Executive Briefings

E-Connectivity in Multi-Enterprise Supply Chains: Leveraging the Business Network

The lengthening of supply chains at both the supplier's and the customer's side of the equation has resulted in an increased need for collaboration of all kinds.

Business and IT leaders are under increasing pressure to improve B2B collaboration and the underlying electronic communication capabilities of their organizations. Benchmark data from a recent survey of over 117 companies (Process Collaboration in Multi-Enterprise Supply Chains) show the following trends:

• 68 percent of companies reported an increased emphasis on customer collaboration over the last two years whereas 2 percent reported a decrease

• 74 percent reported an increased emphasis on supplier collaboration over the last two years whereas 0 percent reported a decrease

In today's global economy, businesses are finding an increasing need for multi-enterprise supply chains, or business networks, to be focused on process integration and collaboration. This is due to a variety of business pressures such as rising costs, global competition, the need for reduced cycle times, etc. Working in a multi-enterprise supply chain world requires bi-directional electronic connectivity (referred to as process integration in our research), as well as process collaboration to succeed. Process collaboration is an advanced stage of process integration which includes not just data transfer but also includes business processes that span the collaborating enterprises.

The top three pressures identified by companies driving their focus around process integration and collaboration are:

• Rise in business complexity due to an increase in value chain partners (40 percent). For companies to be flexible and responsive they need to move beyond purely focusing on internal innovation to building a strong business network that can transform and respond based on market pressures.

• Shrinking margins due to price pressure (34 percent). The globalization and widening of the business network affects not only the buy side of the supply chain but the sell side as well. Enterprises are being forced to diversify their view of what constitutes a target customer as they embrace new markets that require new channels.

• Pressure to reduce supply chain risks (28 percent). When the number of nodes in the supply chain increases, the risk of business disruption or even catastrophic failure increases at a faster rate.

The top two strategic actions taken by companies in terms of process integration and collaboration are:

• Improve supply chain visibility (64 percent). Visibility in a multi-enterprise supply chain is not easy to gain but is critical to successfully managing the increased complexity of these relationships. When the number of nodes in the business network increases, the impact of changes and disruptions, and thus the need for timely reactions, increases dramatically. A small disruption in raw material supply can cause a major shutdown of a plant, and an immense loss of time and money. Traditional approaches to managing complexity that focused on expediting and the use of alternate suppliers, while still viable in some cases, can also result in increased supply chain costs and management intervention. A better solution is to gain visibility at the point and time closest to where the issue or disruption occurs, rather than several steps downstream.

• Integrate partner-facing collaboration processes with internal business processes (35 percent). Companies that build external-facing collaboration processes with their trading partners have solved only part of the problem. Until they take the next step of driving the collaboration into existing internal business processes, they still face reduced efficiency and potential supply chain disruption. In creating this integration, however, companies must often deal with monolithic legacy systems (including internally developed suites and ERP) that were often designed with an internal enterprise view point in mind.

The Outlook

When it comes to being able to on-board trading partners or being able to support unique business processes for trading partners, on-demand solutions are proving to have better capabilities. However, when it comes to internal process integration, the pendulum swings towards on-premise applications. On-premise applications are able to better integrate with internal legacy ERP systems as well as other internally managed systems. Their single point of IT management allows them to support an integrated application and data infrastructure.

Business and IT leaders are under increasing pressure to improve B2B collaboration and the underlying electronic communication capabilities of their organizations. Benchmark data from a recent survey of over 117 companies (Process Collaboration in Multi-Enterprise Supply Chains) show the following trends:

• 68 percent of companies reported an increased emphasis on customer collaboration over the last two years whereas 2 percent reported a decrease

• 74 percent reported an increased emphasis on supplier collaboration over the last two years whereas 0 percent reported a decrease

In today's global economy, businesses are finding an increasing need for multi-enterprise supply chains, or business networks, to be focused on process integration and collaboration. This is due to a variety of business pressures such as rising costs, global competition, the need for reduced cycle times, etc. Working in a multi-enterprise supply chain world requires bi-directional electronic connectivity (referred to as process integration in our research), as well as process collaboration to succeed. Process collaboration is an advanced stage of process integration which includes not just data transfer but also includes business processes that span the collaborating enterprises.

The top three pressures identified by companies driving their focus around process integration and collaboration are:

• Rise in business complexity due to an increase in value chain partners (40 percent). For companies to be flexible and responsive they need to move beyond purely focusing on internal innovation to building a strong business network that can transform and respond based on market pressures.

• Shrinking margins due to price pressure (34 percent). The globalization and widening of the business network affects not only the buy side of the supply chain but the sell side as well. Enterprises are being forced to diversify their view of what constitutes a target customer as they embrace new markets that require new channels.

• Pressure to reduce supply chain risks (28 percent). When the number of nodes in the supply chain increases, the risk of business disruption or even catastrophic failure increases at a faster rate.

The top two strategic actions taken by companies in terms of process integration and collaboration are:

• Improve supply chain visibility (64 percent). Visibility in a multi-enterprise supply chain is not easy to gain but is critical to successfully managing the increased complexity of these relationships. When the number of nodes in the business network increases, the impact of changes and disruptions, and thus the need for timely reactions, increases dramatically. A small disruption in raw material supply can cause a major shutdown of a plant, and an immense loss of time and money. Traditional approaches to managing complexity that focused on expediting and the use of alternate suppliers, while still viable in some cases, can also result in increased supply chain costs and management intervention. A better solution is to gain visibility at the point and time closest to where the issue or disruption occurs, rather than several steps downstream.

• Integrate partner-facing collaboration processes with internal business processes (35 percent). Companies that build external-facing collaboration processes with their trading partners have solved only part of the problem. Until they take the next step of driving the collaboration into existing internal business processes, they still face reduced efficiency and potential supply chain disruption. In creating this integration, however, companies must often deal with monolithic legacy systems (including internally developed suites and ERP) that were often designed with an internal enterprise view point in mind.

The Outlook

When it comes to being able to on-board trading partners or being able to support unique business processes for trading partners, on-demand solutions are proving to have better capabilities. However, when it comes to internal process integration, the pendulum swings towards on-premise applications. On-premise applications are able to better integrate with internal legacy ERP systems as well as other internally managed systems. Their single point of IT management allows them to support an integrated application and data infrastructure.