Demand chain visionaries who adopt "integration as a service" solutions to drive demand-side integration have increased their top-line revenue by building closer relationships with their customers. Putting this model in place takes a lot less time than you might imagine, and it delivers immediate quantifiable business benefits.
Today, there is really no such thing as "business as usual." In a highly competitive global economy, companies are connecting with an ever-growing number of suppliers, customers and other business partners. Opportunities for greater efficiencies and profitability are exhilarating to smart business people yet, at the same time, the mechanics of integrating the companies with which they do business can be daunting. Integration technology is not standardized across the board and likely never will be. What to do when your company uses one set of protocols and methodologies and is trying to sell to companies with multiple different systems of their own?
By deploying service-based cross-enterprise integration, Tradeplace, a European consortium of household appliance and consumer electronics manufacturers, went live with a new business transaction messaging hub and rapidly reduced demand chain operating costs among participating retailers and distributors by 6 million Euro, largely because a service-based approach relieves the technical burden of integration. Additionally, several consortium members reported revenue premiums and improved delivery times with integrated retail partners. All members and their business partners were pleased with how the new model eliminated redundant business processes and improved customer satisfaction.
So, what's behind this success story?
For more than a decade most companies have focused cross-enterprise integration efforts primarily on the supply side. And, despite initial resistance, suppliers have joined in, ensuring that the chain is functioning reasonably well. Integrating the supply chain has been a focus for a number of reasons, not the least of which is that the demand side presents more daunting integration challenges — as well as the greatest ROI opportunities. Companies can have a direct impact on top- and bottom-line revenue while increasing customer satisfaction and retention because they are making it easier for their customers to do business with them.
The Limitations of Conventional Integration Solutions
On the supply side of the equation, there's enormous incentive to comply with the integration demands of the "supply chain master;" it's either that or lose the business. But because most manufacturers and distributors have large-volume agreements with a relatively small number of strategic suppliers, developing and maintaining these connections is somewhat manageable.
On the demand side, though, the stakes are higher. It's unrealistic for manufacturers and distributors to expect customers to follow their lead. In fact, it is incumbent on manufacturers to meet their customers' integration requirements; after all, they are in the business of customer service. Companies have found this to be challenging in a high-volume environment, because the demand-partner base is typically quite large and diverse. Within Fortune 500 companies, customer count typically exceeds supplier count by a factor of more than 50:1. Applying the integration approach that worked well on the supply side simply doesn't work here.
B2B gateway software seems like the right approach, but it doesn't go far enough in meeting the unique needs of varied groups, systems and business processes. Enabling point-to-point connections does not scale effectively or integrate customers rapidly enough. It results in missed business opportunities.
At the end of the day, companies want to connect more customers seamlessly, streamline sales and fulfillment processes, and retain accounts. To achieve these goals, companies should integrate with customers on their terms without compromising their own infrastructures and business processes. To establish and maintain an efficient, high-volume trading environment, both sides must receive the exact information their back-end systems need to process machine-to-machine transactions smoothly and transparently.
A New — and Better — Way to Connect
Demand-side connectivity strengthens competitive advantage. Customers — whether retailers, distributors or end users — want real-time information, such as product availability, price and order status. When a manufacturer can deliver it directly to their business systems and competitors can't, the game is over. Salespeople will use this new ease-of-connectivity to close business with accounts that were previously unreceptive.
Software-as-a-Service (SaaS) benefits companies that want enterprise-class functionality without the headaches of license purchase, deployment, and ongoing maintenance. Now, a similar model, Integration-as-a-Service (IaaS), has emerged. Early attempts at cross-enterprise integration were relatively unsuccessful for a number of reasons. For example, they did not focus on integrating the legacy applications many organizations continue to use. In addition, it was challenging to stay current with maintenance and new versions of business software on either end. Now that a new service-oriented architecture (SOA)-based framework exists, organizations should evaluate IaaS for its ability to enable all value chain partners to work within existing IT and business process frameworks.
Today's IaaS transcends the limitations of conventional integration solutions, whether connecting to customers' systems or consolidating B2B processes within the enterprise. Like SaaS, IaaS drives down complexity and cost while decreasing time to market. It allows IT organizations to concentrate on core competencies rather than building and supporting cross-enterprise integration solutions.
When evaluating an IaaS solution, it may be helpful to examine the following four key elements:
- Comprehensive integration hub — A well-designed IaaS solution employs a hub that connects an enterprise to multiple trading partners without requiring them to change their internal systems and processes, allowing each trading partner to integrate in its preferred manner and use its existing infrastructure. This connection should mediate different validation methodologies, security protocols, routing arrangements and service level agreements. It should also guarantee transaction delivery, support audit trails, and mediate process differences between trading partners.
- Web-based, "subscription" model — A Web-based, "on demand" model does not require installation of any hardware or software. This accelerates partner on-boarding, achieves economies of scale and enables rapid trading partner on-boarding because a proven, scalable environment already exists. And, by delivering a 'multi-tenant' solution that enables data access based on rule-and role-based security, each participant is secure in knowing that other partners do not have access to private data. In addition, infrastructure costs are spread over a larger base of participants, making this an economically attractive proposition.
