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2013

In Part One of this commentary stream, I reflected on some conversations related to the history of online B2B adoption.  I made reference to a research report written in June 2000 that outlined the positive benefits of electronic B2B processes, but even back then, raised some cautions and practical watch outs.  So much has changed in this online B2B technology wave since that time.

 

In the June 2000 AMR Research report, this author outlined important business and technology change management considerations that warrant some important reflection.  The report concluded:

 

Trading exchanges have the potential to provide the mechanisms for impacting how companies interconnect, streamline, and reinvent their interaction with customers, suppliers, service providers and channel partners.  However, they need to be considered in the context of broader comprehensive strategy that addresses a company’s overall strategic business goals and how e-business and supply chain strategy will enable those goals”.

 

The above statements addressed the all-important internal and external organizational change management factors that needed to occur within many industries and their supply chains. From an internal perspective, procurement teams discovered that e-procurement practices layered on former methods of bludgeoning suppliers for the lowest material cost would not yield mutual benefit. While adoption of e-procurement practices yielded benefits in indirect procurement, many lacked the energy or resources to broaden initiatives to direct materials and complex services, without additional change management assistance. Companies needed to build trust and collaboration in their trading communities.

 

Sales, marketing and supply chain fulfillment teams discovered and overcame issues in cross-functional business process and organizational reward alignment. There were obstacles in channel conflict and consistent pricing that still exist today. Some readers may recall battles of the B2B platforms which placed suppliers in precarious positions of which platform to support. Adoption of standardized processes, terms and taxonomy, along with information integration capabilities that span the enterprise also had to align. Onboarding a new supplier in the early days of exchanges was fairly painful and often requited direct IT assistance, and days to complete.

 

In the external sense, a number of severe global economic recessions provided the mandate to reduce overall supply chain costs, leading toward a wave of global outsourcing and extended supply chains as a mechanism reduce material and labor costs.  Many companies accepted the vision of the Internet as the facilitating mechanism of online commerce at their own pace, after observing the success of others, or after internalizing the compelling differentiators for their businesses. Consumers and businesses become far more comfortable in leveraging online commerce tools to secure goods and services. There were few visible innovators, at least those who were willing to openly share strategic intent.

 

On the technology side, the eventual development of more mature software-as-a- service (SaaS) platforms coupled with improved online integration tools  linked with cloud computing platforms have moved the online B2B maturity curve forward.  While some issues remain, manufacturers and service providers can now understand the important value propositions that were missing before, namely more extended reach across the extended supply chain, quicker time to overall deployment, and reduced IT infrastructure costs.

 

In the year 2000, companies like Apple, Amazon and Samsung never appeared in the listing of the top ten most valuable companies. At the end of 2012, both Apple and Samsung appear on that while Amazon is not that far behind. Each has a business model that leverages a world class supply chain that surrounds E-commerce and online business processes. They are supply chain intensive companies designed to leverage required business outcomes. There were no examples of Linked-In, Facebook and Salesforce.com to help teams understand the notion of the network is indeed the system, and that systems of engagement are the other enabler of deeper collaboration and quicker decision-making.

 

According to a report published by the Boston Consulting Group, in three years, the Internet economy will reach $4.2 trillion among the G-20 economies, a size surpassing some countries. During this past holiday buying season, consumers clearly stepped-up their preferences towards online channels as their  preferred buying option. According to comScore, the growth rate of online retail commerce is outpacing the growth of brick and mortar retail by a 4X factor.  In the U.S. alone, total retail and travel-related E-Commerce sales reached $289 billion in 2012, 13 percent higher than the previous year.

 

It may have taken over a decade for all the business, technology and change management factors to align, but those companies and technology providers who embraced change, stayed the course and adjusted to the lessons of the market are now reaping the benefits. We can unfortunately speculate as to more industry casualties to come from those companies and service providers who were not as adept at catching the online B2B wave.

