[From iSource Business, July 2001] B2B e-commerce software providers have a vision of the perfect front-end system and many claim to provide it. Market research analysts have their opinions. And supply chain executives have a dream of 100 percent Internet integration with trading partners and all the benefits that flow from those relationships.
The term front-end loosely applies to automation elements that directly impact end users, though access to back-end data and processes ( like enterprise resource planning (ERP) and legacy systems) figures prominently in front-end requirements.
In light of the myriad products available in today's B2B domain, iSource Business is wading through the hype and find consensus for the most powerful elements of front-end systems.
After dozens of interviews with industry experts and business executives, and perusing countless research reports and news articles, a few traits surface repeatedly. For the most part, though, responses vary widely, reflecting the industry's increasing segmentation as content management providers, integrators, application service providers, value added networks, auctions and e-marketplaces tout their own products as the key to B2B success.
There are also words of caution against focusing on front-end e-tools at the expense of the big picture or long-term business strategy and against taking analysts' savings expectations to heart. Substantial benefits are expected, but not until the dream of 100 percent supply-chain participation is achieved, and this has yet to occur for most companies.
In a November 2000 Hurwitz Group study of e-procurement trends, the Framingham, Mass.-based consulting firm found that, while Fortune 500 companies may partner with hundreds and even thousands of suppliers, in many cases, only five to 10 of their largest suppliers are electronically linked to their systems.
With the above in mind, the most powerful features lie within two general categories: 1.) integration, as the backbone; and 2.) content, as the meat.
No. 1: The Is Have It
Integration, interoperability, interaction: Pick your buzz word of choice, but the idea remains the same. Without proper network linkages, all other e-tools are useless.
Integration is a multi-layer process, but from the front-end perspective it's the ability to Web-enable your back end, making sensitive information available to end users, as well as to connect with your trading partner's back-end systems, says Elizabeth Sara, vice president of marketing for SpaceWorks, the Rockville, Md. firm that specializes in B2B e-commerce application solutions.
Rick Hofmann, director of product management at another e-business solution provider, Cyclone Commerce of Scottsdale, Ariz., further differentiates between connectivity, the B2B architecture responsible for establishing data types and security protocols; and integration, the mapping of business processes to these supply chain connections.
However, he says, the connectivity platform should be transparent to the end user, enabling a seamless enterprise-wide and partner-to-partner flow of information, whether via Extensible Markup Language (XML)-based documents, binary files, or traditional transactions that are performed using electronic data interchange (EDI).
Within this category lie other technical considerations such as scalability, reliability and tunability, says Peter Blair, who is the vice president of information technology for Somera Communications in Santa Barbara, Calif.
The system must accommodate present and future users, and it must plan for hardware failures with back-up servers. It must also remain, according to Blair, tunable, or agile, so that the Web site can be quickly adjusted to meet the unending demands of users who want speed, flexibility and options.
If there is a break in the cycle of round-trip data movement, then your supply chain falters and customers may take their business elsewhere. The prevailing terms for data movement within your company and between trading partners are EAI, or enterprise application integration; and B2BI, or B2B integration. According to Jeff Ernst, director of industry marketing at Open Market in Burlington, Mass., these two processes form the book-ends for the second front-end category: content management.
No 2: Content Drives Commerce
Not surprisingly, Ernst's company makes content-driven e-business applications, and, apparently, does it well. In 2000, and 2001, Cambridge, Mass.-based Forrester Research named the company No. 1 in its Content Management eBusiness TechRankings.
The company says content comprises the digital assets of the firm. They include information about product and service offerings, such as feature lists, brochures, technical specifications and images. They also include information about how to select and service the goods, such as selection guides, buyer reviews, user manuals and safety sheets.
Purchasing executives have some sales reps they love dealing with because they are a wealth of information, says Ernst. They seem to have all the answers immediately. Now how do you duplicate that on the Net? That's the question. How do you electronically recreate your best sales rep?
In order to do so, companies must provide a central way to capture, manage and deliver this content, while giving business managers across all divisions control over the content and behavior.
This means your system must access raw information nuggets from back-end systems, including sales keeping units (SKUs), products names, units of measure and list price, and surround them with rich product information based on your end user, (or channel,) whether that be a reseller, end customer, Net marketplace, or large manufacturer, he says.
Updates, such as price changes, to the core information should flow to all or select channels, adds Joe Alwan, the firm's senior vice president of worldwide marketing. The manager who inputs the changes might specify that this is for major U.S. clients only and should not impact those in Japan, he explains.
Finally, he says, the system must facilitate the routing of product modifications to the appropriate parties for editing and approval.
Make Search Count
End users access this customized product information via catalogs, with the lowly search engine being a crucial component, says Joshua Walker, a senior analyst in Forrester's eBusiness TechRankings group.
According to Walker, though it may sound simplistic, catalog users want to locate products and place orders with ease and speed. Suppliers, too, want their clients to find particular products, so they won't hesitate to look elsewhere. A powerful search function needs to display results in hierarchical order based on the relevancy to particular clients or channels.
Catalog search engines also need to recognize misspellings and different names for the same products. They need to provide pertinent, actionable information, including an option to buy directly from the result's page.
Other catalog features important to consider include cross-selling, which identifies other products a customer may be interested in based on his or her purchases; and up-selling, which pushes customers toward higher margin products, such as larger quantities or newer models.
Reporting and Analysis
Value-added capabilities also distinguish powerful front ends. For instance, firms need to track the following:
- The number of clients hitting the site
- The amount of time it takes clients to place orders once they're logged on
- The products that are selling best
- The time of day that orders are being placed
- The average price/size of an order
Many e-commerce products out there provide graphical representations of these vital statistics, adds Walker. Such products can further personalize catalogs and search engines, enabling refined searches, which return more relevant information based on popular products.
