C-commerce. Would mixing ERP, CRM, e-Procurement and SCM be an efficient strategy for the future?

Marcin Bkowski
Business Solution Management IFS Central and Eastren Europe M. Flisa 4 02-247 Warsaw e_mail: m.bakowski@ifs.com.pl Keywords: C-commerce, ERP, CRM, e-Procurement, SCM, Extended Enterprise, B2C, vision, Ebusiness, partnership, cooperation. Abstract: The article discusses a Vision for 2005 with the year 2005 serving as the time limit for presenting tools that live up to the demands of the Collaborative Commerce era. A description of a B2C case and a presentation of market analyst forcasts is followed by an overview of system families (ERP, CRM, SCM and e-Procurement) that play a crucial role in the development of CCommerce tools. Will businesses soon adapt their operations to the Extended Enterpriseconcept?

1. Where do we stand and where are we headed?

In mid-September 2001, days after the tragic NY events, I was sitting in my office wondering about what it was that I did, what was the purpose of my work and where todays world was headed? I am certain that other people, not only in the tragedy-struck United States but also in our corner of the world, Central and Eastern Europe, asked themselves the same questions. Within just days of September 11, 2001, I stumbled upon an article by R. Garland in TechnologyEvaluation.com on challenges faced by Collaborative Commerce. The part I found particularly intriguing was the following decription of a purchase made at a hypothetical Internet store: Kate visits www.skateboardingismyworld.com. She prowls the web site for her favorite skateboard, which she busted up pretty good in a bad fall at a recent X-Games event. She's been to this site many times to purchase much skateboarding paraphernalia, and the site greets her by name. She finds the skateboard that she needs, but realizes that it's the new version of her old standard, and she's worried about the new, larger-size wheels they have as the standard configuration for it. She clicks on the Talk To Me Now button, and via Voice over IP, she connects immediately with a knowledgeable customer service rep. She explains that she'd like the skateboard with the original size wheels. The customer service rep, through collaborative web browsing, shows Kate how she can custom order the skateboard with her preferred wheel size on the web. Kate hangs up with the rep, and adds the customized skateboard to her online shopping cart, and proceeds directly to checkout. Since she's a regular, the site automatically discounts her purchase 20%, and presents a full screen with her Billing and Shipping address and credit card information pre-filled in. She selects same-day shipping, since she can't skip a beat practicing for the next competition. She confirms the order and the price on the next screen, her credit card transaction is processed, and she's off to school in time for homeroom. A local vendor of skateboarding equipment gets an electronic order for Kate's skateboard, and the request for same-day delivery. They put on the original wheels, and deliver it to Kate's door by 2 pm, just when Kate returns from school and is ready to once again hit the local boarding course.

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Meanwhile, skateboardingismyworld's logistics package is notified that they just dipped beneath the pre-set threshold for stock on that skateboard. An order is automatically sent to all component manufacturers of the board for re-stock[1]. Perhaps I would never follow up on the above description in any particular way were it not for a very personal event in my life the birth of my daughter on September 19, 2001. It was because of her arrival that a few days after this happy event I returned to R. Garlands article to ponder about what the world would be like in a dozen plus years seen through the eyes of my newborn Aleksandra? When shopping for a skateboard, will she turn to the Internet to hit the right key on herbabytop or will she perhaps enlist the help of her school teacher, who will suggest the best way to purchase a specific item, rather than going to the parents who will have long grown out of touch with the changing market that slips farther beyond their reach by the day? You may wonder what links there are between a skateboard and C-Commerce? Apparently none but then again the story of imaginary Kate and her skateboard made me think about the similarities and differences between streamlining business processes and the modus operandi adopted by on-line stores in handling their target group the customers on the one hand and, on the other hand, in identifying tools and improving the service provided to institutional clients to support them in their day-to-day competition. How different is todays way of doing Business-to-Consumer (B2C) from the 21st century brand of Business-to-Business (B2B)? My focus in this article is on B2B. I will therefore describe the joint daily effort of my customers and myself as I convincing clients to take limited risks to gain a competitive advantage.

