Business modeling is a vast area of research and practice, which is gaining increasing importance
in the rapid development of e-business and globalisation (Holsapple, 2001). The
following are some approaches used in business modeling:
1. Textual description (e.g., abstract use cases)
2. Categories and visualization
3. Simulation approaches
4. Data/workflow-description programs
5. Process notation languages (e.g., Unified Modeling Language (UML))
The common categorization of B2B models seen in the literature is divisions based on target
audience or type of products/services involved in the business processes.
In order to understand this categorization, we have first to observe the two dimensions
through which companies obtain the products and services they need (Kaplan & Sawhney,
2000). The first dimension is related to the kind of products and services purchased, and the
second relates to the frequency with which companies make their purchases. The products
and services can be classified into manufacturing inputs and operating inputs. Manufacturing
inputs are raw materials applied in the manufacturing process. Operating inputs are
normally low-value products and services, usually commodities (e.g., advertising, utilities,
electricity, office supplies), also known as maintenance, repair, and operations (MRO)
inputs. In relation to the frequency inputs are acquired, there are both systematic sourcing
and spot-market sourcing.
Another more general and easier-to-remember categorization can be attained by focusing on
the processes that these e-business models are designed to facilitate. E-businesses can support
the relationship between a company and its customers and suppliers (usually commercial
transactions) and with related partners like collaborators and contractors. Thus e-business
models can be classified according to its focus (IBM, 2003a; Weill & Vitale, 2001):
� Focus on the process of selling goods and services to other companies (e-commerce
sell-side)
� Focus on the process of e-procurement and other processes related to the supply chain
management. Various sub-models in this category are as follows:
o Buyer model (few buyers, many sellers)
o Marketplace model (many buyers and many sellers)
o Longer-term relationship model (few buyers and few sellers)
o Seller model (few sellers, many buyers)
� Focus on collaboration between businesses, partners, and contractors (i.e., e-collaboration,
Saturday, July 3, 2010
A.Process-Based.Categorization. and.Analysis.of. Business-to-Business.Models:
The economic impact of the Internet is like the oil shock in reverse. The jump in oil prices
during the 1970s increased inflation and pushed the world into recession. However, the
Internet reduces the cost of information. This has positive economic effects, since it makes
it easier for buyers and suppliers to compare prices and eliminate the middlemen between
firms and customers, lowers transaction costs, and reduces entry barriers. Economists have
an interesting argument: the main reason why firms exist is to minimize transaction costs.
These reduced transaction and communication costs can lead to both bigger and smaller
optimal firm sizes. Smaller firms can buy services cheaply from outside, and this reduces
the barriers to entry.
The Internet can link up supply chains, make it easy to place and track orders, and display
specifications at the click of a mouse. Hence few companies are willing to miss out on
the benefits e-commerce offers. So, it is certain that the Internet reduces costs, increases
competition, and improves functioning of the pricing mechanism. The Internet moves the
economy closer to the theory of perfect competition, which assumes abundant information,
zero transaction costs and no entry barriers. Analysts feel markets should become more
efficient as the Internet increases the flow of information between buyers and sellers. This,
in turn, should ensure efficient allocation of scarce resources.
E-commerce increases competitive intensity by allowing business customers to consider
every available alternative to every offering. Suppliers no longer compete with two or three
familiar competitors but with every company in the world that has a web site and a comparable
product or service. E-commerce also undermines traditional sources of advantage based on
asymmetries of information. In the past, sellers derived some advantage by knowing more
than their buyers. Such an advantage came from knowing more about the product, the cost
availability of raw materials and components, and the efficiency of their own manufacturing
processes. Each step in the supply chain had a lock on its own information, which made
each link more defensible but the chain as a whole less efficient.
The Internet does away with much of this privileged access to information, shifting the
competitive emphasis away from secrecy and toward transparency and the absolute comparative
value of the offering. Distribution and sales channels have always conveyed a certain
amount of information back to suppliers. However, bandwidth, precision, ease, speed, and
manageability of the information flowing in both directions are orders of magnitude greater
on the Internet. The interactive exchange of information, design requirements, component
specifications, cost tracking, logistics oversight, service requests and troubleshooting advice
permits an unprecedented level of customization. Competition on this level will necessarily
become the rule.
