Executive Briefings

'True' Collaboration: It's in the Eye Of the Beholder

Nearly everyone agrees that a synchronized supply chain requires effective collaboration between trading partners, but when it comes to defining what collaboration actually is and how to accomplish it, opinions are all over the map.

Some describe automated communications between partners as collaboration, even if the information being exchanged is purely transactional. Others believe that true collaboration should include such elements as mutually agreed upon business objectives and performance metrics as well as enterprise-spanning processes. A few say the word "collaboration" doesn't reflect what is happening in the marketplace and ought to be thrown out altogether.

"We banned the use of 'collaboration' internally three years ago," says Lorenzo Martinelli, executive vice president of E2open, Redwood City, Calif. "The truth is that in supply chain and procurement, people don't want to collaborate. What they want is visibility and control-the kind of control they used to have when supply chains were primarily internal. They are not interested in some 'kumbaya, let's all get together' kind of thing."

Such differences may be partly a matter of semantics and partly a reflection of the market's immaturity. Bill Read, a partner in the supply chain practice at Accenture, McLean, Va., says Accenture's research shows that about half of the companies involved in trading partner collaboration are fairly advanced, but the other half are in the very early stages of implementation- either at the planning stage or just getting under way. "It's clear that there is still a lot of room for improvement in this space," he says.

Read takes the more expansive view of collaboration. "Companies have been exchanging automated information for years; that's nothing new," he says. "To my mind, true collaborative relationships are ones that have clearly set out the business objectives that both organizations want to achieve and have put in place the actual process elements to achieve them."

Additional studies confirm that few companies are yet at this level. In a survey last year conducted by Capgemini, Georgia Southern University and the University of Tennessee, less than 10 percent of 2,300 respondents were found to be capable of "true collaboration," which the surveyors defined as comprising real-time data sharing with key customers and suppliers, alignment of people and organizations and alignment of processes and practices. This study attributes the low number to the complexity of today's global supply chains, which "create much higher information demands than domestic movements."

Another reason for the slow progress, says Read, may be the lack of a strong, documented value proposition. Only 15 percent of companies implementing collaborative programs that Accenture has studied describe the benefits as "high," he says. Another 55 percent say benefits have been moderate to low, while 30 percent don't know. "If 30 percent of the people engaged in collaboration don't know if they have realized benefits, that is a major challenge and a major opportunity," Read says.

"When we started working on this solution we quickly learned that it has to be an any-to-any environment."
- Lorenzo Martinelli of E2open

A new study by Aberdeen Group, Boston, suggests yet another cause: many companies haven't gotten to external collaboration because they still are trying to master collaboration internally. This is evidenced by sales and operating planning processes that "are broken," says Nari Viswanathan, research director of supply chain and logistics at Aberdeen and author of the recent "Technology Strategies for Integrated Business Planning Benchmark Report." Viswanathan's research reveals that 83 percent of companies have only one department running sales and operations planning (S&OP) as opposed to the cross-functional teams needed to reach a consensus forecast. "This shows that companies continue to have trouble breaking down internal organizational barriers," he says. It also indicates a lack of technology that can be easily and intuitively used by many people across different departments, he adds.

And then there is the issue of trust. "Cultural issues around collaboration continue to be a barrier because these trading partners traditionally have had arm's-length relationships," says Read. Interestingly, he adds, all of these barriers-process, value and trust-"are related to how companies interact and have little to do with the availability of technology."

Essential Piece
Technology is an essential piece of the solution, however, and advances in recent years have made connecting to and communicating with partners a lot easier. For many companies, the first step is to connect with suppliers and/or customers via a third-party that provides an integration platform for onboarding partners and an any-to-any communications infrastructure. Providers in this space include E2open, Inovis, Sterling Commerce, Axway and GXS, among others. Some of these companies, like Sterling and Axway, grew out of old EDI value-added networks (VANs), while providers like E2open are pure-play providers that were created specifically to address this problem. All say that their type of separate infrastructure is needed because enterprise systems were not built to handle multi-party networking.

