The Microsoft/GXS Alliance in Action

Speeding the Connection between Manufacturers and Suppliers

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	Connectivity Benefits of B2B Technologies
	Majority of Suppliers still do Business Manually
	B2B and Manufacturing: Made for Each Other
	About the Analysts

Midsize manufacturers trying to compete in global manufacturing markets like consumer electronic goods and aerospace often find themselves inadequately prepared when it comes to deep integration with their trading partners. Lacking the technology and staff resources to establish tight supply chain linkages puts these manufacturers at a disadvantage when trying to compete with their largest competitors—many of whom have the deep pockets and business-to-business (B2B) expertise that until recently were needed to create point-to-point integrated solutions with global trading networks. As a result, midsize manufacturers have struggled with more limited portals or even used manual systems, often leading to increased errors, smaller price discounts, higher inventory turn rates, and late or lost invoices.

A new alliance between Microsoft and GXS Inc. (see The Fast Track to Supply Chain Innovation) now provides an online trading hub to level the playing field for midsize manufacturers. Using Microsoft BizTalk Server 2006 to connect to the GXS Trading Grid in real time, midsize manufacturers can finally collaborate on equal footing with their largest and most directly connected competitors.

The alliance between Microsoft and GXS provides midsize manufacturers with an exciting new way to solve a major connectivity challenge. Here’s how.

Until recently, implementing message-based e-commerce was time-consuming and expensive for large trading partners focused on creating direct links with their largest, highest volume partners. With the advent of BizTalk Server, such integration tasks have become easier. Meanwhile, smaller manufacturers that do only a few transactions per year with a supplier have met their needs by placing orders manually through the suppliers’ portal. The problem, according to Bill Swanton, vice president of research for Boston-based AMR Research, comes for the midsize manufacturers in between—companies with limited IT resources and a significant number of transactions to conduct with suppliers.

B2B technologies such as those offered through the Microsoft-GXS alliance can address this challenge for midsize manufacturers.

Connectivity Benefits of B2B Technologies

Electronic connectivity among manufacturers, their suppliers and customers creates compelling results, including:

When business are able to establish robust electronic connectivity, results such as these can lead to reduced lead times, lower costs, fewer service failures, and more sales.

Source: Aberdeen Group, 2006

As mentioned earlier however, many midsize manufacturers find themselves in a difficult situation—they lack the resources to forge direct connections with its top suppliers, but the volume of transactions they conduct makes manual order entry to the supplier portal impractical.

By providing connectivity through B2B technologies, the Microsoft-GXS alliance addresses this conundrum. The Microsoft-powered GXS Trading Grid presents a great solution, providing trading partners with the ability to connect and exchange information within their own enterprise and with suppliers across the globe. With BizTalk Server 2006 operating behind the firewall and in the GXS Grid, the solution works as a single integration platform delivering real-time visibility throughout the supply chain. Using real-time monitoring tools and alerts, manufacturers benefit from increased stock turns, improved fulfillment rates, maximized trade discounts, and increased sales.

Using BizTalk Server 2006, a midsize manufacturer can send a purchase order or other document to the GXS Trading Grid, which will then translate it into whatever format the customer prefers, including EDI, SAP enterprise applications, or a flat file. Companies that connect with one supplier on the Trading Grid can then connect with many others using the same technology and knowledge. The Trading Grid is a “one-to-many” platform—more than 20,000 companies already do business there. Companies can use it as their electronic collaboration platform for nearly all of their suppliers and trading partners.

In some cases, the GXS Trading Grid can help manufacturers retain old customers as well as attract new ones. Such was the case at a midsize manufacturer of crop protection chemicals, which was asked by a large customer to begin trading electronically. Faced with limited resources, scarce IT skills and time, it turned to the GXS Trading Grid. Utilizing BizTalk Server, the Covast B2B Suite and real-time XML integration, the company was able to quickly create a “Grid-ready” solution to keep its partner satisfied. The manufacturer says the new system processes inbound orders automatically, reduces operating costs and increases productivity and performance.

Beth Enslow, senior vice president of enterprise research for the Boston market research firm Aberdeen Group Inc., says more midsize companies will automate their supply chains as a result of the Microsoft-GSX alliance. This solution “gives midsize companies the ability to connect and communicate electronically with a much larger percentage of their customers and suppliers,” she says. Enslow adds the alliance is an elegant way for midsize companies to use their regular business environment to connect electronically with their partners.

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Majority of Suppliers still do Business Manually

Seven out of 10 suppliers are not yet able to do business electronically, making automation a pressing issue across all industries, according to Aberdeen research. Enslow adds that an even greater percentage of midsize manufacturers still operate largely on manual processes, sending and receiving orders by means of phone, fax or e-mail much more often than using other, more automated, electronic methods. It’s a costly and inefficient way to do business. “You really want your people to concentrate on making and selling products or providing excellent customer service, not doing manual data entry,” says Enslow.

