The better we know something, the more likely we are to find fault with it. In IT terms, enterprise resource planning (ERP) has been around since the year dot. Cynics could be forgiven for trotting out the adage that you can’t teach old dogs new tricks. But collaboration in the supply chain is providing ERP with an opportunity to redeem its tarnished reputation for budget blowouts and overlong implementations, by allowing organisations to truly integrate all data and processes into a unified system. Wholesale distributors, importers, manufacturers, their suppliers, resellers and retailers — all are benefiting from the two-way traffic that supply chain collaboration has become.

Mike Francis is group sales manager of Revolution Systems, the NZ distributor for Sybiz Vision, a Windows-based integrated accounting program. Francis reckons any organisation supplying wholesale goods should now be working with a supply chain integrator if they haven’t already begun to do so. “If their software doesn’t allow easy integration, then they should be working on replacing it. Every business should only be using software that allows it to easily communicate with its clients by linked emails and attached documents. The days of printing a document and faxing it or posting it are long gone — if your system cannot email a document in an instant, it needs to be replaced.” The flipside of this is that you may not want your trading partners to see the inside workings of your organisation and risk having them use this information against you. But supply chain collaboration also allows companies to share data and documentation without compromising their security and competitive advantage.

Supply chain ERP players
Chris Easton is managing director of Applied Logic, which creates integrated business systems and specialises in the development of internet-based applications for industry. “We provide both supply- and demand-side collaboration interfaces,” he says, “particularly for New Zealand wholesale distributors in food, automotive and consumer electronics. In food wholesale distribution, for example, recharge orders are common. This often involves retailers placing orders through a web-based order entry facility. Using ERP-based collaboration tools, an electronic purchase order to the manufacturer can be generated based on an order. The manufacturer delivers directly to the customer and its invoices are electronically matched to purchase order and customer invoices to ensure proper margin reporting and less manual intervention.”

“This is Applied Logic’s specialist area,” adds Easton. “This process saves time and money as inventory handling is eliminated, freight and spoilage is reduced. This allows margins to be maintained in an extremely competitive business.”

Francis of Revolution says its clients are commissioning supply chain modules in an effort to smooth business processes, especially where back-to-back logistics documentation is involved. Sage is a supplier of Accpac ERP, warehousing management systems, accounting and customer relationship management to all sizes of business. Mike Lorge, managing director of Sage Business Solutions ANZ says Accpac’s offerings ensure information exchanged between trading partners is accurate and accessible to those who need it. “Orders are exchanged between trading partners, eliminating data entry. During document exchange, stock levels can be checked so the trading partner is made aware and orders can be modified, if need be.” The flow of information to the warehouse also ensures prompt delivery. “Invoice information also flows seamlessly through to the debtors’ ledger, eliminating the need to query payment advice information due to possible data entry errors.”

Microsoft is also active in supply chain collaboration, through Microsoft Dynamics. Stewart Gibbs, manager of Microsoft Dynamics says it works like familiar Microsoft software such as the Microsoft Office suite, flattening the learning curve for users. Dynamics collaboration is achieved through technologies such as Sharepoint, to provide access to documents and transaction information for trading partners; BizTalk, to exchange data and orchestrate processes; and Live Communication Server, to provide unified email, instant messaging, text, and voice messaging.

Infor provides integrated enterprise applications and standalone products. Ross Bolden is sales manager of supply chain management solutions for Australia and New Zealand. The key business benefit of supply chain collaboration, says Bolden, is centralised information. “This results in better customer service through better inventory allocation.” He says Infor’s supply chain management (SCM) and supplier relationship management (SRM) offerings complement each other. “Both are valuable tools to help our customers synchronise longer supply chains with changing customer demands. Our SRM solutions provide web-based communication tools that allow customers to manage their suppliers tightly. Advanced tools for monitoring and rating supplier performance are part of the package.”

Pronto Software is an Australian company using Australian R&D to develop, sell and support its PRONTO-Xi ERP system, which is represented in New Zealand by Velocity Global. “PRONTO-Xi has a comprehensive suite of supply chain and collaboration tools that enable buyers and sellers to exchange and share vital information in a timely fashion, significantly reducing the risk of errors and taking cost out of the supply chain operation,” says Pronto’s product manager, Bonnie Ryan.

Meanwhile, Richard Jacob, general manager of business solutions for Intergen, does not agree that supply chain collaboration will be ERP’s redemption. “Supply chain collaboration is not new. It’s been around for some time and is very 1990s. That’s not to say that everyone has done it, but rather, that we’ve moved on.”

