Extended Enterprise and Ebusiness

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Extended Enterprise and E-business
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Characteristics

• Set of companies with shared interest
• Industry fragmentation
• Developing complementary capabilities with
  partners for customer solutions
• Aligning business processes
• Sharing knowledge
• Setting rules for managing the enterprise
• ROI, Agility, Creativity
• Collaboration or collusion

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Traditional enterprise
Process Alignment
Industry Fragmentation
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Extended enterprise
Process Alignment
Industry Fragmentation
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Nonlinear value-chain
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Cisco and partners
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Ford Motor
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Forms of Collaboration

• Operational
• Communication (e.g. advance shipment
  notification)
• Tactical
• Joint modification of a traditional process
  (e.g. implementing VMI)
• Strategic
• Restructure resources of partners based on core
  competencies
  (e.g. IBM has
  restructured its supply chain so that unlike a
  traditional contract manufacturing relationship,
  operations such as manufacturing, assembly, and
  kitting, take place in a series of stages both
  inside and outside of IBM.)

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The Range of Relationships

• Full Ownership

Increasing Complexity

• Supplier Network Partial Ownership
• Integrated Operations

• Shared Equity

• Selective RD Partnership
• Licensing
• Collaborative Advertising
• Alliance

• Annual or Multi-Year Purchase Agreement
• Sourcing Relationship
• Licensing

• Cross Purchase Order

Shared Funding
Shared Resources
No Linkage
Cross- Equity
Shared Equity
From SCM Review, March 2004
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Product Partner architecture IProduct

• Integral
• components are closely coupled
• not easy to outsource component manufacturing to
  several suppliers
• Modular
• Customers mix and match receivers, speakers,
  compact-disks players, and other components for a
  home stereo system
• components can be individually upgraded and they
  may not share functions

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Product Partner architecture II Partner
network

• Integral
• close geographic, organizational, cultural, and
  electronic proximity
• high degree of dependency among partners
• not easy to substitute one supplier with another
  
• processes of individual partners aligned with the
  total system
• Modular/flexible
• a large number of diverse partners
• stand-alone business processes
• suppliers can be substituted easily without
  adversely impacting the overall performance of
  the partnership

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Capabilities in the EE

• How should it align its capabilities with the
  capabilities of its partners
• In-house production capabilities
• outsourcing
• How should it realign its capabilities with the
  needs of its customers (products)
• develop customer-specific capabilities dedicated
  to a few customers
• develop general purpose (versatile) capabilities
  that can be used to supply a large number of
  customers

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Focused Capabilities

• Strategic/Acquisition
• Focus on Integration

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Coordination

• Transparency of operations
• knowledge of levels and rates
• inventory levels, production rate
• Alignment of processes
• information format and common standards
• linking databases and applications
• partners at different technology sophistication
  levels
• Bullwhip effect
• Multi-tier funds flow
• Downstream delays in payment, floats, due-date
  slippage
• Hand-off inefficiencies

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Capability dimensions and outsourcing

• Knowledge
• know-how
• Capacity
• time and money
• Capability scenarios
• possess knowledge and capacity
• possess only knowledge
• possess only capacity
• possess neither knowledge nor capacity

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Toyotas capabilities
In-house RD and Production
In-house RD, outsource production
Outsource RD and Production
Transmission
Electronics
Engine
Inadequate
Possesses
Possesses
Inadequate
Knowledge
Knowledge
Capacity
Capacity
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E-business value drivers

• Aggregation
• Integration
• Mix of Aggregation/Integration

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Partner Roles in the Value-chain

• Creator
• Develop new products/service ideas
• Refine existing products/services
• Producer
• Package creators ideas into products, services,
  and business solutions
• Distributor
• Enable buyers and sellers to connect,
  communicate, and transact (supply chain or demand
  chain)
• Customer
• Individual customers
• Business customers

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Business Model Positioning
Value Chain Integrators
High
Collaboration Platforms
B2B Procurement
Private exchanges
Functional Integration
B2B Sell
e-market place
Value Chain Service Provider
e-auction
B2C e-procurement
Trust Services
Infomediaries
B2C Sell
Low
High
Innovation
Low
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Forms of Collaboration

• Operational (public e-marketplace)
• Communication
• Tactical (consortium e-marketplace)
• Joint modification of a traditional process
• Strategic (private e-marketplace)
• Restructure resources of partners based on core
  competencies

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IT Capabilities

• Information exchange
• Information visibility
• Information format and protocols
• Conflict resolution
• Coordinated Planning
• Coordinated Execution (project management)
• Technology
• Access (Web browser)
• Application sharing (run each others
  applications)
• Process collaboration (share through workflow)

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Collaboration Framework

• Goals
• Opportunities (products to be sold)
• Means (merchandizing/promotion, markets)
• Performance evaluation
• Competencies, resources, accountability,
  changes, key business processes
• Control system
• triggering orders, staffing levels, time
• Metric
• inventory turns, cycle time, fill rates, cash to
  cash cycle, yield rates