As B2B e-commerce becomes one of the most profitable applications for the Internet, we
need to understand the implications of the many technological and market changes that will
usher in an entirely new way of doing business. The B2B e-commerce revolution includes
e-procurement, B2B exchanges, and business infrastructure relationships.
E-procurement involves firms selling supplies, equipment, materials, and services with
a streamlined online purchasing function that often eliminates traditional intermediaries,
thereby reducing costs and cycle times while offering greater flexibility and responsiveness
to changes in demand. Web-based supply chain management networks improve coordination
during the 1970s increased inflation and pushed the world into recession. However, the
Internet reduces the cost of information. This has positive economic effects, since it makes
it easier for buyers and suppliers to compare prices and eliminate the middlemen between
firms and customers, lowers transaction costs, and reduces entry barriers. Economists have
an interesting argument: the main reason why firms exist is to minimize transaction costs.
These reduced transaction and communication costs can lead to both bigger and smaller
optimal firm sizes. Smaller firms can buy services cheaply from outside, and this reduces
the barriers to entry.
The Internet can link up supply chains, make it easy to place and track orders, and display
specifications at the click of a mouse. Hence few companies are willing to miss out on
the benefits e-commerce offers. So, it is certain that the Internet reduces costs, increases
competition, and improves functioning of the pricing mechanism. The Internet moves the
economy closer to the theory of perfect competition, which assumes abundant information,
zero transaction costs and no entry barriers. Analysts feel markets should become more
efficient as the Internet increases the flow of information between buyers and sellers. This,
in turn, should ensure efficient allocation of scarce resources.
E-commerce increases competitive intensity by allowing business customers to consider
every available alternative to every offering. Suppliers no longer compete with two or three
familiar competitors but with every company in the world that has a web site and a comparable
product or service. E-commerce also undermines traditional sources of advantage based on
asymmetries of information. In the past, sellers derived some advantage by knowing more
than their buyers. Such an advantage came from knowing more about the product, the cost
availability of raw materials and components, and the efficiency of their own manufacturing
processes. Each step in the supply chain had a lock on its own information, which made
each link more defensible but the chain as a whole less efficient.
The Internet does away with much of this privileged access to information, shifting the
competitive emphasis away from secrecy and toward transparency and the absolute comparative
value of the offering. Distribution and sales channels have always conveyed a certain
amount of information back to suppliers. However, bandwidth, precision, ease, speed, and
manageability of the information flowing in both directions are orders of magnitude greater
on the Internet. The interactive exchange of information, design requirements, component
specifications, cost tracking, logistics oversight, service requests and troubleshooting advice
permits an unprecedented level of customization. Competition on this level will necessarily
become the rule.
As B2B e-commerce becomes one of the most profitable applications for the Internet, we
need to understand the implications of the many technological and market changes that will
usher in an entirely new way of doing business. The B2B e-commerce revolution includes
e-procurement, B2B exchanges, and business infrastructure relationships.
E-procurement involves firms selling supplies, equipment, materials, and services with
a streamlined online purchasing function that often eliminates traditional intermediaries,
thereby reducing costs and cycle times while offering greater flexibility and responsiveness
to changes in demand. Web-based supply chain management networks improve coordination
Achieving.the.Necessary.Coordination.in.Web.Services..Development:
The question concerning distributed vs. decentralized computing directly shows in a discussion
on standards. After all, standards play a big role in integrating systems; they resolve the need
for coordination (at the level at which the standard works). The concept of Web services is
currently receiving very much attention as a paradigm that allows B2Bi. The biggest strength
of this concept is just that it includes a set of ICT standards. Simple object access protocol
(SOAP), for example, is a standard way to communicate with Web services.
In building a business-to-business process, companies need to agree on a number of issues.
Agreement is not only needed at ICT level but also at business level. Above that, it is important
to know how to translate the business agreement into an ICT agreement, and�the
other way around�how to use ICT agreements to enable the business.
