A Blueprint for Enterprise Commerce Management
By Bob Parker -- Supply Chain Management Review, 9/30/2001
Recently, I was listening to the business news on National Public Radio. What struck me was that, in three consecutive stories, the subject company's supply chain was mentioned. The news covered an acquisition, a cost-cutting initiative, and actions being considered to improve the efficiency of healthcare delivery. It wasn't too long ago that most discussions about supply chains had to begin with a definition. Now we're mainstream!
The importance of the supply chain is rarely debated. In fact, it has become accepted that companies will compete with their supply chains. There is, however, considerable discussion as to how supply chains will evolve once external constituents are fully integrated into the information flow. On one end of the spectrum are folks who believe that planning becomes one big resource allocation issue ... ERP (enterprise resource planning) on steroids, if you will. I refer to proponents of this approach as Optimization Optimists. At the other end are those who believe that supply chains will become perfectly fluid, moving like a school of fish around barriers. I like to call these folks Adaptive Anarchists.
These extremes overlook two important factors: (1) the effect of self-interest on the part of the individual companies making up the supply chain and (2) the influence of the companies that own the customer relationship. Between the rigidity of the Optimization Optimists and the chaos of the Adaptive Anarchists lies the most likely scenario—supply chains formed around a specific business opportunity but driven by a venture sponsor. These "venture chains" will come together quickly and corporate finance will take on the look of venture capitalists funding the creation, incubation, operation, and disintegration of these ventures. This development will be known as enterprise commerce management.
The Father's Day ExampleThe immediate future for supply chain technology is the powering of ad hoc ventures. The hypothetical example frequently used at AMR Research is relatively simple: Sears, a national retailer, and Turtle Wax, a maker of car care products, decide to create an ad hoc joint venture around a Father's Day promotion.
The two companies would like to combine several Turtle Wax products into a single package that consumers could purchase as a Father's Day gift. The companies also decide that they would like to include a special Father's Day greeting card that promises Dad a car wash. Additionally, the two primary partners wish to collaborate on the package design, outsource fulfillment, and create a funds flow based on consumer purchase by utilizing third-party Web services.
Today, such ventures take months to assemble and involve little automated information sharing. This inefficiency is essentially an enterprise application problem. It's not so much that the applications don't carry the requisite functionality but rather that the systems deployed within a company do not interoperate well. This is a classic case of the whole's being less than the sum of the parts. Most of the blame lies with the enterprise application vendors that have put themselves at the center of the system's universe at the expense of the customer's integration needs.
The ECM BlueprintWe have developed the enterprise commerce management blueprint to help companies deal with integration challenges and to create rigorous technical standards for vendors. Exhibit 1 shows a graphic representation of ECM. The blueprint includes five layers made up of three critical sets of services and the technology that links them together. The discussion that follows examines each of the layers individually.
The information services layer must form a corporate system of record.
The objective of the information services layer is corporate governance. Consistent representation of data about products, customers, assets, suppliers, and employees is requisite for effective decision making. Once a consistent representation of data is achieved, attention must be paid to assuring transactional integrity across the application data models that make up a corporate system of record. The required integrity doesn't have to be embodied in a single physical data model, but databases and content repositories must be federated to provide a single logical view and facilitate reporting.
From an IT governance perspective, this layer requires considerable technical management. Database and content administrators need some business grounding, but organizations should view these personnel as 75 percent technical and 25 percent business in terms of skills. Clearly, this layer should be part of an IT function.
Interaction services form a company's system of process.
Companies have long been on a continuous cycle of centralization and decentralization. The boardroom decides that the company isn't entrepreneurial enough and moves aggressively to shift decision making to the business units. After some time, those same board members become concerned that the company is missing opportunities for economies across the business units, and the cycle swings back to centralization.
The emergence of global process management (GPM) applications holds the promise of providing a consistent set of business rules on an aggregated basis while allowing individual business units to use the capabilities in a relevant way. Implementation of these applications can break the centralization/decentralization cycle.
The interaction layer defines business rules and provides enterprisewide, corporate shared services. The layer incorporates all of the GPM applications, including the following process sets:
- Supply chain management (SCM).
- Product life cycle management (PLM).
- Customer relationship management (CRM).
- Procurement.
- Enterprise management.
Enterprises will view these five process sets as their system of process. They will select enterprise applications from large vendors that will serve as the process master. These applications will be complemented by offerings from smaller niche vendors that can address specific industry problems within the process set. Each of the processes has specific "linchpin" processes that connect them, as shown in Exhibit 2. For example, order management provides the key connection or transfer point between customer relationship management (CRM) and supply chain management (SCM).
Collaboration services deliver the system of venture.
This layer enables a company to form specific ventures with external constituents and puts information technology at the center of value-producing activities. Enron Corp., for example, used its EnronOnline unit to become a dominant natural gas trader and then put that same technology at the center of ventures in multiple commodities, including plastic, pulp, and even telecommunications bandwidth. Eastman Chemical, Grainger, and Procter and Gamble also have been active in creating new ventures based on technology—this is clearly in every company's immediate future.
Integration and exchange services are the connective tissue.
Connecting the information and interaction layers requires an independent integration bus (set of parallel conductors) that is bidirectional. Integration services must focus on maintaining the integrity of the system of record while delivering the data needed for specific process instances. To realize the full promise of their technology investments, companies must stop and fix the point-to-point integration solutions they have created.
Exposing internal business processes for combination with those of partners and public exchanges requires a private trading exchange (PTX). The PTX essentially becomes a venture operating environment by providing a gateway between external constituents and company processes.
To make ECM happen, companies need to invest in seven key infrastructure technologies—portals, private trading exchanges, application serving, integration, business process management, analytics, and systems management. They then have to hold application vendors accountable for supporting those technologies.
The good news is that the time is right for ECM. Key enabling technologies are reaching maturity; the current cooling of the economy is allowing companies to take a breath and assess what they have; and the development of exchanges, both private and public, has raised confidence levels for intercompany connectivity. Adopting the ECM approach will allow companies to make the most of their existing technology investments, set priorities for new investments, and put the company on the path to a venture chain future.
Note: To promote the principles behind enterprise commerce management, an ECM council made up of CIOs and business process experts from large enterprises has been formed. The council's charter is to establish best practices for putting the ECM concepts to work and to set expectations for software vendors to comply with the technology underpinnings. If you would like more information on the council, feel free to e-mail me at bparker@amrresearch.com.
| Author Information |
| Bob Parker is service director and vice president, Enterprise Commerce Management at AMR Research Inc. |
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