Trends Affecting Manufacturers and ERP Part Three: Four More Trends

Individual standalone IT applications for structured tasks have been reasonably easy to justify and implement in a specific functional area. Some examples are a computer aided design (CAD) system in design engineering, a statistical process control (SPC) application in quality management, and an automated material handling system in distribution. Efforts to link these stand-alone applications to ERP are termed computer integrated manufacturing (CIM).

This is Part Three of a three-part article reprinted from Maximizing Your ERP System by Dr. Scott Hamilton. Bridging the theory and realities of current ERP systems, Maximizing Your ERP System provides practical guidance for managing manufacturing in various environments. Drawing on case studies from Dr. Scott Hamilton's first-hand experience in consulting with more than a thousand firms, it covers common problems and working solutions for how to effectively implement and use ERP systems. This excerpt on "Trends Affecting Manufacturing and ERP" is drawn from one of the book's twenty-five chapters. The book can be ordered on amazon.com. The trends discussed in this part are:

• ERP and Computer Integrated Manufacturing (CIM)
• ERP and Advanced Planning and Scheduling (APS)
• Evolution of ERP Software Packages
• ERP and Generally Accepted Manufacturing Practices

An ERP system provides the basic planning and control system to manage a manufacturing operation. It provides integration across functional areas, coordination of functional activities to meet strategic plans, and integration of activities between the firm and its customers and suppliers. The relationship between CIM applications and an ERP system can be demonstrated by examples of data exchanges that loosely couple the parts of the system.

• Computer-aided design applications require item data from an ERP system and provide item and bill of material data to an ERP system.
  
  
• Shop floor data collection applications require information about manufacturing orders and routings from an ERP system. They provide material movement and labor time transactions to an ERP system. Labor transactions may also feed a time and attendance system or a payroll application.
  
  
• Quality management applications, such as an SPC and laboratory information management system (LIMS), can provide detailed tracking of manufacturing processes. For example, quality data may be collected about defects and reason codes, or about product attributes. This quality data can supplement standard ERP functionality, such as lot- and serial-tracking and inspection requirements.
  
  
• Automated material handling systems require information about picking and shipping schedules from an ERP system and provide material movement data to ERP.
  
  
• Automated assembly systems and flexible manufacturing systems require ERP information about the manufacturing schedule and product/process design, such as routing details, tools, component parts and identification of numerically controlled machine programs. They provide information about manufacturing events, such as units completed and scrap.
  
  
• A sales forecasting system may be as simple as a standard micro-based software package, or a customized decision support application. An ERP system maintains historical sales data about bookings, shipments, invoices and returns that provide key inputs to generating a statistical forecast, and the resulting forecast provides the primary inputs to ERP for a sales plan and inventory plan.

Several approaches can be taken to link CIM applications with an ERP system. Tools provided by the ERP software vendor and the software's database management system facilitate (or constrain) the approaches for integrating CIM applications. Ideally, the tools should enable you to extend and supplement ERP functionality without affecting source code, so that you can easily upgrade to new releases from the ERP software vendor. The tools include:

• Open Database Connectivity (ODBC) Design. An ODBC design within an ERP system makes it easy to access the data with off-the-shelf industry standard decision support tools, such as spreadsheets and report-writers. A data export capability provides the additional benefit of extracting ERP data for use in an external application.
  
  
• Data Import. Data import capabilities can be used to initially load the ERP database with data from existing systems. The same tool also enables other applications to update the ERP database, such as data collection systems and rules-based configurator packages.
  
  
• Event Manager. Events within an ERP system can be monitored so that additional applications get launched, or personnel get notified as a result of the event. Events occurring outside the ERP system may also be monitored to trigger actions.

Before undertaking significant capital outlays for CIM integration, it is critical that business processes be reengineered and simplified. The cost and difficulty of integrating a CIM application increase as the level of integration becomes more extensive.

Many ERP systems employ MRP logic as the primary engine for coordinating supply chain activities. Advanced planning and scheduling (APS) logic represents a major change from traditional MRP logic for scheduling purposes. To explain the differences, it helps to understand the starting points of MRP logic and APS logic.

MRP logic uses backward infinite scheduling to explode demands for make items through the bills and generate production schedules. It assumes infinite resource capacity and no material constraints, requiring manual adjustments to loads or available capacity during overloaded periods. With manufacturing orders, some ERP systems calculate a variable lead-time and operation due dates that reflect simplistic models of available capacity and scheduling rules. Using MRP logic provides a simple yet sufficient synchronization of supply chain activities for many environments.

APS logic uses finite scheduling based on capacity and material constraints to synchronize activities in the supply chain. In the context of production activities, APS automatically schedules manufacturing orders (and operation due dates) based on comprehensive models of available resource capacity, detailed routing information, and finite scheduling rules. The APS logic underlying a specific schedule can be very complex. This means the scheduling person requires easy drill-down to the scheduling exceptions and rationale. Schedules automatically generated by APS may need manual overrides. APS logic can generate schedules that do not meet due dates, which means demands must be adjusted to align with the schedule (such as revising sales order delivery promises).

APS applications have been maturing so that they are becoming easier to implement and use, as well as less expensive. The comprehensive modeling and finite scheduling logic have a degree of complexity making APS difficult to implement. In addition, APS logic can have difficulties with component date effectivities, phantoms, by-products/co-products, subcontract purchase orders, inventory buffers by resource, and other issues. The focus of APS logic—manufacturing orders—seems to run counter to JIT philosophies involving order-less manufacturing. APS logic has been incorporated into some ERP systems as the primary engine for coordinating supply chain activities. Many ERP systems provide APS logic as a supplement to MRP logic, such as a finite scheduling module. The following case study highlights some of the issues in integrating APS logic with MRP logic.

One ERP software vendor integrated a stand-alone APS application with its ERP system, where the level of integration evolved through several design iterations. The ERP system acted as the master database for resources, bills/routings, manufacturing orders (generated by MRP logic), and inventory/purchases. This data was replicated in the APS application, where the APS application supported comprehensive models of resource availability.

The ERP application supported infinite capacity planning to identify overloaded periods for key resources, and resource availability was then modified in the APS application. The APS application performed finite scheduling using resource and material constraints, and generated detailed production schedules for each resource. It uploaded the resulting schedule to the ERP system for coordinating procurement activities and making delivery promises. Actual production activities reported in the ERP system provided the basis for calculating remaining work in the APS application.

Integration between the APS application and the ERP system covered most of the manufacturing issues. For example, the integration handled phantoms, planned manufacturing orders, bill of material dependencies, parallel and alternate operations, operation attributes (such as setup matrices), split operations (across multiple machines), and updates to the order-dependent bill in the ERP system. Difficulties were encountered in handling component date effectivities (since they were not recognized in the APS application) and capable-to-promise calculations across a multi-level bill (since MRP logic was required to calculate multiple manufacturing orders prior to downloading them to APS).

The theory of constraints (abbreviated as TOC) is a management philosophy that focuses attention on the constraining resource within a production process. As a simplified explanation, TOC starts with the production rate of the pacemaker resource, and a time buffer or inventory buffer to protect the constraining resource from disruptions. The production rate and buffer reflect the family of items produced by the resource. Operations at prior (and subsequent) resources are synchronized to the pacemaker resource, resulting in the timely release of materials to support scheduling at the pacemaker. The production schedules for resources involved in prior operations ensure that releases match the production rate (or capacity) of the pacemaker resource. Improvement activities focus on the constraint. This approach has been coined "drum-buffer-rope," since it focuses on the pacemaker's schedule (the drum), its buffer, and the pull-through effect (the rope) on other activities.

APS logic and the TOC approach both employ detailed routing data to schedule orders through the pacemaker or bottleneck resource. Differences between APS logic and the TOC approach include the need for routing data for other non-constrained resources, reporting requirements, and the use of inventory buffers.

