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Manufacturers turn to SaaS BPM to tighten supply chains

Prepackaged business processes go online as manufacturers seek better trading-partner integration from SaaS BPM.

Online platforms and Software as a Service (SaaS) technology are already helping manufacturers standardize and improve supply chain processes. Now, business process management (BPM) is moving further into the cloud. Adoption of SaaS BPM could mean simplified trading-partner connections and more efficient supply chains for manufacturers.

Supply-chain business processes include forecasting, managing the supply against the forecast, order management, converting orders to inventory, and measuring inventory, according to Richard McCluney, general manager of international business at B2B provider E2Open.

Automating such processes can eliminate user errors and confusion over which data is correct, according to people familiar with the technology.

BPM moves to SaaS

Manufacturers already use SaaS in the supply chain, whether it's an add-on application to a large ERP implementation or a supplier collaboration portal. But recent market trends point to increased use of business process networks (BPNs), according to Benoit Lheureux, research vice president at Gartner Inc. BPNs are networked communities around specific business processes. As the market grows, Lheureux said, manufacturers might eventually be able to find all their suppliers in one place.

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These new BPNs differ from previous methods by providing prepackaged tools for B2B process-integration problems. Traditionally, Lheureux said, a manufacturer would buy a big ERP suite, then find separate B2B software to connect with trading partners. But the recent partnership between E2Open and ERP vendor Oracle heralds a changing market, he said. Now, a manufacturer using Oracle's transportation management system (TMS), for example, can also get E2Open's eLogistics Network (ELN), a BPN, to connect the TMS to trading partners for shipping order delivery, logistics tracking and other functions.

E2Open's service provides manufacturers a prebuilt community of shippers that can register with E2Open once, then receive orders from multiple customers as long as they use the same Oracle software. Users access the community through direct application integration or a Web portal.

Gartner hasn't published a formal BPN market forecast, but Lheureux said: "According to my initial estimates, companies in 2010 will spend several hundred million dollars, and by 2014 well over $1 billion, on BPNs." He noted that SAP has a relationship with B2B provider Crossgate to sell its integration services, and B2B integration vendor GXS and SaaS provider Inovis are in the middle of a merger.  IBM intends to buy Sterling Commerce, largely to gain its global trading-partner network, Lheureux said.

It's all part of defining demand, said E2Open's McCluney. "Everyone is trying to move to a demand-driven supply chain," he said. Collaborative forecasting and visibility into suppliers' information can help a manufacturing company discern its actual capacity to deliver to demand, McCluney said.

Other ways B2B collaboration happens

Although online B2B communities are an emerging technology, manufacturers have long used other on-demand methods, such as separately purchased ERP connectors. Sugarland, Texas-based Imperial Sugar has used Sterling Commerce integration software for 13 years, according to George Muller, the vice president of administration in charge of IT at the company.

Suppliers access the software, which runs on Imperial's servers. The mailboxes are in a cloud, and customers use a URL and password to send their transactions, which Imperial pulls hourly from the system, Muller said. "In today's marketplace, it's not just sending transactions back and forth," he said. "It's total integration with the respective supply chain systems of both the customer and the supplier."

Web portals are a common way for trading partners to interact. A manufacturer might give all its suppliers a URL and password to access an online application that can handle many processes.

"What I'm striving to enable from an IT perspective is that we don't have to use a keyboard in that whole process," said Kevin Trentham, lead IT director for supply chain, manufacturing and finance applications at Portland, Ore.-based NACCO Materials Handling Group (NMHG) Inc., a maker of materials-handling equipment. The company uses Hubspan software to "on-board" suppliers and automate procure-to-pay functions. Suppliers can elect to receive purchase orders (POs) electronically via email, electronic data interchange (EDI) transaction, or Web portal.

Automating the PO change-transaction process remains a hurdle to total manufacturer-supplier integration, according to Trentham. "That's an area in our space that has not matured," he said. It might be that smaller suppliers, or ones that don't do as much business with NMHG, are less interested in going electronic. "When you talk to them, they see the benefit. It's just getting them to do it."

Many suppliers are still learning how to automate the PO change process on their end, which is a "more disciplined process to ensure the supplier responds consistently to us," Trentham said. He plans to continue the push for a "no keyboard required" system, so that, "from an e-commerce perspective, we're really only working the exceptions."

SaaS supply-chain applications have made inroads and still have potential. Muller would like to put all of Imperial Sugar's strategic business systems onto SaaS. "I don't have any hardware challenges then," he said. "I don't have to worry about the upgrades, I don't have to worry about the support, or disaster recovery."

Moving business processes to a SaaS model, especially as collaborative communities evolve, makes sense, Lheureux said. "Companies just don't have time to do this stuff from scratch."

About the author: Christine Cignoli is a Boston-based freelance writer who covers IT infrastructure and storage technology. She is a regular contributor to SearchManufacturingERP. Contact her through her  website.

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