B2B: A Brave New World

Remember Cortes? To ensure that all of his men were committed to the mission of conquering Mexico, he destroyed his ships so that there could be no turning back.

Supply chains enable trade. Four flows--demand, material, information and financial flows--define effectiveness. Most companies have focused on transactions not flows. Steadily, over the course of the last two decades, automation improved the pace of transactions. As we moved from telex, fax and manual orders to Electronic Commerce, information flowed quicker, but not without friction. Today, only 21% of orders move hands free. Money flows more seamlessly than supply chain information. Banking systems have known identifiers and well-defined processes. The supply chain is still like the wild, wild west.

I believe that supply chain pioneers have not been aggressive enough in building value networks and defining new business models. Instead, the focus has been on functional enterprise automation and transactional efficiency. Making the enterprise more efficient does not help to build effective value networks.

Networks offer both opportunity and complexity. Materials move through more and more hands---third-party logistics providers, contract manufacturers and transportation services-- and most information exchange is manual. With more connections, and the greater the latency of data, the number of black holes increases (periods of time when data is not available). The focus on transactional architectures lined the pockets of ERP consultants, but did not improve value networks. Here is how I think that we move forward like Cortes:

1. Freeze Spending on ERP. Do Not Build Another Portal. The continued investment in ERP is an opportunity cost to build value networks. If our focus is always on ERP upgrades, then we will never build valuenetworks. And, portals, often an extension of ERP architectures, are not effective to improve trading partner relations. Why? There is no system of record for changes in rules, and the data exchange is passive and one-way.
2. Stop the Focus on B2B Integration. Instead, Focus on Data Portability. The goal historically is a connection. Instead, focus on the translation of data elements into meaningful collaboration. Use ISO-8000 standards to define authoritative identifiers for trading partners, locations and items.
3. Focus Teams on the New World. Build B2B Capabilities. The market is deluged with visibility and control tower solutions. The dirty little secret is that these solutions are self-serving holding data hostage into silos that do not enable interoperability. Work with innovators to build one-to-many and many-to-many networks to enable bi-directional orchestration. Kudos to Elemica and Ariba for working with BASF to drive interoperability between their networks. Act like BASF to force existing solutions to drive interoperability. Make it a requirement.
4. When You Say 'Collaboration' Mean IT! ?Use Carrots Not Sticks. We are moving into a world of autonomous replenishment. While in the 1990's we focused on Just-in-Time (JIT) and Vendor-Managed Inventory (VMI) solutions the processes stalled due to a lack of governance. Retailers stopped encouraging VMI when consumer products companies stuffed the channel at the end of the quarter. Automotive manufacturers drove suppliers out of business through the use of JIT to push costs and waste backwards into the channel. Today, the use of smart contracts with blockchain enables a level of governance not possible in yesterday's systems. Tie contracts to transactions and drive behavior through incentives not penalties. True collaboration is a win/win sustainable value proposition.
5. Blockchain. Embrace it. Walk Slowly. Test and Learn. I love new technologies. When it comes to blockchain there is much hype, great promise, but immaturity. Walk slowly and help technologists to understand requirements. Blockchain works the best when there is a clear definition of goods and services. Use authoritative identifiers to build quality blockchain deployments.

Be like Cortes. Sink the ships in harbor. Realize that point-to-point integration is not sufficient. We have portal’ d the supply chain to death. Remove noise. Improve transparency. Have the same expectations for B2B as you have in your personal life. When you grab your iPhone tonight before you go to bed think about how easy it is to communicate in our personal lives and how difficult it is to move forward in trading partner relationships. Then reflect on how you can change this as a supply chain leader.