• APS logic uses routing data for other non-constrained resources to synchronize prior and subsequent operations (via backward and forward finite scheduling), whereas the TOC approach employs simplistic rules such as lead-time offsets. It could be argued that simple routing data for APS logic accomplishes the same purpose as lead-time offsets, and provides additional benefits in costing and capacity planning.
  
  
• APS logic requires reporting of actual work performed (such as unit completions by operation) to calculate remaining work at non-constraining resources, whereas the TOC approach does not.
  
  
• APS logic generates detailed schedules for every resource and focuses on schedule adherence, whereas the TOC approach focuses on the schedule and inventory buffers at the constraining resource. In addition, APS logic often has difficulties with the concept of inventory buffers.

Some environments require more advanced scheduling capabilities. These environments can be characterized by multiple potential constraining resources (dependent on the product mix), multiple parallel legs (rather than a single linear flow), products with widely varying time requirements for the pacemaker resources, and/or resources with varying capabilities. APS logic provides these scheduling capabilities, whereas a TOC approach becomes more difficult.

ERP software packages have evolved over time to support a wide variety of manufacturing environments and business practices. They have also evolved in terms of ease-of-use and ease-of-implementation. The starting points for ERP can be traced to early accounting systems that handled sales order processing, basic purchasing functions and inventory, and also to early bill of material processing logic.

Variations in ERP software packages can frequently be traced to their origins. This includes an accounting versus manufacturing orientation, a standard versus custom product orientation, a discrete versus process orientation, a mainframe versus microcomputer origin, and a standard package versus toolkit orientation.

Variations in ERP software packages can also be traced to their maturity and the use of third-party applications. An ERP software package matures over time with additions of new modules and functionality by the software vendor. These enhancements are typically driven by user group requests and target market requirements. Increased functionality frequently reflects increased complexity, especially when new functionality runs counter to the package's fundamental design. This sometimes results in multiple mutually-exclusive versions of software modules. Increased complexity makes it very difficult to re-engineer the software package to a simpler fundamental design. New initiatives in an ERP package are often constrained by concerns about upgrading the installed base, upgrading the technology foundation, and/or the expense of re-writing the entire system. New initiatives are also constrained by the sheer complexity of an existing ERP system. Hence, new initiatives often take the form of third-party packages that are unencumbered by concerns about an installed base or technology platform.

Additional modules within an ERP package frequently reflect third-party packages, with various degrees of integration and replicated data. The arguments for a best-of-breed approach to third-party packages make sense for peripheral ERP applications, such as human resources, quality management, sales forecasting, and CRM. The third-party approach does not work as well with core ERP applications, such as order entry or purchasing, since these require more integration points and extensive common data. Limitations in connectivity tools and in the package's fundamental logic typically constrain approaches to third party packages.

Generally accepted accounting practices have been widely accepted and consistently implemented in most ERP systems. Generally accepted manufacturing practices, in contrast, have not been widely agreed-upon and consistently implemented. This has been complicated by the different ways in which a given ERP system simulates or models a manufacturing business. The conceptual framework underlying an ERP system's design may provide an overly complex approach to needed functionality, or even ignore needed functionality. Extensions to the framework to support new business practices—such as order-less environments—may be cumbersome and overly complex, rather than natural extensions that reflect simple symmetric solutions. Explanations in this book are based on conceptual frameworks that reflect generally accepted approaches taken in most ERP systems, and the body of knowledge represented by APICS (American Production and Inventory Control Society).

The relevant chapters in this book provide further explanations of generally accepted approaches (and natural extensions) for each concept. This includes comparisons to alternative approaches taken in some ERP systems. The key point is that each ERP system can provide different solution approaches to handling various manufacturing practices.

Trends Affecting Manufacturers and ERP Part Two: Three More Trends

Virtual manufacturers contract with suppliers for outsourcing almost all manufacturing activities. A virtual manufacturer takes responsibility for the complete product design for documentation and costing purposes. They define the items and bills within an ERP system. Depending on the virtual manufacturing scenario, the bill defines reference information for a "buy complete" item, the supplied material for a "subcontract" item, or the internal production activities for a "make" item.

Variations in virtual manufacturing scenarios, summarized in Figure 2-4, mean that an ERP system must handle bills for buy and subcontract items. A subcontract item's bill defines the subset of components that will be supplied to the subcontractor. These bills can be used for cost roll-up and material planning calculations. An ERP system must handle subcontract purchase orders, and track kits of components as well as direct-ship components to the subcontractor. It may need to track overseas shipments and capture the landed costs. It may need to recognize different costs for an item stocked in two locations, handle sales orders that designate the ship-from location, and communicate shipping requirements to the different locations.

Figure 2-4 Virtual Manufacturing Scenarios

Final Assembly + Subcontract Manufacturing. The subcontractor makes an intermediate item, where some or all of the component parts are supplied to the subcontractor. The virtual manufacturer purchases these component parts, and either kits them for shipment to the subcontractor or has them drop-shipped directly. Multiple levels of subcontractors may even be used. The subcontractor sends the completed intermediate to the virtual manufacturer, who performs final assembly with other components and tests the completed end item.

Final Assembly. The virtual manufacturer purchases all components "complete," with internal final assembly and test of the end item.

Buy Complete. The virtual manufacturer purchases the end-item "complete." No components are supplied to the vendor. Inventory of the end item may be kept at the supplier, or sent back to the virtual manufacturer's location, for subsequent shipment to a customer. Costs of the item may differ between the two locations because of high transportation costs, such as high shipping costs from an overseas vendor.

Subcontract Final Assembly. The subcontractor makes the end item, where some or all of the component parts are supplied to the subcontractor (either as a kit or direct drop-shipment). The end item may be stocked at the subcontractor or sent to the virtual manufacturer, with the possibility of different item costs between the locations.

This is Part Two of a three-part article reprinted from Maximizing Your ERP System by Dr. Scott Hamilton.
Bridging the theory and realities of current ERP systems, Maximizing Your ERP System provides practical guidance for managing manufacturing in various environments. Drawing on case studies from Dr. Scott Hamilton's first-hand experience in consulting with more than a thousand firms, it covers common problems and working solutions for how to effectively implement and use ERP systems. This excerpt on "Trends Affecting Manufacturing and ERP" is drawn from one of the book's twenty-five chapters. The book can be ordered on amazon.com. The trends discussed in this part are:

Many firms with multisite operations are adopting a management bias towards small autonomous business units, rather than a large centrally managed organization. These thrusts to "demassify" the organization have been coupled with efforts to push decision making down in the organization, empower the local management team, reduce corporate staff, and eliminate layers of management. Associated with this general trend is decentralization of the ERP systems and the MIS function.

The Advantages of Decentralizing the Organization

The movement to smaller plants has an objective of fostering an entrepreneurial spirit and "ownership" within the plant management and employees. The smaller size reduces bureaucracy. Decisions are delegated to personnel who best understand the local operation and can create the best solutions to problems in the shortest time. It helps middle managers become profit-oriented.

The availability of low-cost easy-to-implement micro-based ERP systems has enabled and accelerated the movement to downsize. Compared to mainframe centralized applications, they can be implemented faster and at less cost. Less MIS expertise is required for system administration, and end-user decision support tools (such as spreadsheets and report-writers) make users less dependent on MIS staff for customizations. In particular, an autonomous ERP system fosters the sense of "ownership" within plant management. It facilitates the ability to tailor the application to local operational requirements and management style, while enforcing consistent corporate procedures via a standardized ERP package.

Operations management typically drives the decision to decentralize and downsize the ERP systems. It gives them greater control of the tools to plan and control their business. In many cases, they have experienced difficulties in implementing a centralized ERP application, and inadequate support from a corporate MIS function. They also question the costs (or allocations) of corporate MIS services and consulting assistance.

