I am of course referring to the global economy. The banks here in the UK are predicting that we are on the verge of a recession, interest rates are likely to remain at the same level until 2010 and the price of petrol has reached £5 a gallon!

Now if you are a relatively small company, comprising of perhaps a couple of manufacturing plants or a chain of ten retail stores, how do you remain competitive in this tough economic climate and how do you survive any impending recession that may be knocking on your door?. You can just imagine that there are board rooms all over the world full of executives trying to work out their strategies for riding the recession rollercoaster, looking for ways to reduce costs, restructure their businesses and at the same time try and remain competitive in order to make that all important and often elusive operational profit.

Normally when recessions come knocking on the door,  the larger global companies will delay implementing large scale IT projects, they will look to reduce costs by outsourcing key business processes and make their creaking IT infrastructures last until the economy picks up again.  But who knows when this will happen and in the meantime how are the smaller companies suppose to restructure their own IT infrastructures in order to reduce costs and keep their businesses above water.  Again, outsourcing is an efficient way to reduce IT related costs and streamline supply chain strategies, however outsourcing, especially from a B2B perspective, has traditionally been the preserve of the much larger companies. 

Until now that is, GXS has recently introduced a Managed Services offering called MX which allows companies of any size to outsource their B2B infrastructures.  But what are the business drivers for the smaller companies wanting to outsource their B2B infrastructures. Well, let us take a quick look at some of the more important business drivers and areas of a business where B2B outsourcing can help the smaller company.

Company Restructuring – each industry sector is experiencing company divestitures, merger & acquisition activities or more general company restructuring.  Often through a potential acquisition for example there will be a period of consolidation, rationalisation of departmental infrastructures.  In a similar way, IT and B2B infrastructures will have to be reviewed to see if cost savings can be made by for example having a common infrastructure or outsource B2B services to a single trusted vendor rather than having to deal with several vendors.  B2B outsourcing offers a means of managing your B2B trading platform during a period of change.

ERP Projects – many companies today, no matter what their size, will have a wealth of information locked away in back office systems such as ERP and CRM solutions.  As described by my colleague Steve Keifer in a couple of recent ERP related posts, ERP information will normally stay within the confines of an enterprise and yet a company is expected to work seamlessly with perhaps hundreds of different trading partners who may find this ERP information helpful, if only they could get access to it.  B2B outsourcing offers a way of unlocking ERP information and allows the relevant pieces of information to flow uninterrupted up and down the supply chain.  Many companies will not have the internal resources to undertake this kind of integration project, B2B outsourcing, especially through GXS Managed Services MX allows seamless ERP to B2B supply chain integration to take place.

Manual Process Improvement – in today’s ‘green’ culture, removing waste, especially paper from a supply chain is one of the key goals of B2B automation.  Implementing an e-Invoicing solution for example helps alleviate the need to send paper copies of invoices across a supply chain, which ultimately helps companies to get paid much more quickly.  Hosted web based form environments allow your suppliers, no matter what their technical capability, to complete order forms etc in a very short time, reducing the need to re-key in form related data and ensure that all transactions can be accurately traced across all trading partners.

Improve Global Connectivity – many automotive companies for example are being asked to support their customers in new emerging markets where a multitude of different communication standards or document formats could be in use.  GXS Managed Services MX is built on GXS Trading Grid, so companies will have access to a B2B platform that can connect to any trading partner around the world, no matter where they may be located. GXS has operations in over 18 countries around the world.  As a result, GXS can support your supply chain operations in Asia Pacific, Europe, North and South America.

Trading Partner On-boarding – B2B outsourcing can help to improve the way in which you work with new trading partners and it can help reduce the time it takes to get new partners up to speed with new B2B technology and integrated within a company’s B2B infrastructure.  For new customers projects, adopting an outsourced B2B strategy will allow your trading partners to engage in projects much more quickly, this improving the efficiency of your supply chain.

Legacy System Upgrade – B2B Outsourcing also allows a company to upgrade legacy and outdated IT infrastructures with a state of the art B2B platform. The outsourced environment shields users from learning about how to manage new connectivity options or document translation standards. GXS provides the ideal opportunity to employ new Software as a Service (SaaS) or Service Oriented Architecture (SOA) based B2B environments. These are easy to deploy  to trading partners as there is minimal implementation required and a company can be rest assured that every trading partner is using an identical ‘version’ of the B2B platform.

If you feel that your company, irrespective of size, could benefit from outsourcing your B2B environment then please feel free to visit our website for further information, click here to visit the GXS Managed Services MX specific page.  In further blogs we will take a more in depth look at how some other recession related business issues could be addressed through the adoption of leading edge B2B services & technology.