"ERP and other enterprise systems were designed to automate internal processes, but it requires a very different architecture to automate processes that now go externally between companies," says Martinelli. "You have to establish a common view and a single version of the truth that both you and your supplier can see. You have to be able to onboard people using whatever systems they have and there has to be support for and transformation of any type of communications format." Seagate, an E2open customer, requires that all of its trading partner communications adhere to RosettaNet standards, for example. While more technically capable partners run their own RosettaNet servers, E2open integrates other suppliers into Seagate's supply chain via a Web-based interface and provides the necessary RosettaNet translations, regardless of the origination program.

"When we started working on this solution we quickly learned that it has to be an any-to-any environment because the moment you ask a supplier or any trading partner to change something they are doing, you introduce costs, delays and risk," Martinelli says. "The better way is to say, 'give me the data you have, whatever way you can' and then adapt to that." E2open currently enables 51 customer hubs and 12,666 trading partner connections, mostly in the high-tech industry.

One of the primary benefits of this type of network or hub solution is that it eliminates the need for companies to implement separate one-to-one integration with each partner, making it possible to onboard all suppliers. "People used to think that these systems were only good for big suppliers, the old 80/20 rule," says Martinelli. "That's a fallacy. You need to onboard 100 percent of trading partners because if you are missing one component you cannot ship a product."

Moreover, since these solutions are typically delivered as a service, they require little upfront investment and have a relatively low total cost of ownership.

The majority of information exchanged via these hubs is transactional data, such as purchase orders, acknowledgments and advance ship notices. Providers aggressively are adding more collaborative tools, however, especially to enable visibility, exception management, process management and analytics.

"Over the last couple of years , we have been adding applications specifically focused on data in motion, providing things like real-time analytics to help our customers improve demand visibility," says Dave Bennett, chief technology officer at Axway, Scottsdale, Ariz. "The next natural piece will be forecasting and channel management to help them deal with overstock and out-of-stock issues." Axway, which recently acquired Cyclone Commerce, has more than 7,000 customers worldwide with particular vertical strength in the healthcare and pharmaceutical industries.

"Many of our pharmacy customers that are using our connectivity and integration technology are now also buying real-time analytics so they can monitor inventory in their distribution channels," Bennett says. This trend, he explains, is being driven by government regulations aimed at preventing distributors from buying large amounts of drugs in anticipation of price increases. "Compliance actually is a big driver of collaboration, especially in healthcare," he says. "A lot of companies are being forced to be more transparent and expose more information across their supply chain. Once they do this, they then see how they can leverage that information to deal with exceptions real time and to monitor supply chain performance."

Inovis, Atlanta, has more than 20,000 users, primarily in the retail industry. In addition to its connectivity platform, President Sean Feeney says the company "has added capabilities around event management and work flow." In addition, Feeney stresses Inovis's leadership in data synchronization. "We think the key to collaboration and to supply chain optimization going forward is clean data," he says. Inovis maintains product catalogs that retailers and suppliers rely on to ensure that they are referring to the same product in documents like orders and invoices. "These catalogs are the result of retailers and suppliers collaborating to synchronize data, which leads to more correct orders and better supply chain efficiency," he says. Inovis catalogs more than 100 million items, with more than 100 different product attributes for each item, including price, size, color and style, Feeney says. Recently the company added imaging. "Now the retailers and suppliers can not only have data about a product, but they can see an image to further ensure that they have the correct order," says Feeney.

Visual display company ViewSonic implemented the Gentran Integration Suite from Sterling Commerce, Columbus, Ohio, to connect to customers and automate its order-to-cash cycle. "From the time we receive a sales order from our customer, all the way to when we actually ship the product and send an invoice, all those business processes are automated," says Jordan Beseiso, global business-to-business integration manager. "Sterling offered a tool set that allowed us to do data transformation in a very efficient manner; a tool set that allowed us to do business process modeling so we could automate our actual business processes; and it offered a lot of pre-built services that we could pretty much drag and drop to configure the system as we wanted it," he says.

