1.

0
The Path
Forward 2.0
Supply Chain
Innovations
3.0
Industry
Perspectives
4.0
Making
It Happen
white paper
written by:

Tom Anthony
PeopleSoft
http://anthony.ASCET.com

Supply Chain Collaboration:

Success in the New Internet Economy
Supply chain collaboration is continuing to emerge as a fundamental change toward new methods of

conducting business. Closely united partnerships with emphasis on greater supply chain visibility and

proactive response to changing market conditions are going to be the requirements rather than the

goals placed on businesses. Today‘s technologies are accelerating the race toward the development

of new business models and collaborative solutions. This trend is encouraging heavy investments in

technology infrastructure as businesses prepare to be part of this new business environment.

Companies preparing for this new economic channels and trading partner relationships. Tom Anthony is the Supply Chain
model are faced with several key challenges: Internet-based communications technolo- Collaboration Strategy Manager for
gies surrounding the transfer of XML-formatted
PeopleSoft, Inc. Tom has been with
• Support of multiple technologies data will continue to evolve. Many existing trad-
• Support of multiple collaborative business ing partners will require support of EDI-based PeopleSoft’s product strategy
models transactions for years to come while more for- organization since 1998.Working with
• Scalability of collaborative solutions ward-looking companies will require confor- world class manufacturing and
mance to XML-based standards. The prolifera-
distribution operations for the past 10
Disparate systems and processes present chal- tion of multiple XML-based standards will fuel
lenges to businesses looking to execute on the the requirements for flexibility at a trading part- years, he has worked to build unique
supply chain collaboration vision. As business ner level. Businesses will be forced to support supply chain solutions for the consumer
transactions that have historically been internally multiple communication technologies and part- packaged goods, high-tech, and
focused now need to become external to the ner-specific communication standards well into
wholesale distribution markets.Tom
organization, your ability to succeed will be the future.
based on your ability to provide an integrated A seamless 360-degree customer and part- serves on the U.S. Chamber of
view across your business processes. ner view of your business is critical to your con- Commerce Logistics Council and is
Organizations that rely on human intervention or tinued success. All outward-facing systems must committed to the development and
lack integrated systems will run into scalability be integrated across your internal organization.
support of next-generation supply chain
issues as the business world begins to transact at Throughout the process of customer contact,
an accelerated pace. Response times expressed in order placement, procurement, production, and solutions.
days will no longer be an acceptable measure as fulfillment your outward communications must
the business world continues to move towards be consistent, timely, and accurate. As you pre-
the real-time exchange of information. pare your business for collaborative commerce,
The emergence of trading exchanges for you must ensure that your systems are tightly
specific business transactions such as procure- coupled, flexible, and allow you to extend your
ment and transportation adds additional com- reach outside the walls of your business.
plexity to the underlying infrastructure chal-
lenges. Very few companies will have the luxury Challenges of Supply Chain
of dealing with a single exchange. Most busi- Collaboration
nesses will need to comply with the specific Supply chain collaboration occurs when two or
business process and data requirements of mul- more companies share the responsibility of
tiple trading exchanges. This will again force exchanging common planning, management,
issues of infrastructure flexibility to the fore- execution, and performance measurement infor-
front in order to support multiple business mation. Collaborative relationships transform

http://anthony.ASCET.com 41
white paper 1.0
The Path
2.0
Supply Chain
3.0
Industry
4.0
Making
Forward Innovations Perspectives It Happen