 

As noted in Part One, we are now entering the third platform wave of online business, the fusing of transactional, advanced analytical and social engagement information where line of business, B2B and supply chain teams will be able to harvest incredible capabilities.  The takeaway is accepting the learning of the past as the passport to the future.  The spheres of Technology, Process, People and Business will need to again align. The winners will be those who provide the leadership and mentoring toward achievement of the vision, and execution of the components in manageable and organizational readiness phases.

 

I would be interested in your views on the evolution of online B2B, especially those readers who have first-hand navigated their organizations through this era.  You can contact me via email at: info <at> supply-chain-matters <dot> com.

 

Bob Ferrari

Within the last couple weeks, I have had some fascinating conversations with technology professionals who have participated in the young history of B2B networks. The conversations included Sean Rollins, Vice President of Product Marketing, E2open, Greg Johnson, Senior Vice President of Marketing and Greg Kefer, Vice President of Corporate marketing, GT Nexus.  The gist of our conversations centered on the history and current day adoption rates of electronic B2B commerce and how certain actions and events 10 years ago would change what we see today in the B2B technology landscape.

 

Over ten years ago, there was lots of market interest in the vision of electronic B2B processes, but lots of doubt also existed. There was confusion in the definitions of private, public consortium or industry trading exchanges. There were enormous claims relative to both the customer and supplier facing online commerce potential of online processes, fueled from both the industry analyst and the vendor community. These were the times that featured trading exchange names such as Chemmatch, Chemconnect, Logistics.com, TradeMatrix.com, Hightechmatrix.com, Covisint, Myaircaft.com, Exostar, and others. Some succeeded and continue to exist today, while others did not.  In 2013, we have a far different picture of mainstream adoption, with analyst firms such as IDC predicting a ten-fold explosion of industry focused platform-as-a-service (PaaS) offerings in the next three years.

 

These recent conversations motivated me to search back to some research reports that I personally authored for AMR Research (now subsumed by Gartner) almost 13 years ago, in the year 2000. The title of a specific report was: Get Your Supply Chain Ready for Trading Exchanges. I doubt that not all Supply Chain Matters or Supply Chain Expert Community readers will recall the report, since so much has transpired since then, but bear with me in this two-part look-back commentary as I point to some important takeaways.

 

The conclusions of that 2000 research report were that while the (new) concepts of electronic B2B trading exchanges had the potential to fundamentally alter supply chain management processes, companies needed to address whether utilizing online processes would give them a competitive model for supply chain best practices, and whether online processes should be incorporated in the overall adopted supply chain strategy.

 

In the year 2000, there were many skeptics to these models, believing that the technology vendor community was over hyping the fact that online business processes would become the new fabric of business.  At the time, while many of us at AMR Research believed in the potential of online B2B, we raised cautions as to market overhype.  That 2000 report noted:

 

AMR Research predicts that most current electronic trading exchanges will fail because of errors in revenue strategy, technology choices, functionality integration, or marketplace liquidity.  Integrating multi-billion trading communities will involve considerable complexity and heavy lifting. This will take time, commitment, and patience.”

 

For the most part, these statements turned out to be true.  Needless to state, AMR Research was not on the favored list of some of the leading vendors because of its stated caution to clients. Certain of its readers can possibly recall claims from vendors such as i2 Technologies, CommerceOne, Manugistics, Oracle and others regarding the new coming of E-commerce.  Alumni of i2 Technologies will certainly recall an atmosphere of market leadership in B2B and supply chain vision. Unfortunately, some of the PowerPoints sometimes got ahead of the actual existence of released software. Doubt and fear were reflected on prospects in compelling messages of “new” vs. “old” economy companies and who would eventually survive in the industry.  Technology vendors were riding the Y2K and E-business wave, with lots of third-party venture and investor funding.  The visions were spot on, but the execution in overall scale and depth of the technology was a bit premature. That was then.

