Mergers and acquisitions (M&As) in the enterprise applications arena are certainly not uncommon. In fact, if a week goes by without an intra-market acquisition announcement, a market observer might even begin feeling out of sorts. Often, many acquisitions have meant outright bad news or at least anxiety for existing customers of the (usually beleaguered) acquired software provider. However, the market has also witnessed a number of mergers between relatively well-performing supply chain software companies that have joined forces to deliver even broader and deeper set of solution footprints and better value propositions to the market.
Such an example is Sterling Commerce, a $630 million (USD) subsidiary of AT&T Inc. (NYSE:T), which has long been a prominent provider of solutions that connect client enterprises' business communities, processes, people, and technology in a global economy. Over the last few years, the company has acquired a number of supply chain management (SCM) software companies that, at the time, were not perceived as companies in distress or in any pressing need of a "white knight" to help stave off a hostile takeover or abate financial woes. However, these relatively small vendors were apparently not loath to more liberal access to new funds for product development and international customer cross-selling opportunities within Sterling's huge traditional install base. This is particularly true in light of Sterling Commerce's operations in 24 countries, with regional headquarters in four geographies: 1) the Asia-Pacific region in Singapore, 2) the Europe, Middle East and Africa (EMEA) region in London, England, 3) Latin America in Sao Paolo, Brazil, and 4) the North American region in Dublin, Ohio, (US). Headquartered in Dublin, Ohio (US), Sterling Commerce has offices in 17 countries and most major cities around the world. The company also has engineering laboratories in 5 countries (France, Germany, India, Singapore, and US). Gradually, Sterling has become more of an enterprise applications vendor by diversifying its traditional focus on being a business-to-business (B2B) infrastructure provider. Namely, apart from core B2B communications and recent SCM applications, Sterling also offers application integration and network service; electronic data interchange (EDI) applications, and translation products.
Sterling Commerce's Genesis
To better judge the rationale behind the SCM acquisitions, it's helpful to explore Sterling Commerce a bit deeper. Stemming from an EDI and value- added network (VAN) communications and integration background, the company has been in business since 1976, and with decades of profitable growth and currently with over 2,500 employees around the globe. It has over 30,000 customers in virtually all industries, which constitute about $23 trillion (US) of the global economy. Amid that install base are many of the largest banks in the US. The vendor also serves the financial services, manufacturing, logistics, communications/media and retail markets.
Given its longevity, Sterling was involved in electronic commerce way back when transactions took place on closed, proprietary systems using the rigid EDI format. In its more than three decades of existence, the company has seen the emergence of the World Wide Web (WWW) and the Internet-based EDI protocols (see EDI versus. XML—Working in Tandem Rather Than Competing?); the dot-com bubble; and a share of its own corporate changes. Namely, Sterling Commerce became an independent entity in 1996 after being a division of former Sterling Software (which was subsequently acquired by Computer Associates [CA]). In early 2000, Sterling Commerce was acquired by SBC Communications Inc., which later became AT&T Inc. following the merger with Ma Bell. Then there were rumors in the early 2000s of SBC being uncertain what do with Sterling Commerce, SBC's $3.9 billion (USD) investment at the peak of the dot-com boom. For a while, Sterling was not considered core to SBC's business, so much so that at the end of 2002, SBC reportedly tried to divest it, with Sterling Commerce receiving strong interest from Bain Capital in late 2002.
However, that the spin-off never took place and EDI/VAN provision became a limited growth business (albeit still quite lucrative). Nonetheless, since the early 2000s, Sterling Commerce and its VAN service providers offering EDI transport and translation services have been engaged in the most sweeping re-engineering of their businesses and value propositions since the advent of Internet-based EDI during the late 1990s. Namely, traditional document interchange and guaranteed message delivery services have recently been enhanced with a new series of integration and application services designed to enable inter-enterprise business process execution, collaboration, and management for SCM, and customer relationship management (CRM) strategies. While emerging as a new breed of inter-enterprise integrators, these providers' services have increasingly been including data cleansing and syndication, product information management (PIM), global data synchronization (GDS, see The Role of PIM and PLM in the Product Information Supply Chain: Where Is Your Link?), cross-platform and inter-enterprise transaction management, document reconciliation and analytics, trading partner business intelligence (BI) and analytics. They have also included an array of enterprise applications to assist businesses with collaborative processes, ranging from dispute and financial process management to demand planning, supply chain visibility (SCV), and vendor-managed inventory (VMI).
