Automating post-ERP business

Automation of transactions between companies is not a new idea, but firms are now benefiting from web-based collaboration.

Automation of transactions between companies is not a new idea, but firms are now benefiting from web-based collaboration

Trying to conceive of life after enterprise resource planning is difficult when so much of an IT budget is committed to ERP upgrades, enhancements, consolidation and maintenance.

Yet we are starting to see widespread adoption of software that automates transactions between trading partners. Early adopters are building "composite applications" on top of the ERP backbone to streamline procedures such as procurement, inventory and order management, fulfilment, replenishment, trade promotions, and financial settlements.

The concept of automating these transactions is not new; this was the central tenet behind the launch of the Collaborative Planning, Forecasting, and Replenishment (CPFR) initiative in 1995. Despite the focus on win-win benefits, widespread adoption never happened.

Momentum for inter-enterprise collaboration picked up back up in the late 1990s during the frenzied rush by executives to join with dozens of competitors to form consortia that would own and operate a public trading exchange.

One chief information officer predicted that 80% to 90% of his company's transactions would go through a shared exchange within 18 months. It never happened. The plans were too ambitious and companies needed a single "killer business process".

But what is a killer business process? Enterprise spend management firm Ariba has found a solution within the broad notion of enterprise spend management, which helps organisations work with suppliers to manage and reduce company-wide spending on products and services.

Last week, Ariba posted its first profitable quarter since its inception in 1996. The company closed 43 deals, its best record in two years, and 40% of its revenue came from first-time customers - another record.

Mike Schmitt, Ariba's executive vice-president and chief marketing officer, described how one high-tech customer saved £5m, or achieved a 14% reduction in spending, by automating manual procurement processes and moving them to the internet.

The Manugistics' Envision 2003 user conference last month focused on using the internet to collaborate with customers, suppliers, carriers and other trading partners.

Almost every user had some sort of web-based initiative. These included a well-known beverage manufacturer linking to 26 distributors for demand planning and trade promotion management, and a major retailer linking to 48 suppliers for CPFR.

At the event, Manugistics distributed a survey and asked attendees to rate the importance of automating various business processes with customers, suppliers and carriers. Respondents were asked to rank the processes from one to five, with five being "extremely important."

Out of the 41 responses, the most important process was to "review forecasts/demand with your suppliers", where 19 people ranked this as extremely important. This was followed by "collaborative planning with your customers" (17), "confirm pick-up data with your carriers" (16), "performance data with your carriers" (14), "confirm product availability to customers" (13), and "allow customers to track order/shipment status" (13).

During the dotcom boom, there was the belief that these transactions would be handled by a public or private exchange. The reality is that companies are more comfortable doing one transaction or business process at a time. I think inter-enterprise collaborations mark the start of the post-ERP era.

Bruce Richardson is senior vice-president for research at AMR Research

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