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To execute multi-enterprise network business processes and manage supplier relationships, companies must invest in their infrastructure to achieve greater competitive advantage.

Achieving the Potential of Network Collaboration

Collaboration is multiple enterprises working in concert to execute critical business processes while sharing responsibility, quality, and accountability. It's key to greater efficiencies, better trading relationships, and improved profitability. But what if it could do even more? What if you were able to re-invent collaboration to facilitate real-time, rapid response trading with multiple partners simultaneously? What if you could find a way to unite your trading community into a single, seamless operation — an operation with top-notch transaction, execution, and collaboration capabilities, no redundancies, and mutual processes? And what if that ability could mitigate — if not completely eliminate — the risk of doing business across a complex supply network?

Managing Supply Chain Risk

Supply chain management. Supplier relationship management. Customer relationship management. For years, companies have been implementing these processes and the technology that supports them to improve the movement of goods and services across the supply network. The goal has always been simple: to boost profitability by cutting costs, increasing revenue, and improving service levels. But in today's environment, a new goal has been added. Today's corporate leaders are seeking assurance that their supply network can be adjusted and recreated in the face of unexpected events — whether those events include a delayed supply, a plant disruption, or an incident that shuts down an entire geographic area.

While it's clear that the need to find some way to keep supply moving in the face of any number of contingencies is urgent, few organizations are willing to toss away the benefits of just-in-time and return to the days of inventory stockpiling. And despite the ubiquitous nature of the Internet, most companies have not yet achieved the level of real-time, bi-directional communication required to create a seamless extended enterprise — one that provides the flexibility to effectively manage risk.

Fortunately, all of the components required to achieve these objectives exist today. The challenge is to leverage existing technology and processes in a manner that supports a significant number of one-to-one or one-to-many collaborations across the supply network. Already, one-to-one collaboration among trading partners is becoming common — and proving successful. But even for the largest corporate giants, the adoption curve has been focused on simple data sharing and building trading relationships one at a time. At such a slow rate of adoption, companies have found it nearly impossible to reach the critical mass that enables fluid, uninterrupted movement of components and materials across the entire trading network. Suppliers may have visibility into their customers' requirements via collaborative sharing models, but the collaboration is not always timely, does not fully enable rapid response, and often only provides visibility into one customer at a time. The same is true for the customer, who may have visibility into their suppliers' inventory to understand if and when orders will be fulfilled — but again, only one at a time, and lacking the real-time rapid response capabilities that are required to effectively manage unexpected events of every scale.

The Next Step: Creating the Supply Network

What's needed is complete visibility and actionable information across the trading network — in aggregate. The result is a fully inter-connected network in which customers can share their suppliers' — and their suppliers' suppliers' — business processes. With a complete view of complex material attributes (i.e., actual engineering properties like tensile strength and viscosity) throughout the supply chain — not just at the next tier — each supplier can understand and plan for changes in supply and demand as they occur. Working together, companies throughout the network can gain visibility and understanding at the materials level rather than stopping at the finished-goods level. This new level of detail enables trading partners to reduce process redundancies across the network, fully integrate planning systems, and dramatically cut the cost of goods sold. In essence, this network-wide system enables companies to operate as a single entity — complete with all of the operational and fiscal benefits that such efficiencies afford.

The Key to Success: Network Business Processes

The key to success lies in implementing network business processes (NBPs). Ford's success with network business processes (highlighted in the sidebar) is not unique, and the benefits can be achieved in other organizations and other industries. Defined as any business workflow where business decisions and transactions are shared across more than one organizational boundary, NBPs make it possible for companies to streamline traditional business processes by working together to create a level of communication that extends well beyond simple one-to-one, next-tier trading relationships. While the traditional business processes include activities such as resale, directed buy, co-packing, and consigned inventory management, the true value lies in creating a level of network collaboration that has the power to provide companies at every point in the supply network with significant benefits.

