Deploy and participate
IBM, ECMD, and Maytag collaborate and conquer by taking part in exchanges
By Mary Stearns Sgarioto, Senior Editor -- Manufacturing Business Technology, 3/1/2001 7:00:00 AM
Instead of building e-marketplaces from scratch, manufacturers are participating in, and banking on, public and private exchanges built on packaged solutions that offer collaborative commerce and transactional capabilities, as well as business-to-business (B2B) integration.
According to Paul Sterne, founder and chief financial officer of e2open, a Belmont, Calif.-based exchange for the electronics industry powered by the alliance formed by IBM, i2, and Ariba, "e2open is not one of the B2B ebays of this world. We are truly going to improve product development and product life, and impact the bottom line of businesses. With an open exchange, we have one system to tap into, making it more pervasive so that multiple people can participate without having to own the infrastructure."
The technology alliance launched by IBM, i2, and Ariba, based in Armonk, N.Y., Dallas, and Mountain View, Calif. respectively, already is painting the B2B landscape and building industry communities. The alliance was chartered to create an integrated B2B marketplace solution that enables businesses to rapidly and efficiently build and deploy full-service marketplaces.
e2open is an open, industry-sponsored, and independent public exchange for the electronics industry that was launched using venture capital funding to cover the life cycle of a product from design to manufacturing, through and on to distribution and end-of-life, according to e2open.
In addition, a technology agreement struck by e2open, Chelmsford, Mass.-based MatrixOne, and Ariba further extends e2open's ability to deliver collaborative product design and commerce services through its collaboration network. The agreement leverages MatrixOne's eMatrix framework and Value Chain Portfolio applications, as well as the Ariba B2B Commerce Platform, which will provide the key components.
Founding partners of e2open, which has been fully functional since October, 2000, are electronics manufacturers Acer, Hitachi, IBM, LG Electronics, Matsushita Electric (Panasonic), Nortel Networks, Seagate Technology, Solectron, and Toshiba.
Why a public exchange? Public implementation is less expensive, Sterne notes, adding, "It happens faster and will likely be based on standard interfaces, workflows, and APIs [application program interface]. People joining e2open individually usually do not have the resources to start an exchange. So we said, 'Let's create a company in which a supply chain expert is the CEO.'" Sterne says. The exchange's president and CEO, Mark Holman, is a supply chain expert.
According to Sterne, seeking industry members to join the exchange netted varied results. "Some didn't want to join. The ones that did join, did so for specific reasons." For example, Sterne says, Matsushita wanted to create a standard, unified catalog of part numbers. Seagate wanted to drive the design collaboration area, while IBM wanted to drive the use of trading exchanges as a new Internet channel for its Technology Group. Acer joined because it wanted to drive standard systems in the greater China market. Not surprisingly, says Sterne, participation and team building, and sharing information are important in being part of an exchange because partners offer their expertise and input.
Private, secure collaboration
Participating in an exchange enables trading partners to collaborate, which is important for manufacturers managing intricate supply chains and highly technical products, according to e2open. Teams can be built via the exchange, and this facilitates involvement early in the design phase. For example, engineers who cannot fly out to attend a meeting can attend an on-line design meeting. Sterne says that privacy is important. "While e2open is talked about as a public network, people have their own private spaces on the network. It's reliable, secure, and confidential. It's not a public platform where people can see what you're doing."
Standardization also is crucial to an open exchange. According to Sterne, by following an open platform and ensuring that standards are consistent with RosettaNet, a standardized interface for e-commerce, the exchange will appeal to a much broader audience. "The IBM-i2-Ariba alliance powers the exchange," Sterne says, "but the real focus is on open architecture. While we do have engines on which we are basing our collaboration, we are really trying to build an open standard interface layer that will connect different types of advanced planning platforms." We clearly have tried to select industry's leading platforms to build open standards to seamlessly connect into our exchange."
