The rising value of B2B integration programmes
Written by Jonny Williamson
SCD: Could you give a little background to the report and why GXS became involved?
SK: Stanford University has a supply chain management group that conducts a wide variety of research studies and work closely with companies such as ours. During our day-to-day activities with hundreds of businesses, we were noticing that there was still a great deal of paper moving about in supply chains.
Technologies like B2B e-commerce systems and EDI have been around for decades, but there’s still a large amount of companies who’ve either only embraced them to a small extent or not at all.
We approached Stanford to go out into industry to investigate the problem and research the use of a new cloud-based approach which has emerged through vendors like GXS. Essentially we host and operate that technology on a company’s behalf, taking the accountability for making sure that, as much as possible, their supply chains become fully digitised and automated.
What was the pool that Stanford surveyed and how did the results pan out?
Stanford looked at 75 companies that were using such an approach to see if they had realised any benefits. The sample cut across a number of different industries, such as logistics, automotive, high-tech, pharmaceutical, industrial manufacturing and retail; as well as geographies, covering Europe, Asia and the US.
96 percent of respondents felt managed services had added significant value to their overall B2B integration programmes, the same amount plan to increase the number of customers and suppliers they trade with electronically, and 59 percent plan to expand their use of B2B e-commerce.
Though cost savings weren’t the only important benefit, enhanced customer experience to accelerate international expansion and improved business efficiency were also regularly cited.
Of them all, only four percent had no plans to increase B2B e-commerce in any area.
How do B2B managed or integrated programmes differ from traditional approaches?
Historically, when companies have wanted to exchange information electronically with business partners, they have had to go out and buy software. Though there’s some very good software on the market, the challenge is that it puts all the risk and burden of achieving success on the company buying it.
It’s doesn’t make sense to spend upwards of a $million on the software and then not be sure whether you will be able to achieve the ROI originally expected. Many companies purchase expensive integration software then struggle to convince partners to engage with it and conduct business electronically, realising an uptake of just 10 or 20 percent .
The new model we’ve introduced has all the technology rooted in the cloud and is a success-based pricing model, you only pay when your business partners become connected and invoices, purchase orders, shipping documents, etc. start flowing.
How many companies are currently using your cloud-based B2B Managed Services?
Around 550 companies are currently signed up and though it was launched several years ago, it’s really caught on in a big way over the last 18-36 months, especially in Europe as SaaS (Software as a Service) and cloud have become more mainstream.
Interest in it is growing as companies are drawn to our success-based pricing model as it balances the risk much better across the customer and technology vendor. We are paid on a monthly basis based on what is actually taking place, rather than having to make a payment upfront.
One of the questions asked in Stanford’s survey was how do participants expect their level of B2B integration to grow over the next three years. The vast majority responded that they saw transaction volumes and the number of business partners they connect to growing by at least 25 percent, and a third came back and said they expect it to grow by between 26-50 percent, which is quite substantial.
What do you think is driving this high level of growth?
What with the continued outsourcing of different business partners, contract managers and logistics companies, you simply can’t run a successful business now if you’re not connected, especially to the international markets and the ever-growing number of suppliers and customers.
You can’t make much use of a lot of the SCM tools and packages available today if you can’t get the data in from your transportation carriers, warehousing parents, manufacturers, suppliers and customers in a timely fashion. Increasingly, the long-term survival of your business is critically dependent on the data from these outside partners.
What do you hope to achieve with the announcement of Stanford’s latest findings?
This new research from Stanford provides further proof that the B2B Managed Services model not only offers lower cost, but higher business value than traditional approaches to integration.
We think it’s an innovative way to solve a problem that’s persisted for the past twenty years that of trying to get your supply chain wired and connected. This cloud-based approach seems to be catching on and gaining a lot of interest, and hopefully the release of Stanford’s survey will only help build a greater awareness of it.
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