Stand-alone ERP applications work best in autonomous manufacturing sites, which typically require minimum coordination between sites. The minimum coordination typically reflects periodic updates of the corporate general ledger using the plant's consolidated general ledger data. Stand-alone ERP applications can be easily deployed at remote sites of larger firms, such as an off-shore manufacturing plant. A stand-alone ERP application facilitates the acquisition and divestiture of an autonomous site, since the system and site stay together. With a centralized ERP system, a newly acquired unit must convert from an existing information system to a system that meets central specifications. Divesting a business unit may change the overhead allocations and pricing for services from the central ERP system.

The degree of coordination between business units affects the ability to decentralize and downsize the ERP applications. For example, a centralized ERP application is typically required for a firm that takes sales orders for shipment from multiple distribution sites, with replenishment from multiple plants.

A Swedish consumer products company involved in appliances has over 100 plants around the world. Each plant operates as an autonomous business unit with its own ERP system. It was especially critical that the ERP software vendor had language translations and local support for the 15 languages (and 25 countries) encompassed by the multi-site operations.

A large US-based transportation equipment manufacturer established several overseas plants in China. The US corporate plant supplied components to the overseas plants, which operated as autonomous business units to manufacture and sell products to Chinese markets. As each site was established, a fully-configured ERP system (hardware and software) was shipped from the corporate office. The database and associated procedures had already been prepared by the local management team during training sessions at the corporate offices. The management and ERP system were ready to run each remote plant on the first day of operation.

An ERP system provides the foundation for many electronic business applications, termed e-business or e-commerce applications. E-business applications differ slightly between business-to-business and business-to-consumer relationships.

- Business-to-consumer (termed B2C) relationships do not generally involve negotiation and collaboration. One example involves an on-line catalog of standard products, or custom products with predefined options, with fixed prices. Orders are often placed by one-time customers, with payment by credit card.

- Business-to-business (termed B2B) relationships generally involve negotiation and collaboration, covering issues such as product specifications, delivery and price. One example involves an electronic marketplace or trading exchange, where a web site enables companies to buy and sell from each other using a common technology platform.

Collaboration in a business-to-business relationship (sometimes termed c-commerce) can be carried out within a framework that integrates the firms' business processes and manages knowledge across organizational boundaries. Collaborative product development, for example, may involve multiple trading partners providing components. Work-flow capabilities—with access to technical documents/drawings and electronic signoff procedures—can facilitate this collaboration. E-business applications represent 24/7 availability for customers and suppliers, and reduced personnel requirements for handling inquiries and coordination. On the customer side, for example, customers can place orders and check status at any time of day without waiting for normal business hours or availability of customer services personnel.

EDI standards have been developed for US markets in various industries, such as automotive and retail industries. Other standards apply in European and Asian markets. The core concept is that basic transactions in supply chain activities can be replaced by electronic communication. Some of the basis transactions, shown in Figure 2-5, include releases for shipment and shipping schedules (from the customer) that represent demands, and advanced ship notices upon shipment to customers. Each transaction has been identified by an ANSI identifier, such as the 856 transaction for an advanced ship notice transaction.

Figure 2-5 Supply Chain EDI: Basic Transactions for Scheduling & Delivery

An EDI transaction requires a mapping between the standard transaction format and the transaction format in an ERP system. The vendor schedule in one ERP system, for example, can be generated as standard EDI transactions and subsequently translated into a customer shipping schedule in a second ERP system. The standard EDI transaction format provides a bridge between two different ERP systems.

E-business can facilitate collaboration between the customer and sales (or the sales channel). This step in sales order processing—termed "configure order"—often precedes the actual sales order. It can be structured around the key constructs in an ERP system, such as quotations and sales orders. It can support attachments to the quote/order, such as text or other objects, which flow through to an ERP system for specifying customer requirements. The customer can obtain quotes and enter sales orders directly, typically via the "shopping cart" analogy. To load their shopping cart, a user can directly identify items, select from catalogs, select from user-defined templates or previous orders, or use "expert assistance" to guide them to the correct product. The system provides availability and pricing information, and access to product pictures, specifications and other descriptive information. The system may identify previous purchases, and suggest related purchases (for up-selling and cross-selling purposes). The user can save the cart (with a user-specified description) for subsequent use.

A custom product can also be configured without personal assistance. A rules-based configurator can prompt the user through a decision-tree of questions, and provides pricing information based on responses. The configuration can be saved as an item in the shopping cart, and revised as needed.

Each item in a shopping cart represents a line item on a quote, and the "check out" process converts the cart contents to sales order line items. The "check out" process enforces credit management policies and payment methods, such as credit card processing. The system prompts established customers for ship-to and bill-to information, and gathers additional information to process orders from "guest" or new customers. Confirmations can be sent via e-mail about the quotations, sales orders and shipments.

A customer can verify his or her order and account status without requiring assistance from customer service personnel. Order status typically identifies the quotes and unshipped orders and enables the user to change information. Linkages to carrier web sites can augment shipment information for the specified tracking number.

Request for Quotes and Electronic Marketplaces

E-business enables a manufacturer to electronically communicate requests for quotes to suppliers, and to obtain and store the responses. An electronic marketplace or trading exchange provides a one solution approach. A "buyer" firm can publish product requirements and demand schedules, request quotes from "supplier" firms, and then review the bids and select the supplier.

An electronic marketplace can facilitate more than just requests for quotes. It may offer additional services—such as logistic/transportation services and payment services—to help complete a transaction. It may support community activities, like distributing industry news, sponsoring on-line discussions, and providing research information about the industry.

Trends Affecting Manufacturers and ERP

The evolution of ERP systems has been driven by the emergence of new business practices and information technologies. These have been supported by the growing maturity of the manufacturing profession, and by the evolving development of commercially available software packages.

New business practices include supply chain management, customer-oriented strategies and customer relationship management (CRM), just-in-time (JIT) and lean manufacturing, virtual manufacturing, and "de-massified" multi-site operations. These new business practices sometimes represent a reformulation and synthesis of previous ideas, or current themes in the literature. New information technologies include e-commerce, computer integrated manufacturing (CIM), and advanced planning and scheduling (APS).

The commercially available software packages reflect variations in origins and orientation, as well as software maturity. Although progress has been made to standardize vocabulary and conceptual frameworks for generally-accepted manufacturing practices, the underlying design of each ERP software package reflects wide variations in interpretation of these practices.

Supply chain management (SCM) emphasizes the need to model the manufacturing enterprise from the perspective of the supply chain in order to synchronize supplies with demands and respond to change. An ERP system provides the tools to model various supply chain scenarios, from simple to complex. In many ways, the perspective of supply chain management has helped push the evolving scope of ERP applications.

The supply chain model for a particular manufacturing enterprise reflects the company's product, industry, and its position within the supply chain. Supply chain models range from the simple to complex. The two supply chain models shown in Figure 2-1 help illustrate the impact on an ERP system.

Figure 2-1 Supply Chain Models

Simple Model. The "simple" manufacturing enterprise buys items from external suppliers, and internally produces items for direct sale and shipment to customers. The ERP system must handle buy and make items, and a single-site operation.

More Complex Model. The "complex" manufacturing enterprise buys items from external suppliers, authorized distributors (for approved manufacturer part numbers), and from sister plants. In addition to internally produced items, it supplies components for external production at subcontractors and sister plants. The ERP system must handle buy and subcontract items, make items, and transfer items for both "buy complete" and "subcontracted" products at sister plants.

The "complex" manufacturing enterprise sells and ships products direct to customers and through multiple sales channels, such as resellers, distributors, and original equipment manufacturers (OEMs). It involves multiple sites, with inventory at distribution centers replenished from manufacturing plants. Sales orders can be shipped from designated sites, requiring visibility of available inventory across the distribution network. Items may also be drop-shipped from supplier and subcontractor sites.

