eCommerce Requires Intelligent Supply Chains

Early networking within the corporation consisted of mainframe-connected terminals. Users were limited to viewing and entering data, and had to manually pore over printouts and reports to analyze their data. The advent of the PC and applications like the spreadsheet enabled users to use their data, bringing reporting, analysis and presentation onto the desktop, thereby increasing users' ability to act on decisions quickly, and heightening the company's business agility.

Internet computing is following a similar path. With browsers and the World Wide Web, the Internet today is largely for viewing and entering data. The pivotal change that's underway is moving the industry to a more interactive Internet that enables applications to not only view, but also make active use of data. As this transition occurs, business systems evolve from supplier-centric to customer-centric.

Figure 1.	Stage 1: Web presence

The Web server is a standalone server, usually outside the company's firewall. It is not linked with any existing business systems. Many businesses establish this type of Web presence through an Internet service provider (ISP).

Figure 2.	Stage 2: E-commerce -- linking internal data

Stage 2 -- E-commerce
On the World Wide Web today, suppliers go beyond displaying electronic brochures describing their products, services, and company information. Suppliers offer e-commerce services that allow their customers to place orders directly with them by linking to an internal line of business systems. An example is Barnesandnoble.com, which uses a Web presence for e-commerce that ties into the fulfillment systems they already had in place to support their catalog sales.

We have also seen the rise of a new set of middlemen who consolidate information made available from a number of external Web sources to provide a single site for their customers to get information from many suppliers. If stage 1 was the stage of disintermediation, this is the stage of re-intermediation. An example of re-intermediation is Travelocity, a travel site that incorporates information from other Web sources to provide its travel customers services such as airline ticket, hotel room and rental car reservations.

Both Stages 1 and 2 are supplier-centric models. In supplier-centric computing, customers go to suppliers to get one-size-fits-all data. All customers receive the same data (no personalization). There are still many suppliers without a Web presence today. We will continue to experience explosive growth in stages 1 and 2, since these models provide new ways for suppliers to advertise, market, and sell their products and services. Table 1 summarizes the stages of e-business and compares supplier-centric and customer-centric characteristics.

Figure 3.	Stage 2: E-commerce -- consolidated data from external sources

Tomorrow's Internet: Customer-centric Computing
Stage 3 -- Data Delivery
For tomorrow's Internet, we will see a significant transition to customer-centric computing. Customer-centric computing is about the shift from customers using their browser to obtain data from their suppliers to suppliers enabling their customers by delivering personalized data (tailored to what they care about) directly to them. Suppliers begin to deliver binary data that can be integrated into their customers' and suppliers' spreadsheets and business systems. For example, the supplier might supply a component that automatically updates the customer's spreadsheet whenever an order status changes. Having this data delivered allows the customer to proactively take steps to deal with issues like inventory shortages or missed customer delivery windows.

Data delivery improves a customer's decision support capability. One example is when a customer checks inventory to determine whether they will be able to fill a sales order on time. The ability to order data across multiple systems and suppliers means available inventory is not limited to what the customer's business system says is available in the warehouse. The available inventory is a combination of internal stock, stock in transit, and stock that could arrive (from one or more suppliers) in time to fill the sales order. Stage 3 combines information from both internal and external business systems.

Figure 4.	Stage 3: Data Delivery

It also initiates a radically different relationship between suppliers and customer -- one in which suppliers compete on the basis of how effectively they can integrate their information with those of their customers and suppliers to create a positive service experience. Suppliers win by not only accelerating, automating, and optimizing their own business systems and decision-making environments, but also by delivering information that helps customers and suppliers accelerate, automate, and optimize their decision-making processes.

As a result, IT organizations must consider suppliers and customers as a new constituency in addition to their traditional customers (corporate management, business units, and end-users). To increase the efficiency of the value chain without changing core business systems, IT must rapidly develop application services for customers and suppliers. An example of an application service is an Internet-based dynamic inventory control system, which has logic encoded to aid customers and suppliers in decision making.

Figure 5.	IT gains a new constituency: customers and suppliers

Stage 4 -- Automated Inter-business Processes
Process integration between the decision-making systems of businesses, their suppliers, and their customers becomes bi-directional and tightly integrated. Suppliers can interact dynamically and can initiate business processes within each other's information systems by pre-defining business rules that trigger events across systems. That means that supply chains can be fully automated. For example, when an order comes into a supplier, orders to the supplier's suppliers to replace committed stock are automatically generated and a ripple effect through the supply chain ensues. Less human intervention is required at each step, as inter-business processes become more automated and rules-based.

As Stage 3 evolves, customers' and suppliers' business systems are able to make more intelligent business decisions. For example, if one supplier's price drops below that of other suppliers, the customer's application might automatically move that supplier up in the vendor of choice list on the business rules engine. The customer consulting the vendor of choice list before ordering would see the supplier at the top of the list and place an order with that supplier rather than the others.

Stage 4 is about the automation of the decision-making processes between businesses. For example, a supplier application sends a customer application a component that includes pricing information and services that let that customer automatically place orders. If the supplier's price drops to a level designated in business rules, it triggers the customer's inventory control system to start ordering stock (without human intervention) from that supplier, rather than from the competition, because that supplier in effect automated supplier selection.

Figure 6.	Stage 4: Automated inter-business processes

The key value of Stage 4 is rich connections, which convey more than information, between businesses. They provide interfaces that support process automation between businesses over the Internet, instead of being limited, as it currently is, to intra-business transactions or to business partners who create expensive custom linkages. The rapid, two-way flow of information accelerates the business cycle, enables just-in-time delivery, reduces the cost per transaction, and streamlines the way resources flow through the supply chain.

The e-business transition of today's supplier-centric data-view environment to a customer-centric environment is one in which suppliers:

• Use the universal communications medium of the Internet to tightly link their business information systems.
• Win customer loyalty and increase the of their supply chain by using their own information technology systems to increase their customers' and suppliers' decision-making effectiveness.

Table 2 summarizes the key transitions in this evolution from supplier-centric to customer-centric e-business.

Successful suppliers will capitalize on technology advancements to gain a competitive advantage. As these technologies become commonplace, cus tomer-centric computing will transform enterprise computing from business processes that are wholly contained within a company to business processes that transcend business boundaries.

Figure 7.	From multiple processes within an enterprise to a single process that encompasses multiple enterprises.

Going Forward
Customer-centric e-business suppliers will compete not only on the price and quality of their products and services, but also on the quality of their information services and e-business links. Suppliers who operate within intelligent supply chains will be able reduce inventory, be more responsive, and improve customer service. It is easier for these suppliers to target customers with whom they have already established business links. Customer-centric computing breaks down barriers between suppliers and their customers and suppliers and improves decision-making. Intelligent supply chains provide suppliers with a competitive edge.

About The Author
George Moakley
Director of Enterprise Architecture, Intel

George Moakley is the lead architect for Intel's Distributed Enterprise Architecture Lab (DEAL), whose charter is Intel's vision and architecture for enterprise computing and e-business solutions. George started with Intel as distributed computing architect for Intel's manufacturing and IT organization, defining the architecture and strategies Intel would use for their internal information systems architectures. Before joining Intel, George spent 9 years managing information systems in the aerospace, retail, and mining industries. George is also an Editorial Board member for Achieving Supply Chain Excellence through Technology.

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