B2B connectivity is no longer a luxury; it’s a necessity in order for a company to remain competitive. B2B integration enables a company to focus on its core competencies and offload other services to partners in order to gain efficiencies and reduce cost. Companies today operate in a global business environment. They don’t live on an island; they need to interact not only with their suppliers but also with their trading partners and customers, all of whom may be distributed throughout the world.
After spending the greater part of the past decade purchasing expensive ERP systems, Customer Relationship Management, and e-Commerce applications in a departmental manner, companies are turning their attention to integrating these information silos and looking beyond the corporate walls for new opportunities to eliminate costs and gain a competitive advantage.
Companies need to embark on three distinct initiatives for creating and deriving value from an extended enterprise. First, optimizing internal processes; second, reducing transaction costs; and finally, enhancing supply chain efficiency.
Optimizing Internal Processes
A primary reason for building e-business integration initiatives internally is that value chains are only as strong as their weakest link. Devoting extensive time, resources, and capital to B2B projects will seldom yield substantial return on investment if internal systems are not integrated. B2B initiatives such as e-commerce and procurement often fall outside the capabilities of ERP software. To compensate for ERP’s shortcomings, companies purchase other applications, build custom applications, or rely on legacy applications. Although they provide significant value collectively, these disparate applications build thiefdoms of information that cannot be easily shared, contributing to business process bottlenecks and inefficiencies.
Companies that try to integrate these systems on a point-to-point basis get what Gartner calls ‘spaghetti code.’ This is one reason companies spend up to 35 percent of their software maintenance budgets on simply maintaining these connections instead of focusing on their core competencies. Simply connecting applications on a point-to-point basis is not enough. Without a thoroughly integrated internal infrastructure, B2B initiatives are sure to provide little value in the best-case scenario, or no value in the worst.
To fully achieve the kind of business process visibility required to gain true insight into the enterprise and supply chain, companies must rise out of the thiefdoms of information and departmental approaches to conducting business. They need the ability to define enterprise business processes that can span across multiple systems and business partners that reside beyond the firewall. These processes are independent of any particular application and should support open industry standards of business process and portability.
The answer involves standards-based Business Process Management (BPM) and Business Activity Monitoring (BAM) software that, among other benefits, reduces the amount of always-expensive human intervention.
In order for a system to provide real-time Business Activity Monitoring, it needs to have a common metadata repository and an events repository that caches all the relevant events in real-time. This repository can be accessed in real-time to gather insight into a business process. A user needs to have the ability to define key performance indicators (KPI) to monitor, and associate them with specific events. This enables real time visibility into processes and KPIs.
BAM has the ability to drill down into the process in real-time to identify bottlenecks and either notify the application administrator to fix the error in the system … or simply change the business process to make it run more efficiently.
Reducing Transaction Costs
To reduce transaction costs, companies need to focus on three initiatives: reducing (always expensive and often error-prone) human interaction to managing by exceptions, leveraging the Internet as much as possible for conducting transactions, and supporting industry-standard protocols that not only define the document exchange format but also automate the process of communications between trading partners.
Enhancing Supply Chain Efficiency
Collaborative commerce is a non-linear, near real-time, many-to-many flexible technology platform that creates an extended enterprise where suppliers, partners and customers can share, modify and act upon information and processes.
One benefit? Better-managed and less expensive inventory as information takes the place of physical inventory. Another? Transferring active leads to partners better-equipped to act on them.
To drive down costs across the entire value chain, partners must define their business processes across the entire enterprise, enable two-way visibility of both supply and demand information across the value chain, and consider tight integration with partners’ back-end systems.
While the rewards of B2B are considerable, there are barriers to success:
- Without internal visibility, internal bottlenecks and inefficiencies simply replace external ones.
- Managing a diverse group of trading partners — potentially supporting a variety of business communication protocols — is a daunting task.
- Security is required to protect potentially sensitive information; partners must provide a message-tracking system to prove that transactions actually occurred.
- Adoption, support and establishment of industry-standard protocols for conducting transactions, especially when moving beyond exchanging transactions to actually sharing business processes.