Why Nobody Sends Out an RFP for Supply Chain Operating Networks

In my 25+ years as an industry analyst, I have reviewed (and helped craft) many Request for Proposals (RFP) for supply chain and logistics software applications — especially for shippers and third party logistics providers (3PLs) looking for a transportation management system (TMS) or a supply chain visibility solution.

Never, in 25 years, have I come across an RFP for a Supply Chain Operating Network (aka “business network” or “multienterprise collaboration network”).

Why is that? 

There are various reasons, but it all boils down to this: Companies don’t have a Chief Network Effects Officer (CNEO).

That is, companies don’t have a C-level supply chain executive who views supply chain management through a “network effects” prism. As Michael Schrage writes in a December 2013 Harvard Business Review post (“Who’s Managing Your Company’s Network Effects?”):

“Your organization needs a CNEO — a Chief Network Effects Officer — to integrate and align how your enterprise gets value from ‘harvesting collective intelligence’ [from colleagues, suppliers, customers, channels, and other trading partners].”

If such an executive existed, a CNEO would be the person crafting an RFP for a Supply Chain Operating Network. Unfortunately, most companies today still take an inside-out approach to supply chain management, and they still think and operate in process silos. This siloed perspective applies to how companies procure software too. The transportation team sends out an RFP for a Transportation Management System, the distribution team creates one for a Warehouse Management System, the planning team sends one out for a Supply Chain Planning solution, and the list goes on.  

Simply put, companies don’t send out RFPs for Supply Chain Operating Networks because they don’t understand what they are; they don’t know how to define and quantify their business value; they still think and operate in functional silos; and they don’t have an executive responsible for harvesting the value of network effects to create more resilient and collaborative supply chains.

What needs to happen for this to change? Well, it’s clear that more education is needed about the value of business networks and network effects. We also need more executives to question “the way we’ve always done things” and be willing to think and act differently. I also believe that we should consider renaming “Supply Chain Management” to “Network Effects Management” or something similar (although, based on an Indago survey we conducted in August 2021, many industry professionals are fine with SCM).

Something else has been happening that will also drive change: traditional supply chain and logistics software vendors are recognizing the value of network-based solutions.

One of the earliest examples was SAP’s acquisition of Ariba for $4.3 billion in 2012. Other notable transactions include:

The most recent example was announced just a couple of weeks ago. On March 29, Blue Yonder announced “the signing of an agreement to acquire One Network Enterprises (One Network) for approximately $839 million.” Here is an excerpt from the press release:

By tapping into One Network’s revolutionary platform and multi-party network, leveraged by over 150,000 trading partners, Blue Yonder’s customers will benefit from an ecosystem that:

  • Accelerates end-to-end decision-making, with increased visibility into materials, resources, loads, routes, and capacity.
  • Offers real-time insights and predictions, enabling the ability to take action across the supply chain ecosystem, leading to fewer disruptions and a more resilient supply chain.
  • Shares data seamlessly across the entire multi-tier supply chain, including suppliers and carriers, allowing for streamlined insights into potential disruptions and the ability to mitigate risk.
  • Improves supplier and carrier collaboration processes – from order creation through scheduling and fulfillment – from days to minutes, removing inaccuracies, reducing time, and decreasing cost. 
  • Enables the journey to autonomous supply chain management through Smart Prescriptions™, adaptive flows, and interactive visualizations, powered by proprietary AI technology.

I won’t go into the details of all these acquisitions, but it’s sufficient to say that the promised synergies and benefits often take longer to realize than anticipated. There’s the usual hard work and challenges involved with integrating different technology platforms. But there’s also a mindshift and cultural shift required. In short, developing and selling a network-based platform is different from developing and selling traditional software, even if that software is already in the cloud. Just as with their customers, more education is often needed among the executive leadership, sales, and development teams of the combined company about the value of business networks and network effects.

SAP is a good example. As I highlighted last June in “SAP Business Network Takes Center Stage At SAP Sapphire 2023,” it took almost a decade after acquiring Ariba for SAP to announce in 2021 that it was taking “the first step toward creating the world’s largest business network with SAP Business Network, which will bring together Ariba Network, SAP Business Network for Logistics and SAP Asset Intelligence Network. Over 5.5 million organizations will benefit from being members of this connected community.” Today, SAP Business Network is being integrated across a wide variety of SAP solutions, business processes (Procurement, Supply Chain, Logistics, Asset Management, Finance, Talent) and trading partners (Suppliers, Contract Manufacturers, Shippers & Carriers, Financial Institutions, Service Providers/Contingent Labor).

Why did it take so long? I believe part of the reason is that it took that long for the C-suite at SAP to finally understand the value of business networks. As I wrote last June, “To me, seeing and hearing the CEO of one of the largest and most influential enterprise software companies talk about the importance of business networks in front of thousands of customers at a major conference was a clear sign that SAP (a Talking Logistics sponsor) is committed to growing and innovating its business network. In other words, business networks have reached the C-level suite at SAP and it is now a critical component of the company’s supply chain value proposition and roadmap.”

All that said, I firmly believe we’re getting closer to the day when sending out RFPs for Supply Chain Operating Networks will be the norm — even though it’s been more than 20 years since I first wrote about this trend!

If this is all new to you, I recommend three things:

First, educate yourself about “network effects” and how they currently exist in supply chain management, and what opportunities lie ahead. Below are links to some posts we have published related to this topic.

Second, get the conversation started with your teams about network effects, as well as your supply chain and logistics technology providers, suppliers, customers, logistics service providers, and other external partners. 

Third, do something — don’t just think and talk about network effects. Determining what steps to take should be one of the outcomes from your team and trading partner conversations.

Maybe that first step is putting together an RFP for a Supply Chain Operating Network.

For related commentary about Supply Chain Operating Networks, please read: