Tuesday, June 12, 2001

B2B Partnerships Fall Short

In these difficult economic times, traditional B2B partnering approaches and supporting applications aren't enough to help firms slash costs, improve offerings, or better serve customers. According to Forrester Research, Inc. in order to achieve the next big breakthrough, firms need to master a new operating strategy: dynamic collaboration. To support this strategy, firms must deploy a new class of business apps that make dynamic collaboration work: eXtended relationship management (XRM).

Up to now, firms' partnering approaches have pushed inventory around the supply chain, not reduced it -- the auto sector alone is still burdened with $74 billion in idle inventory. In today’s ruthlessly competitive environment, firms need a new approach. Dynamic collaboration is a strategy of win-win partnering that shares business activities across a network of allies.

"Firms and their partners can lay the groundwork for dynamic collaboration by starting small with trusted partners to engage in basic information sharing," according to Steven J. Kafka, research director at Forrester Research. Over time, firms should invest in incremental levels of dynamic collaboration -- monitor, manage, and optimize -- to transform processes for product design, supply chain and procurement, and sales and service. "Dynamic collaboration will speed new products to market, streamline operations, and support high-quality, cost-effective service," said Kafka.

To date, business applications have focused on the needs of the enterprise, not on the trading community on which it increasingly depends. Firms' globalization and outsourcing partnering efforts have been hampered by these legacy apps because they don't support multitier relationships. "Firms' efforts to streamline their value chains have been stalled by clumsy processes, proprietary interfaces, and data hoarding," said Navi Radjou, senior analyst at Forrester Research.

In contrast, XRM apps will support each level of dynamic collaboration by letting firms monitor partners' status, manage intercompany transactions, and optimize automated decision-making. Multiple firms can share a single instance of an XRM app to more efficiently design and make products or improve customer service.

"With dynamic collaboration and XRM applications, a CPG manufacturer will be able to create optimized production plans that boost its own profitability -- as well as the profitability of its suppliers and retail clients," according to Radjou.