how information is shared between compa-

nies and drive change to the underlying
business processes. Businesses are looking
Financial
toward collaboration as an opportunity to Customer Institution Supplier
Portal HR Portal
optimize their supply chain and relation-
ships with their trading partners. Supply
chain collaboration poses complex chal- Trading
CRM Fulfillment Planning Procurement Exchanges
lenges to supply chain partners in that there
is a broad spectrum of collaborative initia-
tives, disparate standards for communica- Trading Production
Exchanges Critical
tion, and various levels of trading partner Third
Suppliers
Party Logistics Production
competencies and business processes.
Collaborative relationships will require sup-
Internal Enterprise Performance Measurement
pliers and consumers to support multiple
External Tools and Technology
simultaneous business models and commu-
nication media in order to fully realize the
benefits of collaborative business.Your busi-
ness systems must be flexible enough to Figure 1.0 Enterprise Performance Measurement – Tools and Technology
support the variances in technologies and
business models that can be as unique as
the trading partnerships themselves. laboration initiatives; however the Internet on the depth of their trading relationship.
Collaborative business stands to reap the and XML-based messaging has emerged as For example, within inventory replenish-
benefits of a highly effective supply chain a medium for low-cost information ment there are multiple models for how
when systems are able to support the broad exchange between business partners. These the customer orders and item quantities
spectrum of trading relationships across the technologies are acting as a catalyst for are determined. The simplest trading rela-
end-to-end business process. change in the development of new stan- tionship for replenishment is based on a
The term collaboration is used broad- dards to support collaborative business pull model where the customer deter-
ly in today’s market and encompasses mul- models. Pilot programs have already shown mines the appropriate item balances and
tiple functional areas. It is important to that collaborative solutions can provide places an order with the supplier when the
recognize the functional areas of collabo- significant strategic direction in the areas goods drop below minimum inventory
ration as well as the initiatives that are tak- of reduced inventories, reduced stock outs, levels. As the trading relationship matures,
ing place within each area. The figures improved customer service, and improved the supplier may agree to manage the
within this article illustrate several of the supply chain process efficiency. replenishment of inventory through a VMI
collaboration initiatives that are currently The consumer packaged goods (CPG) model. In this model, the supplier will
underway and then describe the processes sector has historically been a leader in maintain visibility of current customer
involved. developing and implementing collabora- inventory balances and create customer
Cost has historically been a barrier to tive initiatives. Consumer products compa- orders for replenishment based upon the
the technological implementation of col- nies started building EDI-based collabora- customer’s sales forecast. For more strate-
tive solutions through the development of gic relationships, CPFR could be used to
Weblink the UCS standards. The Efficient Consumer further strengthen the overall supply chain
W2 Response (ECR) initiative focused on solu- visibility and management. In a CPFR
For more on supply chain initiatives: tions for VMI and customer replenishment. model, the supplier and customer work
uchneat.ASCET.com Today, the Voluntary Interindustry together to develop a joint sales forecast
srivastava.ASCET.com Commerce Standard (VICS) organization is and agree to parameters of acceptable vari-
For more on standards, see: supporting the development of the CPFR ances. Customer point of sales information
uchneat.ASCET.com standards for the CPG industry. Notables is tracked against the joint forecast and
For more on partnerships, see: such as Kimberly-Clark, Sara Lee, Procter & when variances are not within the agreed
ramanathan.ASCET.com Gamble, and Hewlett Packard are piloting upon tolerance levels, both the supplier
For more on competencies, see: CPFR initiatives with leading retailers like and customer are notified so that the
prince.ASCET.com Wegmans and Wal-Mart and achieving the appropriate action can be taken. This
benefits of collaborative commerce. proactive approach to the inventory
The collaborative business model that replenishment process requires close
is used between trading partners is based interaction between the trading partners

42 Achieving Supply Chain Excellence Through Technology

 change as well. In addition, distribution
channels may be limited in their ability to

Promotions Management

Trade Fund Management

Transportation Planning
Catalog Management

Third Party Logistics

supply detailed and accurate information

Procure to Pay

Item / Product

Order to Cash

Electronic Bill
Presentment
Scan Based
used to drive the replenishment process.

Information
Initiative

Trading
CPFR

CPC
This will result in suppliers needing to
VMI

support multiple collaborative business

models to support the broad spectrum of
trading relationships.
In many cases, the requirements of
Area

