Executive Briefings

Trading Partner Enablement for Multi-Enterprise Supply Chains

Analyst Insight: Top-performing companies have developed a range of capabilities that, when combined with the proper technology enablement, allow them to achieve improvements in business metrics such as cash-to-cash cycle time and customer service level.  Trading Community Management (TCM) refers to a closed-loop process that involves trading partner recruitment, trading partner enablement, trading partner on-boarding, and trading partner performance management. In this context, the trading community refers to both the demand network (retailers, customers, VARs, resellers, distributors) and the supply network (systems suppliers, contract manufacturers and original design manufacturers).

--Nari Viswanathan, vice president & principal analyst at Aberdeen Group

The following are the process capability advantages that Best-in-Class companies have demonstrated across the TCM process:

1. Building the business case for TCM. This is the key step where upper management is provided a business case by the IT and/or the line of business organization (supply chain, procurement and operations) for creating a trading community initiative.

Aberdeen research finds that Best-in-Class companies are 5 times more likely than all others to indicate that B2B integration and collaboration has a mission-critical impact on their organization. This implies that Best-in-Class companies have a better handle on the importance of building trading communities (both suppliers and customers).

2. Segment the trading partner base. Aberdeen research reveals that companies today are two times more likely to on-board a critical trading partner as compared to a non-critical trading partner. This approach of focusing on the key suppliers may have worked in the past but in today's highly distributed demand-supply network environment, this approach is not viable. In fact, 49 percent of respondents indicate that for every week that a new trading partner is not fully enabled in the supply chain, there is a significant operational impact on the business. So how can companies integrate and build community with the entire set of trading partners? One of the crucial first steps is to segment the trading partner base across multiple tiers. Some of the approaches for segmenting the trading partner base are based on business document volume per trading partner, integration complexity, or percentage of spend with a supplier. However companies are quite immature in their ability to segment their trading partner base. In fact, 53 percent of all other category survey respondents did not conduct surveys of their supplier base to identify contact information as compared to 33 percent of Best-in-Class companies not doing so.

3. Recruit and on-board trading partners. Best-in-Class companies have established a higher percentage of their trading partners utilizing electronic methods of communication. For example: 70 percent of Best-in-Class companies receive sales orders (from customer to manufacturer) electronically from greater than 50 percent of their customer base. Similarly, 60 percent of Best-in-Class companies have the POs transmitted electronically to greater than 50 percent of their supplier base.

4. Manage trading partners. Best-in-Class companies are 1.3 times more likely than all others to conduct post-on-boarding surveys of their already on-boarded supplier base to identify the extent of their involvement in B2B integration and collaboration. On-going monitoring of the usage of the solution by trading partners and ensuring that they are in compliance is critical. There could also be situations involving disputes between trading partners or between a trading partner and the organization. There should be workflows defined for how to resolve these disputes if they arise and identification of the chain of command on both sides.

5. Monitor performance. Once the trading partners are on-boarded it is critical to continuously monitor the performance based on operational and financial metrics and identify a resolution approach if the performance is not up to par. This is an area of differentiation, as Best-in-Class companies are 2.2 times more likely than all others to have the ability to measure supplier performance over a period of time.

6. Evolve with business changes. In today's dynamic business environment, processes must be nimble and should support changes rapidly. This is true for TCM as well. The precursor for the change in business processes (responsiveness being the ability to change the process rapidly) is the visibility into processes. Only 20 percent of even the Best-in-Class respondents indicate that they have adequate visibility into the status of business processes at their trading partners.

The Outlook

Cloud computing is the way of the future for supply chain collaboration. There is a need for establishing a single object that can be reused across multiple trading partners. In the retail supply chain example, if a manufacturer sends a shipment to retailer, it should be modeled only once irrespective of whether it is at a regional DC, on an ocean carrier or at a customer's store. Cloud computing allows the establishment of this type of information model. However, the challenge is whether the various parties in an industry can agree on a common information and frequently bidirectional information exchange model. Only on acceptance of a secure and sustainable information model will there be the possibility of a public cloud.