It is important to recognize the role of standards, their powers, and their threats. It can be
very useful to standardize issues�be it business issues or ICT issues�on which it does not
make any sense to compete. But of course, by standardizing some issues, competition shifts
to other issues. Companies want to make a difference somewhere. Standards such as SOAP
are very useful and lift the competition to the level of using the standard creatively.
There are different levels of compromise possible among parties (Besen & Farrell, 1994).
The levels of agreement on ICT issues are shown in Figure 5. Parties need at least bilateral
agreements. An active coordination among the parties is, however, not always necessary.
Some issues have already been standardized sufficiently at a higher level (for example at
the level of the software vendor). Clearly, companies do not have to discuss on the contents
covered by a standard anymore if they both agree to use the same existing standard.
Of course, not everything is being standardized. When it comes to technology, it is only where
interoperability is important that standards become required. Features that cause customer
dissatisfaction or hinder industry growth4 evolve into standards, while �customer-useful
differentiating features� do not tend to evolve into standards. Furthermore, the demand for
standards usually comes from the users and customers of the technology who experience
the confusion caused by the lack of standards (Cook, 1996). Employees (be it business or
ICT employees) may for example notice that there is no standard terminology for important
concepts in their company and that this creates communication problems. Companies then
consider creating a �data dictionary� with a standardized vocabulary. At the level of business-
to-business relations, companies may suffer from a non-standardized vocabulary too.
If one company uses the field �customerno� in its database, and another company uses the
field �customernumber,� both companies know the same concept but have a different name
assigned to the concept. In order to have IT systems of such companies talking to each other,
a translation will be necessary (from the standardized vocabulary of one company to the
standardized vocabulary of another company).
In choosing which level of agreement (and which standard) to use, it is important to evaluate
the opportunities that are being offered by the different levels (and standards at those levels).
As such, the presence/absence of network effects should be taken into account when deciding
when to use standards. Network effects are based on the concept of positive feedback,
that is, the situation in which success generates more success. The value of connecting to
a network depends on the number of other people already connected to it (i.e., you can
connect to). Network effects do not play in the extended
enterprise (�change partners� is a contradiction in terms), but they do play in market B2Bi
on standards. After all, standards play a big role in integrating systems; they resolve the need
for coordination (at the level at which the standard works). The concept of Web services is
currently receiving very much attention as a paradigm that allows B2Bi. The biggest strength
of this concept is just that it includes a set of ICT standards. Simple object access protocol
(SOAP), for example, is a standard way to communicate with Web services.
In building a business-to-business process, companies need to agree on a number of issues.
Agreement is not only needed at ICT level but also at business level. Above that, it is important
to know how to translate the business agreement into an ICT agreement, and�the
other way around�how to use ICT agreements to enable the business.
It is important to recognize the role of standards, their powers, and their threats. It can be
very useful to standardize issues�be it business issues or ICT issues�on which it does not
make any sense to compete. But of course, by standardizing some issues, competition shifts
to other issues. Companies want to make a difference somewhere. Standards such as SOAP
are very useful and lift the competition to the level of using the standard creatively.
There are different levels of compromise possible among parties (Besen & Farrell, 1994).
The levels of agreement on ICT issues are shown in Figure 5. Parties need at least bilateral
agreements. An active coordination among the parties is, however, not always necessary.
Some issues have already been standardized sufficiently at a higher level (for example at
the level of the software vendor). Clearly, companies do not have to discuss on the contents
covered by a standard anymore if they both agree to use the same existing standard.
Of course, not everything is being standardized. When it comes to technology, it is only where
interoperability is important that standards become required. Features that cause customer
dissatisfaction or hinder industry growth4 evolve into standards, while �customer-useful
differentiating features� do not tend to evolve into standards. Furthermore, the demand for
standards usually comes from the users and customers of the technology who experience
the confusion caused by the lack of standards (Cook, 1996). Employees (be it business or
ICT employees) may for example notice that there is no standard terminology for important
concepts in their company and that this creates communication problems. Companies then
consider creating a �data dictionary� with a standardized vocabulary. At the level of business-
to-business relations, companies may suffer from a non-standardized vocabulary too.