As a result, a couple years ago GXS introduced Trading Grid, an EDI services business, acquired from IBM, and announced a partnership with WebMethods (now part of Software AG). It also acquired HAHT Commerce, a former partner relationship management (PRM) vendor (see GXS Acquires HAHT Commerce for More Synchronized Retail B2B Data). On its hand, Inovis has acquired QRS (see Inovis Delves into PIM by Snatching QRS), while Perfect Commerce has acquired the Internet trading exchange Pantellos.
Realizing Opportunity from Trading Complexities
Somewhat resembling Click Commerce's approach (see Will a Tool Manufacturer and a Supply Chain Software Vendor "Click" in Matrimony?), Sterling Commerce's supply chain thinking and strategy also stems from the premise that collaborative commerce turns traditional linear value chains into multi-enterprise supply chain networks. The business challenge, which can thus be turned into opportunity, comes from the fact that selling and fulfillment across an extended supply chain have become quite complex. Namely, the word "multiple" and "cross-channel" has become part of the complicated game, starting with multiple enterprises involved in trade, whereby each enterprise will often have multiple locations with multiple brands, divisions, independent business units (IBUs), each with their own back-end systems, sales channels, etc. Most of these have come, in great part, due to frequent M&As in the market.
Consequently, multiple catalogs with products or services and multiple product choices that require configuration and guided selling have long become the matter of course (see The Basics of Quote-to-Order Systems). Further, globalization and more demanding customer expectations have resulted in the need for multiple fulfillment methods, whereby goods can be delivered from warehouses, stores, or directly from suppliers (via drop-shipping, see Drop-Shipping—Internet Retailers' "Little Helper"?), through third-party logistics (3PL) networks or the company's own fleet (in a full truckload [TL], less than a truckload [LTL], or parcel delivery), or through a service network, a third-party service network, etc.
As seen in Retailing Trends—Shopping Anyway and Everywhere, Internet-based technological advancements have caused consumers to expect interchangeable multi-channel (e.g., retail store, catalog, call center, commercial contractor, web site, kiosk, etc.) inquiry, shopping, goods return, etc. In fact nowadays, a consumer expects a true cross-channel experience, and rightfully so, where they are able to buy something online and return it to the closest retail store for a refund, without any questions asked. Last but not least, when one counts in multiple customer segments (such as consumer, distributor, or corporate customer), effective collaboration should provide visibility and transparency, optimize shared assets, and orchestrate common processes in the demand, supply, and service chains (consisting of sales force, key accounts, consumers, retailers, distributors, suppliers, manufacturers, field service, etc.).
Failing to execute well in such intricate environments typically results with lower revenue growth, declining profit margins, and declining brand equity, with the all-too-common symptoms of high operating costs, inaccurate orders, and poor on-time delivery (see The Perfect Order—Inside-out or Outside-in?). It can also result in high stock-outs (missed sales opportunities), lower customer satisfaction, or a myriad of other problems. Nowadays it's become cliché to call traditional phone, fax, and paper-based communications systems labor-intensive, inefficient, and prone to error. Yet, companies have historically dedicated significant resources and time to the manual entry (re-keying) of information from faxed or phoned-in purchase orders (PO), and on manually processing paper checks, invoices, and shipping notices. While spreadsheets and e-mail are also used to somewhat better manage partner relationships, these electronic systems can also be inefficient and difficult to integrate. The large volume of paper generated by these systems and the mass of information to be sorted and processed frequently produce hidden costs, such as errors and delays in information delivery. Moreover, timely changes can be difficult to implement in manually intensive processes and the cost related to such changes can also be significant. For example, a paper-based catalog cannot be quickly or inexpensively updated to inform customers of changes in product offerings, availability, or pricing (see Differences in Complexity between B2C and B2B E-commerce).
It is also important to integrate channel partners into the selling experience. Companies should to be able to allow their partners to not only have a web portal to purchase products and services, but they also need to allow them to be part of the quoting process and leverage quoting capabilities of a manufacturer or retailer, and allow partners to add their products along with the manufacturer's to the quotes that they send to prospects.