Configurability is important, because companies have many different communities of trading partners and the same collaborative tool will not be right for all, says Roy Lee, vice president for global product marketing at Sterling. "Some groups of trading partners may supply raw materials, others may relate to regulatory controls, others might be around market channels, all needing to exchange different types of information," he says. "It might be something simple like a purchase order or invoice, or something more complex, like validating credit risk. Only when you understand these issues can you select the blend of solutions and technology that optimize the relationships you rely on to serve your customer," he says.

Some industries are large enough and specialized enough to support their own trading community. One of the best examples is Exostar, an aerospace and defense industry hub that was founded in 2000 by Boeing, BA Systems, Lockheed Martin, Raytheon and Rolls Royce. Exostar survived the crash of 2000, when so many other fledgling exchanges went under, "because we managed to stay focused on our mission," says Peter Scott, vice president of marketing. Today Exostar has 23,000 registered users that last year transacted $23bn worth of goods and services. On top of its integration and communications platform, Exostar has deployed a portfolio of collaborative business applications, Scott says, but its "secret sauce" is its leadership in security and identity management. "We found that one of the biggest barriers to collaboration is a lack of trust that the data is secure and that the people committing to commercial transactions are who they say they are," he says. Also, he says, users want to know that if something goes wrong, they can perform an audit and find every person who touched a piece of data."

Authentication
Exostar requires two-factor authentication for every user. The first factor is a user name and password and the second is a digital certificate or token that has to be downloaded. "The next higher step is biometrics, but we don't see a need for that as yet," Scott says.

In addition, Exostar has created special security measures in conjunction with ForumPass, a solution that allows virtual meetings where partners from different organizations, in different countries, can simultaneously view the same design drawing or other document. To make this work for users, Scott says, Exostar had to come up with end-to-end encryption. "Files can be encrypted on a desktop and they stay in an encrypted state, even when they are at rest in the database. Only someone who has been given specific rights to that information and has been authenticated can unencrypt the file."

Product design seems to be the area where the most in-depth collaboration occurs. This has been driven by the outsourcing of design and manufacturing and also by a shift in corporate priorities, says David Edwards, senior product marketing manager at Cimmetry Systems, a leader in collaborative visualization solutions. "Innovation has eclipsed cost cutting and manufacturing efficiency as the number one priority of American corporations," he says. "And innovation doesn't happen by accident." Innovation requires, among other things, "a culture where people are able to access information and each other in order to collaborate on both structured and unstructured documents," he says.

Unstructured documents include pictures and drawings of 3D models. Cimmetry's AutoVue solution enables many people to simultaneously view and manipulate files at their own desktops. All comments and changes are captured and an audit trail is established. "That is what we call synchronous collaboration," he says. "We also enable asynchronous collaboration, which is where you throw something up on a portal and keep it open for a week for review. People can go there at any time, open the drawing and apply comments to it."

Cimmetry does not republish these documents in a collaborative format. Rather, all documents are kept in their native systems and native format. "We just plug in the collaborative capability on top," says Edwards. "That simplifies and streamlines the process and it creates a self-serve environment." Cimmetry is a wholly-owned subsidiary of Agile Software.

Forecasting is another supply chain area that has long been the focus of collaborative initiatives, starting a decade ago with a standardized process around Collaborative Planning, Forecasting and Replenishment. "A lot of companies adopted CPFR as a good model, but the problem was that the nine steps were very linear. By the time you were done, the world had moved on," says John Cummings, senior vice president of i2 Technologies, Dallas. "We are now moving to the next level with a new generation of solutions that allow trading partners to collaborate in a more real-time environment with a greater depth of information," he says. The company enables this with an offering called Multi-Enterprise Interactive, "which is a light layer that sits across multiple enterprises," he says.

Cummings says that one of the best examples of multi-enterprise collaboration that he has seen involves electronics manufacturer Panasonic, retailer Best Buy and i2. "This is a model that we call Virtual Direct," says Cummings. Essentially, Best Buy collects Panasonic point-of-sale information at its stores and sends it to Panasonic, which uses i2 solutions and consultants to plan store replenishment and production. As a result, Panasonic's in-stock positions at Best Buy stores has increased dramatically, boosting sales and revenue for both companies. At the same time, overall inventory has decreased.