Aberdeen Group’s 2006 Supplier Enablement Benchmark study reveals B2B connectivity is improving, but still remains under-implemented across most industries.

Source: Aberdeen Group, 2006

Leveraging the BizTalk Server “Grid-ready” solution can give these businesses a platform for collaboration they can use with many partners and suppliers. Because more than 20,000 companies worldwide currently operate on the GXS Trading Grid, this opens up a new world of suppliers to midsize manufacturers, including those not reachable before.

B2B connectivity “makes it easier to do business with the best suppliers out there. That’s a real value,” says Enslow. Global manufacturers with key business ties in Asia are especially likely to benefit. Across multiple continents and time zones, the BizTalk Server “Grid-ready” solution functions as an efficient platform for timely exchange of mission-critical information, such as planning and forecasting data.

GXS Trading Grid can give manufacturers a global edge

Manufacturers in global industries rely extensively on an extended enterprise of worldwide partners to both design and supply key components and products. Many design, production, testing and even selling tasks are now outsourced to partners, creating huge collaboration challenges. Thanks to its tight integration with BizTalk Server 2006 and the Microsoft Dynamics enterprise resource planning (ERP) platforms, the GXS Trading Grid gives midsize manufacturers a cost-effective platform for e-collaboration, helping them get the most out of their existing IT investments.

Manufacturing sectors that have already made steady progress toward automation can gain further benefits by being part of a larger supplier network as is found on the Trading Grid. Many electronic component suppliers, for example, have used e-collaboration standards such as RosettaNet to pull ahead of other types of manufacturing. Now the BizTalk Server “Grid-ready” solution offers an exciting new way to bring partners onboard more quickly than alternatives.

“The promise is they can get up and running within days, rather than weeks or months,” says Enslow. The Trading Grid provides the international network connections and operational support to smooth the kinks of global sourcing, speeding the time to value.

For their part, midsize electronics manufacturers based in the Asia/Pacific region want to offer transparency in communications with their partners and customers in North America and Europe. They want their customers to know they are easy to communicate with and can provide a wide variety of value-added services, such as design and sourcing, in addition to low-cost assembly.

Some manufacturing sectors have already made investments in electronic collaboration. For example, many larger discrete manufacturers have invested heavily in EDI, especially in the automotive sector. Far from having to put aside their EDI infrastructure, these companies can now offer suppliers of all sizes the chance to interact electronically for the first time by hiding EDI’s complexity behind the simplicity of the BizTalk Server “Grid-ready” solution. For these companies, the Trading Grid is a way of “of bringing down the cost of message-based e-commerce and reaching more companies, without having to build up a huge EDI department to do it,” says Swanton.

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B2B and Manufacturing: Made for Each Other

Several factors continue to drive the expanded usage of B2B technology in manufacturing:

Source: Forrester Research, Trends 2006: Electronic Data Interchange

The combination of the integrated BizTalk Server 2006 with GXS’s well-established Trading Grid is a powerful and cost-effective e-collaboration solution for manufacturers. Midsize companies can use it to save time by addressing only conditions that exceed normal parameters, just as the largest companies in the world do. “Manufacturers and retailers tend to have lots of small transactions with each other,” says Swanton. “This solution will let them manage by exception instead of trying to track everything manually. This is important any time companies are doing a lot of relatively small transactions with each other.”

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About the Analysts

Aberdeen Group

Aberdeen Group provides fact-based research focused on the global technology-driven value chain. Founded in 1988, Aberdeen has established the market leading position as the “voice that matters” when it comes to understanding the measurable results being delivered by technology in business.

AMR Research

AMR Research focuses on supply chain, enterprise applications and next-generation infrastructure. Founded in 1986, AMR Research provides advisory services and peer networking opportunities to supply chain and technology executives in the consumer, life sciences, manufacturing and retail sectors.

Forrester Research

Forrester Research is an independent technology and market research company that provides pragmatic and forward-thinking advice about technology's impact on business and consumers. For 22 years, Forrester has been a thought leader and trusted advisor, helping global clients lead in their markets through its research, consulting, events, and peer-to-peer executive programs.

GXS

GXS GXS is a leading worldwide provider of business-to-business integration, synchronization and collaboration solutions. The company operates a highly-reliable, secure global network services platform enabling more than 30,000 businesses, including more than half of the Fortune 500, to conduct business together in real time.

Lauren Gibbons Paul is a senior writer for Triangle Publishing Services Co. Inc. and has more than 15 years of experience as a writer and editor for leading business and technology publications, including eWEEK, CIO, Managing Automation and Network World. She has also done research assignments for a number of well-known analyst firms.

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