Replenishment Buy Side Sell Side Fulfillment Fulfillment Mfg. multiple collaborative business models
equate to multiple systems to support the
business processes. Many collaboration ini-
Collaboration Initiatives Description tiatives in place today heavily leverage
Vendor Managed Inventory (VMI) Supplier manages a customer’s inventory human intervention or utilize point solu-
levels using either traditional Min/Max/EOQ or tions that are not fully integrated across the
forecasting replenishment models.
multiple business processes. There are also
Collaborative Planing Forecasting Supplier works with the customer to develop a multiple technology alternatives that can be
and Replenishment (CPFR) joint sales forecast that is used as the basis for
replenishment. Actual sales vs. forecast are used to facilitate the collaborative process.
compared to alert parties of variances so that The reduced cost of transferring informa-
proactive action can be taken.
tion utilizing XML-based technology has in
Scan Based Trading Suppliers provide manage customer inventory some ways added complexity to collabora-
levels and provide goods on consignment.
Customers exchange point of sale information tion in that there is a proliferation of com-
with suppliers to drive both replenishment and munication standards. A supplier will likely
billing activities from actual sales activities.
need to communicate via EDI, and multiple
Procure to Pay Transactions Traditional transactions that are used for
placing a purchase order, communicating customer specific XML data formats for the
changes, and acknowledging receipt with a same set of business transactions.The result
supplier.
is that suppliers not only need to manage
Item / Product Information Suppliers and customers share information multiple collaborative models, but must
related to items that they purchase/sell. This
initiative is focused on keeping the information also manage multiple communication
in synch across multiple suppliers and methods within each model.
customers.
The same statements can be made for
Catalog Management Customer centric exchange of supplier catalog
information with facility for customers to place both the supply side and the demand side
orders against new products/items with minimal of collaborative relationships. Customers
data entry.
must manage multiple supplier relation-
Order to Cash Transactions Traditional transactions that are used receiving ships in much the same way the suppliers
sales orders, communicating changes, sending
an advanced ship notification, and invoicing a must manage multiple customer relation-
customer. ships. Material can be forecasted and pro-
Promotions Management Suppliers provide notification to customers for cured directly with the supplier and can
planned promotions, exchange activity
information against a promotion also be directed through the use of a trad-
Third Party Logistics Suppliers can outsource the fulfillment of goods
ing exchange. The additional business
to a third party logistics (3PL) provider to models associated with using a trading
service smaller regions, or to handle excess exchange increase the overall complexity
inventory. The 3PL must receive sales order
information and send back shipment details. of the supply chain.
In the end both suppliers and their
Different varieties of Supply Chain Collaboration Initiatives
customers must provide a seamless end-
Figure 2.0
to-end process that can meet the business
and technological requirements of their
respective trading relationships. They will
and helps reduce inventory levels through ships from casual buyers to strategic part- need a flexible solution that can support
the supply chain. ners. As the strategic level of partnership multiple business models and work seam-
Across the overall supply chain, a sup- matures between the supplier and a cus- lessly across their execution systems.
plier must manage multiple distribution tomer, the collaborative business model Seamless execution will reduce the
channels with multiple levels of relation- used to support the relationship will likely amount of manual intervention that is

http://anthony.ASCET.com 43
white paper 1.0
The Path
2.0
Supply Chain
3.0
Industry
4.0
Making
Forward Innovations Perspectives It Happen

often required in maintaining the trading

relationships and will allow the process
to flow through a common process XML Supply/
Pull
stream. Supplier 1 EDI Customer 1

Conclusion
EDI VMI
For companies seeking to effectively
EDI
develop and manage business-to-business Supplier 2 Customer 2
and business-to-consumer commerce
with customers and suppliers, you must CPFR
utilize collaborative commerce solutions Trading XML
Exchange Format A
that enable comprehensive business Supplier 3 Customer 3
process interaction for selling, buying,
CPFR
and developing products and services
XML
over the Internet. For example, PeopleSoft Format B

users enable their customers and suppli- Supplier 4 Customer 4

ers to become part of the extended col-
laborative community exchanging busi- Figure 3.0 The Trading Exchange
ness documents and information
throughout the product, customer order,
and purchase order lifecycle. They are including: procurement, forecasting, direct interaction with customers and
leveraging Internet-enabled solutions that advanced planning, customer order ful- suppliers through the Internet that lever-
offer modular, best-of-breed functionali- fillment, and customer relationship man- age leading-edge collaborative commerce
ty for back-end and front-end processes agement. These solutions provide secure, techniques.

44 Achieving Supply Chain Excellence Through Technology