Solutions for Public and Private eMarketplaces
“Major multinational companies will buy software solutions,” says James Hatcher, vice president of business development for ECNet. “But when you go to the supplier base, only 10 percent of them will buy software. So what do you do with the rest of the guys? An eMarketplace needs to scale across the whole community of your supply base. That is one of the big pain points of private Exchanges and private eMarketplaces now. When you want a private network to work, you need to assess whether trading partner management is your core competency. If not, you better select an outsourcer that is willing to step up to the line and go out and get all your suppliers on the system. If you have to do it yourself, you are doomed to a very low adoption rate.”
That’s just one of the big problems B2B networks face today.
The other, according to Randy Clark, vice president of marketing for Enigma, is that companies don’t want to give control of their product content information to someone else because it’s truly strategic. Yet, there is a need to make it available to dealers who market the products. Clark says it’s a hot topic these days. “Who owns the data? I bought a product from you. Do you owe me all of the product support information? If the answer is yes, then am I free to modify that information and build businesses around it?”
Outsourcers ECNet and Enigma are solving the problems.
ECNet provides a managed service that allows companies to run their private networks. Hatcher says that major companies are usually running a “mishmash” of different technologies. “It’s a big pain point,” he states. “They have trouble just rationalizing data inside their four walls to allow these systems to talk together – much less trying to get out and establish some common format to deal with their suppliers who are also using different systems.”
Hatcher’s company’s solution takes care of the traditional electronic data interchange (EDI) issues. ECNet allows manufacturers to provide data in whatever format they prefer (Oracle, SAP, etc.), no matter how customized it is. Then the ECNet system provides the data back to the manufacturer in that same format. “Whatever their preferred method of data integration is, that’s how we do it,” he claims.
They do the same for the suppliers. They do back-end integration for the companies that want that service, or they provide the information through a browser interface. The outsourcer removes the burden of the manufacturer and supplier companies having to buy software and trying to standardize their information formats. ECNet also recognizes that a manufacturer has invested millions of dollars developing a competitive advantage through its supply chain, and it doesn’t want to share that proprietary information with outsiders or have it tweaked and standardized. ECNet also builds a customized workflow and process so the manufacturer will be able to manage through exceptions, analysis and visibility into trading partner performance.
More importantly, the outsourcer’s managed service takes on the challenge of supplier adoption. It’s an important element of success, but it’s not a core competency of manufacturers. ECNet is averaging a supplier adoption rate of over 80 percent. Traditional EDI adoption was less than 20 percent. Hatcher says the company asks its customers to inform their suppliers that they are going paperless and that the suppliers must become paperless by such-and-such date.
ECNet then works with the suppliers to review their different options and determine what is the most appropriate option based on their capabilities and their budget. “Getting rid of phone calls and faxes and being able to respond electronically to your customer by browser for $100 a month is instantly cost-justifiable,” states Hatcher. “It doesn’t permit downloads, but it gets them online and paperless.”
The paperless process removes a huge pain point for manufacturers that are “bleeding” faxes – some send more than 20,000 per week. Because lead time is reduced, costs are reduced. Because the supplier has better visibility of its customers’ demands, it can reduce inventory levels. And because orders and invoices can be reconciled electronically, fewer invoices are bounced out of the system and the revenue cycle is faster.
Managing Information Content
Enigma’s specialty is to take a customer’s product information (from a catalog, support documentation and parts lists) and package it into an application that can be sent outside the customer’s organization. Not a simple task. The information for the maintenance, operation and repair of an aircraft engine, for instance, is well over 50,000 pages. Enigma’s customer list is full of blue chips: Bell South, British Telecom, GE Aircraft, GE Power, John Deere, London Underground, Lucent, Marconi, Perkins Engines, Pratt Whitney and Sun Microsystems.
Clark points out that the market for spare parts of capital equipment is eight percent of gross domestic product. It’s a hidden market that is extremely important to companies whose large products – such as an airplane or tractor – have a long life cycle. So the product content information is strategic to competitive advantage because it facilitates the sale of spare parts and the servicing of equipment. “Those intellectual assets are best practices,” says Clark, “and that’s the key to the kingdom in terms of building a tighter customer relationship and driving customer satisfaction.” These types of companies have opted for the private exchanges.
According to Clark, manufacturers of capital equipment will be organizing their data and getting it out on the Web for the next couple of years. “It’s a fairly complicated problem,” he explains, “and we are still in an early stage of the market.”
Because manufacturers want to maintain control of their best practice data, the solution must be “more than a patch. We actually have to fix how people author data, manage data and then distribute it to customers. On whose Web site will the data reside? Who will have control of it and revise it? It’s a big problem.”
Collaborative groups in private networks form relationships upstream with suppliers in order to reduce costs and buy more efficiently. But they also look downstream to the support chain, which is all about increasing revenue and equipment uptime. The better a product is maintained, the happier the owner will be, and the more parts and service the manufacturer will be able to sell. The private Exchanges sort of own the asset together and collaborate to jointly maintain it.
Enigma’s outsourcing solution involves more than linking the data together in a way that is intuitive and searchable. Collaboration begins when the Exchange members communicate to enhance the data content. The software allows end users to add their own content to the underlying content as eNotes, so a field maintenance person can make a notation that a procedure is wrong or incomplete. “This allows the people who actually use the equipment to give feedback to the people who engineer the equipment, which has never happened before,” Clark says. “It builds a community of interest and shares best practices between groups that are dealing with similar problems.” It’s no longer simply data; it becomes a threaded discussion.
Predictions for eMarketplace Outsourcing
Outsourcing analyst and industry expert, Peter Bendor-Samuel, says that value in outsourcing is created when the outsourcer can leverage its expertise, economies of scale or resources. To do that, the outsourcer must be able to take more control of the outsourced process than is usually allowed in many B2B Marketplaces.
Enigma’s marketing VP believes that “as they mature, they will become more linked with other business applications that more and more look like the ASP model.” Clark says that the maintenance business is around $700 billion dollars worldwide. As companies will always want to expand their offering, they will need to eliminate older products by selling them to companies that are one tier smaller than they are. So the early B2B eMarketplace functionality is being built out under private Exchanges but, as the technology starts to become more standardized, it will be outsourced. “In effect, somebody will connect these virtual exchanges together and add new services on top of that.”
Hatcher, of ECNet, predicts that the “companies that are buying software to build private networks now will quickly realize that running them in an efficient manner is not their core competency. Is Company X running its private network going to staff a 24×7 service for its suppliers? Absolutely not.”
He believes that outsourcing will be the best strategy also because it enables suppliers that log in through a provider such as ECNet to access multiple customers’ eMarketplaces. It’s a much more cost-effective and efficient approach. “It leverages the many-to-many effect of the Internet,” Hatcher adds. “Private networks only leverage the Net’s communication medium. There is a big difference.”
We’re just now seeing an early stage of the B2B market.