"This is a great example of multi-enterprise collaboration because it goes from the shelf straight back through manufacturing and distribution," says Cummings. "Panasonic's supply chain is virtually connected to its shelf-that's a story every company would love to be able to tell."

HP Improves 3PL Connections
Hewlett-Packard, Palo Alto, Calif., has developed a collaborative process to work more efficiently with its third-party logistics providers. The solution is called LEGO, after the children's toy. "Historically, HP was tightly coupled with its 3PLs, meaning we gave the 3PL our system and they had to use our system for transactions," says John Daniels, business solutions manager for worldwide logistics. "With LEGO, we are moving to a loosely coupled relationship."

Instead of giving 3PLs a system they have to use, LEGO provides modular components that include business processes and standard messaging formats, Daniels explains. The real key, however, is standard business content. "What we are really doing is standardizing the way we talk with our partners," he says. "We will talk whatever language our partner needs us to talk. But by standardizing content, even though we are using different languages, we still get the same answers in and out of both our systems."

An example might be the requirement for including country of origin, he says. Before, some systems would require this, some would not. "We have standardized content on shipping notes, such as whether something has to be shrink-wrapped, and even content on value-added services," he says. This makes doing business a lot easier for everybody and it should reduce costs. "Just not having to train somebody on a specific system and being able to have flexibility in moving employees around will enable our 3PLs to be more efficient," he says.

Standardized content also makes it easier for HP to manage by exception, he says. "All of our messages with partners are integrated so we always know what our inventory levels are at our 3PLs and what their cycle count accuracy is-things like that. But we are able to manage it from afar, as we should. The whole point of outsourcing logistics is to have this done by experts."

HP's logistics providers are very happy with this solution, he says. "We have a large number of messages that we exchange with our 3PLs, and LEGO drastically cuts down their design time, development time, testing and implementation time. Things go faster on their side with lower IT requirements, because once you have done this the first time it is like a cookie cutter."

Some describe automated communications between partners as collaboration, even if the information being exchanged is purely transactional. Others believe that true collaboration should include such elements as mutually agreed upon business objectives and performance metrics as well as enterprise-spanning processes. A few say the word "collaboration" doesn't reflect what is happening in the marketplace and ought to be thrown out altogether.

"We banned the use of 'collaboration' internally three years ago," says Lorenzo Martinelli, executive vice president of E2open, Redwood City, Calif. "The truth is that in supply chain and procurement, people don't want to collaborate. What they want is visibility and control-the kind of control they used to have when supply chains were primarily internal. They are not interested in some 'kumbaya, let's all get together' kind of thing."

Such differences may be partly a matter of semantics and partly a reflection of the market's immaturity. Bill Read, a partner in the supply chain practice at Accenture, McLean, Va., says Accenture's research shows that about half of the companies involved in trading partner collaboration are fairly advanced, but the other half are in the very early stages of implementation- either at the planning stage or just getting under way. "It's clear that there is still a lot of room for improvement in this space," he says.

Read takes the more expansive view of collaboration. "Companies have been exchanging automated information for years; that's nothing new," he says. "To my mind, true collaborative relationships are ones that have clearly set out the business objectives that both organizations want to achieve and have put in place the actual process elements to achieve them."

Additional studies confirm that few companies are yet at this level. In a survey last year conducted by Capgemini, Georgia Southern University and the University of Tennessee, less than 10 percent of 2,300 respondents were found to be capable of "true collaboration," which the surveyors defined as comprising real-time data sharing with key customers and suppliers, alignment of people and organizations and alignment of processes and practices. This study attributes the low number to the complexity of today's global supply chains, which "create much higher information demands than domestic movements."

