The aerospace and defense (A&D) industry is following the path of many manufacturing segments with a paradigm shift in its business model. Thanks to globalization and increased outsourcing strategies, firms no longer design, build, manufacture and support products entirely themselves. Instead, an increasing percentage of product value creation is executed outside of the company's virtual four walls -- driving greater dependency on worldwide, multi-tier supply chains comprised of partners of all shapes and sizes. To optimize supply chain performance, organizations must be able to extend critical business processes, lean practices and real-time information to the partner community. Do these organizations have the right supply chain collaboration infrastructure in place to successfully handle this new way of doing business? Today, the answer almost always is no.
The initial inclination for many organizations is to turn to their internal information systems for a solution. Firms in A&D and other verticals have invested substantial time, resources and money over the last 10 years in enterprise resource planning (ERP) system projects to standardize, consolidate and improve their internal operations. These systems of record often serve as the source for the basic information companies need to share with their suppliers and frequently possess Web portal capabilities. So why not just open the door and invite suppliers in to directly access your data and internal processes? Because enterprise applications are built from the ground up to support the needs of a single enterprise, and thus lack the functionality, scalability and security capabilities needed to address the fluid requirements of multi-enterprise supply chain collaboration.
In A&D, companies have begun to acknowledge these shortcomings and recognize that extending their ERP systems to directly interface with their suppliers is problematic. Many of the biggest players are pursuing an alternative approach -- one that maximizes the value of enterprise system investments while protecting them from external security breaches and eliminating the need for unnecessary (and costly) changes. The solution? A hosted supply chain collaboration platform delivered via a Software-as-a-Service (SaaS) model that seamlessly connects buyers with their supplier partners to enable a broad range of collaborative business processes, from demand planning to order management to inventory and logistics optimization.
The SaaS supply chain collaboration platform delivers value by promoting the real-time interaction that is mandatory in a multi-enterprise environment, while addressing the cost and risk factors that come to the fore with ERP system portals. Specifically, a hosted collaboration platform enables A&D companies to better:
- Connect the Supplier Community -- Regardless of the number or variety of ERP systems an organization has across its businesses, integrating those systems once with the hosted platform lays the foundation for communication with all of their suppliers, creating "One Face" to the supply base. This eliminates the need to support hundreds or thousands of Web portal connections, not to mention the B2B integration that many large suppliers require to efficiently extend customer processes to their back-end systems. Direct supplier access and integrated connections to ERP systems can imperil performance and require significant resources to establish and maintain over time. From the supplier's perspective, one more bespoke portal increases cost and complexity when the goal of e-enablement is exactly the opposite. Buyers and suppliers in the A&D community can tap into a common, business-ready platform that promotes 100% supplier participation.
- Protect Intellectual Property (IP) -- SaaS platform providers often are ahead of the curve in managing information security for multi-enterprise collaboration with leading-edge functionality, architecture and operational policies. In A&D, where there is particular sensitivity around export control regulations in addition to commercially-sensitive IP, security is further extended to digital identity and access management for the collaborating community. In this case, the SaaS provider conducts on-boarding of buyers and their suppliers, including the issuance of individual authentication credentials that define privileges and roles dictating the functions and information each validated user is authorized to access.
- Manage Change -- For businesses competing in an increasingly global market, supply chain collaboration is constantly evolving. The speed at which supply chain process requirements change and expand leave enterprise applications struggling to deliver capabilities to various business process owners. Linking delivery of supply chain collaboration functionality to internal ERP deployments can put both initiatives at risk from a time and cost perspective. By leveraging a hosted collaboration platform, companies can update collaborative processes at a central hub (with their supplier partners), minimizing the impact on critical enterprise systems and resources.
- Optimize Performance -- The hosted platform decouples ERP systems from multi-party supply chain processes, freeing them to execute their core functions optimally. The highly-dynamic, iterative flow of information between buyers and suppliers occurs on the hosted platform, which encapsulates and automates business-critical supply chain processes. The hosted platform's position as a common, neutral clearinghouse for supply chain information provides all parties with a single source of truth. Furthermore, once the parties define their collaborative process, the system can highlight exceptions (for both buyers and suppliers) when events stray outside predetermined tolerances. This gives qualified users an ability to rapidly identify and resolve problems, as well as mine historical data for business intelligence that sets the stage for proactive, continuous improvement.
Several of the world's leading A&D firms have embraced this model. One of the largest aircraft manufacturers, with over 40 ERP systems including BAAN, Infor, Oracle, Maximo and legacy systems, is collaborating with more than 7000 global partners via a hosted supply chain collaboration platform. A $10 billion defense company that has standardized on SAP to manage its internal processes is collaborating with its external trading partners through a SaaS supply chain collaboration solution. And Europe's largest defense contractor has leveraged the hosted supply chain collaboration platform to extend business processes from multiple ERP systems, including SAP and Oracle, to its global supply base -- exchanging and collaborating on purchase orders, planning schedules, invoices and more.
The value proposition for ERP investments is clear and compelling -- drive management and optimization of internal, enterprise business activities. When it comes to engaging your global supplier community, take advantage of SaaS collaboration platforms that extend the value of ERP investments while protecting these critical systems to achieve their core mission. Hosted supply chain collaboration platforms support the dynamic requirements of multi-enterprise process enablement with the functionality, security and scalability companies and their suppliers need to compete in today's ever-changing business environment.
Peter Scott is vice president, Supply Chain Solutions for Exostar. Exostar provides multi-enterprise solutions for secure information sharing, collaboration and business process integration throughout the extended value chain. Exostar's identity assurance products and on-demand business applications reduce risk, improve agility and strengthen trading partner relationships and profitability for over 40,000 companies worldwide. www.exostar.comInterested in information related to this topic? Subscribe to our Information Technology eNewsletter.