Executives from E2open discuss how mediating in the cloud creates agility in the demand and supply network operations of their customers.
Interview conducted by Vinod Baya and Bud Mathaisel
|Andrew Salzman is E2open’s chief marketing officer, responsible for managing all worldwide company operations related to corporate and product marketing, demand generation, sales support, field marketing, public relations, and analyst relations.|
|Rich Becks is responsible for leading E2open’s product strategy and development of demand and supply network solutions. Becks focuses on translating customer needs into leading-edge products that rapidly deliver value.|
|Rob Schoenthaler is E2open’s senior vice president of deployment in charge of the company’s deployment strategy and resources. The deployment team provisions E2open’s solutions for customers.|
E2open is the leading provider of multi-enterprise value network solutions delivered on demand as a working business process in a pay-as-you-go model. E2open delivers end-to-end visibility, collaboration, and responsiveness in global value networks with faster time to value, lower total cost of ownership, a continuous value road map, and easier integration between internal enterprise applications and trading partners, including suppliers, customers, distributors, and logistics providers. More than 71,000 trading partners worldwide currently use E2open.
In this interview, Salzman, Becks, and Schoenthaler share their insights on how information mediation and real-time shared interactive views provide a foundation for agility for their customers in their demand and supply network operations.
PwC: How do you define agility, and how does E2open enable agility for its customers?
RB: One aspect of agility is customer responsiveness. Companies that are well behind the curve talk about measuring their response time to their own commitment. That might be step one, but agility is really the response time to the original customer’s request.
AS: Some people think of agility as being reactive. A lot of what we do is to help companies to be proactive, seeing issues that could arise and being able to solve those issues before they do arise. For example, you might set min/max parameters for a day’s stock on certain products and if a company or a key supplier falls below certain minimum or maximum levels, then you would have secondary or tertiary tiers of alternative sources you could go to on a go-forward basis. This approach enables you to proactively anticipate and solve issues in the demand or supply network before they ultimately arrive.
We pay a lot of attention to the word “network” at E2open instead of “chain.” Instead of a classical one-to-many model, we’ve built our architecture on a many-to-many model—a multi-nodal model, if you will—that recognizes the interdependencies across different players in the chain. This architecture has the ability to sense problems and opportunities and then automate the set of actions that need to be taken to solve issues as they arise.
RS: There are three levels to the concept of agility. The first one we talked about was execution agility: While you’re in the course of running your business, you’re more agile. Next, the people with whom you do business—suppliers, trading partners, customers, whatever—change from time to time. The ability to plug and play them into this business process helps you be more and more responsive and also address a new business relationship. A third dimension is the pace at which you can change even bigger things. For instance, if you’re buying an asset to be part of your company, how do you plug that into how you operate? Your ability to plug and play that asset into your operational structure architecturally is far better with E2open versus on your own, because of how we are architected. We provide one data pipe into your ERP [enterprise resource planning] system or systems, and we do the work for you through our SaaS [Software-as-a-Service]-based managed service model. You can absorb and integrate major changes in your business model a lot faster when you have an E2open infrastructure behind the scenes rather than an ERP infrastructure.
PwC: What is it about E2open that makes it possible to get these benefits?
RS: Fundamentally, an in-the-cloud approach to connecting business processes must assume that every node will be different, as opposed to assuming every node will be SAP. Now, we’ve become very good at connecting to Oracle and SAP, because we’ve done it a lot, but the E2open platform also talks to many disparate ERP systems or inventory systems. It may not be an ERP system; it could be a best-of-breed or some legacy system that plays a role. On the other side, we also talk to trading partners via the customer’s supplier. Our approach is to be highly flexible and agile and not worry too much if something doesn’t conform to what was expected. Our design instead is set up to not expect anything. We’re good at dealing with differences on the back end, whereas most IT architectures assume some sort of consistency, which isn’t always there when a company makes an acquisition, for example.
RB: Going one level of abstraction higher, when I was at Seagate, I dealt with some situations that I think illustrate what Rob is trying to say from an architecture perspective. In other words, E2open was one hub to me; I didn’t have to maintain 256 connections to all of my suppliers when we upgraded our ERP system from one version to another. It was a weekend event. While the in-house connections that were wired directly to customers took six months, the E2open connections to the suppliers happened in one weekend on the inbound side. And then I had the same experience when Seagate bought Maxtor. We onboarded all of Maxtor’s distributors the same way we had all of Seagate’s distributors, and again, that happened in a matter of weeks. This loose coupling effect is so powerful because it allows a company to rapidly reconfigure assets, especially when mergers and acquisitions occur. In fact, a large portion of our customers are spinoffs. And why does that happen? It happens because of this plugability issue. The E2open platform is managing all of that onboarding complexity and the change. That’s what makes it so powerful from a flexibility and
PwC: You defined one aspect of agility as allowing your customers to anticipate disruptions. How does that happen, and can you provide some examples?