Another reason for the slow progress, says Read, may be the lack of a strong, documented value proposition. Only 15 percent of companies implementing collaborative programs that Accenture has studied describe the benefits as "high," he says. Another 55 percent say benefits have been moderate to low, while 30 percent don't know. "If 30 percent of the people engaged in collaboration don't know if they have realized benefits, that is a major challenge and a major opportunity," Read says.

"When we started working on this solution we quickly learned that it has to be an any-to-any environment."
- Lorenzo Martinelli of E2open

A new study by Aberdeen Group, Boston, suggests yet another cause: many companies haven't gotten to external collaboration because they still are trying to master collaboration internally. This is evidenced by sales and operating planning processes that "are broken," says Nari Viswanathan, research director of supply chain and logistics at Aberdeen and author of the recent "Technology Strategies for Integrated Business Planning Benchmark Report." Viswanathan's research reveals that 83 percent of companies have only one department running sales and operations planning (S&OP) as opposed to the cross-functional teams needed to reach a consensus forecast. "This shows that companies continue to have trouble breaking down internal organizational barriers," he says. It also indicates a lack of technology that can be easily and intuitively used by many people across different departments, he adds.

And then there is the issue of trust. "Cultural issues around collaboration continue to be a barrier because these trading partners traditionally have had arm's-length relationships," says Read. Interestingly, he adds, all of these barriers-process, value and trust-"are related to how companies interact and have little to do with the availability of technology."

Essential Piece
Technology is an essential piece of the solution, however, and advances in recent years have made connecting to and communicating with partners a lot easier. For many companies, the first step is to connect with suppliers and/or customers via a third-party that provides an integration platform for onboarding partners and an any-to-any communications infrastructure. Providers in this space include E2open, Inovis, Sterling Commerce, Axway and GXS, among others. Some of these companies, like Sterling and Axway, grew out of old EDI value-added networks (VANs), while providers like E2open are pure-play providers that were created specifically to address this problem. All say that their type of separate infrastructure is needed because enterprise systems were not built to handle multi-party networking.

"ERP and other enterprise systems were designed to automate internal processes, but it requires a very different architecture to automate processes that now go externally between companies," says Martinelli. "You have to establish a common view and a single version of the truth that both you and your supplier can see. You have to be able to onboard people using whatever systems they have and there has to be support for and transformation of any type of communications format." Seagate, an E2open customer, requires that all of its trading partner communications adhere to RosettaNet standards, for example. While more technically capable partners run their own RosettaNet servers, E2open integrates other suppliers into Seagate's supply chain via a Web-based interface and provides the necessary RosettaNet translations, regardless of the origination program.

"When we started working on this solution we quickly learned that it has to be an any-to-any environment because the moment you ask a supplier or any trading partner to change something they are doing, you introduce costs, delays and risk," Martinelli says. "The better way is to say, 'give me the data you have, whatever way you can' and then adapt to that." E2open currently enables 51 customer hubs and 12,666 trading partner connections, mostly in the high-tech industry.

One of the primary benefits of this type of network or hub solution is that it eliminates the need for companies to implement separate one-to-one integration with each partner, making it possible to onboard all suppliers. "People used to think that these systems were only good for big suppliers, the old 80/20 rule," says Martinelli. "That's a fallacy. You need to onboard 100 percent of trading partners because if you are missing one component you cannot ship a product."

Moreover, since these solutions are typically delivered as a service, they require little upfront investment and have a relatively low total cost of ownership.

The majority of information exchanged via these hubs is transactional data, such as purchase orders, acknowledgments and advance ship notices. Providers aggressively are adding more collaborative tools, however, especially to enable visibility, exception management, process management and analytics.

"Over the last couple of years , we have been adding applications specifically focused on data in motion, providing things like real-time analytics to help our customers improve demand visibility," says Dave Bennett, chief technology officer at Axway, Scottsdale, Ariz. "The next natural piece will be forecasting and channel management to help them deal with overstock and out-of-stock issues." Axway, which recently acquired Cyclone Commerce, has more than 7,000 customers worldwide with particular vertical strength in the healthcare and pharmaceutical industries.

