Imagine you meet a new friend who you want to communicate with regularly. That sounds easy, right? But, instead of just selecting her name on your phone and contacting her, your telco provider says you first have to create a “flight plan” – a list of all your new friends sorted by 1) their value (meaning what’s in for you and your friend), and 2) the technical effort it takes to connect. Unfortunately, your new friend is No. 21 on the list. That makes her part of the third wave to be “onboarded.” But, even before the first wave, there has to be a pilot to test the best way(s) to get in touch with your friends. And, once wave three starts, a communication consultant will get in touch with her on your behalf to tell her she will have to contract with your telco provider before the two of you can communicate.
In private life, this scenario sounds crazy. In the world of B2B communication, this is how it often works.
In a B2B scenario, regular communication between trading partners is a key success factor. Sharing forecasts, commitments, production plans, stock-on-hand details, and end-to-end procure-to-pay communication avoids surprises and disruptions and ensures a high level of transparency, agility, and process efficiency.
For many years, one-to-one Electronic Data Exchange (EDI) for integrated electronic B2B communication as well as on-premises supplier portals was the state-of-the-art technology. However, technical setup, maintenance, and support costs were fairly high and, depending on the industry, prevented the technology from adding significant value for users.
Figure 1: Traditional, one-to-one connections between companies have reached a level of complexity that is difficult and expensive to handle. As a result, suppliers hesitate to introduce new connections.
In the past 10 years, multiple B2B collaboration networks have evolved. B2B collaboration networks are cloud platforms that offer multiple ways to connect and also support manual or electronic communication with the cloud platform. The key advantage of those networks is the ability to connect just once to communicate with multiple trading partners. Most of those networks have a focus area (either a specific business area, such as procurement or logistics, or a specific industry), and trading partners are fairly distributed across those networks.
Figure 2: Cloud collaboration platforms allow a company to connect once and communicate with all trading partners on the network.
In order to drive value for the companies collaborating via such a network, the number of connected trading partners is the key success criteria. Unfortunately, convincing trading partners to join a new network takes months, if not years, because they have to connect to multiple communication channels, which drives process complexity and costs.
Figure 3: Suppliers still must connect to multiple collaboration platforms (e.g., in case supplier C and D would like to collaborate with company A and B).
Consequently, suppliers and customers are heavily pushing network operators to connect their networks, enabling interoperability between the networks so the trading partners can stay on the network of their choice and still transact with all their customers. As a result, network providers can establish things like value-added network (VAN) tunnels and field maps between the networks so every message can be transmitted and translated easily from one network to another.
This approach shows incredible results in terms of supplier adoption and onboarding time. Furthermore, the rate of electronically integrated processes (driving process efficiency and compliance) is much higher compared to net new onboardings, which often start with web graphical user interface-driven, manual processes.
There are several reasons for success:
- The network of networks (NEON) approach truly fulfills the connect-once promise. Besides some additional potential legal and commercial agreements, the supplier can continue to use its network of choice.
- Companies have almost immediate access to all trading partners connected on the networks and can run robust B2B collaboration processes within a matter of days.
- There’s no need to convince and educate suppliers in regards to how to connect to and maintain a new network.
- Issues can be resolved quickly, as the network providers speak to each other directly.
- There’s no need to build up additional backend integration for orders, forecasts, track and trace, etc., as a supplier’s backend systems (ERP, planning, engineering, etc.) typically would already be well integrated into its network of choice.
The flipside is related to the fact that there’s no standard method of interoperability. These network-to-network connections will always look different in terms of:
- Technical connectivity protocols and formats
- Business rules: Many networks will send out a reminder in case of an overdue order response or an alert in case a goods receipt does not match the original order. Those rules need to be aligned between the networks, so it’s clear who informs who in case of a disruption.
- Electronic invoice compliance: In the event that both networks can create legal electronic invoices, one network would have to step back.
- Support models: Support workflows could be different for a network A and B combination compared to a network C and B combination.
- SLAs (e.g., response times, uptimes, etc.) and security aspects (e.g., support of International Traffic in Arms Regulations, or ITAR, compliance)
- Commercial and legal aspects: For example, some networks charge suppliers, some charge customers, some are transaction-based, some are spend-based.
Last, but not least, while the technical aspects of the NEON approach can be solved quite easily, misalignments in terms of processes are harder to solve. Think about a supplier-managed inventory (SMI) process: It is fairly easy to technically share forecasts and stock levels, but it is more difficult to come to an agreement about process workflows, responsibilities, and liabilities.
Still, what we see in the market is that the benefits of connecting once overlay the potential negative aspects. There are more and more success stories of where a procurement and supply chain collaboration network interoperates with industry networks.
Making it as easy as possible for trading partners to communicate with their customers is the key success criteria to drive value in terms of process efficiency and working capital at minimal IT costs. Interoperability between networks is the next evolutionary step to enable companies to interoperate seamlessly, in just the way you would get in touch with a friend.
The Ariba Network is supporting the approach of network interoperability and established network connections to multiple industry and solution-specific networks so that customers not only have access to more than 4 million suppliers directly connected to the Ariba Network, but also to suppliers connected to other networks.