Raising the Performance of New Trading Communitites
Studies by Forrester Research (Boston, Mass.) show business-to-business e-commerce surging from $43 billion in 1999 to $1.3 trillion in 2000. Currently, nearly 300 ventures have created Web-centric business models centered around vertical sectors, a number that is expected to double in the next year.
The Standish Group (Dennis, Mass.) research firm projected that 15,000 data warehouse projects with budgets greater than $3 million were launched in 1999 at a cost of $95 billion. With all these IT and solution investments, businesses are expected to transact over $1.25 trillion in business-to-business sales. Currently, nearly 300 ventures have created Web-centric business models centered around vertical sectors, a number that is expected to double in the next year.
Possibly the biggest news to date comes from Ford and General Motors who've announced they're moving their entire multibillion dollar purchasing operations onto the Internet. They'll establish market sites that establish worldwide networks of business-to-business commercial portals. The sheer size of this initiative is stunning: Ford makes annual purchases of $80 billion in components and materials from over 30,000 suppliers. Ford's extended supply chain has sales of about $300 billion a year.
And that's just a small sampling of how seriously IT managers and their staffs are leveraging data warehouses, ostensibly the powerful technology behind the blending of Enterprise Resource Management (ERP) and Supply Chain Management (SCM) systems. Studies by Forrester Research (Boston, Mass.) show business-to-business e-commerce, surging from $43 billion in 1999 to $1.3 trillion in 2000.
"An example of how dramatically things are changing is HP's introduction of e-speak technology this past Fall that gives legs to dynamic brokering capabilities," noted HP's Lane Kato, Global Supply Chain Program Mgr. "It enables creation of modular services for the Net - agents can be constructed that "talk" to each other. They describe what they're capable of doing; and they can band together to complete a given, proactive task automatically."
In a trading community equipped with these agents, an e-service portal gains from greatly facilitated supply chain processes, from end-to-end. For example, when e-services can communicate with each other, the various rippling effects of a delay in delivering a component to manufacturing become significantly less problematic. Inventory levels are automatically reported. Meanwhile, agents set in motion a search for alternate suppliers who can quickly respond with product delivery.
At HP and elsewhere, enhancements that have special significance for trading communities are taking shape. ERP market leader SAP is shipping key components of its my-SAP.com portal software, a Web front-end that provides both access and personalization to its ERP modules. In September, the company also unveiled the mySAP.com Web site, a public portal designed to connect business partners that aren't yet linked electronically.
Oracle recently unveiled Oracle Applications Release 11i, which links the vendor's existing Web-based ERP and procurement software with new Web supply chain, order management and self-service apps. The package, due out in the first quarter, will be tied to a new release of Oracle's customer relationship management tool, as well as to a newly operational portal that resembles mySAP.com.
And vendors such as Ariba, are developing Web-based technology to automate purchasing processes and provide services that weren't previously possible. This product reduces costs by removing the manual, paper-based elements inherent in today's purchasing systems, and using the power of the Internet, to link employees from their desktops directly with preferred suppliers. In partnership with HP, Ariba has created the Ariba Network, a business-to-business Internet service which connects buyers and sellers. These services allow large enterprises to manage all their operating resources, including capital equipment, services, maintenance, repair, and operating (MRO) supplies and travel expenses, in one comprehensive, integrated application.
Nowadays, trading communities are moving to incorporate suppliers, vendors, and distributors well beyond the confines of EDI without custom software applications that practically limited the number of users. Web technology will enable companies to link Customer Relationship Management (CRM) and customer service groups, tightly coupling e-commerce sales to the inventory and manufacturing processes.
While it's not limited to trading communities alone, Web technology already enables corporations to outsource database and applications hosting and management to suppliers and vendors who can do the job more cost-efficiently. "This is essentially a strategic move in the sense that IT departments become less of a cost-center which makes shareholders happy. HP's vision of e-services includes information as a utility, where users will access computing power on a pay-per-basis," says Kato.
IT managers can buy additional storage capacity as needed. And they can even outsource database hosting and management entirely. Again, the trend is to move areas of non-core competencies off-campus to suppliers and vendors who can host databases more efficiently, and most likely have more experience in providing extensive data security and backup measures. IT managers can also arrange for service level agreements that guarantee user response times and database availability.