 

Analyst Insight: Top-performing companies have developed a range of capabilities that, when combined with the proper technology enablement, allow them to achieve improvements in business metrics such as cash-to-cash cycle time and customer service level.  Trading Community Management (TCM) refers to a closed-loop process that involves trading partner recruitment, trading partner enablement, trading partner on-boarding, and trading partner performance management. In this context, the trading community refers to both the demand network (retailers, customers, VARs, resellers, distributors) and the supply network (systems suppliers, contract manufacturers and original design manufacturers).

--Nari Viswanathan, vice president & principal analyst at Aberdeen Group

The following are the process capability advantages that Best-in-Class companies have demonstrated across the TCM process:

1. Building the business case for TCM. This is the key step where upper management is provided a business case by the IT and/or the line of business organization (supply chain, procurement and operations) for creating a trading community initiative.

Aberdeen research finds that Best-in-Class companies are 5 times more likely than all others to indicate that B2B integration and collaboration has a mission-critical impact on their organization. This implies that Best-in-Class companies have a better handle on the importance of building trading communities (both suppliers and customers).

2. Segment the trading partner base. Aberdeen research reveals that companies today are two times more likely to on-board a critical trading partner as compared to a non-critical trading partner. This approach of focusing on the key suppliers may have worked in the past but in today's highly distributed demand-supply network environment, this approach is not viable. In fact, 49 percent of respondents indicate that for every week that a new trading partner is not fully enabled in the supply chain, there is a significant operational impact on the business. So how can companies integrate and build community with the entire set of trading partners? One of the crucial first steps is to segment the trading partner base across multiple tiers. Some of the approaches for segmenting the trading partner base are based on business document volume per trading partner, integration complexity, or percentage of spend with a supplier. However companies are quite immature in their ability to segment their trading partner base. In fact, 53 percent of all other category survey respondents did not conduct surveys of their supplier base to identify contact information as compared to 33 percent of Best-in-Class companies not doing so.

3. Recruit and on-board trading partners. Best-in-Class companies have established a higher percentage of their trading partners utilizing electronic methods of communication. For example: 70 percent of Best-in-Class companies receive sales orders (from customer to manufacturer) electronically from greater than 50 percent of their customer base. Similarly, 60 percent of Best-in-Class companies have the POs transmitted electronically to greater than 50 percent of their supplier base.

4. Manage trading partners. Best-in-Class companies are 1.3 times more likely than all others to conduct post-on-boarding surveys of their already on-boarded supplier base to identify the extent of their involvement in B2B integration and collaboration. On-going monitoring of the usage of the solution by trading partners and ensuring that they are in compliance is critical. There could also be situations involving disputes between trading partners or between a trading partner and the organization. There should be workflows defined for how to resolve these disputes if they arise and identification of the chain of command on both sides.

5. Monitor performance. Once the trading partners are on-boarded it is critical to continuously monitor the performance based on operational and financial metrics and identify a resolution approach if the performance is not up to par. This is an area of differentiation, as Best-in-Class companies are 2.2 times more likely than all others to have the ability to measure supplier performance over a period of time.

6. Evolve with business changes. In today's dynamic business environment, processes must be nimble and should support changes rapidly. This is true for TCM as well. The precursor for the change in business processes (responsiveness being the ability to change the process rapidly) is the visibility into processes. Only 20 percent of even the Best-in-Class respondents indicate that they have adequate visibility into the status of business processes at their trading partners.

The Outlook

Cloud computing is the way of the future for supply chain collaboration. There is a need for establishing a single object that can be reused across multiple trading partners. In the retail supply chain example, if a manufacturer sends a shipment to retailer, it should be modeled only once irrespective of whether it is at a regional DC, on an ocean carrier or at a customer's store. Cloud computing allows the establishment of this type of information model. However, the challenge is whether the various parties in an industry can agree on a common information and frequently bidirectional information exchange model. Only on acceptance of a secure and sustainable information model will there be the possibility of a public cloud.