2. The 2005 Vision

Can businesses embrace the above description of fully-automated sales management in their relations with customers and other enterprises? While businesses may have been able to do so once, today, the whole idea seems unrealistic, at least for the simple reason that the concept is not 100% true* in the context of todays Internet commerce. I have tested a number of systems adopted by manufacturers of various widely available products for their on-line stores and not even once have I come across a site whose functionality would fully meet the above description. The number of possible consumer behavior patterns that need to be anticipated in such projects is far lower and entails a much lower risk of error than solutions designed to support businesses projects where account needs to be taken of differences between the specific characteristics and needs of enterprises. The option of forming what I will provisionally refer to as conglomerates and providing them with effective IT support remains a pipedream. In Central and Eastern Europe, if not in other parts of the world, we should focus on improving the internal organization of business processes to the extent absolutely required to add new links to such conglomerates. And time is running out fast... According to Gartner Group, the popping of shampaign corks during New Years celebrations of 2000 ushered in a new era of C-Commerce solutions that is posed to reign through 2005. This is not to say the time limit is set in concrete. We are a few years wiser now than when the vision was first announced and yet, even today we can see that while the 2005 timeframe is a reference point of sorts for business solution providers, it should not be seen as inevitability out to compel all businesses to fit into the one and only right mold. Having gone through the stage of the Internet, which Ines Usman, the former Swedish Minister of Telecommunications, once described as a passing fad, to an initial fascination with E-Commerce that ended in turbulent failures of dotcoms, we should focus on developing tools for combining the competencies of multiple businesses to create a competitive advantage.

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C-COMMERCE. WOULD MIXING ERP, CRM, E-PROCUREMENT AND SCM BE AN EFFICIENT STRATEGY .

Figure 1, Business Application Revolution

According to Gartner Group, The C-Commerce vision includes interenterprise Internet connection, but it goes a step further by enabling multiple enterprise to work interactively online to find ways to save money, make money and solve business problems often dynamically restructuring their relationships[2]. How far are we from achieving this vision and what distance have we gone so far to assure ourselves that our prior efforts have been taking us straight to our prescribed goal? Should a transformation toward C-Commerce be our goal?

3. The Extended Enterprise[3] the way to a partnership

It appears that leading companies have long stopped looking to customer service improvements for competitive advantages and have grown to consider them as prerequisite for their survival. It would be appropriate to believe that all players in the global IT solutions market have evolved their business process support systems in response to the business needs of their customers. The systems grew through the stages of Materials Requirements Planning (MRP) solutions, which are relatively simple for todays challenges, to Enterprise Resource Planning (ERP) applications, and finally to ERP II and its derivatives. Yet, it is not only the above classes of applications with their answers to ever changing needs of customers that have made it possible for us to pursue the vision of 2005. It is also changes in customer approach strategies that gave rise to a range of Customer Relationship Management (CRM) tools, various applications designed to integrate critical Supply Chain Management processes and efforts to identify potential savings and improvement areas with the use of Internet-based corporate purchasing

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management tools (e-Procurement). In the below discussion, I will overview the families of solutions named in the articles title to bring us closer to anwering the questions posed therein. 3.1

Enterprise Resource Planning

ERP dominated the IT business solutions market in the 1990s. While all of its suppliers claimed to offer the application package that best met the definition of ERP, only some were able to prove that claim to customers and market analysts. From the very start, the main idea was to go beyond production and inventory management by providing businesses with unprecedented support in the areas of production and logistic process integration additionally extended to finance, accounting and HRM functions. Systems of this class are currently in common use in Central and Eastern Europe. This is especially true for large and mid-sized enterprises which have teamed up with solution suppliers in developing the market as they convinced other businesses to increase the role of IT in their day-to-day operations. What is important for answering the question asked in the articles title is that some such solutions began to evolve toward supporting customers in strategy building and increasing goodwill and shareholder value. This was possible through the emergence of industry-specific applications. It was with reference to such applications that the word collaboration was first used indicating the option of exchanging data not only internally in given companies but also externally. 3.2