RS: Planners typically spend an inordinate amount of time each day finding information, not thinking about what the information means. For example, planners are constantly seeking information from a raft of suppliers regarding their ability to commit to orders of varying magnitudes. Half their week, they chase down stuff and the other half they fill out inordinately complex spreadsheets to generate forecasts. They do that so they can make sense of the information. By the time they’re done, the information is stale and they get trapped in a circle of firefighting. Often they don’t know a supply problem has hit them until it arrives; they can’t predict it. And when it does hit them, they often need to build spreadsheets that reflect sourcing from many different suppliers. When they start using us, the first level of improvement is that the same brainpower has now spent more time analyzing the information as opposed to finding the information. The system provides accurate and timely information, so planners can see that something is going to be a problem before it becomes a problem. One step further, we’re not only presenting to them the problem. We help manage by exception. You can have a thousand parts you’re responsible for, but you may have only five that are a problem. Now they can fireproof instead of firefight.
PwC: E2open mediates between trading partners and handles considerable information as a result. Does this information allow you to enable agility for your customers?
RS: Think about all of the different people who contribute to creating the value that a company delivers. Perhaps a company has outsourced manufacturing and design to someone. There’s also a heavy use of third parties to move goods around the earth. The more that other parties contribute to the value that’s created, then the information a company needs to be really good at producing probably is not within its four walls. To be agile in making business decisions, our customers need high-quality data from a lot of other folks. By mediating between the trading partners, we are a source of this high-quality data.
PwC: Do your customers benefit from information that they would not have access to if they weren’t using the E2open platform?
RS: We have access to inventory positions at various suppliers. For example, say I have something multi-sourced, a demand signal just changed, and I’m trying to determine whether to resource from a supplier in Asia or a supplier in Eastern Europe. If I know what their answer might be before I ask whether they can do it, then I might save a cycle of trying options. On the sales side, we can provide high-quality, auditable information about what the sell-in, sell-through, and sell-out has been through distributors. That information can help companies solve revenue-recognition challenges. We can provide third-party information that companies have trouble getting to and that they need to make better decisions. Access to this information allows customers to make better decisions quickly in
RB: Another thing to keep in mind is that an ERP approach is built around a general-ledger view of the world—the assets and liabilities for that corporation. The reality is that in some supply chains, the entire product lifecycle occurs outside of the firewall. All the customer really does is design and market it. The business solutions that are needed to run that kind of a network can hardly be expressed in a behind-the-firewall general-ledger approach. The ERP system would assume that once the product is sold to the distributor, it belongs to the distributor. The reality is that we know a certain amount of that product is going back anyway. So, our business solutions aren’t hardwired into this asset liability paradigm. Instead, we are free to create a process that gives you the visibility that you really need multiple tiers down the chain.
PwC: Can customers now perform analyses that they would have been unable to do if they weren’t your customers?
RS: Yes. We can manage a forecast and commit process, for example. A lot of ERP systems don’t have a place to store the commit. Some of our customers work with forecast waterfalls and look at the changes week over week to determine what’s really happening. There’s nowhere you could even get the data in your ERP system, much less do the analysis. As soon as they use us to manage that process versus whatever they’ve been doing, they have not only the data but also the analysis. It is such a quick win.
AS: Another example is spend consolidation. Say you have a company that grew through acquisitions and has more than 16 different operating companies. Do they know if they’re paying the lowest price on a component across that whole network? E2open can provide the glue between those operating companies. We can aggregate that information, compare it against the price book, do an exception alert, and tell them they have a lower price they’ve already negotiated. That’s an example of a quick win even within a company, because they have similar ERP systems all over the place.
PwC: How does E2open and the mediation it provides fit into an end-to-end process of a particular customer?
RB: Traditionally, your ERP system would create the order, and then you need to communicate the order to your partners. The twentieth century guys are still doing that with mail and faxes, and the twenty-first century guys are trying to do that electronically. So, you have the order. What is the response from your supplier? Do you have a commitment from the supplier today that is not going on a spreadsheet? Because, as Rob said earlier, there’s no place to put it in the ERP system. Now you’ve gone from the order to the commit, and you’re going to then ship against that commit, right? That’s a different department altogether. You probably have some shipping software, and maybe the ERP system is generating a shipping release, but you’re probably performing warehouse management functions in totally different applications. When the product is ready to ship, then it’s in the hands of logistics and the carrier who uses another application. You’re only in transit now. You haven’t even reached the destination, where it’s going to go through that whole process in reverse: being received, being stocked, and so on and so forth and all the changes that are happening along the way. To make all of these connections from inside your firewall through SOA [service-oriented architecture] or through any other way is going to be a really big challenge. Technically it could be done, but why would you want to do it?
PwC: You advocate the value network concept. What benefits does the concept of a value network bring to the industry and your customers?
RB: This may seem obvious, but it’s really powerful. It’s the ah-ha moment, frankly, for our customers when they understand the system or process concept. Here’s what happens: I could log you in today to your trading partners’ network, for example, and show you that there are some exception conditions—red conditions that mean that they’re going to stock out of something, or they’re going to run short, or something bad is going to happen. This is a real-time, interactive environment, and the partners you depend on are looking at it simultaneously. You and I could log into that same screen tomorrow, and that red item would be green. It would be green because they were watching it while we were. The data didn’t need to be downloaded into some application that was being handed to a data warehouse that had to be extracted by a report that had to be put into a spreadsheet. Instead, we were all looking at the data at the same time. Our hypothesis is that this is a vital function for a modern demand and supply network. There needs to be a network that orchestrates, coordinates, and transforms this information between parties, and there is nobody better equipped to do that, because you have to live in the network to do it.