Initiatives in supply chain management have created other requirements for ERP applications. For example, an ERP system must handle inventory stocked at customer sites and supplier's material stocked at the manufacturing enterprise.

The supply chain perspective has helped expand the scope of ERP beyond coordination of internal production activities to align supplies with demands. On the demand side, supply chain management concepts intersect with the philosophy of customer-oriented strategies and e-business. Supply chain concepts also intersect with JIT and virtual manufacturing strategies.

GXS Acquires HAHT Commerce or More Synchronized Retail B2B Data Part Four: Challenges and User Recommendations.

the large, privately-held business to business (B2B) e-commerce software, services, and solutions pioneer, which operates one of the largest B2B e-commerce networks in the world and manages one billion annual transactions for more than 100,000 trading partners, announced that it has signed a definitive agreement to acquire HAHT Commerce (www.haht.com). HAHT Commerce is based in Raleigh, North Carolina and is a privately-held provider of demand chain management applications (DCM) that strategically automate, integrate, and optimize order management, product information management (PIM), channel management, business intelligence (BI), and customer services functions between manufacturers, their channel partners and end customers.

Under terms of the agreement, GXS would acquire all the capital stock of HAHT Commerce through a merger for approximately $30 million (USD) in a combination of cash and shares of GXS Holdings, which is the parent company of GXS, headquartered in Gaithersburg, Maryland (US). The transaction was subject to the approval of HAHT Commerce's shareholders and other customary conditions, and the acquisition was completed in February. CIBC World Markets Corporation acted as exclusive financial advisor to HAHT Commerce with respect to the transaction.

However, despite its data exchange savvy (see Part Three of this note), lately GXS has had its share of difficulties. Immediately before the HAHT acquisition, the business to business (B2B) connectivity and service provider has announced its plans to restructure and streamline its operations, which involved cutting about 5 percent of staff and reducing office space by 30 percent at its headquarters. In 2002, GXS had total revenue of slightly over $400 million (USD), which was significantly lower than over $600 million (USD) during the GE era, but nonetheless, was somehow in tune with the current economic trends. Overall, GXS's core business has remained fairly steady over recent years compared to many other B2B services that rose and fell quickly.

While EDI value added network (VAN) service prices might have fallen to competition, transaction volume has also fluctuated back and forth whereby revenues are the same or slightly declining across the industry. Still, the use of virtual private networks (VPN), which provide secure connections over the Internet, and extensible markup language (XML), which makes data exchange more flexible as discussed earlier, allows for similar services that are growing in popularity, while the more recent emergence of web services technology for exchanging data could further change the electronic data interchange (EDI) landscape and drive down costs for subscribers. Also, the former VANs are taking advantage of emerging standards like AS2, RosettaNet, and UCCnet, while the emphasis has been moving from mere connectivity to becoming more flexible and better-rounded service providers.

Although GXS's above capabilities have put pressure on such specialists in EDI-XML translation including Inovis (after acquiring IPNet), Sterling Commerce, Internet Commerce Corporation (ICC), webMethods, Vitria, or Cyclone Commerce, these have been swift to recognize early on the need for such translation services, and have been able to enhance their services with useful ancillaries such as support for collaboration (see Secure Transport of EDI and XML for Trading Exchanges). While we still find it hard to see how they make it on their own in the face of competitors like GXS and IBM, each of which should be easily capable of commoditizing its infrastructure work to serve smaller and midsize companies and which can certainly attract the large enterprises as customers, these smaller players deserve commendation for raising the bar within the B2B e-commerce arena. Although connectivity remains important, the value proposition of collaboration and improved planning drives efficiencies and improvements on both sides of the relationship. Those complex relationships require a great deal of face-to-face discussion and this, rather than the actual transaction, is the real expense in B2B trading. This is why technologies that enable collaboration and interaction are often more critical in B2B e-commerce situations than simply technologies that enable basic transactions.

Thus, over the last few years GXS has been diversifying its network service offerings as demand for EDI activity has shifted away from proprietary VANs onto the Internet. That migration is fueled in part by the earlier mentioned pressure from retailers like Wal-Mart, which is requiring that its suppliers be able to send and receive EDI data over the Internet using the AS2 standard. Although the global network infrastructure still plays a large part of GXS's business, its future focus will involve growing value added services like data synchronization and the AS2 outsourcing.

Now, with HAHT's acquisition, GXS is making a play to build out its complementary software offerings—in particular, its product information management (PIM) and data synchronization tools. Going hand-in-hand with the trend to conduct business transactions electronically via the Internet is an effort to clean up those transactions and reduce the occurrence of errors. Often enough, the trouble with product attributes is that they do not match from one database to the next in the value chain. For every product under its brand umbrella, there are several product attributes, including definitions, specifications, images, marketing messages, and prices. As a result, something as bland as a can of food comes with arrays of data relating to pricing, description, promotion, and so on.

To make things worse, companies may have hundreds or thousands of products and multiple individuals may maintain each bit of product information. The task of organizing and maintaining all this information is critical to companies, since bad data costs companies billions of dollars in incorrect purchase orders, subsequent returns, and the manual effort required to fix these problems. To that end, data synchronization applications automate the process by which suppliers, manufacturers, and retailers share information relevant to issues like inventory status and product specifications. This technology might also be an important underpinning for emerging plans around radio frequency identification (RFID) technology, which is high on the agendas of retailer giants.

The HAHT acquisition seems to bring together two providers of complementary e-commerce products that help retailers, manufacturers, and suppliers manage and sell products to other companies and customers on-line. GXS has the technology that allows the businesses to communicate with each other, while HAHT provides software that helps companies record the correct product data and push it throughout the channel in order to avoid such things as the overstocking or under-stocking of often incorrect items. Additionally, HAHT has been specializing in demand chain management (DCM), with a software portfolio aimed at helping manufacturers and their business partners manage orders, product information, and channel activity. In other words, GXS gains PIM software, which aggregates and organizes item-related data from multiple application sources; and data synchronization/syndication tools, which let manufacturers and suppliers synchronize items with retail partners through the UCCnet foundation service. Given Wal-Mart's requirements for its suppliers to meet data sharing regulations passed by UCCNet and given both GXS's and HAHT Commerce's endeavors in addressing UCCNet's compliance, one can discern the major rationale behind the acquisition.

On a more general note, it is only logical that EDI VANs and other providers of integration as a service would seek to reinvigorate their business value proposition by adding applications to their "plumbing" portfolios, which offer more of an application-like, vertical solutions-oriented approach to trading community integration requirements. Examples of other vendors that have also eyed delivering packaged data synchronization software and transaction delivery services would be e-commerce network services vendor Transora and product information management software maker Trigo Technologies, which recently announced plans to work together on a joint offering that combines the two companies' products.

Contrary to the above competitors as well as to Inovis and Sterling Commerce, which partnered to fill in key functional gaps in PIM and data synchronization areas, GXS's direct acquisition of HAHT shows its commitment to the retail sector. Sterling still has a significant partnership with HAHT Commerce, and its sales force has provided many of HAHT's opportunities in the past. Therefore, this acquisition will likely cause Sterling to seek another behind-the-firewall data repository partner and GXS-HAHT competitor, such as Trigo, Velosel, or FullTilt.

HAHT's data-synchronization and PIM capabilities will allow GXS a chance to attract smaller suppliers and retailers that sell goods to the larger ones such as Nordstrom and Hecht's. While the HAHT product will require minor enhancements to be suitable for retailers, it should not be a major undertaking given HAHT's focus on the consumer products segment. The acquisition should provide GXS with a strong behind-the-firewall data repository proven with many consumer product manufacturers (for example, Pfizer Consumer, Clarins or Kraft). GXS's own data product has been amenable to just the hosted mode, which prevented it from winning deals in more complex global corporation situations where traditional on-site behind-the-firewall data management was required. The future GXS offering should appeal to retailers, as it can now not only provide retailer systems, but also a huge committed trading partner community. This will be dependent on swiftly delivering interoperability plans to ensure retailers can synchronize with all suppliers regardless of the supplier's own system. Thus, interoperability between GXS and other data pools and exchanges, including Transora, will have to be proven as a matter of urgency.