"Many of our pharmacy customers that are using our connectivity and integration technology are now also buying real-time analytics so they can monitor inventory in their distribution channels," Bennett says. This trend, he explains, is being driven by government regulations aimed at preventing distributors from buying large amounts of drugs in anticipation of price increases. "Compliance actually is a big driver of collaboration, especially in healthcare," he says. "A lot of companies are being forced to be more transparent and expose more information across their supply chain. Once they do this, they then see how they can leverage that information to deal with exceptions real time and to monitor supply chain performance."

Inovis, Atlanta, has more than 20,000 users, primarily in the retail industry. In addition to its connectivity platform, President Sean Feeney says the company "has added capabilities around event management and work flow." In addition, Feeney stresses Inovis's leadership in data synchronization. "We think the key to collaboration and to supply chain optimization going forward is clean data," he says. Inovis maintains product catalogs that retailers and suppliers rely on to ensure that they are referring to the same product in documents like orders and invoices. "These catalogs are the result of retailers and suppliers collaborating to synchronize data, which leads to more correct orders and better supply chain efficiency," he says. Inovis catalogs more than 100 million items, with more than 100 different product attributes for each item, including price, size, color and style, Feeney says. Recently the company added imaging. "Now the retailers and suppliers can not only have data about a product, but they can see an image to further ensure that they have the correct order," says Feeney.

Visual display company ViewSonic implemented the Gentran Integration Suite from Sterling Commerce, Columbus, Ohio, to connect to customers and automate its order-to-cash cycle. "From the time we receive a sales order from our customer, all the way to when we actually ship the product and send an invoice, all those business processes are automated," says Jordan Beseiso, global business-to-business integration manager. "Sterling offered a tool set that allowed us to do data transformation in a very efficient manner; a tool set that allowed us to do business process modeling so we could automate our actual business processes; and it offered a lot of pre-built services that we could pretty much drag and drop to configure the system as we wanted it," he says.

Configurability is important, because companies have many different communities of trading partners and the same collaborative tool will not be right for all, says Roy Lee, vice president for global product marketing at Sterling. "Some groups of trading partners may supply raw materials, others may relate to regulatory controls, others might be around market channels, all needing to exchange different types of information," he says. "It might be something simple like a purchase order or invoice, or something more complex, like validating credit risk. Only when you understand these issues can you select the blend of solutions and technology that optimize the relationships you rely on to serve your customer," he says.

Some industries are large enough and specialized enough to support their own trading community. One of the best examples is Exostar, an aerospace and defense industry hub that was founded in 2000 by Boeing, BA Systems, Lockheed Martin, Raytheon and Rolls Royce. Exostar survived the crash of 2000, when so many other fledgling exchanges went under, "because we managed to stay focused on our mission," says Peter Scott, vice president of marketing. Today Exostar has 23,000 registered users that last year transacted $23bn worth of goods and services. On top of its integration and communications platform, Exostar has deployed a portfolio of collaborative business applications, Scott says, but its "secret sauce" is its leadership in security and identity management. "We found that one of the biggest barriers to collaboration is a lack of trust that the data is secure and that the people committing to commercial transactions are who they say they are," he says. Also, he says, users want to know that if something goes wrong, they can perform an audit and find every person who touched a piece of data."

Authentication
Exostar requires two-factor authentication for every user. The first factor is a user name and password and the second is a digital certificate or token that has to be downloaded. "The next higher step is biometrics, but we don't see a need for that as yet," Scott says.

In addition, Exostar has created special security measures in conjunction with ForumPass, a solution that allows virtual meetings where partners from different organizations, in different countries, can simultaneously view the same design drawing or other document. To make this work for users, Scott says, Exostar had to come up with end-to-end encryption. "Files can be encrypted on a desktop and they stay in an encrypted state, even when they are at rest in the database. Only someone who has been given specific rights to that information and has been authenticated can unencrypt the file."

