FEATURE ARTICLE

Subject: November 2001 ECMgt.com: New Dimensions for Growth and Evolution
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November 1, 2001 *4,300 subscribers* Volume 3, Issue 11
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Collaborative Commerce: Automating and Integrating Trading Partner Relationships
By Steve Rabin, Chief Technology Officer
eB2B Commerce, Inc.

When it comes to trading partner collaboration it doesn't matter what the question is because the answer is always … Your Supply Chain. Achieving lower costs, shorter lead times, higher accuracy and greater information flow requires that supply chains evolve towards more and more integration. In fact, the mythical and ideally balanced supply chain operates as a single organism delivering value to the customer by integrating processes and removing barriers between functions and companies.

It is well known that buyers and suppliers have high hopes for utilizing the Internet to streamline trading partner relationships. The opportunity to improve operational coordination, increase execution efficiencies, reduce costs and maintain a high level of customer service is very compelling. While the benefits of collaboration are often touted the processes and procedures required for success are a little less clear. As a rule, enterprises have difficulties managing and balancing internal supply chain processes and associated communications. When one considers the added complexity of extending these processes and communications to trading partners it is not surprising that things get a bit murky.

Unlike driving from San Francisco to Oakland, California (a 20-minute trip) there is neither a straight-forward roadmap or bridge that defines how trading partners should collaborate. In addition, the integration and technology (software, hardware and infrastructure) required to support these extra-enterprise initiatives do not come in shrink wrapped, one-size-fits-all packages. Trading communities have different requirements and individual trading partners have different technology and business needs. These needs often differ for each specific trading relationship.

In order to be successful, trading partner relationships must be managed across the entire order management transaction lifecycle: requisition-order-fulfillment-settlement, or "req to check". While managing and supporting the exchange of lifecycle documents is not new, it has become more of an issue as the constant push towards automation and operational efficiencies accelerates. Existing and newer technologies, trading paradigms and business models have evolved that help solve these issues efficiently.

Rather than a revolutionary approach to trading partner collaboration it is best to build on existing best practices. What specific processes and associated information need be shared? How often will this occur, what is the technology infrastructure and who is accountable? Developing, agreeing to and then implementing a joint plan with each trading partner is critical to the long-term success of any collaborative scheme.

Trading partner collaboration activities significantly reduce the barriers of communication, time and distance. This electronic tightening of the supply chain has garnered much attention because automated interactions provide the ability to exchange and act upon business documents. EDI (the father of all electronic business interactions) the method most currently used to support collaborative activities and has proven to yield numerous benefits, which have been documented over the past twenty years:

1) Reduced paperwork and improve transaction efficiency
2) Improved control of inventories/suppliers
3) Accuracy of data and documents
4) Improved customer relationships
5) Shared resources/risks
6) Reduced costs as compared to manual trading interactions

While EDI helped automate the largest trading partners in a supply chain community it never fulfilled the promise of true collaboration, especially among small and medium sized enterprise (SME's). This meant that the investment in front and back-end systems, through EDI integration, could never be fully leveraged or the benefits fully realized. Migrating the concepts embodied by EDI to the Internet provides a simple way to increase the number of collaborative participants because the technology and cost barriers to entry are minimized.

Since collaborative networking infrastructures, software solutions, standards and technologies are in their infancy it is important to understand the keys to successful Internet based collaboration. EDI will continue to be a strong player but other complementary alternatives need be considered as well. In fact EDI, over time, will morph with XML based schemas and solutions to represent an optimal way of exchanging both planning information (i.e. forecasts), operational documents (i.e. PO, ASN) and the underlying data.

Integration, automation and collaboration are the keys to improving communication between trading partners regardless of their technological sophistication and IT infrastructure (both software and hardware).

Integration insures that all electronic transactions interface seamlessly with existing internal applications, EDI or other collaborative facilities. The format of the transactions, scheduling delivery and interface to back-end systems (i.e. ERP, POS) must be defined and agreed to across each specific trading relationship. This leverages existing system investments while eliminating costly and inefficient manual processes and/or system re-engineering efforts.

Automation uses the technology of the Internet to provide each trading partner with the means to receive and view plans/orders, send turnaround documents and manage each phase of the order management transaction lifecycle. This includes, for example, forecasts, replenishment information, purchase orders, acknowledgements, invoices, advance ship notifications, bar code labels and remittance advice. Automation services are geared to each specific partner segment from small to large regardless of any individual trading partners level of technical sophistication. This leveling of the playing field insures that all participants can communicate most efficiently and effectively to the benefit of all.

Collaboration provides the functionality for buyers and sellers to access and utilize the information that is being communicated. This is, of course, more than a technology issue because it involves how enterprises will utilize this information for the benefit of both parties. For example, dynamic demand activity and sell through reports are required if suppliers are to have the latest information on which to base production, sourcing and shipment schedules.

Achieving the bottom line benefits and efficiencies associated with seamless partner communication can be accomplished in a variety of ways. Regardless of the method selected it is critical that the choice be based on a robust, extensible standard that supports the needs of the business and its trading partner community. It is equally important that the technology solution be flexible enough to support all key trading partners, large and small.

Internet based EDI automation is one example already described that meets the above criteria. It provides for integration, automation and collaboration across a trading community. It is based on an extensible standard and can support the technical/business needs of its users. eB2B Commerce (http://www.eb2b.com) is an example of a firm that provides an Internet based EDI Trading Network for both industry groups and firms of all sizes.

