MAKING THE TRANSITION TO LEVEL 3:THE BUSINESS LEVEL

Given the willingness of the senior management of the company to embark on
the level 3 stage of the journey and a firm foundation of level 2 in place, the
next step is to open the discussion with key suppliers and customers. We say
key suppliers and customers because the discussions and effort needed to make
real progress are not insignificant. Therefore, choose the partners that also have
a willingness to explore the possibilities for finding greater value together, and
limit the discussion to those where you believe the biggest value proposition
lies.
The conversations with the chosen partners should include the examination
of all aspects of the customer/supplier relationship, including technical, transactional,
procurement, and logistics, along with product, information, and cash
flows. Based on this type of analysis, begin looking for the hidden values across
the full supply chain network that connects the customer and its supplier to the
final consumers.
The real breakthrough comes when you can create win-win solutions that
make more money for both firms. By defining specific opportunities for action,
chartering improvement teams, defining success for them, and developing performance
measures to track team performance, the value between the enterprises
can be unlocked.
THE PROCESS LEVEL
By capturing and analyzing the inter-company processes, to identify those with
the greatest strategic importance for both companies, the most profitable areas
for investments can be isolated and prepared for improvement. It is clearly not
possible to work on all processes; a degree of prioritization is vital. Typically,
the processes we see being put at the top of the list are procurement based:
auctions, catalogue-based inquiries, transaction automation, and, increasingly,
checking schedules to ensure that an order can be fulfilled on time, in full.
More advanced tools for BPM, such as Intalio�s tool set, will become an
essential part of the level 3 company�s tool kit. If processes on both sides of
the inter-company gap are automated and made to comply with the same process
protocols, then making them talk to each other will be relatively simple.
ORGANIZATION
The organization of a process-based company will start to reflect the process
priorities adopted. Departmental boundaries will move, and managers� roles and
responsibilities will change, to minimize the disruption to the efficient and
effective execution of the company�s strategic processes. The authors are already
seeing the impact of this in the early adopters.
For the level 3 company, the inter-company processes will be seen as having
increasing importance. Organization will change to make the interfacing processes
as effective as possible. There will be a few critical points of contact,
well-defined data structures, effective problem resolution routines, and, above
all, a clear view of the value added by making these arrangements.
As Gartner recently said: �Enterprises should begin to take advantage of
explicitly defined processes. By 2005 at least 90% of large enterprises will have
BPM in their enterprise nervous systems (0.9 probability). Enterprises that
continue to hard-code all flow control, or insist on manual process steps and
do not incorporate BPM�s benefits, will lose out to competitors that adopt BPM�
APPLICATIONS, DATA, AND TECHNOLOGY
It is a curious condition that this trio is left to the last in the list. For many years,
applications have been the starting point for investment and business improvement
efforts. Latest trends, supported by our recent supply chain survey, show
that this is no longer the case. Fewer companies are investing in applications.
Rather, they are investing in making those they already have work properly and
filling in the gaps � driven increasingly by the need to make processes work
more effectively. So it is that the processes that drive the improvements and the
role of applications become one of supporting the processes. In the authors�
experience, up to 85% of any company�s portfolio of IT projects are canceled
or redirected once the correct process focus can be identified.
THE BENEFIT CASE
With many companies striving to reach level 3, there must be a benefit case.
As we have seen, some companies still do not believe in this principle. The
authors firmly believe in, and have seen, the benefits of collaboration �across
the enterprise boundary,� from business unit to business unit or company to
company. Technology has removed many of the barriers, for example, to true
collaborative planning, forecasting, and replenishment (CPFR). The benefits
come in many guises:
_ Revenue improvement (+5 to 15%)
_ Resulting from reduced out-of-stocks and improved category
management
_ Cost reduction (15 to 30%)
_ For example, automotive manufacturers cut the cost per car by
$5,000 through better collaboration between consumers, suppliers,
and other partners (CSC automotive industry survey, 2001)