Collaboration, communication, and standardization are hallmarks of an open exchange. "The whole theme is implementing standards throughout industry, letting people communicate with each other while using a standard set of tools so design, manufacturing, and purchasing can communicate with each other," Sterne continues. "They don't have to re-input data. Right now it's very hard for [electronics manufacturers] to do their jobs. There is enormous manual intervention in the process and lots of technical complexity." Sterne adds that he believes the e2open exchange is the solution.
IBM participates
In addition to helping found the i2-IBM-Ariba alliance, IBM also participates as a trading partner in e2open. According to Marcello Rolandelli, program director for e-markets, IBM Technology Group, Somers, N.Y., "The proposition around e2open was very interesting to us because it brings together a very good cross section of our customers." He notes that Acer is one of IBM's strategic alliances for display panels sold under the Acer brand name.
e2open has three program areas, including the open market-the interaction of buyers and sellers using the dynamic trading engine-as well as supply chain collaboration and design services collaboration areas. IBM became involved in e2open's open market services, which, according to Rolandelli, "provide trading dynamics, including auction, ask-bid, and all the various functions a trading environment requires." He says being involved in the open market area addresses two dimensions for IBM: channel development, and strengthening relationships with existing business partners.
"With channel development, we cannot do things in an abrupt way. For IBM, it's important that we do it correctly because of implementing additional volume. We are much more interested in testing the model with revenues at a reasonable pace than to go for all possible opportunities and be disrupted." He says IBM is structuring operations in a way that will permit it to assess time and money savings realized through exchange participation, but because IBM has been involved only since November, 2000, statistics are unavailable.
What Rolandelli does say, however, is that happily, the exchange has helped them in regard to terms and conditions on the sales of products. They have experienced a shorter time frame for shipping in some cases because assets could be shipped directly from overseas.
"Finding the right [exchange] forum based on the way you do business today is the first foundational step," says Rolandelli. "Manufacturers will want to participate in an exchange that fits with their business model or strategy."
Private exchanges
For other manufacturers, a private exchange is an option, and B2B integration is crucial. "The sweet spot for B2B integration software providers is manufacturing," says Shawn Willett, senior analyst of Internet commerce for Current Analysis, a competitive analysis solutions firm based in Sterling, Va.
The B2B integration software that is needed to participate in private exchanges represents a relatively new market space, Willett says. These tools automate business processes typically used between manufacturers and their suppliers, such as automatic replacement, available-to-promise, and capable-to-promise. B2B integration vendors include BEA, San Jose, Calif.; webMethods, Fairfax, Va.; IPNet Solutions, Newport Beach, Calif.; Extricity, Belmont, Calif.; and IBM, which entered the B2B integration space recently with its WebSphere B2B Integrator.
On the other hand, Willett says, manufacturers that want to participate in a public exchange need software that supports hosting, aggregates catalog information, provides automated bidding and auctioning, offers sourcing and round-trip capabilities, as well as community functions such as chat and support. Vendors and vendor alliances in this space include the alliance built by IBM-i2-Ariba, Commerce One/SAP, Oracle, Adexa/Broadvision, and Commerx.
Not surprisingly, the pressure to join exchanges often comes from the outside, Willett explains. "If you are a manufacturer and one of your competitors joins a public exchange, you've got to think about joining it yourself," says Willett. He also believes manufacturers can be somewhat driven to participating in a private exchange. "If a manufacturer does 25 percent to 50 percent of its business with a particular customer, and that customer participates in or forms an exchange, then that manufacturer needs to participate to remain competitive."
Private exchanges
Leaving the batch pack and moving core business processes to the Internet is ECMD, a North Wilkesboro, N.C.-based manufacturer and distributor of millwork, wood moulding, doors, windows, and stair parts. The company implemented eBizness Transact from IPNet Solutions, a provider of B2B connectivity and collaboration solutions. Part of the IPNet eBizness Suite, the software allows dynamic collaboration throughout the supply chain. The eBizness Transact component provides rules-based transaction routing of business objects and documents with suppliers, customers, and exchanges.
