They’ve been called ‘virtual manufacturers’ – businesses with market-leading reputations for designing and marketing products, but which actually turn out to possess few if any manufacturing facilities.
In place of those manufacturing facilities: a network of relationships with suppliers, contract manufacturing and logistics partners, with the ‘virtual manufacturer’ and brand owner at the centre, orchestrating flows of both information and physical products.
Apple, Dell Computer, Nike, Adidas, and any number of global fashion brands—look closely at the detailed operations of such businesses and you’ll find just such a business model.
Leveraging their scale to procure economies of scale in everything from component supply to physical distribution and marketing services, they’re smart enough to recognize that their core competencies lie in areas such as brand management and design, rather than the nuts and bolts of product assembly.
And a growing number of successful companies are finding that it’s a business model that works well for them, too. Light on capital investment requirements and the administrative overhead to manage an extensive manufacturing organisation, it allows these manufacturers to focus their capital investment and energies on where they can add the most value – designing and marketing market-beating products.
But as the virtual manufacturing business model spreads, businesses adopting it are encountering a problem, points out Phil Lewis, vice-president for solutions consulting at enterprise applications giant Infor.
Namely, that their ERP systems are designed for a very different world, a world with real factories, not outsourced ones, and a world where the implicit assumption is of product and information flows that are focused on the business at the centre.
And not, in short, a world where in reality the business at the centre is just a node in a network, alongside suppliers, customers, service providers, including financial service providers, such as banks, and logistics and manufacturing outsourcing partners.
So impose the virtual manufacturing model on a traditional ERP system, argues Lewis, and delays and information gulfs will inevitably result, requiring costly interventions in the form of ‘add on’ systems and manual oversight.
“In such an environment, traditional ERP just doesn’t cut it,” he sums up. “What’s required is something very, very different, something that is designed to deliver multi-enterprise collaboration across extended networks, something that can sit alongside ERP, and interrogate and talk to the ERP systems of collaboration partners in the network, but which is actually more than just ERP.”
And what exactly would such a capability look like? Ticking them off on his fingers, Lewis briskly sums up the principal characteristics and requirements of such a system.
“Hyper-connectivity, for one thing: the ability to interface with a wide range of systems, belonging to a wide range of collaboration partners. Cloud-based, for another – shared access to the Cloud is the communications medium that all these enterprises have in common. Fairly obviously, a robust and capable supply chain transaction and execution focus, for another. And finally, at the core, a single data instance so that if an order or forecast is updated, that update is instantly visible to every other collaboration partner in the network.”
And increasingly, he stresses, the possession of such a system will underpin competitive performance to the point where the ability to deploy such a capability is a non-negotiable part of the cost of doing business, rather like an ERP system is now.
“As Cranfield School of Management’s Martin Christopher famously observed, ultimately it won’t be individual businesses competing, but supply chains, and this move to virtual, outsourced manufacturing simply brings that day forward,” he says. “As global production becomes increasing complex and outsourced, the ability to orchestrate a global supply chain will become increasingly dependent on the ability to deploy and leverage a Cloud-based network that connects buyers, suppliers, logistics providers, financial institutions and other trading partners.”
Founded in 2002, Infor has a long track record of deftly exploiting technology trends through well-timed acquisitions. Moreover, privately-held, it has the financial muscle to back its vision with well-funded innovation programmes, putting it in a position of technology leadership, rather than continually playing technology catch-up. Recent examples, for instance, include Infor’s well-regarded advanced ION middleware capability and its Ming.le social collaboration platform.
So it perhaps should come as no surprise, says Lewis, that before setting out to develop its own hyper-connected multi-enterprise collaboration capability, Infor first surveyed the market, and recognized that the technology it wanted already existed, in the shape of real-time supply chain collaboration platform GT Nexus. A deal was swiftly agreed, with Infor acquiring GT Nexus in the summer of 2015.
“GT Nexus connects 25,000 active trading organizations – buyers, suppliers, and logistics and financial partners,” he sums up. “That includes 30 of the world’s top financial organisations and banks, 50 of the world’s top 3PLs, and a roster of blue-chip manufacturers such as Nestle, Electrolux, Philips, Lenovo, Hewlett-Packard, Procter & Gamble, and Caterpillar.
At Caterpillar, for instance, GT Nexus handles both the inbound and outbound supply chains, and is credited with removing three days inventory from the supply – equivalent to a saving of $150 million – as well as reducing transportation costs by a further $150 million.
In short, he sums up, as the world increasingly moves towards the virtual manufacturing paradigm, Infor finds itself well-positioned to deliver the multi-enterprise collaboration that businesses will increasingly be demanding. The result, believes Lewis, is a compelling proposition, and one which puts Infor in a unique position.
“Basically,” he sums up, “Infor has brought together a whole series of advanced capabilities in areas such as social collaboration, mobile computing, Business Intelligence, and expense management; applied a ‘consumer grade’ easy-to-use interface; and then tightly integrated them with its Infor Xi flagship technology platform via its advanced ION middleware capability, and done so within the Cloud, in the form of industry-specific cloud-based ERP suites, pre-configured and pre-enabled with connectors to leading third-party ‘edge’ applications. And now, we’ve added the market-leading multi-enterprise collaboration platform, built into every product.”
The result: not only a genuinely best-in-class industry-specific ERP solution for the subset of industries on which Infor focuses – aerospace and defence, automotive, chemicals, distribution, equipment service & rental, fashion, food and beverage, high tech & electronics, and industrial manufacturing – but one which now comes ready-equipped with the multi-enterprise collaboration capabilities that underpin the world’s fastest-growing business model.
Best of all, concludes Lewis, those multi-enterprise collaboration capabilities will be available to all of Infor’s customers, whether they are virtual manufacturers or not. End-to-end multi-enterprise supply chain collaboration, in short, has never been easier.
