Our business is small, but we plan to grow quickly and we want to collaborate with our partners electronically. We don’t want to go a long way down the wrong road. What do we have to know before we get started?
There are five major questions that companies should ask when considering electronic interfacing between partners and suppliers.
- Do we really want to collaborate or are we in fact talking about improving co-operation through electronic capabilities?
- Have we thought through the costs and benefits of the project?
- Do we have a clear understanding of the grand design? Can we implement it in stages?
- Do we have the internal resources to undertake this initiative or do we need to get external expertise?
- Are we really committed to seeing this project through?
The first issue that companies should address is whether they want to collaborate or whether they’re simply looking to establish better, more efficient communications with their trading partners.
Collaboration inherently requires business partners to share confidential information for mutually beneficial ends. The goals of this collaboration should be the streamlining of inventory from the supply chain, increased speed of product development, reduced cost, greater on-time delivery and productivity improvement. Because both parties are sharing confidential information and reducing total costs from the supply chain, both parties benefit.
Unfortunately, most companies are not capable of doing real collaboration because it requires accurate information sharing, responsiveness to partners’ requests and significant company resources. Small and medium-sized businesses must understand that true collaboration with partners is very time-consuming and costly. In most instances collaboration is not required nor is it practical.
Electronic communication between business partners is a good idea that can bring significant benefits, whether it leads to collaboration or greatly improved co-operation. Electronic communication can be as simple as electronic data interchange/extensible markup language (EDI/XML) exchanges between partners for purchase and sales orders, advanced shipping notifications (ASN), and carrier messages to the more sophisticated Web information sharing capabilities.
When evaluating electronic communications between you and your partners it is important to have a clear understanding of the costs and benefits. Is the motivation for becoming electronically interconnected because it is now de rigueur, or is it a response to large customer or supplier demands? If you become more electronically connected to your partners is there a clear value proposition? Will it improve your relationship with you partner and drive revenue or help reduce total cost of products? Are there clearly understood efficiencies that the company will derive through better operating procedures and organization effectiveness?
If the answers to these questions cannot be quantified you should question the basic concept of going forward.
If you decide there is a strong business case to be made for collaborating through electronic communication you must look at the possible types of communication interfaces. The most common path is to develop a Web capability whereby you can exchange information with your customers and suppliers in a secure environment. You must have a very clear idea of what you want to accomplish through the Web site. Do you want to accept orders over it? Do you want to allow your customers to query your system to be able to check on the status of their orders, shipments, invoices and performance? Do you want to be able to source product over the Web? Are you looking to incorporate quote management capabilities supported by full landed cost management? Do you want to share with your suppliers your order forecasts, their orders with you and your payment schedules with them?
Companies sometimes fail to think through clearly the rationale for having electronic collaboration capabilities. But once you have made a decision in favor of forging them and the objectives of the project are clearly understood, the next step is to understand what technologies and processes are required to support the electronic environment.
It is at this stage that it is important to get the right expertise. The right advisor or consultant can help clearly define the project within the constraints of the current and future budget and lay out a blueprint of how the objectives of the project will be met. Make sure you will be able to work well with your advisor, on a personal level, as he/she will actually become part of the project team.
Finally, a critical element in the success or failure of the project is management commitment. This is not only important at the beginning, but necessary through the entire life of the project. Without management commitment and oversight the project will fail to deliver to its potential.
Edward (Ned) Blinick is vice-president, sales and marketing of Blinco Systems Inc., a developer of global synchronized supply chain solutions for organizations that source globally and manage non-asset based manufacturing operations.
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