Manufacturing News

Business Process Networks: what have you automated in your supply chain?

ALL manufacturers know that effective collaboration with their trading community of suppliers and customers is necessary for success.

Many companies have automated several of these internal and external processes using IT systems to reduce costs and grow profits. But the reality is that very few companies have automated the majority of these processes, leaving a great deal of room to increase business. So, my question is “What have you automated?”

According to research firm Aberdeen Group**, the leading 20% of businesses have automated 65% of their transaction processes. The lowest 20% of companies have automated less than 5% of their processes leaving the industry average less than 65% but greater than 5%. What do these companies have in common?

• Companies usually automate processes for large customers and rely on manual processes for small customers

• Most companies automate for their buy side first (80%) and then the sell side (20%)

• The leading businesses (20%) have automated their internal processes (through EDI) and are working toward greater collaboration with their trading community

• The majority of companies (60%) are working with EDI systems

• The remaining 20% rely on phone, fax and email to communicate with customers

Since the majority of companies rely on a mixture of phone, fax and email to communicate with customers, companies have working manual systems in place that are easily automated and expanded to their trading community.

By moving toward a complete, automated Business Process Network (BPN), companies and their trading communities each gain insight into selected business elements for mutual gain.

A BPN (often comprised of several ERP systems and applications interconnected through communications and processing components) is constructed for multiple participants, usually trading partners, to manage, control and execute business processes. The information in this smart network allows companies and the trading community to minimise the costs and maximise the profit of every order.

For a manufacturer already running their business with a sophisticated EDI system, moving to a BPN offers the improvements that allow more efficiencies plus the information necessary to grow in highly competitive local markets and expand globally while limiting excess expenses.

With business growth as the main goal, companies can’t do this alone or overnight. They need the buy-in and commitment from their trading partners.

So, what’s the argument to move to a BPN and how do you get the trading community on board?

To begin, consider the true cost of an order. Do you know the cost of your most expensive order? Do you have insight into all of the administrative costs of processing an order internally? Can you forecast the external costs of an order based on the ability of real-time retail sales, sourcing delivery and inventory costs? In short do you know the costs of your order process from start to finish?

This combined knowledge of administrative costs and performance information can directly improve your purchase-to-pay and order-to-cash metrics.

So, how costly is it to improve a current system? What’s the ROI?

The question “How costly is it to ignore?” typically comes from an empowered business analyst within the company or an outside vendor sales team.

A complete answer requires an analysis of your business process and can be determined quickly through a vendor ROI calculator or through a more granular approach like those from an industry analyst firm or knowledgeable consultant.

Companies need not be at the leading edge to begin this process, however automation should be a planned process leading to benefits at each stage of implementation.

“The goal is insight or smart processing at each stage of the supply chain, both within and outside the four walls of your business.

In addition, the key to successful automation is to choose and build a solution that is based on your business, your trading partners and, most importantly, one that is scalable and flexible (the two most overused words in our world, but truly important in this instance).

Enabling electronic processes is not just an IT issue. Success requires internal endorsement from marketing and supply chain management and the external support of trading partners to set expectations as well as timelines for compliance.

If you consider a BPN to be the engine to reach greater profits, reduce costs and build a more profitable trading community, you will position your company for future growth.

You will know the cost of your orders from the most expensive to the least. Forecasting will be more accurate and order fulfillment can become a strategic process.

You will have the information your business analysts need to empower your entire staff and the staffs of your trading partners.

For further information on a B2B Automation ROI Calculator, visit www.sterlingb2bautomation.com.

* By Michael Vulcan, ANZ Managing Director, Sterling Commerce

** Aberdeen Group, Business Value Research Series, “B2B Collaboration: Assessing the ROI of Process Integration,” July 2006

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