Concept for case by case interoperability for solution selling communities Volker Stich, Fabian Bauhoff, Jörg Trebels FIR at RWTH Aachen University, Pontdriesch 14-16, 52062 Aachen, Germany,
[email protected] Abstract In order to keep the competitive advantage for creating customer-oriented solutions at a competitive price European ISP’s as well as manufacturers are facing the key challenge of rapid community configuration and its efficient management. Therefore the paper provides not only the conceptual basis (IT) for an easily applicable de facto standard but also a business concept for a communication platform adequate to the requirements of ISP’s and manufacturers organized as solution communities (SC) in case-by-case solution sellers. Keywords Solution Selling, Solution Communities, Inter-Organisational Business Processes, Inter-Organisation information Systems, Interoperability
1
Introduction
The business environment of industrial service providers (ISP) and manufacturing companies with significant service offerings is characterized by a constant competitive pressure (FIR 2007), which is even intensified by the ongoing worldwide economic crisis. This situation pushes companies to set the course for innovative business strategies in order to secure their success in the long-term. One key element is the improvement of productivity of service, by means of efficient service provision architectures (Gudergan 2008). The service provision performed in communities of ISPs is characterized by multiple parties being involved (companies, departments, personnel) and demand being volatile and on short notice. Latest studies show for small and medium enterprises strong needs to develop and design efficient service provision to raise their productivity (cf. FIR 2007; Schuh/Stich/Gudergan 2009).
2
Characteristics of Services
The intangible nature of services one of the central traits in service processes. They can be described as ideas, concepts and methods, but they cannot be touched or tested before purchase. This intangibility of services and the customer participation in the service delivery system causes heterogeneity – high variation of services from customer to customer. Services are created and consumed simultaneously and cannot be stored. Due to this traditional manufacturing strategies that rely on inventory to absorb fluctuation are hardly applicable. Furthermore the simultaneity eliminates many options for quality-control. Therefore and because of the inability to store services are perishable commodities – they are lost forever when not used. (cf. Maleri/Frietzsche 2008; Fitzsimmons/ Fitzsimmons 2008).
3
Solution Selling in SME Communities
The last years, inter-organisational business relations have been developed due to the concentration on core capabilities in manufacturing or service production. ISP’s and
manufacturing companies were forced to substantially outsource production steps to various other companies. In particular, business relations to component suppliers, third party logistic or maintenance providers have intensified over decades. As a result, the perspective has been extended to supply chains that represent all organizations involved in producing and distributing a product from raw material supply up to the ultimate customer (Stadtler/Kilger 2000). Best practices so far are mainly from automotive and consumer goods industry which are known for their stable supply chains, a product lifecycle of several years and a major company dominating the supply chain (Schuh/Schmidt 2007). Especially the dynamic environments of ISPs paired with the characteristics of services cause the need to keep to volatile demand. This directly leads to bound resources, overcapacities and inventories. Nowadays matching service capacity with customer demand on a daily basis is still an unsolved challenge. Especially Service Managers are constantly exposed to decide whether the limit their capacities to the average customers demand or to anticipate the potential peak demand. Whereas the limitation of capacities is unavoidable linked to customers moving away to other providers, the orientation on the peak demand will end up in high costs of waiting (Reckenfelderbäumer 2005). Therefore it is a management issue to determine the appropriate level of service capacities by specifying the proper mix of facilities, equipment, and labour and to identify reasonable alternatives to overcome the described dilemma. Collaboration of various forms has the potential to increase profits also by addressing market demands and organise the sharing of resources and competences in the dynamic and very competitive environment of ISPs (Camarinha-Matos/Afsaramanesh 2004; Camarinha-Matos/Afsaramanesh 2005). Therefore it could be a reasonable strategy of the future to participation in dynamic professional communities consisting of ISP’s and manufacturing companies in order to provide complete customer oriented solutions (Solution Communities; SC). hierarchic
SN
SN: Strategic Networks PN: Project Networks RN: Regional Networks VO: Virtual Organisations SC: Solution Communities
PN VO SC RN
heterarchic stable
dynamic
Figure 1: Typology options for inter-organisational networks
In comparison with established inter-organisational networks, SC are of a very dynamic and heterachic nature (Figure 1). SC can be described as a cloud of ISPs. The described SC strategy aims at bringing the individual core competences into a flexible network to meet the fastgrowing customer requirements and resulting volatile demand, required overcapacities and inventory levels as well as limits to planning (Ahlert 2008). Based on the specific needs and requirements of individual customers and guided by a focal unit, ISPs in this SC are case-wise composed to solution sellers. Due to the very flexible nature of such inter-organisational networks the focal is not fixed and can change from case-by-case (Figure 2).