While the utilization and expansion of EDI will continue other methodologies and standards are also gaining attention. Two of these are CPRF (http://www.cpfr.org) and SCOR (http://www.supply-chain.org).

CPFR - collaborative planning, forecast and replenishment - is a standard developed over the past ten years to help retailers and their suppliers communicate more effectively throughout the demand planning and replenishment process. SCOR - Supply Chain Operational Reference model - is a standard that has also been developed over time to define the processes around the plan-source-make-deliver-return cycle. CPFR and SCOR have similar goals to improve logistics performance at a reduced cost, reduce or balance inventory, improve information accuracy, optimize fill rates and minimize administrative overhead. As with EDI, this is accomplished by the integration/automation/collaboration of trading partner data in a system that supports a rich lexicon and offers alternative technical implementations. Syncra Systems (http://www.syncra.com) is an example of a firm that offers a CPFR certified solution. Many supply chain vendors support the SCOR initiative and process models.

Regardless of the collaborative model used the transactional requirements between buyers and suppliers remain relatively constant. This is one of the reasons it makes sense to look at the map types described by the EDI transaction set. Whether this is pre-order, order time or post order there are specifically defined transactions, being utilized by thousands of trading partners, across the order management lifecycle. In fact one of the reasons many of the earlier XML based collaborative solutions (and their underlying schemas) were not successful was because they were not robust enough as business-to- business documents.

The years of experience and utilization represented by EDI should not be taken lightly. Newer XML schemas (ebXML for example) are now learning this lesson by ensuring the problems solved and data exchanged by EDI are taken into account in these standards. Fundamental business requirements between buyers and suppliers have not changed very much. It is the means of implementing trading partner exchanges that are evolving.

Business documents, in the form of transactions, that are initiated and turned-around to complete a trade come in may forms. For example, the trading relationship, type of product (e.g. hazardous or not), location of partners (i.e. international trade) and business requirements all contribute to the complexity and number of required interactions.

A simple exchange between buyer and supplier can easily include the following:

Buyer

Supplier

inventory inquiry (EDI 846)
product activity (EDI 852)

PO (EDI 850)
PO change (860)
store information (EDI 864)
order status inquiry (EDI 869)
remittance advice (EDI 820)

inventory advice (EDI 846)
product activity (EDI 852)
price change (EDI 879)
PO acknowledgement (EDI 850)


ASN (EDI 856)
invoice (EDI 810)
RMA (EDI 180)

Building a sustainable transaction flow is the key to achieving a state of efficient flow between the various collaborative participants. Event-based business supply and demand decisions can only be identified based on the quality and quantity of the information provided. The biggest barrier to this transaction liquidity is the difficulty of getting trading partners connected and ready to exchange documents. Problems tend to fall into two categories - partner acquisition and activation. Partner acquisition problems occur if an enterprise is unable to get key partners to connect and participate. Causes include a weak value proposition, unnecessary complexity (technical or operational) and cost issues. In effect, the enterprise cannot offer a partner a compelling reason to bear the time and expense of integration and participation. Remember that both sides of the trading equation must benefit from the collaboration. Partner activation problems include frustrated partners, complex implementation requirements, technical inconsistencies and cost issues. In effect, the enterprise cannot offer a partner a reasonable way of implementing the collaborative process and associated infrastructure; the key issues tend to be around integration and automation.

The best way to avoid these problems is to define a joint process and implementation plan, with executive sponsorship and management accountability, between trading partners. This plan should not be overly complex and should be based on the established business practices of each organization. The following is an example of such a plan:

  1. Develop front-end agreement
  2. Create joint business plan
  3. Identify goals and short term milestones
  4. Assign management ownership
  5. Define technical infrastructure
  6. Agree to standards and rules of engagement
  7. Build a joint project team
  8. Develop a detailed project schedule
  9. Define performance measurements

Performance metrics and the ability to measure the success of the collaborative effort is key to the on-going project. While the metrics will differ by organization and trading partner the important issue is that the data be available for analysis. The following are examples of the types of metrics to consider:

a. forecast accuracy
b. delivery performance
c. fulfillment lead times
d. order fill accuracy
e. inventory reduction
f. cycle time
g. replenishment accuracy
h. customer service interactions
i. event visibility and notification improvement

Collaborative networks are intended to support the needs of both buyers and suppliers as they conduct business and collaborate with their trading partners. This is best accomplished by leveraging a buyers or suppliers existing infrastructure (both IT and business practices). The web-based solution must be transactionally mature and support the exchange of business documents across the order management lifecycle.

The ability to pro-actively and uniquely support the functional and transactional requirements of trading partners is the key to better customer service, operating efficiencies and cost reductions. Allowing buyers and sellers to customize the processes utilized during the requisition-order-fulfillment-payment cycle insures that orders and their fulfillment are communicated and executed accurately. Automated business event based interfaces to back-office systems (both planning and execution) supports the synchronized enterprise. Using industry standard communication methods and transaction semantics allows for both inter and intra company interactions.

In many ways the future of commerce will look like the past. That is, a key task will be finding the most efficient, cost-effective means of serving and collaborating with trading partners. The problems and opportunities discussed in this article are not new. In fact, over the years (and starting with EDI) issues involving automated partner communications has led to many advances in operational and planning efficiencies.

STEVEN RABIN is Chief Technology Officer at eB2B Commerce, a New York firm offering Internet commerce based transaction lifecycle and trading relationship management services and solutions. He specializes in emerging technologies in the areas of wireless/internet communications, object/component based development, transaction services, XML schemas and Internet enabled Enterprise architectures.

 

 

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