If one company uses the field �customerno� in its database, and another company uses the
field �customernumber,� both companies know the same concept but have a different name
assigned to the concept. In order to have IT systems of such companies talking to each other,
a translation will be necessary (from the standardized vocabulary of one company to the
standardized vocabulary of another company).
In choosing which level of agreement (and which standard) to use, it is important to evaluate
the opportunities that are being offered by the different levels (and standards at those levels).
As such, the presence/absence of network effects should be taken into account when deciding
when to use standards. Network effects are based on the concept of positive feedback,
that is, the situation in which success generates more success. The value of connecting to
a network depends on the number of other people already connected to it (i.e., you can
connect to). Network effects do not play in the extended
enterprise (�change partners� is a contradiction in terms), but they do play in market B2Bi
Scope.of.the.EDI.and.Web-EDI.Models.in.B2B:
EDI is the electronic transfer of business documents such as purchase orders or invoices
between computer systems of different enterprises based on an established norm/format
such as UN/EDIFACT or ANSI X.12 (Galileo Computing, 2003). EDI has now been used
for over 30 years for the exchange of business data (e.g., delivery notes and invoices as
mentioned above) between two application systems in a standardized and automated form
(Emmelhainz, 1993; Dressler, 2003). The benefits associated with traditional EDI include
cost reductions induced by rationalization and automation and shorter order processing
time (Deutsch, 1994).
Traditional EDI includes converters on both sides of the communication line. Data are normally
transferred between enterprises as illustrated in Figure 6. Therefore, on both sides, a
translation into formats understandable by different ERP systems such as SAP R/3 or JDEdwards
is to be guaranteed. Because of the early introduction and the market acceptance
of EDI systems in the 1980s, different standards exist for the description of EDI data (EDI
Comp., 2003).
Beck, Weitzel, and K�nig (2000) state that besides the alleged benefits, EDI is not as widespread
as many had expected. Presently only 5% of all companies that could benefit from
EDI actually use it (Segev et al., 1997) due to the considerably high costs for implementing
EDI systems (Swatman et al., 1997). New developments of innovative EDI solutions such
as Web-EDI or XML/EDI avoid the problems of traditional EDI technologies.
between computer systems of different enterprises based on an established norm/format
such as UN/EDIFACT or ANSI X.12 (Galileo Computing, 2003). EDI has now been used
for over 30 years for the exchange of business data (e.g., delivery notes and invoices as
mentioned above) between two application systems in a standardized and automated form
(Emmelhainz, 1993; Dressler, 2003). The benefits associated with traditional EDI include
cost reductions induced by rationalization and automation and shorter order processing
time (Deutsch, 1994).
Traditional EDI includes converters on both sides of the communication line. Data are normally
transferred between enterprises as illustrated in Figure 6. Therefore, on both sides, a
translation into formats understandable by different ERP systems such as SAP R/3 or JDEdwards
is to be guaranteed. Because of the early introduction and the market acceptance
of EDI systems in the 1980s, different standards exist for the description of EDI data (EDI
Comp., 2003).
Beck, Weitzel, and K�nig (2000) state that besides the alleged benefits, EDI is not as widespread
as many had expected. Presently only 5% of all companies that could benefit from
EDI actually use it (Segev et al., 1997) due to the considerably high costs for implementing
EDI systems (Swatman et al., 1997). New developments of innovative EDI solutions such
as Web-EDI or XML/EDI avoid the problems of traditional EDI technologies.
B2B.E-Procurement:
B2B e-procurement is used not only by participation in a procurement marketplace but also
as an enhancement of the existing conventional model. The goals of various e-procurement
business models are cost saving through exchanges/marketplaces, direct connection
of supply chain via electronic data interchange (EDI), Web-EDI, desktop purchasing, and
elimination/reduction of procurement department (Lee, 2001).
The above e-procurement models are normally implemented by e-procurement systems
and supplier portals. The major goals in most cases are process and marketing advantages,
such as:
� Availability: 24/7 availability is provided for a set of services 365 days a year
� Speed: Transactions are fulfilled faster, compared to non-electronic transactions
� Logistics efficiency considerations: Support for �Just in time delivery� and �Just in
sequence delivery�
� Integration.of.processes: Synergy effects of integrated processes can be achieved,
and parallelism of processes is supported. As a result, the time between the output of
one process to be recognized as an input to another process is significantly reduced.
