As companies implemented ERP, they experienced significant problems, including incompatibility of business-process models, translating and transferring company data, staff training, process changes, and changes in management. The limitations of early ERP implementations were apparent and motivated corporations to move toward aligning and optimizing business processes.
Advancements in hardware and middleware technologies have enabled worldwide connectivity of ERP systems. This has been critical for the chemical industry with its large number of acquisitions and consolidations. Much greater value is derived through the ability to make better business decisions and deploy business processes that benefit the entire corporation, not just a single department or function. To be successful with this alignment and optimization of business processes, corporations need to obtain excellence in interdepartmental processes, let effective and efficient business processes drive the software-application selection, and leverage existing application software. To this last point, three out of four large companies keep information on two or more applications. The conventional benefits of such an implementation yield cost savings from productivity gains in back-office functions, reductions in inventory, decreases in cycle time and service-level improvements. An example of this in the adhesives industry is Sika's (Lyndhurst, N.J.) corporate conversion to SAP R/3, which is the standard for the chemical industry for enterprise-wide ERP packages.
Customer self-service has been found to increase transaction accuracy, reduce configuration and expand service hours to 24 hours a day, seven days a week (24/7). "There is enormous growth in demand among our customers for Web-based services and support," said Philip M. Neal, chairman and chief executive officer of Avery Dennison, Pasadena, Calif. Through the www.fasson.com Web site, Avery Dennison customers can select products, confirm price quotes, place orders, track shipments and complete a number of other activities.2 This opening of IT systems beyond the corporate boundaries is the key to the company's goal to leverage the previous investments in ERP.
A recent example of this proliferation is Stratyc, a new spin-off business of H.B. Fuller, St. Paul, Minn. Stratyc's browser-based products and services are available in modules to work with existing resources, so customers can subscribe to as much or as little as they need. Modules are designed to integrate supply-chain management, online procurement, quoting, ordering, fulfillment and reporting.3 (See ASI's April 2001 issue, page 24, for more information on Stratyc.)
The business strategy for the future (e-business), involves the pursuit of customer service and collaboration with trading partners. Companies need to manage the total supply chain and extend information technology outside the company boundaries to trading partners. Supply-chain solutions interact with the ERP system to extract base information. This information is enhanced and remitted to trading partners. Often the same type of information is supplied from trading partners (Figure 2).
An interconnected or integrated transaction layer such as ERP inside each company is critical. If information is to flow seamlessly from Company A to Company B to Company C and back to Company A again, the network must build the necessary foundation. Any company that has a disconnected internal system will quickly become a bottleneck in the flow. The Internet-based system-to-system connections (also known as enterprise-to-enterprise integration) address some of the requirements of an e-business. They provide deep connections that support collaborative work, complex document exchange and inter-company processes.
However, these custom-developed connections are expensive, take time to set up and are difficult to scale. This highlights the importance of having standard protocols in place. Standards bodies, such as CIDX, are developing these protocols for the chemical industry. Chemical Industry Data Exchange (CIDX) has developed a broad set of nonproprietary, eXtensible Markup Language (XML) standards to facilitate business-to-business data exchange across the chemical industry worldwide. The initiative focuses on logistics, invoicing, forecasting, exchange and multinational interactions. As a result of these efforts, over 700 data elements have been defined and 47 new transactions can be conducted using the standards. More than 1,000 pages of standards documentation containing technical and implementation information have been created.4
Participation in these organizations takes careful consideration regarding your go-to-market strategy. In many cases, the exchanges provide a new channel for your products. "Sealantsource.com provides us with another outlet through which we can effectively reach segments of our customer base," said Al Stroucken, H.B. Fuller Co. chairman, president and CEO.5
Last year, Envera and Elemica were developed. These consortia, backed by the chemical industry, are providers of e-business solutions that improve supply-chain communications. There has also been rapid growth of marketplace service providers who offer off-the-shelf solutions that allow companies to create private-trading networks with their business partners. Since approximately 80 percent of chemical purchases are based on pre-negotiated, long-term contracts, private marketplaces are becoming the main focus for chemical manufacturers who want to improve their competitiveness and responsiveness using Internet-based commerce.
"A significant percentage of our distributors use Prophet 21 enterprise solutions," said Kevin Boyle, director, Industrial Distribution, Loctite, Rocky Hill, Conn. "Loctite expects to achieve a major return on investment via better customer service and increased electronic-commerce efficiencies. We are counting on Prophet 21 to enable our distributors to streamline transactional efficiencies by conducting EDI and XML commerce transactions via the Trading Partner Connect marketplace."
To truly transform an organization and its trading partners (to succeed as an e-business), it is necessary to engage the people and leverage the knowledge that resides there. The company's employees are the keys to creating sustainable transformation. A transformation effort that leverages the people and the knowledge within a company is far more stable and likely to succeed. The process of e-business transformation involves the progression through the four milestones of integration, alignment and optimization, e-commerce, and e-business. The key to succeeding as an e-business is to continually align the drivers of people, process, knowledge and technology through the milestones.
This paper was based on ERP and Beyond, Exceeding ROI Opportunitiesc 1999 Benchmarking Partners, Inc., and IBM Corp.; and Beyond ERP, Collaboration and Value Networksc 2000 Benchmarking Partners, Inc., and IBM Corp. It was presented at the Spring 2001 ASC Convention and Exposition in Orlando, Fla.