Jacob says ERP used to have a fairly limited definition, but it has expanded in scope and today embodies something far broader. If indeed ERP requires redemption, he says, it will come from its ability to contribute to a platform where the complete exchange of information is seamless and cost-effective. “The organisation of structured and unstructured data is vital,” he says.

“Business have always been willing to integrate their supplier chains as long as the other guy does the integrating,” says Brent Ellison, business development manager for Conexa - a trading network provider.

“To synchronise the supply chain often requires clever wiring between businesses, a little bit of ‘grease’ to smooth the transition of data to information and some ‘polyfilla’ to fill the gaps between a customers ERP system and the ERP systems of various suppliers – something that service providers like Conexa can also do cost effectively.”

While metrics on the cost saving of B2B integration are thin on the ground, Ellison says from a procurement perspective the expected savings are up to 23% on maverick purchases that are focused on to supply contract, and up to 40% on transaction processing and accounts payable processing costs.

Trusted suppliers and security
When taking your first steps along the collaborative supply chain, you need to consider a number of security threats and associated risk profiles. The investment you make in controlling access to your data depends on the potential impact to the business if it is stolen by competitors or released into the public domain. Our interviewees agree that it makes most sense to bring your most trusted suppliers online first.

“Make sure the correct security is in place and that the supplier’s system is capable of this, as well — at a user level and technology level,” suggests Easton of Applied Logic Systems. “Remember the key business reasons for implementing this; that is, to save time and money and to improve the services levels and business processes. There needs to be a clear return on investment.”

Greentree says its Windows-based modular, integrated business management suite is purpose-built for Australasian small to midsize business and offers integration with Microsoft Office. Steve Sims, Greentree’s R&D director, recommends ensuring your supplier information is siloed so that internal communications are not inadvertently circulated. “And provide detailed training to ensure the supplier gains the maximum advantage from the capability.”

Francis of Revolution Systems recommends creating an independent area between your internal network and the internet — a ‘demilitarised zone’ in which you can publish your data. “The cost of doing this is minor, compared with the issues that could arrive if the security is breached,” he points out. “This security breach would generally not be from the trusted relationship but from outside hackers.”

Bolden of Infor advises businesses to start by sharing less-sensitive information such as sales data, in order to build trust gradually. “As the relationship develops and the business requirement evolves, they can expose more business information to that supplier or customer over time.”

Sage advice on selective access
”Selective access should be configurable by trading partner, based on the level of trust,” says Easton of Applied Logic.

In Greentree’s case, says Sims, selective visibility is configured to meet the customer’s objectives as part of a requirements study. Francis of Revolution Systems says access to stock levels should be controlled by simple business rules that eliminate the risk of over-promising and under-delivering. “Honesty in communication is now vital for a successful business relationship. If the internal systems cannot supply the data that is required, the business needs to upgrade.”

Lorge of Sage says you don’t have to let your trading partners know precise inventory levels; merely confirm that there is sufficient stock available for that order.

But Ryan of Pronto points out that while it is entirely possible to transact with limited content, the larger market players and legislators often explicitly dictate what data is to be exchanged. “For example, a large retailer may make supplier inventory levels a mandatory data item, with the consequence that if the retailer cannot see a supplier’s inventory levels, they won’t place orders with them.”

As collaboration technology continues to mature, there will be further opportunities to tweak access controls while improving inter-business efficiencies. More widespread use of web services will improve direct business-to-business collaboration and will eventually replace electronic data interchange and virtual area networks. Enterprise application integration (EAI) and service orientated architecture (SOA) will provide yet more opportunities for businesses to interact electronically. And as prices continue to drop for radio frequency identification (RFID) technology, which is currently affordable only to large organisations, even small businesses will be able to vreduce supply chain costs and improve their customer service.

Francis of Revolution Systems says the internet culture of “no delays, I want it right now” is driving immediate information availability, and he puts out a challenge to business owners to spend more time with their key staff members, gaining an honest view of their internal systems: “Make your company the easiest in your industry to do business with and you’ll achieve the growth you desire.”

Making an ERP investment decision this year? 

Check out the 2007 iStart ERP Buyers Guide and the ERP Research Pavilion for exhibits, case studies, white papers and downloads from a range of New Zealand’s leading ERP vendors.

March 2007

By Chris Bell