A manufacturer and the members of its distribution network often have limited capability to track orders, inventory, warranties, and other information (or to compile useful databases) using paper-based or semi-automated processes. These forms of communication do not permit manufacturers and their business partners to exchange information on a real-time basis, and thereby prevents easy access to key information needed to transact business. Manufacturers and trading partners may also suffer from differences in languages, cultures, and time zones, which are additional barriers that traditional methods cannot easily overcome. Yet, increasing market and supply chain complexity motivates companies to improve operations and communications with their trading partner community. The continued growth of outsourced manufacturing, an increased focus on low-cost international materials procurement, and heavy market reliance on vendor- or supplier-managed inventory programs to control costs all require a solid infrastructure for coordinating the extended supply network (see What Does the Future Hold for PRM?).
Furthermore, traditional enterprise resource planning (ERP) systems typically cannot handle these types of multi-enterprise complexities, and they tend not to provide the visibility and control required to efficiently manage and synchronize extended business processes – and were really never designed to be customer and partner-facing. Inefficient processes and poor customer service often result. Indeed, most ERP systems were not originally designed to coordinate business processes across a multi-enterprise supply chain, including outsourced manufacturing, 3PL deliveries, partner fulfillment, etc. and neither were they designed to be customer-facing. Subsequently, traditional systems often require multiple instances across an organization (see Standardizing on One ERP System in a Multi-division Enterprise). And, in many cases, this is based on entirely different processes across various divisions, sectors, business units, or regions of an organization. Yet, the ability to view complete and accurate orders, integrate data, and manage inventory and activities for effective fulfillment execution is necessary to effectively respond to challenging customer requirements and achieve a competitive advantage. Their absence typically results in orders that are stored in different systems; difficult and often manual interactions with external partners; and poor inventory visibility. Ultimately, business process changes are very expensive and time consuming. Likewise, it's not only smaller, lesser known enterprises that have fallen prey to this type of neglect. Even some of the big corporate names with automated web storefronts still have processes that require significant manual interaction. It is common, for example, for an enterprise to pass its fulfillment to a third-party transportation company with no direct electronic communication between the two.
Laying the Foundation for the Solution
Realizing that enterprise applications catering to holistic selling and fulfillment processes across multiple channels would be a value-add for existing and prospective customers, Sterling Commerce saw a growth opportunity and began acquiring some best-of-breed point SCM solutions in 2004. These solutions were focused on coordinating and optimizing supply chain processes across multiple channels of suppliers, customers, and other potential trading partners. However, before any blending of disparate technologies (or "plumbing" infrastructure with an enterprise applications layer atop) could happen, Sterling had to espouse a sound, underlying technology blueprint based on open Internet standards and component-based, service-oriented architecture (SOA). To that end, the vendor has been striving to provide self-provisioning solutions for collaborative commerce, including intuitive user interfaces (UIs), packaged applications, process automation, data security (in partnership with Entrust), and user administration. Most of these components can be delivered in an application service provider (ASP) or managed service provider (MSP) hosted model, which provides companies with deployment options to assist IT departments with a backlog of projects achieve a quicker time to value.
Because most enterprises have to compete through differentiated processes and strategies, only a well-devised SOA framework can typically provide the flexibility necessary to support processes and strategies with the goal of improving customer service, meeting compliance requirements, adopting new business models, etc. As a result, Sterling Commerce has since developed all of its applications using SOA principles (see The Future of SOA-based Applications and Infrastructure). This means including Sterling's current supply chain portfolio and B2B communications software. By embracing the SOA tenets to be granular, extensible markup language (XML)-based, stateless, and protocol and transport independent, Sterling Commerce believes its applications are better able to interoperate with disparate systems and be scaled to accommodate mission-critical, high volume environments. The company's comprehensive platform also features a services library and an integrated development environment (Process Modeler) for configuring or extending solutions without extensive customization, with the aim to reduce total cost of ownership (TCO) and accelerate deployment.
One illustration of Sterling Commerce's continuous delivery of SOA-based applications that address specific business problems that demand the capacity to process information from disparate sources, systems, and formats, is the recently released Sterling Supply Chain Visibility On-Demand (to be detailed later on). Also, Sterling Commerce illustrated the benefit of its SOA platform by demonstrating process-level integration between on-demand technology acquired from Nistevo (also to be detailed later on) and the Sterling Commerce existing supply chain application portfolio. Through SOA, the company was reportedly able to handle this complex integration that had to account for different delivery models in a short timeframe of a few months.