Due to the integration of processes and systems, the complexity of the e-procurement
models increases as businesses further digitally enhance their business with e-procurement
facilities.
as an enhancement of the existing conventional model. The goals of various e-procurement
business models are cost saving through exchanges/marketplaces, direct connection
of supply chain via electronic data interchange (EDI), Web-EDI, desktop purchasing, and
elimination/reduction of procurement department (Lee, 2001).
The above e-procurement models are normally implemented by e-procurement systems
and supplier portals. The major goals in most cases are process and marketing advantages,
such as:
� Availability: 24/7 availability is provided for a set of services 365 days a year
� Speed: Transactions are fulfilled faster, compared to non-electronic transactions
� Logistics efficiency considerations: Support for �Just in time delivery� and �Just in
sequence delivery�
� Integration.of.processes: Synergy effects of integrated processes can be achieved,
and parallelism of processes is supported. As a result, the time between the output of
one process to be recognized as an input to another process is significantly reduced.
Due to the integration of processes and systems, the complexity of the e-procurement
models increases as businesses further digitally enhance their business with e-procurement
facilities.
Monday, May 3, 2010
GENERAL MOTORS SHOWS THE WAY
As an illustration of how a firm can move successfully into level 3 and beyond,
consider what happened at a venerable organization called General Motors, after
chief information officer Ralph Szygenda was brought in to help GM regain
some of its preeminence in engineering and car styling by �better applying and
integrating information technology.� As reported in Supply Chain Management
Review, the first phase of the effort was launched in 1997, to improve the
vehicle development process. There were two subparts to the initiative: reengineer
design processes and implement time- and effort-saving IT. As progress was
made, GM further realized that it really needed to embark on a supply-chain
wide effort, extending much of the effort to suppliers willing to collaborate
electronically. The results have been dramatic: a 70% reduction in product
development cycle time and more than $1 billion in savings. As Szygenda
reported, �Broadening the vehicle development initiative to include our external
partners was always in the back of our minds� (Gutmann, 2003, p. 35).
When GM began its work on the vehicle development process, it formed
teams to look at key design processes, to find how it could make them better
and leaner. Concurrently, the teams looked at what IT could do to enable the
improvements. This is a very typical step in the maturity process, as collaboration
and technology are used to reach the higher levels of progress. The
company started by asking tier one and further upstream suppliers to identify
the problems with the existing design process. When this step is taken, most
firms find there is a lot more that could be accomplished with existing processes
than normally believed. GM used these conversations to identify three main
areas of concern: batch processes that needed to be more interactive, a balance
between security and accessibility, and improvements to the integration of suppliers
and the transmission of data in a way that would not disrupt business
processes.
Design files were synchronized with suppliers, ensuring that all parties were
working from the same information. Instead of exchanging design tapes back
and forth, an electronic solution was introduced to do direct computer-aided.
design (CAD) and computer-aided-manufacturing (CAM) exchanges. A common
technology backbone was used to integrate disparate technology solutions
and systems, �while providing one common source of up-to-date information
related to a product� (Gutmann, 2003, p. 38). This move led to the adoption
of one common CAD/CAM system at all GM locations and joint ventures
across the world. A product data management system was also installed at that
time.
In 1999, GM began connecting its suppliers to the common technology
backbone through its virtual private network and its supplier portal, Supply
Power. Through this technique, GM increased its suppliers� �access to business
and technical systems such as project schedules, engineering change requests,
technical specifications, test requirements, and quality controls. Tier one suppliers
focused on keeping the design changes lean, passing on needed process
improvements to their suppliers. Today, GM is able to integrate and update [its]
bigger suppliers� CAD creations on a daily basis. For smaller suppliers, that
information is updated weekly.� Security and access to information are balanced
by providing �different layers of visibility to different suppliers� (Gutmann,
2003, p. 36). At the end of 2002, GM had 1,000 suppliers in North America
and 1,000 suppliers in Europe integrated into this new system.
