New Strategies

Accelerating Supply Chain Application ROI Through B2B Outsourcing

by Pradheep Sampath

Today’s supply chains are global and multi-enterprise by definition. The term supply chain has always described a system of organizations, people, technologies, activities, information, and resources involved in moving a product or service from suppliers to customers. Best-in-class organizations, recognizing the importance of information that defines and operates their supply chains, have invested millions of dollars in procuring and perfecting a myriad of software applications that either create or utilize such information. These Supply Chain Management (SCM) software applications have become critical imperatives for all organizations—not just those in retail, consumer products, automotive, or high tech sectors— in their quest to fulfill customer demand through the most efficient use of supply chain resources, such as distribution capacity, inventory, and labor. However, the ROI from these SCM software investments is directly dependent upon the quality, accuracy and completeness of the data that is processed by these applications. Integrating with global trading partners to obtain efficient and cost-effective data is typically not a core competency for manufacturers and retailers. Thus these companies often rely on B2B outsourcing solutions to shield them from the complexities associated with such tasks.

Formerly a bastion of smaller niche companies, SCM capabilities have recently become extensions of core Enterprise Resource Planning (ERP) software to the extent that the line that separates the two genres is increasingly blurred. These software applications can be classified into the following groups:

• Enterprise Resource Planning (ERP)—Serve as the information backbone or ‘systems of record’ for a corporation’s business activities, such as Financial Accounting, Sales & Distribution, and Materials Management. Often referenced via their modules or solutions which share common data and practices, these applications automate and integrate a company’s business processes, while enabling enterprise wide, real-time information access.
• Supply Chain Planning (SCP)—Forecast customer demand and inventory supply necessary to satisfy this demand. These applications include functions such as Supply Chain Network Design, Demand Planning, Manufacturing Planning, Inventory Optimization, Replenishment Planning, and Sales & Operations Planning.
• Supply Chain Execution (SCE)—Serve as transaction or execution extensions of Supply Chain Planning applications. They are further classified into Warehouse Management Systems (WMS), Transportation Management Systems (TMS), Global Trade Management Systems (GTM), and Supply Chain Visibility.

Typically, a large percentage of data processed by SCM applications either originates from, or is destined to, business partners located outside an organization’s corporate limits. Multi-enterprise supply chains and extended customer networks have rendered it critical for companies to design and execute B2B integration strategies that enable the efficient automation of communications and business processes between global trading partners. The following figure illustrates the types of B2B documents and transactions commonly exchanged between various parties involved in logistics operations of global supply chains.

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