Today's letter of choice may have changed from an E to a C, but the challenges remain the same. The true promise of electronic commerce has always lain in improved real-time business communication and collaboration and although we may all be much closer to believing the benefits of Collaborative Commerce, are we adopting the cultural and technological changes necessary to deliver on the promise?
Over the last decade, manufacturing companies have made major investments in streamlining their internal business processes by deploying Enterprise Resource Planning (ERP) systems. 84% of manufacturing sites now deploy some form of ERP and the benefit has been an increase in internal productivity. Industry experts now acknowledge that the next wave of productivity gains will come from two areas: optimisation of the supply chain functions and innovation/rapid creation of new products.
Research finds that in the supply chain, 60% of manufactured goods will have already been produced by the time they reach the final manufacturer. A collaborative environment therefore makes good business sense and one that encompasses the whole supply chain (customers, partners, suppliers and trading exchanges) even better sense.
Building on ERP functionality
Supply Chain Management (SCM) tools work above conventional ERP to take realistic account of changing supplier/customer operations and requirements to provide better real-time scheduling. In other words SCM builds on ERP functionality but emphasises the manufacture and movement of materials outside the immediate factory environment. It focuses on demand planning, helping to achieve the three most widely held best practice beliefs: increase throughput, minimise inventory & reduce operating expenses.
SCM solutions need up-to-date, accurate information to be effective. Two critical factors emerge here. First, SCM cannot work without co-operation between a company and at least its key customers and suppliers. Second, information must be communicated clearly across the supply chain fast enough to allow responses in time to make a difference and cheaply enough to allow adoption.
Hence the critical importance of Internet technologies that enable customers and suppliers to communicate with each other in a more immediate, interactive, accessible, manageable, realistic, and viable way than was previously possible. It is Internet-based communications that allow supply chain participants to involve themselves in the notion of collaboration, and as such are the key aspect of modern "Collaborative Commerce."
SCM system penetration
However, the proportion of UK manufacturers with a system that can deliver at least some of this functionality is currently estimated at just 10%. What's more they are predominantly limited to larger organisations and those able to exert more influence over their supply chains (see chart 1.)
It is hardly surprising therefore that AMR Research survey results examining the state of development in use of technology reinforced the premise that few organisations have supply chain visibility throughout their own enterprise, and even fewer organisations have visibility across the extended enterprise, with only 6% of the surveyed companies able to look outside of their own business function domains (see chart 2.)
Disappointing results indeed. But although evidence of technology adoption appears ridiculously modest, it seems that the spirit of collaboration runs at much higher levels. In 2001, Benchmark found that nearly 80% of manufacturing companies now believe there is a major necessity for them to develop joint IT strategies with their customers and suppliers.
High receptiveness
Benchmark also assessed the receptiveness of UK manufacturing to Collaborative Commerce by measuring attitudes towards a total of 39 different areas, relating to all aspects of the business involving sales, purchasing, production and design. The results show that industry can be divided between those that are prioritising closer collaboration and those that are resistant (see chart 3.)
Pleasingly, the balance is now clearly moving in favour of greater collaboration with 34% of respondents classified as highly committed and committed to collaborative working practices and 24% classified as co-operative (recognising the need but not necessarily investing in it over and above other priorities.) However, with 30% resistant and a further 12% unenthusiastic, there is still much work to do on cultural change as well as technology development and up-take.
Barriers
What are the barriers to closer collaboration? No different from those that hinder investment in any e-business technology. What's interesting is that a market that consists of a very large proportion of companies that do not conduct business transactions online tends to cite fears that research among companies actually buying and selling online reveal are rare. For example, security is perceived as a key barrier to future e-business investment but research reveals that security problems are rare (although complacency over security is always foolish.) By contrast, the problems posed by lack of integration between back office systems like ERP and e-business solutions are more serious than commonly perceived (see chart 4 & chart 5.)
Ultimately, it is in the interests of the larger supply chain members to encourage suppliers to adopt Collaborative Commerce as supply chains cannot respond any faster that the slowest of their members and in this sense are only as strong as their weakest link. However, those reluctant to move towards Collaborative Commerce may find out that larger organisations will vote with their feet and favour those willing to and able to collaborate whether based in the UK or not.
And we all know what happens when you are the weakest link.