Painstakingly Building a SCM Portfolio
Through its 2004 acquisition of the once privately-held Tewksbury, Massachusetts, (US)-based supply chain fulfillment vendor, Yantra. Sterling has since leveraged this purchase to help Sterling's development of composite SCM applications, built with Java 2 Enterprise Edition (J2EE) technology, and is considered an advanced SOA platform, which enables business collaboration beyond the four walls of the enterprise.
Yantra's solution had long offered tools to build and manage complex event-based workflows which synchronize supply chain order fulfillment activities among a variety of suppliers, carriers, and channel partners, etc.—all the way to the end customer (often a consumer). Yantra's warehouse management system (WMS), Yantra WMS, provided the typical execution and management of complex processes, inventory, and labor. In addition to the typical WMS functions, which enable supply network communications; coordinate business processes and services; and optimize supply chain execution fulfillment functions (see Who Needs Warehousing Management and How Much Thereof?), Sterling enhanced Yantra WMS to create Sterling WMS, which today caters to both the selling and fulfillment and side. For selling, multi-enterprise, multi-division, multi-location capabilities provide central point of control over complex processes, while a flexible process definition framework enables easy configuration of customer specific value-added services. For the latter, fulfillment, in addition to real-time operational views, and activity monitoring enable continuous improvement, while resource and productivity tools are to improve labor planning and utilization to drive out unneeded costs.
When we evaluated Yantra in 2002, (Leader in Distributed Order Management, But Wait There's More) we noted that its platform was marked with flexibility. Based on object-oriented (OO) programming, it allowed components to be assembled into "custom" solutions in the same runtime as traditional solutions. Yet it offered a protected upgrade path, and allowed different distribution centers (DCs) to run off a single instance of the overlaid fulfillment software even if their processes and practices were quite different. The fact that Sterling paid $170 million (USD) in cash for the privately-held company—about four times of Yantra's estimated revenues—likely indicates that Sterling Commerce deliberately paid a premium to get a differentiated technology (with the "Single platform, Multi, Multi, Multi…" message). Sterling has also largely kept the staff of around 250 to operate Yantra as a new business division. Consequently, with embedded SOA and process-centric modeling capabilities, Sterling WMS is highly adaptable, enabling rapid process change to ensure consistency across multi-site warehouse operations while providing for facility-specific configuration. The product provides a central point of control over complex warehouse operations and across multiple facilities of varying types. Further, its support for radio frequency identification (RFID) and materials-handling integration, as well as strong planning, execution, and measurement tools for distribution managers, brings operational discipline to many complex warehouse operations.
Additionally, building on Yantra's distinctive distributed order management (DOM) functionality, the Sterling Order Management product also supports complex fulfillment (order execution) and selling (order capture) requirements. As for fulfillment, an intelligent sourcing engine orchestrates complex fulfillment scenarios across the supply chain, deciding which location, based on predefined business rules, is the ‘best' location to fulfill the order. Additionally a single order repository allows a complete view of all orders no matter where the order was taken or which ERP system it resides. Global Inventory Visibility provides an aggregated view across multiple systems to provide an accurate view of all available supply and demand requirements. As for the selling side, reverse logistics capabilities automatically direct returns to the appropriate location, including partner locations, based on user-defined return rules, while a multi-channel call center management provides visibility into order and service fulfillment across channels. Visibility is also given through scripting, wizard-driven interactions, and intuitive UIs for quick order management.
In early 2007, Sterling Commerce announced the availability of two new modules for the Sterling WMS solution: 1) the Resource Planning module, and 2) Activity Reporting Manager module. The first module provides increased visibility into labor performance within the warehouse (for improved operational productivity), while the latter ensures more accurate and granular view of billing for tasks executed, thus enabling companies to better understand the true cost of serving multiple clients or divisions. Since labor availability is often the biggest impediment to meeting shorter lead times or providing value-added services when fulfilling orders, the new Resource Planning module aims at helping companies manage demand variability by providing analytic capabilities that enable dynamic labor deployment for manufacturers, retailers, and logistics providers. It verifies, in real time (or near real time), if demands can be fulfilled with available capacity, and when capacity falls short, helps assign resources to cover the shortfall. The module graphically depicts the balance of workload and resource availability and enables "what-if" scenarios to help organizations manage demand variability, leading to increased on-time fulfillment and optimal resource utilization. In addition, it monitors activity with real-time views of operations, enabling continuous improvement for increased productivity.
