Best Practices

The Importance of a Highly Available B2B Infrastructure to ERP Success

B2B e-Commerce—A Strategic Application?

by Steve Keifer

If you asked business or IT executives to list the top 10 mission critical applications in their enterprise, very few would list B2B e-commerce. For many leaders in the retail, manufacturing or services sector, B2B e-commerce is not considered a strategic application. The attitudes towards B2B are reflected in the investment levels in business continuity plans for B2B infrastructure. Most corporate disaster recovery managers focus on internal enterprise applications when developing business continuity strategies. Such a prioritization seems logical upon first consideration. In the event of a disaster, common sense would suggest that you prioritize the recovery of the applications your own employees use above those used by your business partners. What many IT leaders fail to consider is that without operational B2B platforms, many internal applications, such as ERP, lack the data needed to operate and are therefore significantly handicapped. In fact, ERP dependency on B2B applications has grown substantially in recent years as businesses have

ERP Depends on External Data

In the early days of manufacturing, vertically integrated companies would produce all of the raw materials and component parts required to build their products. The past 100 years have seen radical transformations in value chains. Corporations have become more specialized, depending upon a network of partnerships to help them design, manufacture, transport and service their products. Today’s manufacturing leaders are leveraging original design manufacturers, contract manufacturers, third-party logistics, freight forwarders, channel distributors, aftermarket service providers and postponement specialists to fulfill various functions in their value chain. Specialization and outsourcing are not limited to the supply chain. Increasingly, back-office business processes are being sourced to specialized third parties. Examples of outsourcing exist in every major business function including human resources, finance and accounting and information

The benefits of these new network-centric, highly-outsourced business models can be significant. However, the risks should not be underestimated. The specialization of roles that occurs with horizontally structured value chains creates a strong dependency upon business partners for day-to-day operations. The implications of the change can be substantial, particularly if the choice of business partners proves to be problematic. Consider what the impacts would be if a key value chain partner became financially insolvent or suspended operations temporarily. The disruption to a supply chain and business operations could last for days, if not weeks. There are implications for information technology strategy as well. In today’s specialized value chain, information systems are dependent upon your business partners as well. Applications such as ERP quickly become inoperable without data feeds from external sources. In fact, a high percentage of the data housed in enterprise applications actually originates from external business partners. A recent AMR Research study¹ in the manufacturing sector found that 1/3 of all data housed in an ERP system originated outside the organization. The external data came from three key sources: customers and distributors (43%), suppliers and contract manufacturers (31%) and third-party logistics (17%).

Without reliable information exchange between business partners, the value chain becomes dysfunctional. Consider what the impacts would be if a company’s B2B communications went offline for 24 hours? How many orders would be lost? How many customer credits would have to be issued? More importantly, how much credibility would be lost?

 

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