"ECMD is participating in a private exchange with Lowes and connecting with their suppliers that way," says Kian Saneii, a senior vice president at IPNet Solutions. Lowe's, also based in North Wilkesboro, is a retailer of building materials and supplies, and is rolling out IPNet eBizness Transact to its 4,000-member supplier community. The result will be an optimized supply chain with no value-added network (VAN)-based transaction fees.
"A private exchange is the next step in the evolution of the traditional supply chain. Every business that has a supply chain is a candidate for a private exchange," says Saneii. "We think private exchanges are the next step in getting people off the paper-and-fax model."
B2B connectivity
According to Matt Sidden, manager of electronic commerce at ECMD, installing eBizness Transact dramatically speeds orders to Lowes, its largest trading partner. "eBizness Transact is basically a transport control mechanism for EDI [electronic data interchange]. You send documents via an encrypted e-mail attachment. It is a tremendous savings over traditional VAN," says Sidden. "We basically send the equivalent of a Zip disk per month-about 120 to 130 megs-and it was costing us a lot." Because the software supports traditional VANs, trading partners can migrate from VANs to the Internet all at once, or one transaction type at a time.
Sidden says ECMD expects a complete return-on-investment for both hardware and software in 10 months. "But the big winner for us is timing. We are now able to exchange documents in a matter of minutes," Sidden says. In addition to Lowes, Sidden says, "ECMD has two other partners in the wings, two live, and another five or six scheduled to begin testing later this year."
ECMD evaluated a half-dozen packages, Sidden says, and the IPNet solution was impressive. "They focused on what needed to be done, not all the bells and whistles. It's modular, so you can buy what you need. Within four hours at most we were sending test documents to IPNet."
Connecting retail partners
Big into branding, Maytag Appliances wanted to leverage its brand and develop a private exchange with its many retail partners over the Internet. The Newton, Iowa-based manufacturer of home and commercial appliances launched the Maytag.com site, where the manufacturer connects with its retail partners and offers consumers everything from product information to order fulfillment.
Maytag is using the Distributed e-Business System from Comergent, a provider of collaborative commerce solutions based in Redwood City, Calif. Maytag says its strong brand name draws customers to its Web site, where consumers can browse product information and locate a dealer that carries Maytag products.
"We're not retailers," says Ken Boyle, vice president and general manager of e-commerce at Maytag. "We want to connect with our channel partners." Phase one involves opening the channel to 2,000 Brand Source dealers-small, independent retail dealers-and 650 independently owned Maytag stores.
"Integrating with the Brand Source dealers nationwide took less than a month," says Colin Bain, manager of Internet business development for Maytag e-commerce. "Phase two, taking place mid- to late summer, will involve opening the channel to national retail outlets such as Sears."
According to Bain, Maytag didn't want a homegrown solution. "We talked to retailers in concept and principle. Some got it, some didn't. But we knew the system couldn't be a Maytag-only type of a system. They can use Comergent with other vendors." So for Maytag's application, commercial availability was required.
The Comergent system enables sell-side collaborative commerce across a multi-tier network of manufacturers and channel partners to improve customer visibility, build brand equity, and increase revenue by strengthening channel partner relationships. According to Comergent, the vendor's solution allows enterprises to engage in sell-side B2B e-commerce, leveraging sales channels to drive top-line growth, increase customer satisfaction, and improve channel productivity.
Changing the buy
Clearly, insight into how people purchase appliances based on Web statistics will be of great value to Maytag. "We will be learning a lot about how consumers respond to appliances on-line," says Bain. "For the first time we will have visibility into the buying processes-without interpretation from a retail sales force or a third-party market research firm." He expects this information to be valuable for design and future product development.
Internet-based trading exchanges are escalating collaboration as they become integrated with back-office systems and are powered and launched by robust alliances. As a result, they're transforming vertical markets. The stakes are high for those who hope to benefit from e-marketplace participation. Trading exchanges are expected to generate 40 percent of the $5.7 trillion in U.S. e-commerce transactions by 2004, according to Boston-based AMR Research. As manufacturers choose which type of an exchange to participate in and why, the proposition of which software to deploy becomes a more manageable decision, as building a from-scratch solution often is unnecessary.