Customer Relationship Management

Customer relationship management (CRM) is neither an application nor a technology. Seeing and deploying it as either runs against the grain of the approach to the customer assumed in this concept. CRM is a business strategy aimed at selecting and managing customers to optimize long-term value and increase customer share. It expands the concept of selling from an individual act performed by a sales person to a continuous process involving every step from marketing, lead generation, opportunity handling, and sales management to ordering and follow-up. Every single process containing operations, interactions, information or activities between the enterprise and the customer should be in the overarching CRM process. This also means that all parties involved in a type of customer-facing activities should have access to, share information with and take an active part in CRM. The CRM process is actually made up of several important elements such as analyzing customer and channel structure, attracting customers, presenting the companys product and services, selling, order management, fulfillment, customer support, and after market service. These form a coherent whole that is necessary to achieve a complete CRM strategy. A company considering an implementation of a CRM strategy should focus on the complete value chain and all customer interaction and management processes while keeping in mind that vertical offerings are crucial as the value chain is drastically different between market segments.

3.3

Supply Chain Management

Suply chain executives are in the hot seat given the flat economy and a slowdown in revenue growth. They are challenged by senior executives to find new and innovative ways to reduce cost, while still meeting customer needs[4].

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C-COMMERCE. WOULD MIXING ERP, CRM, E-PROCUREMENT AND SCM BE AN EFFICIENT STRATEGY .

It is difficult to disagree with these words by Todd Buelow. They summarize well the dire threats that most businesses faced in 2001 and that, in a less severe form, have persisted to this day. Perhaps as the global economy cools off, businesses will be more motivated to make broader use of tools designed to integrate mostly internal processes. This may be so if we assume that customers will benefit the most by starting the change process with their internal supply chains where most enterprises still have a large potential for improvement. The statement is particularly true for businesses operating in our part of Europe. Figure 2, Supply Chain Environment

There are several key areas of functionality within Internal Supply Chain: material procurement planning, manufacturing planning and scheduling, distribution and transportation management, and inventory management and warehousing[5]. SCM approach should be based on a process-oriented strategy of optimizing supply chain performance and providing visualization of supply chains for people making informed and cost efficient decisions. There are three views which address the complexity of the Supply Chain: Supply Chain planning, execution and performance. According to Supply Chain Council the supply chain encompasses every effort involved in producing and delivering a final product or service, from the supliers suplier to the customers customer[6].

3.4

E-Procurement

A company is often viewed in terms of the products or services it offers, how these are produced, and what channels it uses to move them to the market. There should also be a supply side to business, and

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for the vast majority of companies, procurement is fundamental process. In fact, purchases typically represent 50-90 % of a companys cost structure (according to anlysts, TechnologyEvaluation.com). There are some fundamental things the purchasing company wants to achieve when it comes to purchasing. These include reducing the time employees spend looking for a product, service or suitable supplier, reducing the time and cost of administering purchases, reducing cycle times, increasing volume with a few preferred suppliers to get better pricing and other conditions, as well as limiting choices to only a number of pre-qualified suppliers to ensure quality. E- procurement has a role to play in all of these areas, and the potential gains are huge. Several types of material are purchased by a company. Much of the e-procurement attention so far has been directed toward purchasing indirect white-collar material such as office supplies and capital goods. The main vehicles for this have been the many marketplaces that are available for every industry (industry sponsored marketplaces). They offer a number of benefits, like the ability to find new suppliers, seek quotations for certain needs, and compare supplier catalogs. Other areas are project procurement and blue-collar indirect material. Further, a very large part of purchasing costs is typically the direct material used in production. If these purchases can be streamlined, resulting in smaller inventories, shorter cycle times, and less administration, huge benefits can be achieved. Figure 3, e-Procurement process