The acquisition signals another chapter for HAHT (standing for its founders' initials), which has had many ups and downs and shifts in its direction throughout most of its history. After it was founded in 1995 by former Q+E Software executives (after Q+E was bought by Intersolv), Thomas, Archer, Holcomb (who stepped down as chairman in 2001), and Hebert (who left in 1997), HAHT Software spent the first few years selling software tools that have helped customers develop their own interactive Web site applications. During that time, it raised about $47.5 million (USD) in venture capital.

When that business model failed to generate strong profit, the company underwent a facelift and changed its name to HAHT Commerce. It also shifted its focus to B2B sell-side e-commerce applications announcing alliances with Ariba and Commerce One. These alliances came in addition to the earlier partnerships with SAP America and Computer Associates, during the mid 1990s, when these vendors needed help with e-commerce enablement. In November 2000, HAHT filed to raise $75 million (USD) in an initial public offering (IPO) of stock, but canceled those plans two months later, citing the decline in technology stocks. It instead went on to raise an additional $37 million (USD) in venture funding, but slow sales forced it to make several rounds of layoffs. In the past year however, HAHT has had a turnaround, and it now has about 110 customers, including Pfizer, Phillips Electronics, OxyChem, and Dow Corning, which bundled with the recent profitability has made it attractive prey for GXS. As mentioned earlier, in 2002 HAHT acquired two small software companies, Paris-based iMediation and San Francisco-based ArcadiaOne, which allowed it to release new software (in 2003) aimed at helping companies organize data (i.e., catalog, translate, and synchronize) about their products.

This brings us to the question about the advantages and sustainability of partner relationship management (PRM) applications. Designed to help manufacturers reach end users served by an intermediary, PRM software lets OEMs grasp feedback from end customers, while also supporting commerce and interactions with distributors. The natural question then is why only a few software vendors specializing in PRM, which is also known as channel management, demand chain management (DCM), or channel relationship management (ChRM), have thrived? For a detailed discussion of the future of PRM. See "What Does the Future Hold for PRM?"

The relatively recent demise of PartnerWare, a PRM pioneer, whose TCX Insight product included components for channel marketing, closed-loop lead management, and extended team selling, as well as a number of recent mergers and acquisitions like Click Commerce and Allegis (see Click Commerce Acquires Allegis), ChannelWave and Aqueduct, or Comergent and Profile Systems, indicates the rapidly more difficult competitive position of pure PRM players. That is, their insufficient client base traction and recurring revenue, narrow functional footprint (e.g., without order management functionality) and it is almost impossible to find new investment funds infusions. For more discussion on what constitutes PRM/DCM functionality, its importance, and its stand-alone sustainability.
HAHT must have breathed a sigh of relief for finding its white knight in GXS. However, given the company's traditional focus on order management aspects including catalogues, configuration, order capture, order tracking, returns management, etc., one should watch GXS's commitment to maintain continuity with HAHT's order management products. GXS will likely focus on data synchronization and PIM in the immediate future. HAHT has a substantial customer base with these legacy products, which might be neglected or even divested, causing these customers to be concerned and even possibly consider alternatives.

Further, PRM is still a moving target in part because different industries have very different needs in their PRM solution. A chemicals company for instance, will start with order management, while a more consumer-focused company will be more interested in looking at brand management. Telecommunications companies will pay attention to order management and commissioning (a complex process based on partner agreements and rate structures) and will be interested in giving their agents a single interface to many back-office systems, such as billing, order management and pricing, which would require a flexible integration framework. In the energy sector, the emphasis will be on the service side.

Thus, GXS has to clearly articulate an overall strategy for blending the two companies' software into a single package that provides architecture for processing and sharing data from the time it is first captured into the system till it is archived. At this stage, the company is unable to detail much beyond its indication that it will support all of HAHT's stand-alone applications, for the time being. While GXS might be tempted to tackle the role of inter-enterprise translator between disparate industries, that is an immensely overwhelming task requiring savvy in every industry and how best to integrate enterprises coming from these unrelated industries.

Despite a good fit at first glance (the enlarged install base and improved cross-selling opportunity) there are more challenges to overcome. One is to possibly conduct a product rationalization and integration (although integration should be moderately straightforward with XML, given that both products are Java-based, time will be of the essence) to orchestrate sales forces, and organize service strategies, given the constituents' different expertise and culture in the past. In addition to the above-mentioned direct and indirect competitors in data synchronization, retail distribution, and PRM spaces the combined company's possibly biggest challenge remains a lack of awareness of the need for these applications. While many people have realized the power of e-commerce on the consumer side, there is still plenty of education to be conducted by all the B2B e-commerce vendors to prove how much leverage their applications can bring to corporations.

In any case, the GXS acquisition will cause commotion amid the competition, which will have to rethink their strategic moves and partnerships in the future, but the speed of executing the acquisition will make the major difference between GXS's ultimate domination in the market or not.

GXS Acquires HAHT Commerce for More Synchronized Retail B2B Data Part Three: Market Impact

the large, privately-held business to business (B2B) e-commerce software, services, and solutions pioneer, which operates one of the largest B2B e-commerce networks in the world and manages one billion annual transactions for more than 100,000 trading partners, announced that it has signed a definitive agreement to acquire HAHT Commerce (www.haht.com).HAHT Commerce is based in Raleigh, North Carolina and is a privately-held provider of demand chain management applications (DCM) that strategically automate, integrate, and optimize order management, product information management (PIM), channel management, business intelligence (BI), and customer services functions between manufacturers, their channel partners and end customers.

Under terms of the agreement, GXS would acquire all the capital stock of HAHT Commerce through a merger for approximately $30 million (USD) in a combination of cash and shares of GXS Holdings, which is the parent company of GXS, headquartered in Gaithersburg, Maryland (US). The transaction was subject to the approval of HAHT Commerce's shareholders and other customary conditions, and the acquisition was completed in February. CIBC World Markets Corporation acted as exclusive financial advisor to HAHT Commerce with respect to the transaction.

Analyzing both GXS' and HAHT's geneses should help us discern both good and bad experiences with the Internet-based trading so far. The concept behind a business to business (B2B) exchange and marketplace—to bring together (aggregate) multiple buyers and sellers via the Internet to save money, expand markets, improve supply chain efficiency, and whatnot to all the parties—had seemed obviously straightforward and too good to be true. However, it has since turned out to be much more painful to achieve the grandiose promises which have far outweighed any of the actual benefits so far. Namely, creating the technology to operate such a marketplace has turned out to be far more difficult than originally envisioned, while suppliers remained hesitant if not even resentful to compete for business on-line and watch their profit margins erode within the cutthroat bidding process.

Namely, joining an Internet-based trading exchange requires integration not only between a company's own systems and applications, but between those of its trading partners and community members, and so far, this has largely made system integrators the only profit-making benefactors from B2B exchanges so far. Also, many early enthusiasts initially failed to realize the complexity of the above undertaking, which was perhaps affordable to a Fortune 500 company, but prohibitively expensive for small and midsize companies and their suppliers. On the other hand, the initial idea of saving buyers money by enabling them to aggregate their purchasing and select the least expensive supplier at a given moment has hardly impressed anyone—while suppliers hated to be hammered with heavy discounts expectations during their bidding races, buyers have also come to the conclusion that the phone or fax are still as good business enablers in these elusive exchanges, if not even better for their inexpensiveness.

For a detailed comparison of the differences between B2B exchanges and business-to-consumer (B2C) e-Commerce providers, see "Differences in Complexity Between B2C And B2B."