On the other hand, because value-added services are the main staple for companies that manage warehouse operations for others, such as 3PL providers or fulfillment houses (which companies also face multi-tenant situations that warrant more accurate billing for tasks executed), Sterling Commerce introduced a new Activity Reporting Manager module. This module is designed to help these companies understand the true cost of serving multiple clients or divisions. Both new modules can leverage labor standards available through the existing Productivity Manager module of Sterling WMS, which has also been enhanced to offer a new method for creating labor standard benchmarks. By creating a benchmark based on an analysis of historical task execution data instead of engineering standards, Productivity Manager provides labor benchmarks that can be implemented easily and kept current, which has been a challenge for most warehouse operations. In 2008, Sterling unveiled Sterling Yard Management System (YMS), and administrative controls and additional multi-enterprise controls for the SOA platform, which will be detailed later on.
Adding Transportation and Logistics Management Capabilities
Sterling had created Sterling WMS and Sterling Order Management as starting blocks that enable companies to orchestrate inventory globally, across multiple fulfillment locations. And by providing a level of configurability and supporting multiple operating requirements across industries, customers, products, and warehouse types, the solutions allow companies to manage their extended enterprises to meet various business requirements. Sterling then addressed another area of supply chain execution (SCE)—transportation and logistics management. Through this, the company saw additional, significant efficiency improvement opportunities for its customers (and, to be fair, cross-selling opportunities for itself) through a combined WMS and transportation management system (TMS) solution. This combination should not only provide customers with a way to cut costs in an industry estimated to be almost a trillion dollars in the US alone, but also a means to improve customer satisfaction and loyalty, because the integrated solution should improve visibility and control throughout the whole order-to-shipment supply chain process. This should be attractive to many companies that have recently seen double-digit growth (in terms of percentage) in transportation costs, while they would rather focus on their core business of designing, making, and delivering high-quality products on time, and at competitive prices.
To meet this goal, Sterling Commerce acquired Nistevo, a privately-held provider of on-demand transportation management services in mid-2006. At that time, the Eden Prairie, Minnesota-based (US) company had approximately 45 employees and offered Nistevo Collaborative Logistics Network for transportation management, an on-demand software as a service (SaaS) (see What Is Software as a Service?) which enables manufacturers, retailers, distributors, and logistics service providers and carriers to view, plan, execute, settle, and report on their shipments. Although the Nistevo's original focus was on collaborative transportation, which is a method of bringing shippers together to create combined shipments and routes, the company ultimately developed an on-demand transportation planning and execution network-based solution with more than 130 connected shippers, spanning a community of over 9,000 carriers who manage approximately 65 million transactions during 2008. Using the network, members were managing more than five million shipments annually, resulting in significant cost savings for freight moved. Nistevo's clients included Church & Dwight Co., The Dial Corporation, Tractor Supply, Clorox, Smithfield Foods, Cargill, Burlington Coat Factory, Autozone, HP Hood, and Seneca Foods.
Sterling was attracted to Nistevo's on-demand competence, as a way to lower the entry-level costs for implementing vastly transparent SCM systems. Transportation management is innately a network-centric process that lends itself well to the SaaS deployments, where the exchange of timely, accurate, and complete information among trading partners is critical. Although connectivity has long been Sterling Commerce's "bread and butter" (a capability that most pure enterprise applications vendors lack), Nistevo's on-demand solutions complemented several solutions Sterling Commerce offered at the time as part of the company's efforts to provide a wide range of deployment choices for its customers.
Sterling has since absorbed Nistevo's web-based Collaborative Logistics Network into its existing supply chain application portfolio. Today, Sterling TMS is the leading on-demand network for transportation management, providing a vast member logistics network that increases available transportation capacity and simplifies and automates carrier communications. Sterling TMS addresses fulfillment issues via on-demand, multimodal transportation management capabilities and a pre-connected logistics network of over 9,000 carriers and 30,000 suppliers. As a result, when enterprises buy Sterling TMS, they do not just buy the software, but they also get a network of providers to do business with immediately. Like its predecessor Nistevo product, Sterling TMS also enables shippers, third-party logistics (3PL) providers and carriers to view, plan, execute, settle, and analyze their inbound and outbound transportation via these capabilities:
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Planning. Seeks routes, organizes loads, and structures transportation for carriers to fulfill delivery times. Through this function, Sterling TMS addresses selling issues, since automatic load tendering ensures all shipments are scheduled for the best possible, on-time delivery performance. Optimization tools consolidate orders into shipments and builds multi-stop, multi-pickup routes using preferred carrier allowing users to select the "best cost" service for an order.
