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E-commerce in action - SUPPLY CHAINS, VALUE CHAINS AND THE ATTRACTIVE ECONOMICS OF INTRANET BUSINESS

This article appears in the issue June 1998 [Volume 7, Issue 8]

A virtual roundtable

A revolution is brewing. The support for conducting business between companies--trading partners, supply chain members, important customers--electronically is fast becoming the primary focus of many of the solution providers who serve the document, workflow and knowledge exchange marketplace.

Why? It's an enormous business opportunity. Forrester Research (www.forrester.com) places the value of goods and services traded between companies at $8 billion (that's 1,000% over last year!). By 2002, that number will reach $327 billion.

To what driving factors can we credit such alarming growth? According to Pushpendra Mohta, VP of TCG Cerfnet (www.cerf.net), one reason is that electronic commerce is real, and "delivering on its promise to lower costs, reduce order processing time and improve information flow. Business can be conducted around the globe 24/7 for a fraction of the cost of conventional methods, and in a fraction of the time."

Hand in hand, the second reason is trust. Businesses are becoming comfortable and confident in the security and reliability that can be built into Internet access. (Internet security--or the lack of it--was often cited as the number-one barrier to E-commerce until recently.)

Jeanne Logozzo, VP of marketing for Optika (www.optika.com) thinks preparation for an electronic future is a must for business today. "Organizations must implement a solution that provides an infrastructure to manage paper-based transactions today, the transition from paper to electronic commerce and, finally, electronic commerce transactions in the future," Logozzo said.

E-commerce provides much more than just a means to issue purchase orders and receive payment. "We focus on the knowledge chain as a piece of the value chain that must be managed all the way to the customer through E-commerce," said Larry Warnock, VP of marketing for Documentum (www.documentum.com).

But most enterprises already have an active, working process in place to communicate with trading partners, suppliers and best customers. Why should businesses rethink their current supply chain process and adopt an intranet-based supply-chain management scheme?

"An existing well-proven process is not sufficient for an organization to retain its competitive advantage," claimed Adriaan Theron, VP of sales and marketing, Plexus division of BancTec (www.plx.com). "The replacement of hard-wired or proprietary processes with open systems Internet-based systems will drive viable architectures of the future. Key considerations are the ability to expand the number of participants in the work process--workflow can now be seen to include customers and suppliers workflow--and, two, the shift from 'supply-chain focus' to 'demand-chain focus.'

"The emerging value of a true extranet environment, provided the appropriate technology platforms are implemented, is that each employee will become part of the customer interaction process and every interaction with the customer becomes a marketing opportunity," said Theron.

Mohta agreed: "With the Internet as the backbone, sharing information and documents across the country or around the world is not only less expensive, it's easier to deploy and manage. Private networks, by their nature and structure, limit the number of firms a single company can reach and interact with," he said.

In Mohta's view, intranets allow the development of "virtual private networks" (VPNs) that provide a best-of-both-worlds synergy. (A VPN is a type of intranet that incorporates public--the Internet--and private components--security).

VPNs permit organizations to add and subtract business partners, remote offices and members of workgroups in real time. Telecommuters and mobile employees, branch offices, vendors and customers can be provided with full or selective access to corporate databases and inventory/sales management systems for electronic collaboration, information content distribution and business-to-business interactions.

As interesting as the strategic potential of intranet E-commerce is, the hard-dollar savings over current trading systems is even more compelling. Studies carried out by Infonetics Research (www.infonetics.com) show that site-to-site network costs can be reduced as much as 20% to 40% in the United States and even more internationally. The savings in supporting telecommuters and road warriors can be as much as 60% to 80% because they can access the corporate WAN for the price of a local phone call. According to a recent study by IDC (www.idc.com), businesses that invested in intranet solutions had an average ROI of more than 1,000% and average payback periods of six to 12 weeks.

How should a business implement and manage such a complete overhaul of its trading systems? Very carefully, says Optika's Logozzo: "In order to ensure optimal evolution and success, enterprises should use a three-phased approach. First, an organization must automate internal work processes within departments using an integrated imaging, document management, COLD and workflow solution.

"The second phase is to deploy this functionality across departments. After automating these core processes, the final phase is to streamline business-to-business transactions by providing business partners secured access to images, discussions and workflow. Completion of this phase leads to automation of the supply chain and the adoption of electronic data interchange.

"Automating internal process, the first phase, is the biggest barrier, because once completed, it provides the foundation upon which to evolve the remainder of the solution."

E-commerce environments defined

Mohta defines the key implementation categories of intranet-based business-to-business electronic commerce infrastructures, or VPNs:

Intranet VPNs--streamline activities such as distribution of sales materials and collaboration. Data sheets that previously took weeks to develop, print and ship can now be posted for immediate access, shortening time-to-market schedules. The same system that keeps the sales force informed of new products, product enhancements and new price structures can be used by engineers for collaboration on product design, manufacturing and a host of other activities that will speed problem resolution.

Remote-access VPNs--The Gartner Group (www.gartner.com) estimates that there will be 60 million mobile and remote workers worldwide by 2002, up from 40 million today. Among larger companies, 25% reported having more than 1,000 remote-access users; nearly 50% expect to have more than 1,000 remote users a year from now.

Rather than maintaining large modem pools and incurring the cost of long-distance charges, many corporations find that using the Internet as a backbone for remote access is much more affordable and easier to implement and maintain than traditional solutions.

Extranet VPNs--Unlike intranets, which are relatively isolated, extranets are intended to reach business partners, customers and suppliers.

External applications include collaborating on new products and posting electronic catalogs, parts and dealers; online ordering and shipping information; as well as providing application, installation, troubleshooting and maintenance/service files and other information that can help resellers, prospects and customers.

With an extranet VPN, organizations can quadruple the efficiency of their customer service department, improve the staff's productivity and enhance customer satisfaction. By extending their extranets to key


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