One of the keys to strong trading communities is having high performance, scalable and easily manageable hardware and software to wire the communities together. To reward and win over site users with availability and responsiveness, trading portals will require 'five-nines' uptime (99.999%). HP supplements its trading community platforms with remote monitoring services and management tools such as HP OpenView to assure appropriate availability and support effective network, systems and applications performance management.
Significant progress made by electronics distributors model (see Bell Microproducts sidebar) what other trading communities will likely undertake. The HP/i2 partnership, which dates back to the early '90s, has largely succeeded with this particular trading community because it provides them, for the first time, with a complete set of tools generically required at each link along the supply chain (i.e., decision support, business process optimization, interactive planning and collaboration, order fulfillment, and tracking and reporting).
HP contributes additional network management and operational enablers such as HP's WebQoS, e-speak, Praesidium security and High-Availability and hosting services that make this trading community tick. Furthermore, HP e-speak will be used in the next-generation trading community to define and facilitate conversations between services and provide much more proactive operations and processes, automatically.
The process of establishing trading communities typically sheds greater light into the various process requirements of customer management. These include segmenting the market, identifying potential customers, attracting, profiling and acquiring customers, defining and executing the sale (either directly, or through indirect channels), delivering the product or service, retaining the customer through superior after-sales service and maintenance programs and creating long-term up-selling and cross-selling opportunities.
Of these, which aspects or characteristics ensure the most functional, intelligent and truly advantageous trading communities and how does this relate to HP hardware and other elements of infrastructure? Generally, the maximum benefit from online trading portal services is gained when the infrastructure addresses the following:
• Provides users with convenient connections to associated marketplaces enabling rapid response throughout the buying and selling cycles as well as optimized planning and email/collaboration tools (which might ideally take advantage of hosted applications).
• Enhances customer services across entities, support customer "help-desk" services.
• Supports the exchange of complex data in multiple formats in real-time (complex objects, EDI, formatted email, secure HTML) from suppliers, enable supplier/ vendor self-service.
• Provides links for company users into order, manufacturing and distribution information (demand/forecast plans, manufacturing/distribution plans and scheduling.
• Supports inventory processes with capabilities for outsourcing and even auctioning.
By leveraging ERP and SCM systems with new capabilities attuned to trading community processes, companies can automate and simplify many operational processes essential to performance, reliability, and security. HP an d prominent solution partners are making a sweeping integration of back-office and front-office processes, and providing scalable, extensible platforms for these purposes that were hard to imagine just two years ago. Using Web technology on top of existing or next-generation ERP and SCM systems will truly empower trading portals that serve trading communities.
Bell Microproducts Raises The Performance Standard
In July 1999, Bell Microproducts became the first enterprise to adopt a new view of next-generation e-business trading communities, specifically for electronics distributors. Motivating the company was its unique place, serving both industrial and commercial distribution channels, even as channel margins dramatically shrink.
Bell Microproducts (San Jose, Calif.) is one of the nation's ten largest distributors of high-technology semiconductor, storage and computer products. The electronic components we sell originate with more than one hundred manufacturers. It's a considerable challenge to orchestrate processes supporting just-in-time inventory to our customers including industrial and commercial original equipment manufacturers, value-added resellers, systems integrators and resellers. This challenge shaped our requirements for an optimized trading community and consequently, the infrastructure that will be deployed in phases during the year.
We looked to leverage the HP and i2-based trading community platform to support a host of basic transactional capabilities needed for streamlining Bell Microproducts' purchasing and supply chain, (i.e. auctioning, buy/sell, automating RFPs to a large degree). Decision support tools will enhance company users' decision making prowess and support more effective forecasting and planning with customers for a variety of purposes such as coordinating deliveries from multiple component manufacturers.
But what happens during special events or circumstances? Our vision was that the trading community support both planned and unscheduled transactions. It's not unusual for our customers to request expedited delivery or even deliveries to multiple locations. But this is difficult for legacy SCM solutions to accommodate. The trading community solution we'll be using has the flexibility to handle these situations; it allows us to search for suppliers with delivery capacity or even to add new suppliers as needed for additional capacity.
What Bell Microproducts has learned and articulated throughout the organization, is that the strongest defense to competitive pressures, shrinking profit margins, and serving multiple channels effectively is to reduce the cost of buying, handling, and owning the product. By being first to adopt the HP and i2 intelligent trading community for electronics distributors, Bell Microproducts and the other community members are equipped to collaborate and exchange data through integration of i2's RHYTHM solutions on an HP infrastructure.
Director of Internet Marketing