The real potential benefit from Internet exchanges only comes at the level where they provide collaborative facilities to help suppliers and buyers work closely to improve key supply chain processes (including inventory management, collaborative planning, forecasting and replenishment [CPFR], manufacturing capacity planning, transportation planning, etc.) or aspects of a product lifecycle management (PLM), such as design, creation, servicing, retirement, and so on. All the above require close relationships along the supply chain and which is different from only electronic connectivity. For that reason, private trading exchanges (PTX) have optimized buy- and sell-side activities among certain known groups of suppliers and customers. Consortium exchanges (such as Covisint, Pantellos or now defunct Chemdex), though additionally challenged by antitrust law and regulations in addition to technological hurdles including interfacing with legacy systems and protocols, have offered some domain-specific, value-added services to their respective industry, while only a small number of independent public exchanges have survived by owning and providing vertically or regionally specific content, applications, and services.

Thus, to say that GXS is a dot-com survivor would be a gross misnomer, given its longstanding pre-dot-com e-commerce expertise that makes it an electronic data interchange (EDI) pioneer. A former General Electric subsidiary and the successor to GE's information services unit GEIS (for more information, see GE Comes to Lunch. Want to Guess Who the Appetizer Will Be?), GXS has gained recognition as a network operator for B2B e-commerce via value-added networks (VAN). GEIS was a pioneer in creating trading exchanges based on the EDI standard, and has been a strong participant in extensible markup language (XML) standardization efforts, including CommerceNet's and Microsoft's. GEIS' Trading Process Network (TPN), which was launched early in 1996 and provides free software to let suppliers bid for GE contracts over the Internet, was an early e-procurement experiment. It was enriched in 2001 with TPN Register when GE bought it out from another co-founder Thomas Publishing. Consequently, GE has had the infrastructure, acumen, existing customer base, and financial strength to rapidly become a major player in the e-commerce space.

Thus, GXS, which was started thirty-five years ago, currently has 1,300 employees in twelve countries. More importantly, it claims to manage over 100,000 trading partners which accounts for one billion annual transactions over a variety of its networking technologies, including providing infrastructure and services to many Internet exchange ventures (see GE GXS: Part and Parcel of B2B Exchange). Some of its high-profile clients include J.C. Penney, Liz Claiborne, Tweeter, Woolworth's, Eastman Kodak, FedEx, and DaimlerChrysler.

For these aforementioned reasons, many ill-fated Internet upstarts will have had a rude awakening when they realize that B2B e-commerce is very complex and requires an enormous labor investment. The building of a trading community is a difficult and time-consuming process hung up on organizational, behavioral, and technical issues. The trouble with many now defunct exchanges lay in their aggressive over-hype that actually did not deliver. This, bundled with burning cash fast during the carefree "salad days" of the late 1990s on upfront marketing and unjustifiably expensive technology buys rather than on meticulous value proposition, trading community, and infrastructure building also contributed to their failure.

Conversely, GXS has tackled many tenets of Internet exchanges' success—scalable and secure infrastructure, integration capabilities, process management, and policies (inherited from stringent process competence practices at GE, such as Six Sigma, International Standards Organization [ISO], and NATO certification, and high levels of security), trading partner reach, experience, and financial viability. For example, as for the infrastructure provision, GXS boasts three major data centers around the world, which are sophisticated buildings that have backup power, computer equipment, and highly trained personnel to ensure twenty-four hours a day, seven days a week uptime. The company has staff trained in the applications, who can speak the local languages, and who can troubleshoot for customers at a moment's notice.

Further, GXS has several hundreds of people in its professional services organization that ramp up trading communities and implement these solutions. They are well versed with everything from connectivity protocols to C++ and Java programming. These are people who both understand legacy environments and have also been trained in contemporary technologies. Additionally, the company has a sales and marketing force that is globally deployed.

Furthermore, by spinning-off from GE in mid-2002 to Francisco Partners, one of the world's largest technology investment company, has not only created the opportunity for GXS to become the largest independent trading network provider, but also to become a more flexible one that can address Internet-based messaging services and upcoming web services-oriented competition. Additionally, it has had the freedom to evolve product and service offerings to include non-EDI functions and services and GXS can have a particular focus on small to medium sized businesses (SMBs) and on a web services-based architecture.

Meanwhile, with a hands-off approach, Francisco Partners have allowed GXS to achieve a controlled diversification and increased visibility. Over the last thirty years, GXS has delivered B2B solutions through its three solution groups: 1) Interchange Services, which manages and processes B2B transactions leveraging EDI over VANs and the Internet; 2) Integration solutions, which provides licensed application integration broker software to facilitate B2B connectivity; and 3) Marketplace solutions, which are hosted applications that generate transactions for the source-to-pay process including RFQ functionality, demand requirements publishing by buyers, catalog purchasing, invoice tracking, and automated settlement. It is among these that GXS hopes to see an uptake in growth rates, especially as SMBs look for ways to outsource functionality. Finally, as mentioned earlier, in 2003 GXS began offering services for order life cycle visibility and data analysis tools, but that work is apparently still in progress.

Since the spin-off, there has also been a renewed interest from other surviving Internet exchange providers to provide GXS' trading services by leveraging its huge expertise and investment in a global infrastructure. In particular, GXS could cater for integration between the exchange and the enterprise systems of members, including diverse back-office and front-office systems, and integrate processing and routing of transactions between participants. The exchange and the transactions within it are typically XML based, and GXS can be responsible for mediating these transactions and for translating between XML and EDI for the companies that are still using that standard. GXS claims to also assist members of the exchange in migrating their internal systems from EDI to XML. The exchange might even use a dialect of XML defined specifically for it, but GXS says that it expects no difficulties in adopting any XML standards that may emerge because the company uses the same process for EDI-to-XML translation and for translation between XML dialects in other like projects.

This combination of GXS' transaction enabling infrastructure with a number of regional or industry-specific trading exchanges could reinvigorate the once unpopular vision of the "many-to-many" trading model. More transparency about pricing and availability may allow more spontaneous interaction between trading partners who may not have done business together before. Given GXS' long presence in electronic markets in many different vertical segments, it might be able to parlay its presence into a generic multi-protocol, multi-industry marketplace, which has been a hard job for industry consortia to drive liquidity with XML-only networks.

A sort of an irony here might be that since EDI has earned a reputation among tradingg partners as a complex, rigid, and expensive means of business document and data exchange, one would expect it to be relegated to a relic of a bygone era. In the computer business, where new technologies can come and go almost overnight, EDI should have long become an artifact, let alone a technology with a mid-life crisis, given the extinction of a number of younger technologies such as DOS or FORTRAN.

While at the surface there would be few economic or strategic reasons for organizations to persist with EDI, many seem reluctant to adopt the alternative at this stage. In fact, there has been almost negligible growth in the number of organizations replacing their EDI-based systems with XML. Furthermore, it even seems that sales of EDI-based products and services are growing, given some estimates that EDI transaction volumes increased almost 20 percent in 2003. To be fair, XML transactions volume almost doubled during the same period, but, coming from a miniscule install base, it still constitutes a single digit percentage of overall B2B transaction flows.

The natural question is how come EDI has sustained its popularity and what factors are inhibiting the take-up of XML in earnest. Well, it appears that there is no immediate incentive for enterprises to move away from EDI. The key reason for this is that the number of organizations using XML has not yet reached the "critical mass" of at least a double digits percentage of overall B2B data flow; meanwhile the estimated number of large and mid-sized organizations using EDI is estimated between 250,000 and 350,000 worldwide. For the time being, the wealth of businesses that have invested significant resources in EDI still use the technology for B2B communications, and many see EDI as the best choice for secure, reliable transactions, given it is a mature, standardized and trusted medium.