So after a brief sabbatical, I thought it was time to start blogging again

In recent weeks we have been running a series of Executive Briefings across Europe to showcase a recent study that we conducted with Stanford University.  Late last year we completed a research study with Stanford which looked at the area of B2B outsourcing and why companies look to outsource their B2B infrastructures.

Last week I presented at two Executive Briefings in Paris and Munich, the feedback we have received from those companies that attended was that they found the briefings very informative and that it had changed their perceptions as to why they should consider outsourcing their B2B infrastructure.  The briefings were very interactive with a good mix of companies from a variety of industries talking openly about the challenges they faced with managing their B2B infrastructures on a daily basis. These briefings, held over dinner in exclusive hotels in the heart of Paris and Munich, provided the ideal informal environment to discuss B2B best practices and it also provided a chance for the guests to learn from each other as to how they manage their respective B2B environments.  I certainly found the events useful to understand, at first hand, why companies consider going down the outsourcing route and the challenges they faced in today’s tough economic climate.  Based on both the feedback from the attendees and the results from the research, I believe B2B outsourcing will pick up more momentum across many different industries over the next 12 months. 

B2B outsourcing is no longer reserved for large global corporations, many mid market companies are also starting to take an interest in B2B outsourcing as well.  In fact, nearly 25% of the respondents to the Stanford research were from mid-market size companies.  The research confirmed that these smaller companies are keen to leverage the B2B outsourcing services that have been used by the larger companies for many years.  The research showed that many of the smaller companies were able to implement new B2B technology very quickly,  provide connectivity and support to global trading partners and more importantly significantly  improve customer satisfaction. 

The research with Stanford was conducted by Dr. Hau Lee who heads up Stanford’s Supply Chain Management Forum.  He is regarded as one of the world’s leading authorities on developing supply chains.  He is famous for developing his ‘Triple A’ theory that says that nearly all supply chains are made up of three key characteristics.  He says that supply chains need to be AGILE, in other words they need to be designed in such a way that they can be flexible to certain market conditions.  They need to be ADAPTIVE, in order to change according to differing supply chain patterns and they need to be ALIGNED to the incentives applied to all trading partners involved in a supply chain. Recently, Dr. Hau Lee suggested that his theory could be extended by the addition of a further ‘A’ and that is ensuring that supply chains are ARCHITECTED properly to ensure that maximum value is obtained from the supply chain management process. 

For me, as part of my preparation for presenting at these events, it was a great opportunity to take a more in depth look at the results from the Stanford research.  For example, of the companies that took part in the research, just under half had only been using B2B outsourcing for the last year.  This was probably due to tough economic conditions, a need to globalise their supply chains or possibly a need to update their B2B infrastructure to support new connectivity standards or electronic document formats.  Whatever the reason, B2B outsourcing is here to stay and GXS expect many more companies to go down the B2B outsourcing route over the next few years. 

If you would like to find out more about why companies are looking to outsource their B2B infrastructures then please feel free to download a copy of the Stanford report from our website. Alternatively if you are based in Europe and would like to join us at one of our Executive Briefings in the near future then please keep a close eye on the events section of our UK website , as we will be running a number of other briefings over the next few months.

In recent months we have seen an increased interest from Tier 1 and Tier 2 automotive suppliers wishing to outsource the management of their B2B infrastructures. Automotive OEMs are asking their key Tier 1 suppliers to take on more solution based work, for example producing entire transmission, drivetrain and suspension systems for delivery to their customers. As a result, a shift of responsibilities is occurring in the automotive supply chain where the original Tier 2 suppliers are now being asked to undertake work previously carried out by the Tier 1 suppliers. In order to manage this shift in the supply chain, many of the lower tier automotive suppliers are having to re-evaluate their B2B e-Commerce strategies so that they can remain competitive and support their customers with their global expansion plans.

Many of these suppliers will have never implemented a B2B platform before, or know how to manage their B2B environment effectively. In addition, these suppliers may be in a different country or located in a region where B2B expertise is limited and IT infrastructure cannot support global trading partner relationships.  These smaller suppliers are expected to embrace new B2B technologies and at the same time change business practices in order to implement these solutions and services. Also, they will not have extensive inhouse expertise to run a complex B2B environment and more importantly they must be allowed to focus on their core competency, manufacturing automotive components for their customers.

GXS hosts its Managed Services environment on GXS Trading Grid®, GXS’ secure, scalable, high-performance B2B integration services platform that spans best in class data centres around the world. If required, GXS can provide a web form based trading environment, community enablement programs and support for a multitude of communication protocols and document formats.

