Insights on the Power of Supply Chain Operating Networks

There’s been a lot of buzz and activity lately around Supply Chain Operating Networks (for example, see Infor acquiring GT Nexus), but I still find that many companies are still on the learning curve when it comes to understanding the role and value of SCONs.

Earlier this year on Talking Logistics, I had the opportunity to discuss “The Power of Supply Chain Operating Networks” with Arun Samuga, VP of Research and Development at Elemica, a leading Supply Chain Operating Network for companies in the process industry (and a Talking Logistics sponsor). I kicked off the conversation by asking Arun if the terms Supply Chain Operating Networks, B2B Networks, and EDI Networks — which are often used interchangeably — refer to the same thing or if they represent different capabilities. Here’s what he said:

They are definitely not the same thing. While EDI and B2B connectivity are used interchangeably, they represent only one aspect of a Supply Chain Operating Network. The primary focus of EDI and B2B connectivity is data delivery between parties — so, Point A to Point B, let me send you a message and you send me a message back. The fundamental objective is process automation, nothing more than that.

When you think about a SCON, you’re really talking about an ecosystem, which is very different because the goal of an ecosystem, once the data exchanged, is for all parties involved to look at their process behaviors and actually start collaborating on improving the way they do business, as opposed to just saying, ‘Here’s my message, you send me another message’ and all you’ve achieved is just basic process automation. In that regard, a level of sophistication is fundamentally missing from traditional EDI and B2B connectivity networks.

So, are Supply Chain Operating Networks a replacement for EDI or does EDI still have a role to play?

In my mind, as time passes, there will be a point where companies that rely only on EDI will be left behind. There is going to be an inflection point where companies that rely on EDI alone will start to lose some fundamental capabilities around differentiation — and that differentiation is having an enriched experience with their trading partners.

Now, EDI will have a role to play, but it’s just an enabler for process automation. It’s not going to be a real value add or value differentiator within the overall concept of an ecosystem or SCON.

I often position Supply Chain Operating Networks as the business equivalent of Facebook and LinkedIn, and as we know from those social networks, the larger a network grows, and the more capabilities that are added to the platform, the more value it provides to members. A similar dynamic exists in the business realm with supply chain operating networks. But onboarding trading partners and managing those connections has traditionally been a costly and time-consuming process. In the clip below, Arun shares how the onboarding process has evolved at Elemica.

“A while back, we did a calculation showing that for a company with 5,000 trading partners, it would take us about 300 years to onboard them at the rate we were doing it, which was obviously not acceptable, especially when you’re talking about a network and trying to create change and enable collaboration,” said Arun. “We realized that we needed to reduce the onboarding process from months to weeks to days, and eventually, to hours.” This prompted Elemica to invest in innovating the onboarding process, which ultimately led to the company being issued two patents (see “Elemica Issued Patent for Innovation in Authenticating Commerce Partners” and “Elemica Awarded 2nd Patent on Supply Chain Operating Network”).

I encourage you to watch the rest of my conversation with Arun for additional insights on this topic, including the capabilities and attributes companies should look for in a Supply Chain Operating Network and what the road ahead looks like for SCONs. Then post a question or comment and share your perspective!