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Execution. Moves goods from the dock and to the end point, and monitors the flow of carrier information. Fulfillment is addressed via integrated visibility tools that enable internal users, customers, and suppliers to track shipment status for their orders.
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Invoice and settlement. The automated freight settlement validates carrier contracts against invoices or enables self-invoicing based on agreed carrier rates, resulting in reduced processing costs (contract carrier management can create savings of up to 10 percent for inbound shipments).
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Analytics. Show the best performing carriers, enabling customers to follow supplier performance, including on-time delivery and cost per lane and associated accessorial costs.
In addition to these components, Sterling Collaboration Network is sometimes offered. It originates from the company's almost proverbial experience with operating value-added EDI networks. Sterling Collaboration Network manages over 200 million invoices each year from over 300,000 EDI-enabled businesses, arguably making it the market leader in EDI and managed file transfer (MFT). It is a full-service private network within a real-time, event-driven environment that can host both integration services and applications.
Essentially, the on-demand TMS software can work with a user company's existing SCM application and with Sterling Collaboration Network to automate transportation planning, execution and freight payment processes, hence enabling the company to improve logistics efficiency and customer satisfaction. The orders are accepted from the user's order management application and automatically fed into Sterling TMS for transportation planning. The plan is shared with the order management application and the WMS application for increased efficiency at the dock-door. Sterling TMS customers cite selecting the product for its on-demand architecture and rich application functionality, including settlement process automation and improved reporting, which have allowed them to fully automate their transportation management process. Automating the settlement process is one of the biggest benefits customers often get from Sterling TMS, enabling the freight audit and payment process to be managed in-house instead of outsourcing to an audit and payment company. Eventually, this eliminates manual invoicing from the user company's commercial carriers and enables the company to move to a paperless invoicing system.
Some Internal Development Helps Too
Following these two acquisitions, Sterling Commerce further embarked onto blending these applications with its existing B2B connectivity infrastructure (being the industry's renowned provider of secure file transfer and EDI solutions), and some notable internally developed solutions. Thus, in late 2006, the vendor announced enhancements to its evolving supply chain applications portfolio, with the idea of benefiting both its existing customers and their extended trading communities. Specifically, Sterling Commerce enhanced its portfolio with new capabilities that leverage business process management (BPM) to help companies better serve their customers' unique demands (see The Future of Business Process Management Where is BPM heading?). According to a Sterling press release, these enhancements included
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New process modeling capabilities that open new fulfillment channels and offer support for new delivery options. For example, companies can now model new sourcing rules to accommodate new fulfillment channels, such as pick-up in store (after, e.g., ordering online);
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Out-of-the-box workflows that address many possible exception scenarios encountered in order administration process, as well as customer-initiated order inquiries common in a business-to-consumer (B2C) environment; and
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New task-based retail order entry and modification user interfaces (UIs) that provide the ability to handle special orders, services and a mix of fulfillment methods of different lines on the same order.
The press release further explains that some new capabilities built on the Sterling Commerce's application foundation are designed to improve the return on investment (ROI) in existing software. These features include
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A new user screen that enables quicker on-boarding of customer service agents;
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New more efficient, task-based UI's specialized for each store role to reduce training time and costs; and
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A new alerts framework that aims at improved exception handling and reduced costs and errors. This framework simplifies the process of handling exception workflows by intelligently routing alerts based on priority and supporting context-sensitive alert resolution.
To enhance the end-to-end fulfillment process, Sterling added to the Selling and Fulfillment Suite Sterling Yard Management (YMS). According to the company's PR (Source: Sterling Commerce Extends Supply Chain Application Portfolio), offered as an On-Demand solution, YMS delivers operational efficiencies for both shippers and carriers through increased visibility into the yard to manage trailers and shipments:
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Shippers can assign available trailers to loads to ensure that demand and supply of trailers match, resulting in improved on-time departure.
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Dispatchers can switch carriers easily based on available trailers and communicate to the new carrier with a shipment pickup request.
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All users can inquire on trailer availability by carrier, for example whether any trailers are ready for pickup.
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At time of arrival, users can inform an inbound delivery driver about an outbound load that is ready for pickup.
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Carriers can drop a loaded trailer and immediately leave with the correct empty trailer, without having to wait for the unloading process to happen.
With YMS, Sterling now offers a fully integrated fulfillment solution that coordinates all activities related to the warehouse, yard and transportation, sharing delivery schedules, order status, inventory and asset availability to carriers, 3PLs and to all departments within the company.
At about same time, Sterling Commerce introduced Sterling Supply Chain Visibility On-Demand, a new internally developed application that automates and provides the holistic collaborative execution of many SCM processes. Specifically, the software combines real-time visibility of supplier information with proactive exception management to enable companies to better manage the performance of their inbound supply chain. This combination aims at better inventory allocation, improved customer satisfaction, consistent lead times, reduced risk and lower operational costs. It goes without saying that with the complexity of today's global supply chains, it is a competitive advantage for companies to have visibility into their entire supplier community and the ability to manage the community, based on real-time information. For example, managing shared processes (those that involve interaction with other companies), are harder to coordinate and synchronize. Today's businesses thus require visibility into shared processes more than ever before, as they rapidly change and globally extend themselves, creating global supplier communities that include 3PL providers, outsourced operations, and decentralized organizations (see Using Visibility to Manage Supply Chain Uncertainty). Yet, the primary means of identifying exceptions today still relies heavily on manual mechanisms like fax, e-mail, and phone, which are costly to manage and error-prone.
Accordingly, Sterling Commerce has been striving to deliver connectivity across the entire supply chain; Sterling Supply Chain Visibility provides inbound supply information amid supply trading partners (e.g., the management and monitoring of inbound inventory, purchase orders and shipments) in several usable, understandable, and actionable formats, such as the following:
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Dashboards provide a comprehensive view of supply and demand associated with late shipments and items.
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Event (exception) management offers full alerting, notification, and automated action functionality. It flags disruptions early in the supply process to improve operational performance and customer satisfaction. Proactive alerts enable users to manage supply exceptions and avoid sifting through volumes of information.
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Supply and demand matching minimizes the impact of supply disruptions
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Supplier key performance indicators (KPIs) with further drill down capabilities measure supplier performance over time.
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Business modeler allows users to reconfigure supply processes easily without IT involvement. The automation of manual processes typically results in the ability to adapt more quickly to changing business situations with suppliers.
These product deliveries mark the continued momentum in Sterling Commerce's strategic use of SOA for its customers' benefit and its own broad effort to expose its SOA foundation to deliver more streamlined and cost-effective multi-enterprise collaborative solutions. As mentioned earlier, by harnessing SOA, Sterling was reportedly able to integrate Nistevo Collaborative Network (now called Sterling TMS) with the Sterling Commerce supply chain application portfolio in just three months after the Nistevo acquisition.
Closing the Multichannel Sales Order-to-Fulfillment Circle
To address the customer and partner-facing side, such as order capture (and thus address the entire order management cycle consisting of the "buy", "sell", "ship" and "pay" processes), Sterling Commerce acquired Comergent Technologies Inc., in early 2007 for approximately $155 million (USD) in cash. This Redwood City, California (US)-based developer of e-business software had offices in the US and Europe. Comergent's software has helped many organizations orchestrates complex product, selling, and order management processes across multiple systems, business organizations, and sales channels. . And with this addition, Sterling Commerce continued to strive to deliver a more comprehensive order capture and order management solution that spans across both supply (fulfillment) and sell (creation and capture) processes.
In other words, together, Sterling Commerce and Comergent solutions should now address the fuller spectrum of the order management lifecycle, which, with its multiple touch-points to customers, partners, and suppliers, is a difficult process to properly execute, given its reach well beyond the typical four walls of an enterprise. To that end, Comergent had long offered an e-business platform and application suite that simplifies and improves the selling of complex products, services, and product bundles across channels, where one has to also deal with sophisticated pricing and discounting models to boot. The Comergent solution complements Sterling's existing application suite, which, at the time, was able to manage the dynamic and complex processes associated with warehousing, transportation, distributed order fulfillment, and supply chain visibility.