Despite high initial set-up and value added service costs, EDI implementations can actually be cost-effective. The advent of web-based EDI connectivity standards, software, and services has lowered barriers to entry for many companies that initially would not have considered it an option.

GXS is positioned to accommodate both of these worlds, given it has an excellent track record in enabling EDI, and can demonstrate its ability to take EDI users into the XML world. Whether through translation alone or through translation followed by retrofitting, it has captured the attention of the manufacturing world, which is largely EDI dependent. For example, GXS TradeWeb, an EDI solution offered by GXS, requires a low up-front investment consisting only of a PC, a standard Internet browser, and a modem. By simply selecting the appropriate pre-configured form from a library created by GXS, completing the information, and then sending it over the Internet through a web browser, GXS TradeWeb routes the information electronically to trading partners. When trading partners receive the information, the sender is notified via e-mail.

GXS Acquires HAHT Commerce for More Synchronized Retail B2B Data Part Two: HAHT Commerce

the large, privately-held B2B e-commerce software, services and solutions pioneer, which operates one of the largest B2B e-commerce networks in the world and manages one billion annual transactions for more than 100,000 trading partners, announced that it signed a definitive agreement to acquire HAHT Commerce (www.haht.com). HAHT Commerce is based in Raleigh, North Carolina (US) and is a privately-held provider of demand chain management applications (DCM) that strategically automate, integrate, and optimize order management, product information management (PIM), channel management, business intelligence (BI), and customer services functions between manufacturers, their channel partners, and end customers.

Under terms of the agreement, GXS would acquire all the capital stock of HAHT Commerce through a merger for approximately $30 million (USD) in a combination of cash and shares of GXS Holdings, which is the parent company of GXS, headquartered in Gaithersburg, Maryland (US). The transaction was subject to the approval of HAHT Commerce's shareholders and other customary conditions and the acquisition was completed in February. CIBC World Markets Corporation acted as exclusive financial advisor to HAHT Commerce with respect to the transaction.

On its hand, HAHT Commerce at the end of 2003 announced that its product information management (PIM) solution goes well beyond basic, short-term fix for compliance with data synchronization via the UCCnet GLOBALregistry service. Namely, like its future parent GXS, HAHT has long realized that data synchronization would be a relatively simple task if the data was normalized, complete, and error-free. Unfortunately, this is rarely the case, given product information is not created by a single department within the company and is usually not overseen by any single group. It is this lack of process within a manufacturer's business and around managing product information that facilitates errors.

To that end, HAHT Commerce claims to have raised the bar by providing more advanced PIM processes with the introduction of Version 7.5 of its HAHT Commerce Suite of applications and through its many updates to the PIM component of the suite. HAHT PIM is a strategic solution designed to meet current and evolving standards for collaborative trading. It empowers manufacturers to manage product information and optimize product data synchronization from product launch through to sunset via the automation of internal and external business processes with trading partners. It supports product item data synchronization with UCCnet services, industry exchanges, as well as directly with trading partners in a point-to-point fashion. Here is a summary of new features found in version 7.5:

* Compliance Manager—Uses data validation rules to ensure compliance with trading partners and industry standards;

* UCCnet 2.2 Certification—Supports the UCCnet GLOBALregistry service for data exchange with global partners and industry vertical markets;

* Visual Workflow Editor—Allows workflow administrators to model business process workflows according to specific business needs and conditions. It enables support across the entire suite for quotes, orders and requests for quote (RFQs);

* Proxy Delegation—Allows approvers to sign a proxy while they are unavailable thus facilitating the continued handling of workflow tasks on their behalf;

* Personalized Workgroup Templates—Allows administrators to create different data views for various group functions which enables business users to focus on their area of expertise;

* Parallel Workflow—Speeds approval process by splitting work across multiple users;

* Audit Trail Support—Administrators can view changes made by each step of approval process; and

* Business Intelligence Enhancements—New reports and data analysis functionality highlights potential problems. At the discretion of the manufacturer reports can be generated to show average days to market by product, a summary of trading partner actions, and a retailer responsiveness scorecard for data synchronization, to name a few.


Prior to that, early in 2003, HAHT announced general availability of three new vertically-focused DCM application suites for chemical, consumer products, and discrete manufacturers. The HAHT Consumer Products Suite, HAHT Chemicals Suite, and HAHT Discrete Manufacturing Suite are all built on HAHT's new core technology, Commerce Suite 7.1, and provide specific functionality for each respective industry. They are also touted to offer a modular architecture, rapid implementation, out-of-the-box ERP integration, easy customization and support for global deployments.

While manufacturers in different industries share some common needs, they determine their demand chain initiatives according to the operational priorities of their industries. For example, consumer product manufacturers are more concerned with managing and sharing branded product information, while a typical commodity chemicals company is more interested in increasing market share via segmentation and customer service levels, and meanwhile, discrete manufacturers are focused more on their channel partners than the other two. The following is a list of industry-specific functionality and their potential benefits found in the suites:

1) HAHT Consumer Products Suite

* Ability to define multiple packaging configurations for each product manages complex packaging relationships

* "New Product Introduction (NPI)" workflow process decreases time to launch

* Workgroup-level security, edit controls, and validation rules for product information

* UCCnet Global Registry support for item synchronization and market groups simplifies maintenance

* Electronic-to-paper print controls streamline hard-copy product data sheets and catalog creation

* Personalized "Favorites" portal clip allows for easy access to frequently ordered or accessed product data

* Dynamic querying capabilities serve to provide extended product data

* Improved reporting controls for business intelligence enhance data analysis

2) HAHT Chemicals Suite

* Quote Management shortens the length of time it takes to reach a price agreement with Global customers during negotiations

* Auto-replenishment based on collaboration, events, and order history reduces errors and enhances customer service

* FaxPO functionality automatically converts faxed purchase orders directly into an ERP system, reducing errors and processing costs

* Support for Chemical Industry Data Exchange (CIDX) 3.0 Chem eStandards increases integration options

* Enhanced Business Intelligence helps increase market share through analysis of sales channels and customer segmentation

3) HAHT Discrete Manufacturing Suite

* Catalog customization for channel partners via dynamic templates and partner-defined fields

* Co-branded site functionality lets channel partners customize manufacturer's content

* Channel-defined product bundles support collaboration

* Optimized shipping-point models tied to individual channel partners provide cost savings

* Line-item order history search

* Personalized context-sensitive e-mail alerts save channel partner time when completing transactions

Like in GXS' acquisition of Celarix, many of the above capabilities are the result of HAHT's 2002 acquisition of channel management vendor iMediation and content exchange vendor arcadiaOne, which was purchased by iMediation immediately prior to HAHT's play. The acquired companies' customers included the dominant consumer products leaders Hasbro, L'Oral, Philips, and Virgin. This strategic acquisition has benefited HAHT by extending the product and brand information management and channel management components of its product portfolio, by increasing its European presence, and by increasing the size of its customer base, specifically in the consumer products industries.

Cognos Unveils CRM Solution

business intelligence (BI) companies, today unveiled a comprehensive BI solution (including interactive reporting, data analysis, and scorecarding) for the customer relationship management (CRM) marketplace. The announcement was part of an aggressive CRM market initiative showcased at Cognos's Enterprise 2000 conference to an audience of corporate executives and industry experts. Cognos showcased its Cognos business intelligence for CRM solution as providing the extensive interactive reporting, analysis and scorecarding functionality critical to organizations looking to better attract and retain customers.

CRM is generally understood to refer to an integrated information system that is used to plan, schedule and control the presales and post sales activities in an organization. Although the dividing lines are not well-defined, CRM has generally not been understood to include the marketing function. The theory behind CRM initiatives is to improve a company's understanding of their customer's needs and preferences. Theoretically, this will create greater customer retention and easier customer acquisition.