In 2001, the scope was expanded to include external suppliers for such
downstream processes as tooling, manufacturing engineering, and manufacturing.
A tooling supplier can now download design files right after the design/
styling phase, allowing it to begin its work earlier in the process. This assistance
is offered through GM�s product development portal, eliminating a previously
heavily manually intensive set of processes. This feature allows GM to share
facility and process design with its �most trusted suppliers,� which in turn
�accelerates the assembly design process� (Gutmann, 2003, p. 38). The result
has been a reduction in product development process time from 60 months in
1996 to 18 months in 2003, a dramatic example of how collaboration will work,
especially when enabled with the correct technology.
consider what happened at a venerable organization called General Motors, after
chief information officer Ralph Szygenda was brought in to help GM regain
some of its preeminence in engineering and car styling by �better applying and
integrating information technology.� As reported in Supply Chain Management
Review, the first phase of the effort was launched in 1997, to improve the
vehicle development process. There were two subparts to the initiative: reengineer
design processes and implement time- and effort-saving IT. As progress was
made, GM further realized that it really needed to embark on a supply-chain
wide effort, extending much of the effort to suppliers willing to collaborate
electronically. The results have been dramatic: a 70% reduction in product
development cycle time and more than $1 billion in savings. As Szygenda
reported, �Broadening the vehicle development initiative to include our external
partners was always in the back of our minds� (Gutmann, 2003, p. 35).
When GM began its work on the vehicle development process, it formed
teams to look at key design processes, to find how it could make them better
and leaner. Concurrently, the teams looked at what IT could do to enable the
improvements. This is a very typical step in the maturity process, as collaboration
and technology are used to reach the higher levels of progress. The
company started by asking tier one and further upstream suppliers to identify
the problems with the existing design process. When this step is taken, most
firms find there is a lot more that could be accomplished with existing processes
than normally believed. GM used these conversations to identify three main
areas of concern: batch processes that needed to be more interactive, a balance
between security and accessibility, and improvements to the integration of suppliers
and the transmission of data in a way that would not disrupt business
processes.
Design files were synchronized with suppliers, ensuring that all parties were
working from the same information. Instead of exchanging design tapes back
and forth, an electronic solution was introduced to do direct computer-aided.
design (CAD) and computer-aided-manufacturing (CAM) exchanges. A common
technology backbone was used to integrate disparate technology solutions
and systems, �while providing one common source of up-to-date information
related to a product� (Gutmann, 2003, p. 38). This move led to the adoption
of one common CAD/CAM system at all GM locations and joint ventures
across the world. A product data management system was also installed at that
time.
In 1999, GM began connecting its suppliers to the common technology
backbone through its virtual private network and its supplier portal, Supply
Power. Through this technique, GM increased its suppliers� �access to business
and technical systems such as project schedules, engineering change requests,
technical specifications, test requirements, and quality controls. Tier one suppliers
focused on keeping the design changes lean, passing on needed process
improvements to their suppliers. Today, GM is able to integrate and update [its]
bigger suppliers� CAD creations on a daily basis. For smaller suppliers, that
information is updated weekly.� Security and access to information are balanced
by providing �different layers of visibility to different suppliers� (Gutmann,
2003, p. 36). At the end of 2002, GM had 1,000 suppliers in North America
and 1,000 suppliers in Europe integrated into this new system.
In 2001, the scope was expanded to include external suppliers for such
downstream processes as tooling, manufacturing engineering, and manufacturing.
A tooling supplier can now download design files right after the design/
styling phase, allowing it to begin its work earlier in the process. This assistance
is offered through GM�s product development portal, eliminating a previously
heavily manually intensive set of processes. This feature allows GM to share
facility and process design with its �most trusted suppliers,� which in turn
�accelerates the assembly design process� (Gutmann, 2003, p. 38). The result
has been a reduction in product development process time from 60 months in
1996 to 18 months in 2003, a dramatic example of how collaboration will work,
especially when enabled with the correct technology.
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)
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)
Subscribe to:
Posts (Atom)