So if you are an automotive Tier 1 or Tier 2 supplier and you want to stop pulling your hair out trying to think about how you will implement a best in class global B2B trading environment, simply visit our Managed Services microsite for further information.

There was an interesting article posted over on BusinessWeek Online a couple of days ago, highlighting the need to develop ultra low cost cars for the emerging markets. Renault – Nissan have just announced that they want to manufacture a small car in India with a retail price of $2500.  According to the Monitor Group, the production of low cost cars is now the single most important trend in the automotive industry today. 

So this begs the question, how do you go about making a profit on a car with such a low selling price? More likely, the automotive manufacturers will be selling them at a loss initially in order to gain traction in a new and potentially lucrative market such as China or India.  To make any sort of profit on a low cost vehicle at this pricing level will mean that operational costs will have to reduced still further and the use of IT and B2B solutions to help drive down costs will become more important. 

The emerging markets have huge infrastructure related issues at the moment, unreliable power supplies, and inferior telecommunications links to the outside world.   In order to reduce associated IT costs, the use of hosted applications will become very important for these low cost manufacturers.  There is a danger that by producing cars at $2500 then the quality of the product will deteriorate and the quality of the resulting information flowing across the supply chain will be poor quality as well.   

My previous blog entry eluded to the fact that outsourcing a B2B environment can help to reduce costs and improve efficiencies etc, and I think in the case of low cost car production, this has to be the way to go in terms of setting up a reliable, low cost B2B infrastructure.  The car manufacturer doesn’t have to worry about managing the B2B infrastructure and more importantly the hosted environment can be managed outside of the region where the cars are being manufactured. In addition to hosting B2B environments, low cost manufacturing projects such as this could see the growth in the use of Software as a Service (SAAS) environments as well.  Well I guess it is OK for me to speculate what could happen, but if this Renault – Nissan vehicle and other low cost car projects are successful in the emerging markets then it could help to rapidly increase the adoption of more hosted B2B environments within the automotive industry.

Today’s car manufacturers face a constant challenge to sell more cars and at the same time reduce costs in order to become more competitive in the market place.  Over the years, OEMs have had to change the way in which they manufacture cars and source components from suppliers.  It no longer makes sense for a car manufacturer to try and make everything in house and today many OEMs are becoming known as ‘Branded Integrators’.  Branded integrators are companies who derive the initial design for the vehicle, conduct final assembly and look after the brand management and marketing.   

What has happened is that the original Tier1 suppliers have now become more involved with the actual manufacture of cars, many Tier1s such as DANA Corporation are producing entire suspension assemblies which are delivered track side and fitted straight to the vehicle.  The original Tier2 suppliers have now become the ‘new’ Tier1s and hence there has been an entire shift in the automotive supply chain.  This process of introducing outsourced manufacturing to the vehicle assembly process has meant that OEMs have been able to reduce costs considerably and streamline their respective supply chains. 

Automotive OEMs are also outsourcing parts of their IT infrastructure, typically starting with the management of PCs and associated networking. It is more difficult to outsource the management of software environments because software applications are complex and are often seen as ‘mission critical’ so are typically managed by an inhouse IT department.  However, the management of a B2B infrastructure is an ideal candidate for being outsourced, particularly those infrastructures which are required to be global in nature and need to be managed on a 24/7 basis anywhere in the world.  Compared to managing a network of PCs or software applications, looking after a B2B environment must also take into account the day to day management of a company’s network of trading partners as well. 

So when should a company decide to outsource their B2B infrastructure?, well there is no right and wrong time to do this but there are a number of significant benefits that can be realised if a company does decide to outsource their B2B infrastructure:   

• Lowers costs – less time spent maintaining complex B2B infrastructures and staff can be re-deployed on other projects
• Accelerates time to market – allows manual tasks to be automated and less time will be spent searching for information
• Improves operational efficiencies – allows users to be shielded from the complexities of using a B2B system, improves visibility, back up and reliability of B2B transactions
• Improves customer satisfaction – ability to trade with any partner, in any location worldwide and more importantly helps to reduce payment cycles and delivery times

Now in the ideal world most companies will be looking to gain all of these benefits from outsourcing their B2B infrastructure, but realising these benefits does not happen overnight. However there is one more benefit that automotive companies can obtain by outsourcing their B2B infrastructures, it will allow them to return to what they do best, which is to design and manufacture vehicles, now that can’t be a bad thing! GXS Managed Services is well positioned to help any company address their B2B outsourcing requirements, if you would like to find out further information about this and other services that we can offer please visit our website, www.gxs.com.