 

At the time, companies were very invested in their four-walls oriented backbone ERP systems and were concerned that best-of breed e-commerce vendors lacked maturity and scale for companies to place their trust.  Even during those early times, manufacturers, retailers and service providers raised concerns over the security of the Internet, and specifically, the security of their data.  The price tags for early entry were not cheap, since software sales reps wanted to extract the same seven figure values of existing ERP implementations. There was an inside joke within the original AMR Research supply chain management practice that customers would not get the attention of any visionary B2B vendor sales rep without willing to open-up the purse strings, big-time.  On client calls, I would actually queery clients as to how much they had budgeted for their B2B investments and have to break the news.

 

At the time, some industry analyst firms were too vested in spouting the visions of B2B and certain vendors vs. the realities of business adoption. Sean Rollins and I reflected on whether a couple of changed strategic decisions, alliances or technology breakthroughs would have altered the eventual timetable and the listing of today’s vendor landscape.

In Part Two of this commentary stream, I’ll explore further in history and in what I believe are some specific takeaways for the B2B and supply chain community.

 

Bob Ferrari

Industry analyst firm IDC published actual Q4-2012 worldwide tablet shipment numbers (paid subscription required or free metered view) which should be of interest to supply chain focused B2B and B2C fulfillment teams. Supply Chain Matters and Supply Chain Expert Community readers might recall our late November commentary which contrasted the latest IHS teardown analysis of various Tablets to supply chain strategies addressing the desired business outcomes.

 

According to IDC, worldwide shipments of electronic tablets grew by 75 percent to a fourth quarter record, thanks to lower selling prices and new product offerings.  Tablets were also high on the holiday wish lists of global consumers. Nearly 53 million tablets were shipped, up from a near 30 million shipped in the previous quarter.  That is quite a hockey-stick uptick and kudos to the supply chain fulfillment teams that managed this surge in product demand.

 

This author does not subscribe to any notion that supply chains may be failing- quite the contrary. Supply chains and fulfillment teams, for the most part, have successfully responded to unprecedented challenges related to economic uncertainty, supply disruption, volatile markets and more demanding customers.

 

Getting back to the IDC numbers, as Supply Chain Matters previously noted, shipments of Apple’s iPad tablets grew 48 percent from a year earlier, boosted by the introduction of the iPad Mini. This was accomplished in a mainly supply constrained period where demand stayed ahead of supply. However, IDC notes that Apple’s overall market share in the Tablets market actually slipped roughly three points, which brings home the severity of market competition.

 

Samsung’s shipments almost quadrupled on a year-over-year basis, shipping upwards of 8 million combined Android and Windows tablets in the quarter. On Supply Chain Matters, we previously called for due recognition of Samsung’s supply chain prowess and consistent fulfillment capabilities. IDC names this vendor as second in overall tablet sales.

 

One of the most anticipated questions for this blog prior to the holiday buying season was how would Amazon, Barnes and Noble and Microsoft tablets fare in the quarter? It turns out that Amazon shipped more than 6 million of its Kindle line of tablets.  IDC notes however that Amazon market share slipped over 4 points.  This author was candidly surprised to read of that number.  The Nook family from Barnes and Noble shipped close to a million units, also suffering a significant market share decline.  Rounding out the top five players was Asus and its Nexus 7 line which IDC notes as experiencing the highest year-over-increase of the top five players, but also slipping 2 points in market share.

 

IDC reports that Microsoft’s Surface tablet shipped just shy of 900, 000 units. In our view, the Surface suffered from a late introduction to the market, a tepid response to the Windows 8 operating system and limited channel distribution leverage.  Microsoft purposely limited production and distribution because of the sensitivity to its existing hardware partners who did not take well to the company’s direct market entry. Considering that Microsoft’s strategic purpose was perhaps to make a credible market presence, more work may be required.

 

I don’t know about you, but reviewing these market results leads to this author’s conclusion that the competitive stakes in the Tablet and the impacted PC markets have dramatically accelerated, and synchronized planning, response management and fulfillment are mandatory just to stay in the game.

 

Congratulations to all teams in their accomplishments in this dynamic market.

 

Bob Ferrari