Likewise, in the case of a distributor, these statistics can be used to lock in suppliers, providing them with ordering trends and a recap of last year's sales, says Ted Smykla, senior vice president of products at Newport Beach, Calif.-based IPNet Solutions, an e-commerce application provider.
Last year's sales are huge information to clients, says Smykla. If you have all this information available to them, they're not going to want to do business elsewhere.
Other value-added capabilities include ticker tapes at the bottom of screens that display promotional items and discounts. The ticker tapes, that can be refined for different clients, help increase sales and even leverage discounts.
For example, if I'm a food distributor, I can run a ticker for Kraft to advertise a product discount, Smykala explains. Kraft gets more sales, and I get more sales, but I can also negotiate a discount from Kraft for sending more sales its way.
Furthermore, I may only want the ticker to go out to small companies. If national accounts are already squeezing me, I don't want to provide them with additional discounts.
While rich, personalized content is vital to recreate your firm's best sales rep,' even your best sales representative can't provide the convenience of round-the-clock, real-time access to order submission and tracking, inventory availability, and account profile histories.
This in-depth view of an order's life cycle is beneficial to your customers, suppliers, distributors and manufacturers. It's the oil greasing the skids of the entire supply chain, according to a SpaceWorks white paper on Real-Time Web-Based Selling, published in December 2000.
Critical elements of a well-greased supply chain include:
- Real-time ordering: Purchasers need to know the location of their order within the fulfillment process. Knowing whether your package has been delivered to the loading dock or is on its way to their office can make a big difference.
- Real-time inventory availability: With so many supply options available online, buying decisions are often made based on availability rather than price.
- Real-time inventory commitment: Powerful supply chain systems must have the ability to reflect updated inventory immediately. For instance, if there are 50 cases of a product in stock and a customer orders 20, the system should immediately commit, so available inventory reflects 30 left.
- Real-time account information: Because most B2B buying is done on a purchase order or credit, knowing how much credit is available on a particular day and at a particular time will help customers decide how many goods can be purchased at that moment, says Sara.
- Real-time production information: A final, more strategic feature of a powerful front-end system is online collaboration, such as the sharing of real-time production information by supply chain partners in order to help shorten product-development cycle times.
Keeping e-Commerce in Perspective
No matter the front-end tool, executives need to keep in mind that it's just that, a tool. Industry experts say e-business is not just about technology, it's about the transformation of key business processes through the use of these Internet technologies.
IBM's Javier Urioste stresses that auctions, reverse auctions, catalogs and intuitive graphic user interfaces only skim the surface of all the possibilities that companies can find with B2BI. For example, he says, from an auction you'll derive a first-time cost reduction, but then what?
Urioste is the director of policy, strategy and international operations for IBM's global procurement group in Somers, N.Y., and urges colleagues to take a holistic viewpoint and examine the process side rather than the transactional or operational side of e-commerce.
You shouldn't consider the adoption of a particular application as the panacea for e-procurement, he says. You need to examine the strategic side, which will deliver 95 percent of the benefit in terms of cost and better service.
Strategic considerations might include intelligence gathering, source selection, technical exchange, negotiations, contracting and early supplier involvement. You need to re-engineer your processes to reflect your goals, then apply these tools to help deliver long-term results, Urioste advises.
You also need examine the potential B2B e-commerce savings, which remain a cloudy issue industrywide.
Too Good to Be True
Based on most news reports, joining the e-stampede will reap immediate and substantial cost benefits and efficiency improvements. For instance:
- Boston Consulting Group says B2B e-commerce will generate productivity gains equivalent to 1 to 2 percent of sales by 2004.
- Forrester Research states procurement applications can cut spending by 20 percent and reduce costs per transaction by two-thirds.
- A.T. Kearney estimates e-procurement can save companies 30 percent annually on procurement costs.
- Deloitte Consulting maintains that an e-procurement return on investment (ROI) can top 300 percent in the first two to three years.
But, for all its touted savings and benefits, the results have been lackluster, at least in the short term. Many supply chain executives struggle to demonstrate ROI, but are quick to point out the roadblocks.
In Barriers to Electronic Commerce, CommerceNet's year-end 2000 survey of more than 1,000 worldwide respondents, detractors say primary inhibitors to supply chain success within large corporations have been:
- The inability to adopt the right organizational structure and corporate culture to promote widespread e-commerce applications.
- Concerns about interoperability of the new systems with legacy systems, and with systems of other companies. (See Top 10 Barriers to Seamless B2B below)
Within smaller companies, the survey rates lack of qualified personnel as their top barrier.
According to Forrester, in its October 2000 report Online Supply Chain Realities, more than two-thirds of survey respondents gave their supply chain efforts fair or lower marks. Of the 50 respondents supply chain executives at large corporations:
- 4 percent rated their supply chain efforts "excellent"
- 24 percent, "good"
- 36 percent, "fair"
- 26 percent, "poor"
- 10 percent, "terrible"
Short-term disillusionment notwithstanding, high hopes for the long term prevail. These same respondents expect to send more than half of their orders via the Internet in 2002, which is a tenfold increase over 2000 expectations. Most enthusiasm is spurred by the potential to improve coordination with suppliers. Executives expect supply chain offerings to continue to evolve and improve, and no one wants to be left behind when the products eventually live up to their potential.
Top 10 Barriers to Seamless B2B, 2001 Perspective
3. Interoperability between e-commerce applications and with legacy systems
4. International trade barriers
5. User authentication and lack of public key infrastructure
6. Lack of qualified personnel
7. Lack of standards
8. Interoperability with e-commerce sites of complementary companies
9. Partner e-commerce readiness
10. Executive awareness