Joanne K. Masingill, Cognos's Senior Vice president of marketing stated that "an effective CRM system is no longer a 'nice-to-have' but a must-have requirement for competing and winning in the Internet economy. Cognos allows organizations to consolidate data, across inventory to sales and customer information, to deliver the operational efficiencies and high-touch customer relationships demanded by today's customers."

Cognos is a very strong competitor in the business intelligence space. It is logical for them to enter the extremely hot CRM market. Their extensive experience with tools that use multi-dimensional databases (i.e., Cognos PowerPlay) should enable them to hit the ground running, giving companies the ability to drill down and across product lines, and customers the power to discover developing trends. They also have the advantage of being able to sell into their huge installed base. Companies already using Cognos's CRM solution include Send.com and United Guaranty.

In order to further accelerate their entry into the CRM market, Cognos has joined the Siebel (NASDAQ: SEBL) alliance program as a premier partner, along with 92 other vendors (at current count), many of which are also in the business intelligence space, who provide competencies not core to Siebel's business. Siebel is currently the largest CRM vendor on the operational side, but is partnering to provide some of the analytics. "The basis for successful loyalty relationships is providing a full-service approach. Siebel Systems enjoys a leading position in the customer-facing eBusiness market and Cognos is excited to be a partner," said Patrick O'Leary, Cognos vice president of strategic alliances. "CRM is a natural complement for our enterprise business intelligence solutions. Cognos and Siebel bridge the gap between business processes to ensure that customers, partners and suppliers are making consistent, coordinated decisions to grow the business and strengthen e-business relationships."

The key to this alliance is for Siebel to provide the operational CRM (such as sales force automation), and then work with other vendors to effectively analyze the data. Some of Siebel's competitors, such as E.piphany, have already made strides in this direction.

Globalization Has a Profound Impact on the Supply Chain and Supporting Information Technology

In recent years, the World Trade Organization (WTO) often has pointed out the staggering acceleration of global trade since 1995, and the prospect of continued and dramatic increases in global trade throughout this decade. It is estimated that 55 percent of all raw material for American manufacturing now is sourced outside the US. This is in comparison to only 10 percent to 12 percent just a few decades ago. Statistics like this highlight the growing importance of globalization. At a macro-economic level, the World Trade Bank defines globalization as the growing integration of economies and societies around the world. It is interesting that the key action word in this definition is integration. Integration at a systems level has been the nemesis of information technology (IT) professionals for decades. If we look at globalization at a micro-economic level, or business level, then globalization represents the extension of enterprise business operations around the world. Whether viewed at the macro- or micro-level, however, globalization is causing quite the buzz nowadays, and it is not likely to end any time soon.

When we speak of globalization and its effect on modern enterprises, it must be viewed in the context of two additional contemporary inflection points. One of these is the Internet, which has transformed how most enterprises conduct business today. Another is the transition from a push manufacturing and supply chain paradigm to a pull approach, or, more specifically, the advent of the demand-driven supply network (DDSN). These three forces are driving enterprises toward significant transformation of their supply chains, and in turn, this is having a profound effect on IT.

As shown in figure 1 above, the confluence of these three forces, globalization, the Internet, and DDSNs, will undoubtedly drive information technology and innovation. This will place new challenges and opportunities at the doorstep of the chief information officer (CIO), who will have to use creative teams of IT professionals to meet the changing demands of the business community.

A move toward globalization within an enterprise is rarely a strategically planned event. The number of contact points and amount of business conducted off-shore tend to sneak up on operations people over time. It may begin with the strategic sourcing of a component from abroad, or an arrangement for services with a new business partner overseas. Regardless, as the likelihood of globalization impacting an enterprise increases and the risks mount, senior executives need to consider a more strategic approach toward globalization initiatives. Of particular importance are the less obvious operational risks that indirectly affect the day-to-day business operations of an enterprise. As shown below, the business and IT consequences are considerable. The risks detailed hereafter highlight the need for global data transparency, well defined global business processes, and the global IT enablers to support them.

Expanded Operational Risks	Enterprise Impacts for IT and Business
Political risks Economic risks Infrastructure risks Resources risks Labor risks Regulatory risks Quality risks Security risks Legal risks Contractual risks Patent risks Reputation risks	Risk identification, weight, value, and prioritization Risk mitigation Risk management Critical global organizational capabilities Global operations management Global business processes Global business information management Global IT enablement

Globalization's impact on the supply chain is profound. It creates the necessity for an enterprise to have the following global supply chain management (SCM) capabilities.

* Supply chain planning
* Supply chain execution
* Supply chain visibility
* Supply chain event management (SCEM)
* Supply chain business intelligence
* Global, Web-enabled supply chain collaboration

IT enablers for such global supply chain requirements include supply network integration through interdependent supply networks (ISN) (see Supply Chain Management Is Evolving toward Interdependent Supply Networks), and real time data and event visibility through SCEM software, which includes monitor, notify, simulate, control, and measurement analytics capabilities. Furthermore, at the core of any global supply chain framework is service-oriented architecture (SOA), whose components include Web services, portals, applications servers, security and analytics frameworks, business process management (BPM), and multi-echelon data management. Examples include IBM's WebSphere, SAP's NetWeaver with ESA, and Oracle's Services Oriented Enterprise (SOE). i2 Technologies has also developed an intriguing global supply chain SOA framework it refers to as the i2 Agile Business Process Platform.

As the trend toward globalization continues, the necessary technology will develop. A good example of this causal relationship between globalization and the emergence of the required technology enablers is the current transformation of transportation management systems (TMS). A recent ARC Group report on TMS states: "Globalization is forcing TMS to become multi-modal in order to serve the needs of global demand". Historically, TMS solutions focused on ground transportation, either on local operations that use local common carriers or on domestic private fleet operations. However, intermodal processes, such as ocean carrier offloading, demurrage, or container-on-rail, have gained importance to many industries as a result of expanding global operations. Business logistics processes are expanding with more complexity and global logistics networks are evolving. Global demand for an integrated ocean, air, ground, truck load (TL), non-truck load (LTL), fleet management, and common carrier solution is finally gaining momentum due to globalization, capacity constraints, increasing haul rates, and rising fuel costs. TMS solution providers, such as SAP, Oracle with G-Log, Manugistics, and i2 Technologies, are aware of this growing need and are driving software enhancements toward these expanding global needs.

Integration in its many and varied forms has been a priority of IT professionals for many years, and will remain so for many more years to come. Globalization has only renewed and heightened the focus on integration. Globalization has also driven the need for greater data transparency. Global data transparency implies a vision of supply chain operational data that is at the right place at the right time, in a form that addresses critical, priority needs of data and business information. This vision may be realized by what has become known as a single version of the truth (SVoT) relative to customer, product, and partner information. SVoT is conceptually a virtual data repository, in which data related to product, customer, supplier, and trading partners is available to all global participants in a consistent and timely manner (see Single Version of the Truth). An IT environment that facilitates an SVoT schema should support key processes throughout the enterprise, ensuring a consistent view of data across the global supply network for all participants, as well as benefits for all global players.

In addition to global data issues, the most often cited IT concerns regarding globalization include the following.

* Adherence to global BPM
* Localized network reliability
* Local and global Web disruptions
* IT governance
* Global distribution and education of technology
* Common global business practices for digitized intellectual property

This list represents only a small subset of the plethora of IT issues that can arise from an enterprise globalization strategy that is not designed with a comprehensive examination of the risks and causal relationships driving globalization.

Summary

Globalization's profound impact on enterprise supply chains and the corresponding IT requirements, business processes, communications, data transparency, integration, and need for global technology enablers will challenge IT professionals for the foreseeable future. With globalization, the role of the CIO has also become dramatically more complex, as information management is a ubiquitous concern for global enterprises. Finally, globalization requires a new global business mindset, with new strategies, business processes, and enabling technologies, as well as global, real time data characterized by actionable response capabilities.