N:N relation
Solution Community
Customer
Focal unit
Solution Seller
1:1 realtion
Figure 2: Structure of solution communities and solution sellers
In the case of a dynamically reconfigurable community, a diversity of ISPs and manufacturers – contributing to complex customized solutions – have to be activated and integrated into the processing of a specific order temporarily and repeatedly. As this coordination involves changing business partners, both the scope of stable supply chains and its implementation in software solutions have to be extended even further to dynamic networks of solution selling ISPs with up to several hundred business partners worldwide.
4
Technical Support for the Management of ISP Networks
Today’s CRM- or ERP-solutions do not sufficiently support the organization of community based solution selling due to the complex structure of these temporary business relationships. Open Resource Planning (ORP), as it is currently introduced into the temporary networks of the machine and equipment industry, is a promising and innovative approach for the order management within non-hierarchical networks for solution selling. Practical experiences show that diverse software solutions such as ERP, SMS, CRM and EAM (Enterprise Asset Management) applied for the processing of a typical customer order in the manufacturing and service industries create several interfaces and media discontinuities. This problem intensifies significantly widening the scope to solution selling communities. Although it has been expected for years that the market for enterprise application software would consolidate, the contrary has been the case. As an example, in the German ERP market there are more than 150 ERP-system providers offering their software solutions (Brosze et al. 2007). The extent of the structural difficulties inside dynamic business networks becomes even more obvious when the applied communication media is examined. An investigation conducted for the machinery and equipment industry has shown, that the share of transactions using the communication standard Electronic Data Interchange (EDI) sums up to less than 1% of all transactions (Schuh/Westkämper 2006). As the standard EDI interface is not appropriate to the requirements of mechanical engineering industry, the customization data and process structures for each point-to-point connection are necessary to deal with the existing conditions (Meyer/Lücke/Schmidt 2004). But as the implementation and maintenance of various EDIconnections in case of temporary business relations often leads to a negative return on investment for small companies, these enterprises are often reluctant to invest in these interfaces.
As a result, between 80 and 95% of inter-organisational transactions within dynamic business networks are still processed via telephone, fax and e-mail (Meyer/Schweicher 2005; Wiendahl/Meyer 2006).
4.1
Conceptual Basis (IT)
In order to support the coordination processes in networks of solution sellers and to fill the mentioned gap of information integration, a flexible standard is required. Rather than inventing the wheel again, it seems to be reasonable to use existing methodologies, fix the weaknesses and enhance these standards by solution selling specific aspects. Existing approaches are EDIFACT, ODETTE and Rosetta.Net. Since EDIFACT is accounted by the United Nations as the most important standard for electronic data exchange, it was selected for further analysis. Firstly, various rules for semantics are missing. Problems occur due to the lack of support for quantity and package units as well as the implicit assumption that business processes and scenarios are equal. Secondly, further obstacles for the spread of the EDIFACT standard in the solution selling sector are slow adjustment to changing business processes and low flexibility for further extension of its message formats (Leser 2005). Besides this, the main issue of 1:1 interface concepts are the mentioned high investment costs and the resulting high volume barrier in terms of break even. The break even point is usually only reached for partners which are in an intensive cooperation with the focused company. Following the approach of a classification of partners by an ABC analysis, a 1:1 interface is therefore reasonable for “A”-partners. In the case of dynamically configured communities for solution selling, there is a negligible number of cooperating companies which are classified as “A”-partners. The main need within such communities is to share order and capacity relevant information with frequently changing companies, which are most times classified as “B” and “C” partners in terms of transaction volume. All in all the proposed approach foresees an extension of the company internal information systems by an interface for relevant order and capacity related information between the involved business partners. Depending on the transaction volume related intensity of cooperation this interface is either traditionally designed as a 1:1 interface or as a more flexible interface proposed in the following.
My own company
Central platform
Figure 3: Central platform enabling electronic information exchange
The flexible concept is based on an easily configurable adapter connecting IT systems to a central platform. In order to allow also smallest enterprises to take part in such communities, additionally this platform is accessible via a web interface (Figure 3). The main issue of high investment costs related to the traditional 1:1 interfaces is addressed by the simplicity of the adapter and the use of the central platform. The adapter is styled in a way allowing the company internal IT personnel to connect the internal information system via its standard EDI interface to the adapter and thereby to the central platform. Due to the central platform this connection has to be established only one time. As soon as the link is in place the company is able to communicate electronically to every other company connected to the platform. Compared to the proposed concept current inter organisational platforms mainly focus on the selection and evaluation of suppliers. Due to this focus most platforms are limited to a specific branch. The platform for inter organisational information exchange is completely independent of the branch and character of the good.
