a subtle point but vital nevertheless to e-business.
There are many examples where manufacturers’ ‘back-end’ fulfilment issues have started to impact the profitability and customer service of major Web sales operations. Stories of retyping online orders into a mainframe, following up Web orders with phone calls for conformations, and over-stocking of goods to meet a perceived demand are legion. As are stories of late deliveries – even around Christmas. It’s not good.
But it is important. Conservatively expected to be worth some $1.5 trillion by 2003, the global e-business market splits into business-to-business (B2B) at $1.3 trillion and business-to-consumer (B2C), which takes the rest. Of B2B’s lion’s share, the manufacturing sector is expected to generate a staggering 65%. And hence the urgency.
As a result, virtually all of the enterprise software (ERP) developers and vendors are focussing on e-fulfilment as the main point for getting the Internet and Internet technologies working for companies in handling all the various forms of e-business. Mid-market manufacturing-orientated ERP firm Baan, for example, last month launched its initiative through the ‘Accelerate’ programme in which the company is working with consultant Deloitte Consulting to provide UK manufacturers with a “phased and costed approach to e-fulfilment implementations”.
E-business developments are providing companies with opportunities to rebuild business processes through setting up new relationships, driving down prices and reducing delivery times. E-fulfilment enables these organisations to create collaborative commerce networks, conferring agility while simultaneously minimising inventories, lead times and costs – in an emerging culture where “the customer is king”.
Research by analyst GartnerGroup shows “70% of e-commerce implementation problems are now related to integrating front-end Web processes with back-end fulfilment”. For many, front/back-office alignment and addressing e-fulfilment’s challenge, constitute the number one e-business issue.
David Foster, Baan’s Managing Director, says, “For e-fulfilment to be successful, organisations need to look beyond key supply chain issues such as the ability to check availability - that’s ATP, available-to-promise - and capability to deliver - that’s CTP, capability-to-promise. They need to start addressing profitable-to-promise, PTP, which is particularly important for e-business applications as at any given time an e-fulfilment solution might need to be capable of processing potentially hundreds or thousands or real-time transactions. Determining profitability will be a key requirement.”
“For computer systems in any given supply chain to communicate with each other, there have to be high levels of integration,” says Foster. “Such systems have to be dynamic, with supply chains capable of being instantly reconfigured in response to changing market needs. Software needs to be broken into granular components with standard interfaces to other components and the outside world.”
All this can be achieved through object-orientated technology – intelligent bits of code capable of being reconfigured quickly to reflect different and evolving business processes – and applying the Web’s XML messaging technologies and system-independent standards like Microsoft BizTalk. These will provide the neutral interface format to connect different supply chain systems, nodes and companies.
Whatever the product, manufacturers need access to detailed information when making purchasing decisions over the Internet. New supply chain goals include the ability to synchronise and accelerate the flow of material and information inside and outside businesses.
“They need to enable the real-time exchange of information, moving away from linear supply chains to one where multiple activities occur concurrently,” says Foster. “They need to ensure intelligent decisions can be taken closer to the time orders are placed, effectively lowering costs of delivered goods and improving customer service.”
Consultants and analysts meanwhile suspect e-fulfilment may not span many ‘links’ of the supply ‘chains’. Ralph Seeley at industry watcher Cambashi, for example, believes Baan’s vision is fulfilment on its terms – aided as necessary by Deloitte Consulting – “which doesn’t translate to e-fulfilment via a heterogeneous supply chain. Until consistent, accurate and up-to-date information exists, ‘supply chain management and optimisation, including collaborative planning and forecasting’ is likely to remain a marketer’s aspiration.”
ARC’s Simon Bragg says, “It’s important to pick a software company that’s going to be around in 2005, who you trust will still be developing functionality you require, even though you may not have a clue what you’ll need in 2005. Which manufacturer in 1995 realised it would need to transact business through Internet exchanges?”
Seeley says, “If ERP/supply chain companies were really committed to B2B, their marketing would emphasise commitment to some common messaging schema, eg ‘buy me, I speak ERPeranto’. But apart from a ritual nod to XML – and in some MS-leaning companies, BizTalk – these companies appear to adopt the view that supply chains are neatly disjointed. Each supply chain therefore cannot afford to develop a unique lingua franca based on a single vendor’s tools. It’s either particularly misguided or an extraordinarily arrogant view.”
Nevertheless, B2B companies will only want to deal with suppliers/partners who can make real-time fulfilment commitments at the time of order. So something has to be done.
Baan’s Foster says: “The rewards of a collaborative commerce approach are attractive. We’re already seeing market sectors seriously start to address this opportunity. We’re working with companies like PC manufacturer evesham.com which is rebuilding its supply chain around our e-fulfilment approach and using Baan technology to open up its processes and enable customers and partners to track their orders right through the supply chain.”
And this is happening now.
Author: Frank Booty