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The promise and the perils of choosing a multi-enterprise supply chain network.
We’re almost two decades into the 21st Millennium, yet the basic paradigm of enterprise technology from the last Millennium still persists. That’s surprising given the progress we’ve made on the consumer technology side, and the inappropriateness of enterprise technology for today’s challenges.
Change is hard. Changing well-established, complicated and calcified technology stacks embedded deep in the enterprise is even harder.
But the cost of not changing in an evolving landscape are even higher.
The Challenges of Enterprise Resource Planning (ERP)
A recent report from Panorama Consulting highlights some statistics gathered from 263 respondents who implemented solutions from the top ERP vendors.
- The average ERP implementation takes more than a year, 18 months.
- The disruption to operations during implementation is often significant, average of 123 days per implementation.
- The internal resources dedicated to the project full time are 8-12.
- Most implementations go over budget (64% in 2018, 74% in 2017).
Most importantly, the actual value from the solution is often disappointing. From last year’s ERP report, 44% of respondents saw less than half of the projected benefits. And those benefits are slow to materialize. 60% said they had to wait between one and two years to see the benefits.Change is hard. But the cost of not changing in an evolving business landscape is even higher. - Geoff Annesley @onenetwork Click To Tweet
While ERP has offered significant value for Finance and Procurement a different type of technology is required to super charge the edges around your enterprise that involve partners such as suppliers, carriers, channels, and consumers.
The rise of upstart companies like Uber and AirBnB and technology like blockchain, has brought multi-party networks into the spotlight. Multi-party, or multi-enterprise networks are finally gaining understanding and attention from analysts.
Gartner’s inaugural magic quadrant on Multienterprise Supply Chain Networks was released in November 2018, IDC’s MarketScape on Multi-Enterprise Worldwide Supply Chain Commerce Networks in December of 2018. It’s good to see the role of networks being recognized in solving the complex problem of global supply chains.
What is a Network?
Not all “networks” are the same. Some “networks” are merely portals or hub-and-spoke networks tied to other similar solutions. They are not architected from the ground up to support multiple enterprises on a single network. For example, the existing B2B “networks” require the same supplier to have point-to-point connections for each customer they collaborate with. The same goes for carriers and retail channels.
What One Network calls a “multi-party network” is a network of multiple enterprises, where each enterprise is represented once on the network, supported by a multi-party data model that provides a single version of the truth for all parties. It is specifically designed for multi-party participation, autonomous digital agents, transactions and workflows. Access to the data is controlled by a patented permissions framework that enables each party to control who can see what data, and what they can do with it. There is no data replication and the data does not shuttle back and forth between companies on the network.
One telltale sign of a hub-and-spoke, or point-to-point, network, is that new IT connections are required between parties that wish to establish business relations, even if the parties were previously connected on the “network”. With a true multi-party network, you join the network once, and can begin transacting with any other company on the network. Connections to trading partners are established virtually and instantly. This means a supplier can manage its own suppliers and support multiple customers through the same network.
This might seem like a subtle distinction but the implications are huge. If you do the math for the number of IT connections required for each party on a network to collaborate you quickly see that the cost and time involved make this approach impractical.
The Problems with the Traditional, Pseudo Network Approach
Firstly, traditional systems are inward-looking. They were designed to solve the problems of the enterprise, not the problem of the supply chain ecosystem. The supply chain is inherently multi-party, as are most of the processes. There are buyers and sellers, suppliers and suppliers to suppliers. There carriers, customs brokers, port insurance agents, freight forwarders and third-party logistics providers. The transactions and workflows are multi-party, from sales and purchase orders, to making and moving supplies and product.Patching different solutions together to form a “network” solution with point-to-point integrations does not fundamentally change the underlying data model or architecture. - Geoff Annesley @onenetwork Click To Tweet
When different solutions and technologies are wired together to form a “network” solution with point-to-point integrations, it does not fundamentally change the underlying data model or architecture. Instead, what happens is complexity is piled on top of complexity. Each underlying application still has its own model of the world and is connected to its own sources of data.
Enterprise Application Integration (EAI) have solved some problems, but at the same time they have increased the complexity of application architectures, rather than simplified them. After all, the whole point of EAI is to avoid having to make major changes to the technologies being linked.
A single data model or database in the cloud doesn’t solve the problem. Because each enterprise still has its own separate data model (cloud ERP) which requires point-to-point translation of master data, cross referencing per point-to-point IT connections, and you still get the explosion of IT connections if you try to connect all parties together.
Hub-and-spoke models are an improvement over integrated, standalone systems, but they fall far short of the elegance and simplicity of a true network. The reason is because hub-and-spoke models require new pathways for each customer-supplier relationship. Thus, a supplier serving Customer A needs a second pathway to serve Customer B, a second integration effort. This approach is cumbersome, slow and resource intensive. It also leads to a rigid infrastructure that is difficult to maintain and manage as business needs change.
True Multi-Party Networks are “Hub-to-Hub”
Multi-party networks are designed and architected to be multi-party from the underlying data model through transactions and workflows. A single version of authoritative, real-time data is at the heart of the network, and shared with trading partners (not duplicated or moved). Companies and their trading partners connect once to the network. Trading relationships with control over data access and rights is controlled virtually, via a permissions model that provides access to that data to the relevant, authorized trading partners.
A fundamental principle of true multi-party networks, is that all trading partners are equal “citizens” of the network, with access to the same functionality for their own use with their trading partners. A multi-party network can be described as a “hub-to-hub” network, where trading partners transact on equal footing.
Another key attribute is that the applications designed for a true network can be shared on a single instance across any number of parties allowing optimization of the network based on network objective functions. Legacy B2B providers have enterprise applications that are designed for one-company-at-a-time optimization, instead of end-to-end business network optimization. They still are stuck in a low value quadrant optimizing only the enterprise instead of both enterprise and the network that the enterprise functions in.
Finally, as hinted at earlier, this multi-party philosophy that infuses every aspect of the network, results in a single onboarding process for each participant. Everything thereafter is managed virtually on the network, including managing trading relationships and partner permissions, enabling/disabling network apps and services. Even upgrades to the network platform are rolled out transparently to users.
Yes, change is hard, but transitioning to a multi-party network is nothing like the effort of an ERP implementation, and the benefits gained are rapid, multi-dimensional and enduring. In fact, you can keep your ERP doing what it does best, while complementing and turbocharging it with a network. More about that in a future post.