4.2
Exchanged Information
The information exchanged between the cooperating companies cover the usual information within the order management process like quotation, order, order confirmation, invoice, payment reminder etc. (Figure 4). One important aspect of the electronic information exchange is the reduction of manual data capture reducing the process time and the drastic reduction of transition times. Besides these typical impact factors of electronic data interchange there is one even more important impact for the case of dynamically configured networks. One major issue in the composition of such a solution seller network is the rapid connection of cooperating ISPs having free capacities for the specific order. The decision for one specific partner has to be made short term due to customers’ requirement for short delivery times. The integration of a company can be considerably accelerated by sending a request for quotation to various partners. These partners can provide the quotation manually or in the case of standard goods and services even automatically if the internal enterprise resource planning system is able to perform as required. The head of the network afterwards orders the good or services from the partner offering the best combination of price, delivery time and quality. This reduction of the reaction time to the customer dramatically enhances the competitiveness of the whole network. Req. for quotation Order Change order Req. for status Inventory information Req. for delivery Goods receipt Credit memo Complaint
Quotation Order Confirmation Status information Req. for inventory Dispatch notification Invoice Payment reminder
Figure 4: Information to be exchanged between business partners
4.3
Business Model
The conception of the inter-organisational information system is to be completed by developing an adequate business model for the platform. A reasonable model is the basic operation of the platform by an association of software suppliers or an independent company, offering their service based on the platform. The profit would be gained by selling the application of platform (“pay per use”). Different rates could be applied on the different messages available depending on their outline.
Furthermore, the design of the business model requires the consideration of legal aspects concerning the bindingness of the information and declarations of intent exchanged via the platform.
5
Case Study
As an example in a case study within the machinery and equipment industry a 25% share of the transaction processes were saved equalling one half of a full time equivalent (SCHUH 2008). The use of a communication standard in solution providing communities can lead to similar effects. In addition, high efficiency increases regarding planning and allocation of resources are expected. Such a platform for case by case interaction between companies participating in solution providing communities would especially enable saving of process and transaction costs. On the one hand, the data exchange standard reduces directly the variable costs of processing and transmission of documents for orders and invoices. On the other hand, storage and overcapacity costs are reduced by a faster information flow because companies can order at short notice. In case of machinery and equipment industry first efficiency improvements have already been realized (Meyer/Walber/Schmidt 2006).
6
Conclusion
In this paper we presented a unique approach to enable dynamic solution communities of industrial service providers to meet on the one hand the fast changing customer requirements and on the other hand the dynamic, very competitive and risky environment of ISPs. Solution selling communities turn out to be an appropriate network type to meet these challenges. The main issue of solution communities is to organise and handle the ad-hoc configuration of ISPs to provide complete customer oriented solutions. Therefore an easy applicable tool to reduce the coordination effort of the case-by-case focal units is required. The inter-organisational platform proposed in this paper, which is respecting the intimacy of each participating ISP, turns out to be an easy-to-implement solution for the organisation of such dynamic and complex networks. All in all the realisation of the inter-organisational information system will lead to significant reduction of costs and order processing times making the participation in complex business networks like solution communities much more attractive than it is today. References Ahlert, D; von Wangenheim, F.; Kawohl, J.; Zimmer, M. 2008. The Concept of Solution Selling: Theoretical Considerations and Methods. Münster. Brosze, T.; Gierth, A.; Kleinert, A.; Schmidt, C.; Schweicher, B.; Sontow, K. & Treutlein, P. 2007. Marktspiegel Business Software – ERP/PPS 2007/2008, in Marktspiegel, eds. G. Schuh & V. Stich, 4. überarbeitete Auflage, Aachen. Camarinha-Matos, L.M.; Afsaramanesh, H. 2004. Collaborative Networked Organisation: A research agenda for emerging business models, Springer Press. Camarinha-Matos/Afsaramanesh 2005. Collaboration networks: a new scientific discipline, Journal of Intelligent Manufacturing, 16 (4), pp. 439-452 FIR. 2007. Expertenstudie im Servicemanagement. Forschungsinstitut für Rationalisierung e.V., Aachen. Gudergan, G. 2008. Erfolg und Wirkungsmodell von Koordinationsinstrumenten für industrielle Dienstleistungen. Shaker Verlag, Aachen. Leser, F. 2005. Business Collaboration Infrastructure: Standards, Prozess- und Systemarchitektur für automatisierte Kooperationsprozesse, Dissertation, Universität St. Gallen. Reckenfelderbäumer, M. 2005. Konzeptionelle Grundlagen des Dienstleistungscontrolling. Kritische Bestandsaufnahme und Perspektiven der Weiterentwicklung zu einem Controlling der Kundenintegration. eds. M. Bruhn & B. Stauss, Gabler Verlag: Wiesbaden.
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