Operations - Goods and Services At the Speed of Business

Goods and Services At The Speed Of Business

By Mark S. Merkow (Mark.Merkow@aexp.com)
Boeing 747 customers can lose up to $40,000 per minute while their planes wait on the ground for spare parts. Typical American businesses will expend 80% of their purchasing efforts on 20% or less of their total purchasing dollars on Maintenance, Repair, and Operations (MRO) items that don't directly contribute to company profits.

Modern purchasing systems have turned into nightmare operations with the complexities of business re-engineering and supply-chain management. A general lack of technology to support these efforts contribute to the agony. To help in simplifying matters, many large purchasing departments have reduced their supplier base by establishing sets of "preferred suppliers" with the goal of achieving a tighter integration of the supply chain. As a select group, these goods' providers are expected to be highly responsive to customer demand or face losing their "preferred status". Some examples of the types of demands being placed on selling organizations include:

Custom catalogs.
Custom products.
Custom pricing.
Value-added services.

In response to these demands, companies have developed a slew of highly customized, "one-off," electronic catalogs and purchasing systems, creating more technology-based maintenance nightmares. New products and services, like corporate purchasing cards can help in achieving MRO cost and quality goals, but they alone do not go far enough. Many of the services that use these products are based on proprietary systems and mechanisms that lack standardized processing and systems support. Interoperability among these systems is rare, thus leading buying and selling organizations to seek easy-to-use, open, standards-based solutions to common business problems.

The Trading Web

OBI's ultimate goal is the establishment of a common ground for what the OBI Consortium refers to as "The Trading Web," where OBI Standard adopters establish trading relationships with other OBI Standard adopters through secured access to extranet facilities connected via the Internet. These companies, in turn establish new relationships with others, and the Trading Web expands, forming dynamic sets of interoperable systems.

Software support for OBI from various e-commerce solution providers is beginning to appear on the scene. Open Market's (www.openmarket.com) Transact system offers OBI-compliant order management, online customer service, security services, authentication services, flexible payment processing, and secure transaction processing. Transact is intended to aid in the movement of on-line product catalogs to complete end-to-end Internet commerce systems that form the core of the Trading Web.

The Trading Web

In August 1997, the Motorola Space and Systems Technology Group in Tempe, Arizona ran the first pilot test of OBI using the Intelipro System. Employees at Motorola accessed Office Depot's on-line catalog in the first business-to-business electronic commerce pilot compliant with the OBI standard. Intelipro was developed by Intelisys Electronic Commerce, LLC (www.intelisys.net), a joint venture bvetween Chase Manhattan Bank and software developers, BVR, LLC.

"This pilot will prove the viability of the OBI standard from both a technical and business standpoint. It is the first tangible example of how the OBI standard streamlines the on-line purchasing process so that companies and technology providers can transact business in a seamless fashion." said Peter Roden, executive director of the OBI Consortium.

Executives from both Motorola and Office Depot were pleased with the results of the pilot and plan on continued use of the system as issues of OBI compliance by software developers is being resolved. "The only way standards become useful is with commercial applications like Intelipro." states Scott LaForce, Vice-president and Intelisys product manager at Chase Manhattan.

As additional pilot tests prove successful, the predictions of business-to-business e-commerce are certain to become reality. Forrester Research (www.forrester.com) claims that 1997 commercial transactions will end up around $8 billion dollars, representing a ten-fold increase over 1996 figures, but still rather small when compared to their estimate of $327 billion by the year 2002. International Data Corporation (IDC) in Framingham, Mass. predicts that e-commerce will increase to $220 billion by 2001, with 80% of that between businesses.

OBI-based extranets wring out costs in the supply chain. These same extranets can help companies to finally realize the benefits of Just-In-Time (JIT) inventory systems, a goal that Electronic Data Interchange (EDI) failed to achieve. Once willing companies begin to participate in the types of information sharing that OBI encourages, collaborative environments are bound to prosper and flourish. Now's the time to plan how you'll join them...

Mr. Merkow is a Lead Business Systems Analyst in the American Express Interactive Services Center of Excellence. He has over 22 years of experience in Information Systems. He has held the Certified Computing Professional in Management (CCP) certificate since 1982. He is the author of Breaking Through Technical Jargon, published in 1990 from Van Nostrand Reinhold and has been writing trade journal articles on applied advanced technology since 1989. Mr. Merkow currently holds a Master of Science in Decision and Information Systems from Arizona State University, and is currently pursuing a Masters of Educaton degree. His home page can be found at http://www.public.asu.edu/~mmerkow, and he can reached via e-mail at Mark.Merkow@aexp.com.