Product design seems to be the area where the most in-depth collaboration occurs. This has been driven by the outsourcing of design and manufacturing and also by a shift in corporate priorities, says David Edwards, senior product marketing manager at Cimmetry Systems, a leader in collaborative visualization solutions. "Innovation has eclipsed cost cutting and manufacturing efficiency as the number one priority of American corporations," he says. "And innovation doesn't happen by accident." Innovation requires, among other things, "a culture where people are able to access information and each other in order to collaborate on both structured and unstructured documents," he says.

Unstructured documents include pictures and drawings of 3D models. Cimmetry's AutoVue solution enables many people to simultaneously view and manipulate files at their own desktops. All comments and changes are captured and an audit trail is established. "That is what we call synchronous collaboration," he says. "We also enable asynchronous collaboration, which is where you throw something up on a portal and keep it open for a week for review. People can go there at any time, open the drawing and apply comments to it."

Cimmetry does not republish these documents in a collaborative format. Rather, all documents are kept in their native systems and native format. "We just plug in the collaborative capability on top," says Edwards. "That simplifies and streamlines the process and it creates a self-serve environment." Cimmetry is a wholly-owned subsidiary of Agile Software.

Forecasting is another supply chain area that has long been the focus of collaborative initiatives, starting a decade ago with a standardized process around Collaborative Planning, Forecasting and Replenishment. "A lot of companies adopted CPFR as a good model, but the problem was that the nine steps were very linear. By the time you were done, the world had moved on," says John Cummings, senior vice president of i2 Technologies, Dallas. "We are now moving to the next level with a new generation of solutions that allow trading partners to collaborate in a more real-time environment with a greater depth of information," he says. The company enables this with an offering called Multi-Enterprise Interactive, "which is a light layer that sits across multiple enterprises," he says.

Cummings says that one of the best examples of multi-enterprise collaboration that he has seen involves electronics manufacturer Panasonic, retailer Best Buy and i2. "This is a model that we call Virtual Direct," says Cummings. Essentially, Best Buy collects Panasonic point-of-sale information at its stores and sends it to Panasonic, which uses i2 solutions and consultants to plan store replenishment and production. As a result, Panasonic's in-stock positions at Best Buy stores has increased dramatically, boosting sales and revenue for both companies. At the same time, overall inventory has decreased.

"This is a great example of multi-enterprise collaboration because it goes from the shelf straight back through manufacturing and distribution," says Cummings. "Panasonic's supply chain is virtually connected to its shelf-that's a story every company would love to be able to tell."

HP Improves 3PL Connections
Hewlett-Packard, Palo Alto, Calif., has developed a collaborative process to work more efficiently with its third-party logistics providers. The solution is called LEGO, after the children's toy. "Historically, HP was tightly coupled with its 3PLs, meaning we gave the 3PL our system and they had to use our system for transactions," says John Daniels, business solutions manager for worldwide logistics. "With LEGO, we are moving to a loosely coupled relationship."

Instead of giving 3PLs a system they have to use, LEGO provides modular components that include business processes and standard messaging formats, Daniels explains. The real key, however, is standard business content. "What we are really doing is standardizing the way we talk with our partners," he says. "We will talk whatever language our partner needs us to talk. But by standardizing content, even though we are using different languages, we still get the same answers in and out of both our systems."

An example might be the requirement for including country of origin, he says. Before, some systems would require this, some would not. "We have standardized content on shipping notes, such as whether something has to be shrink-wrapped, and even content on value-added services," he says. This makes doing business a lot easier for everybody and it should reduce costs. "Just not having to train somebody on a specific system and being able to have flexibility in moving employees around will enable our 3PLs to be more efficient," he says.

Standardized content also makes it easier for HP to manage by exception, he says. "All of our messages with partners are integrated so we always know what our inventory levels are at our 3PLs and what their cycle count accuracy is-things like that. But we are able to manage it from afar, as we should. The whole point of outsourcing logistics is to have this done by experts."

HP's logistics providers are very happy with this solution, he says. "We have a large number of messages that we exchange with our 3PLs, and LEGO drastically cuts down their design time, development time, testing and implementation time. Things go faster on their side with lower IT requirements, because once you have done this the first time it is like a cookie cutter."