- Enterprise-level visibility — An ideal integration solution should provide an intuitive, browser-based control panel for centralized integration management across the enterprise. This portal should also provide process visibility and business analytics to properly monitor operations.
- Mission-critical support — Timely, accurate trading partner communication is imperative for continuity of operations. A solution partner should provide 24/7/365 live support on a global scale to ensure that information reaches its intended destination.
Demand-side IaaS in Action: Tradeplace Wins with Customer Integration
Tradeplace is Europe's first B2B joint service venture for household appliance and consumer electronics manufacturers. Composed of five leading enterprises' — BSH Bosch und Siemens Hausgerate GmbH, Electrolux Major Appliances Europe, Indesit Company, Philips Consumer Electronics and Whirlpool Europe — the consortium represents nearly 60 percent of the European appliance and electronics industry, more than $65 billion in global sales and almost 370,000 employees around the world.
These manufacturers, like many of their U.S. counterparts, realized that integrating and automating business processes could significantly strengthen partnerships with retailers and customers, while dramatically reducing operating costs. However, they realized it would be expensive and challenging, as individuals, to integrate many small chains, thousands of individual retailers and several large buying groups. They also understood that success would result from lowering barriers to network participation and expediting retailer adoption.
"We truly wanted to get closer to our retail partners and customers, but without putting stress on our and their already-busy IT departments. The solution that the Tradeplace consortium chose has made it possible for the retail partners to connect quickly, efficiently and seamlessly," said Giorgio Piotti, G.I.S. director sales & marketing Europe, Whirlpool Europe S.r.l , one of the founding Tradeplace consortium members. "Once connected, the retail partners can download product catalogs, place orders, check availability, pricing and order status, receive shipping notification, and many other electronic messages with the different Tradeplace members as if we are one. This immediately generates savings and reduces complexity on both sides."
"Tradeplace is important because, for the first time, manufacturers are working together for the greater good of the retailer and consumer," said Richard Ambler, manager, extended warranty at John Lewis Department Stores. "Now, with 90 percent of our manufacturers able to deliver real-time information, we can give our customers firm availability and delivery dates. This is a truly remarkable improvement, and our sales figures reflect it."
- The Vision
Consortium members envisioned a powerful portal, the ability to execute business transactions end-to-end by "straight-through" customer connections, and a robust machine-to-machine messaging platform that would deliver improved customer service, eliminate process inefficiencies and reduce costs. They also demanded time-to-market of less than four months, superior security (given the competitive relationships of consortium members), technology flexibility and minimal risk.
- The Solution
After thoroughly evaluating multiple options, including traditional B2Bi integration software, consortium members chose a flexible, subscription-based solution that included:
- Integration services — to support virtually any transport, messaging standard or protocol used by retailers; manage end-to-end transaction processing; and analyze transaction activity in depth
- Infrastructure services — to provide a platform designed to ensure maximum levels of security, reliability and performance
- Professional services — to onboard demand-side partners quickly and easily while supporting daily integration community operations such as change management
- Connection "kit" — to enable even small retailers to connect with and test the integration hub in fewer than three days
- TradeXML — to deliver industry-specific XML that would reduce integration complexity while meeting the community's unique needs
- The Results
This unique single-connection integration model began to provide the results specified by the consortium immediately. Time-to-market met the four-month deadline, maximizing return on investment. Subscription pricing and the reduced risk inherent in a proven solution rapidly delivered the desired financial and business results Tradeplace desired. In the first 12 months after deployment, the consortium members had driven costs of more than 6 million in Euro from their demand chains. This savings came as a result of benefits such as improved order quality and fewer requests coming in through the call center.
"This solution was exactly what Tradeplace was looking for," said Fabio Ciarlantini, business process manager at Indesit Company. "The integration concept was sound, and the vendor delivered the support, knowledge and expertise that enabled us to get up and running in a short time. We're still bringing our customer-facing partners onboard, and the service has continued to live up to our expectations."
Business integration across enterprises has traveled far since the days of simple electronic data exchange and flat file transmission. Next-day, batch-oriented processes aren't good enough in the current economy. Rapid response is critical, and companies that can operate effectively in this environment will reap the rewards of higher profitability and greater customer loyalty.
Customers' demands for better service, the widespread use of independently-designed systems and file formats and the need for competitive differentiation have led to more scalable business integration solutions that can accommodate companies' needs to support increasingly complex business processes. These solutions not only offer increased flexibility but also deliver substantial cost savings.
Channel leaders — such as those in the Tradeplace community — who have adopted IaaS are enjoying substantial increases in top-line revenue. Retailers and distributors find it easier to work with them than with competitors, and sales teams can focus on generating revenue instead of handling administrative minutiae. Customer service and accuracy improve. Operating costs decrease, and organizations pay for what they use rather than for an inflexible solution.
About the Author: Tim Ratliff, senior marketing director at Hubspan, has more than 20 years of experience in marketing, operations and large-scale systems design. Before joining Hubspan, he was responsible for B2B demand chain integration at Dell Inc., widely regarded as one of the world's most successful practitioners of e-commerce. He has also led large teams in deploying ERP and EAI solutions within global, Fortune 500 enterprises. He is APICS-certified at the CPIM level and can be reached at [email protected] .