23 March 2012
Electronic processing of business messages between companies in most industries and countries is most advanced in terms of orders from buyers to suppliers and invoices from suppliers to buyers, which at best is a connection between them. At worst, it's about different types of goods and services that have no relation to each other. This means that most companies from Tier 1 (first supply chain) and backwards in the supply chain still live in a world of poorly updated ERP systems, where incoming goods is something of a "happening" and security stocks are unnecessarily high. It results in a cost and stock level that is higher than it should be, reducing profitability and competitiveness.
There are several solutions to the problem. Many companies work on advanced process improvements with their major customers and suppliers, providing advanced technical solutions, which often only partly "hit" a few partners or a small part of their business volume as the market is not mature enough for this type of change.
Solutions that have been been distributed fairly widely so far are web portals, both towards customers (web shops) and suppliers (Web EDI). The problem with portal solutions of this kind is that they are customer-specific, at best, semi-automatic and something of a "Dead End" in a supply chain perspective.
Include everyone in open, broad solutions
The way forward must be inclusive rather than exclusive. By this I mean that the solutions offered must be as open and broad as possible and meet all companies in the supply chain, regardless of their maturity. Only then can the critical mass needed to process improvements be realized. Perspectives must be broadened. The entire order-to-delivery process must be addressed. Without this broader perspective, the greater part of the world's supply chains will continue to live with long information lead times and poor responsiveness in the future. Simply integrating orders and invoices does not lead to improved flows, just to a streamlining of parts of administration.
Those solutions currently on the market should update the involved ERP systems on order status as quickly as possible, and preferably in the complete chain of business information flows.
Focus must be moved from technology and all energy should be placed on creating solutions that work for complete processes and supply chains.
Approaches for a successful process
For any process that has the objective of increased competitiveness and greater value to be a success, I recommend an approach that also takes into account market maturity. It should follow the following steps:
Automate today's order-to-delivery process between ERP systems in supply chains. Solutions should enable a rapid spread to many customers and suppliers in the chain.
Collaborate more by sharing more information, such as forecasting and inventory levels, which increase the opportunities for companies in supply chains to improve their current processes. The 80/20 rule applies to the selection of customers and suppliers.
Increase cooperation with the most strategic customers and suppliers even further by introducing new, demand-driven processes, such as Vendor Managed Inventory (VMI).
Hans Berggren, CEO PipeChain