Creating a collaborative supply network typically requires a sponsor — an industry leader that is actively striving to create a world-class procurement organization that can offer the resources required for the initial creation of the large-scale supply network. The sponsor must provide the infrastructure to support the NBPs spanning multiple tiers. Once established, the collaborative supply network provides the sponsor with the ability to control performance, quality, and cost. While three tiers of a network serve as the starting point, the approach makes it possible for the benefits to expand exponentially as second- and third-tier suppliers piggy-back their own suppliers on the network.

For suppliers, implementing NBPs can help differentiate service offerings by greatly enhancing the level of service provided to customers. By creating network efficiencies, NBPs can also help protect market share, reduce the cost of sale and cost to serve, and create stronger customer relationships and dependencies. The self-service nature of a collaborative supply network allows suppliers to solve their customers' issues without the customer's involvement. Self-service NBPs afford a network sponsor a new level of efficiency in sourcing, buying and moving materials through the supply network while giving suppliers the ability to identify business problems, address the inefficiencies that caused the problem, and take measures to fix the problem — all before the trading relationship can be adversely affected. This benefits the supplier and the customer. Leveraging NBPs to resolve issues with the customer, the supplier can take a proactive and continuous approach to improvement — ultimately driving efficiencies throughout the entire trading network.

For buyers, implementing NBPs can help establish control and confidence by minimizing vulnerability around quality, price, and service, as well as significantly reduce materials costs, inventory costs, and administrative costs. Portals and "nested sites" (suppliers' sites that are built on the sponsored infrastructure and continue to disperse benefits deeper into the supply network) provide a birds-eye view of the total network. This view makes it possible to identify problems long before they become critical, and gives the buyer the ability to move not just orders, but actual materials, to ensure that demands are met. For indirect materials, this change can be as simple as re-routing orders from one supplier to another. For direct materials, the process is much more complex, requiring visibility into costs associated with set up, die cuts, etc. Using NBPs, such constraints can be analyzed in real-time, allowing the buyer to make decisions that balance the final cost of goods sold with required service levels. Overall, buyers can remain confident in the fact that the network will be able to continuously respond to profit requirements and critical events.

For both suppliers and buyers, the ability to collaborate on transactions is particularly important. Not only do all network participants have visibility into the network, but they also have the flexibility to execute transactions and business processes in collaboration with multiple enterprises across the network. Using traditional ERP and supply chain approaches, even advanced planning is based on finished goods inventories — not a detailed view of complex material attributes — so unexpected supply shortages or large fluctuations in demand have the ability to cripple the network. With the implementation of NBPs, each participant has the flexibility to identify where needed resources lie and instantly reconstruct the model to create a preferred solution that fixes the problem as profitably as possible.

Reinventing Collaboration

For NBPs to be effective across a complex trading network, an infrastructure must be created that can provide:
• A platform that has the power to create a configurable trading community that effectively models collaborative workflows and supports the execution of simple and complex transactions

• A detailed view of all materials that includes raw materials, engineered parts, and finished goods, which allow companies to truly optimize materials to the raw materials level by identifying opportunities for cost reduction and higher quality based on analyses of the material attributes and complex dimensions of each component used (e.g. spend analyses, quality, and age)

• Configurable business process libraries that enable network participants to model existing business processes without requiring additional resources. This feature is particularly valuable in its ability to speed implementation and return on investment

Today's technology offers companies in every industry the opportunity to take collaboration to new heights of effectiveness and efficiency. As network sponsors begin to integrate their trading networks into seamless supply networks, the potential value seems almost limitless. While the immediate return on investment lies in the efficiencies generated by individual participants, the benefits are compounded by the "network effect" — the fact that as the number of suppliers using the infrastructure grows, the overall benefits grow exponentially rather than incrementally.

In today's business environment, companies must ensure both profitability and the ability to manage the risks associated with a distributed supply network. NBPs give companies the power to understand the cost of goods sold, find new ways to control those costs to optimize profits, and achieve the flexibility and visibility required to reconfigure the network to respond to unexpected events. As illustrated in the Ford example, the immediate benefits include reduced materials, inventory, and administrative costs, as well as an improved level of overall network control. Ultimately, the goal of NBPs is to shrink the total cash conversion cycle, enabling network sponsors and participants to better utilize assets in their continuous effort to grow and protect their businesses.