ERP II class systems, business strategies aimed at obtaining, maintaining and rationally developing trade relations with customers, SCM systems and, in particular, e-Procurement, have opened up opportunities for fast but not revolutionary use of Internet tools supporting day-to-day business operations. The Internet has opened up new opportunities for organizing and doing business, both for those who would like to use it as a powerful extension of proven business practices, and for the more creative risk-takers. Traditional business imperatives, relating to customer value, quality, cost, time, and innovation, still apply in the Internet economy, but there are means of achieving them. The opportunities provided by the Internet lie primarily in developing value-adding business relationships with customers, suppliers, partners and employees. Using the Internet in this sense
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means that relationships can be created, refined and developed as well as terminated as a result of Internet dynamics. The new opportunities can be found in the dual dimensions of reach and richness. Simply put, reach is about how many parties you can connect to and have business relationship with, while richness is about the depth of the relationship. The ability to exploit these opportunities in the best way possible will constitute a competitive differentiator for the leader and in a rather short frame become the compliant standard for the laggard in almost any business community. At IFS, we use term Extended Enterprise to denote a company that collaborates with its suppliers, partners and customers to streamline business processes, transcending traditional boundaries and enhancing mutual customer benefits. This is not an entirely new phenomenon, but in relation to existing EDI-based collaboration, the Extended Enterprise aims for much more interactive services, higher flexibility, lower investments and, by far, a larger reach and richness in its collaboration. Having collaboration as its hallmark, it extends to customers, suppliers other business partners and employees within a defined market segment or for a particular business opportunity. Figure 4, Extended enterprise

4. A moment of pondering over where we are today

The idea behind collaborative commerce is to break the rigidity of traditional business processes and improve information exchange through systems integration and Internet-based communication. As a principle, collaborative commerce attempts to bring together employees, customers, and business partners in order to improve trust, share information, and eliminate any friction associated with business transactions[7]. These words by Philip Say perfectly summarize the gist of this article. They confirm the viability of the 2005 vision and specifically the need for open and flexible applications to be delivered by global

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providers of technological solutions. Since mid-1990s, experts have repeatedly indicated that entire Supply Chains rather than isolated companies will compete in the future. Such a future is approaching fast and, in fact, can be observed even today. It is not important whether competing holding groups are referred to as conglomerates, coalitions, allies or Extended Enterprises. The important thing is to provide all interested parties with access to data exchange, process integration and analysis tools to allow them to compete effectively, increase the number of satisfied end customers, reduce time pressures and run scattered production while increasing the number of marketing and distribution channels. The responsibility for doing so falls on application suppliers. Am I using the available business process support tools? Do I rely on a consistent IT system? Am I prepared to integrate different systems? Questions such as these are put to enterprises seeking to take part in the building of effective Extended Enterprises of the future. We do not expect that the C-Commerce vision will soon come true. Let us work together on changing the way we think of the new economy and continue to work toward bringing us closer to making this concept of business operation reality.

Literature
[1] [2] [3] [4] [5] [6] [7] R. Garland, Collaborative Commerce: ERP, CRM, e-Procurement, and SCM Unite! A Series Study, www.TechnologyEvaluation.com, September 13, 2001 B. Bond, D. Burdick, D. Miklovic, K. Pond, C. Eschinger, C-Commerce: The New Arena for Business Applications, www.gartner.com Industrial and Financial Systems, IFS AB, A Step-by-Step Guide to the Extended Enterprise, 2001 Todd Buelow, Supplier Logistics Management Part 1, www.TechnologyEvaluation.com, January 22, 2002 Steve R. McVey, Not all SCM Products Are Created Equal, www.TechnologyEvaluation.com, March 14, 2002 www.supply-chain.org Philip Say, The Buzz on C-Commerce, Internet

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