There is no dispute that portals have changed supply chains forever. However, as with many disruptive technologies, not only has a new set of benefits been introduced, but also a new set of challenges.
The early success experienced by portals led to an overly aggressive expansion of their usage in the supply chain. Consequently, a number of unforeseen negative consequences have arisen from supplier portals.
Listed below are four of the major problems created by portals.
#1 – Too Many Portals
Small suppliers can provide better service to their customers by engaging with them electronically for routine transactions such as PO acknowledgements, advanced shipment notifications and invoice submissions. However, most small suppliers do not just sell to one customer. Most suppliers sell to multiple different companies.
Consider a small German auto parts manufacturer that sells to Volkswagen, Daimler and BMW or a small American food supplier that sells to Safeway, Kroger and Wal-Mart. Each of these suppliers has to login into three separate portals on a daily basis to interact with their customers. While the customers benefit by automating supply chain processes, the supplier’s costs are higher due to the added complexity and duplication in their daily business processes.
#2 -Swivel Chair
Most of the data that suppliers key into customers’ portals already exists in digital format within their own in-house systems. While small suppliers may not be running SAP or Oracle, many of them do run small business accounting packages such as Sage, MYOB or Quickbooks. When a purchase order is received in a customer portal, it must then be rekeyed into the supplier’s accounting system.
Similarly, when a small supplier needs to send an invoice they will have to re-key the data that is already in their billing system into the customer’s portal. This process is frequently referred to as “swivel chair” due to the fact that the supplier has to switch back and forth between two different applications. The re-keying process not only creates a duplication of effort for the supplier, but it leads to higher probability of error due to the increased possibility of typographical errors.
#3 – Manual Processes
Contending with multiple portals is not a problem limited to only small suppliers. Much of the information and functionality contained on a portal cannot be obtained through any other means. For example, information about changes to routing guides, contact details and business processes can only be downloaded from a portal. Many buying hubs only make sourcing opportunities, payment status and performance scorecard information available via the portal.
In other cases, processes such as collaborative design and joint promotions planning can only occur through manual interaction on a portal. Requiring suppliers to pull information rather than pushing it to them creates more work for suppliers and it introduces the opportunity for missed communications.
#4 – EDI Replacement
Some buying hubs have embraced portals holistically for all supplier interactions. These organizations have suspended the exchange of point-of-sale, manufacturing forecasts and product catalogs via EDI and XML transactions. Instead suppliers are required to manually process the data.
For example, an electronics supplier receiving a manufacturing forecast from an OEM would have to download the data from the portal then re-key it into their ERP application. Once the forecast was analyzed, the supplier would then have to take the results from the ERP system and re-key them into the customer’s portal. These examples are becoming more and more common in the supply chain.
EIDX Insights on Portals
The Electronics Industry Data Exchange (EIDX) group, which was recently disbanded by its parent CompTIA, performed some very insightful analysis of portal usage in the high tech sector a few years ago. EIDX found that manually inputting data such as a sales forecast from a portal took an average of 90 minutes as compared to only 5 minutes on average with EDI.
Due to the extensive time commitments required, portals increased the number of support staff required from a ratio of 84:1 with EDI to 5:1 with portals. This is clear, quantitative evidence that when used as an EDI replacement portals are, in fact, leading a regression in the level of supply chain automation between trading partners.
92% of the EIDX survey respondents stated that they preferred system-to-system communications via EDI or XML over portals. However, most indicated that they believed portal usage would increase rather than decrease in the coming years.
Why would a buying organization push the use of portals over EDI and XML when there is such an obvious decrease in productivity? I will offer some theories:
- Simplified Interfaces – Large, multi-national corporations have too many entry points for B2B communications. Organizations which have grown by acquisition have a spaghetti-like mess of VAN connections, web forms and direct Internet connections. Centralizing all B2B transactions into a portal greatly simplifies the technology architecture for the buyer. Enrollment, security, reporting and enhancements can all be centralized into the portal significantly reducing the cost of maintenance.
- Data Quality – Through the use of a portal connected to an ERP system, buying organizations can ensure that only high quality data is received from suppliers. Portals can enforce the completion of all mandatory fields by a supplier. Data in fields can be limited to only a small list of choices available in a pull-down box on the user interface. Such data quality enforcement cannot be accommodated easily in traditional machine-to-machine EDI transactions. Furthermore, errors can be minimized through the use of “turnarounds” which are pre-populated forms based upon a related document. For example, 80% of the data in an invoice can be generated from the original purchase order.
While these arguments provide positive ROI for buyers, they add significant costs for suppliers. Such win-lose propositions are bad for the supply chain. Dr. Hau Lee of Stanford University once stated that
“Instead of company to company competition, we are now in an era of supply chain to supply chain competition.”
When developing a portal strategy companies should evaluate the overall cost and complexity impact to not only their own business, but to their trading partners as well.