Specifically, Comergent's applications covers order capture capabilities from Web storefront creation, dynamic catalog and pricing management, to tools for guided selling and product and service configuration, and automating the quote negotiation and approval process. Thus, the solution offers e-commerce capabilities that allow internal (sales, call center, etc.) and external (partners and suppliers) to participate together in the selling process B2B-commerce.
Because Sterling Commerce has always had strong solutions in the retail industry (and not really in manufacturing), the idea was that the combined solution would allow the vendor to do for manufacturing what it has long been doing for retail customers. The first driver for such a solution was the convergence of what are often complex processes for capturing sales orders (due to intricate product configurations, Web-based selling, demand variation, and fragmentation in the channels) and then fulfilling them—because of the sheer number of suppliers, contractors, and distributors and channels. The second driver had to do with most larger manufacturers' plans to consolidate their disparate (and costly) systems that arose from mergers, legacy point solutions for business management, production, warehousing, logistics, and so on.
The former Comergent solutions have been renamed Sterling Multi-Channel Selling and can help companies economically increase market share, improve the buying experience, and reduce costs while driving higher customer loyalty. This should be achieved via providing user enterprises and their trading partners with the ability to find, configure, and order complex products and services through most available touch points. Likewise, by mid-2007, Sterling Commerce announced the availability of Sterling Service Contracts, a new product within the Sterling Multi-Channel Selling solution that delivers capabilities for administering and automating the life cycle of service, subscription, and other duration-based offerings. The idea here is to help companies deliver a better buying experience to their customers and partners by managing the complexities of selling and post-sales management of duration-based offerings, such as product and service bundles (including cell phone and service plans), service and maintenance contracts, and software subscriptions. This is in contrast to traditional order management systems, which were designed to take and fulfill an order, but not necessarily to deal with long-term customer commitments, such as maintenance contracts, warranties, and service plans for cell phones. Conversely and according to a Sterling press release Sterling Service Contracts are expected to allow companies to match the right product and service bundles with customer needs, help them grow revenue through up-selling or cross-selling opportunities, reduce customer churn (attrition), and improve customer service. The company aspires to this through using flexible and rules-based architecture that should enable companies to manage many types of service contracts. The press release further explains that Sterling Service Contract is expected to:
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manage the complex business rules that define how product and service offers are bundled and priced for selling and post-sale contract changes (upgrade, change, renew, cancel, etc.);
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proactively monitor equipment warranties, maintenance agreements, and service commitments, and automatically notify customers of contract expirations and offering auto-renew contracts;
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manage the sale and maintenance of service contracts through self-service storefronts, as well as applications for customer service representatives, direct sales and indirect sales, through distributors, resellers and other selling partners; and
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manage complex pricing for services, including multiple price types to support, for example, one-time fees, subscriptions, cancellations and usage charges.
More recently, Sterling added merchandising and marketing capabilities to Sterling Multi-Channel Selling to provide real-time feedback on user behavior and purchase history by grouping users for merchandising and marketing purposes based on profile and interactions, and enable companies to drive customer retention and greater share of wallet. According to the company's PR (Source: Sterling Commerce Delivers New Multi-Channel Selling Capabilities That Drive Greater Customer Loyalty and Sales), Sterling Multi-Channel Selling can track important behaviors and purchase history and make those events actionable for merchandising and marketing purposes, provide dynamic behavioral segmentation capabilities to group users for merchandising and marketing purposes based on their profile and interactions, and streamline merchandising and marketing execution by allowing companies to more effectively target customers with the most applicable offers and take advantage of cross-sell/up-sell opportunities.
Sterling Multi-Channel Selling also provides gift registry and wish list capabilities that enable consumers to create, manage, and purchase from registries. Registrants can set-up registries for multiple gifting events including weddings and baby showers (Source: Sterling Commerce Advances its Business-to-Consumer Strategy). With these additional solutions, Sterling Commerce customers should now be able to gain a better understanding of who their partners are, what they sell, where they sell, and to whom they sell.
These capabilities align with Sterling Commerce's strategy to excel at problems that reach beyond typical enterprise boundaries. This problem solving is to be done by providing solutions that eliminate barriers to working better with an organization's business community, like trader partner organizations, such as customers and suppliers. As discussed previously, the order management process is becoming more complex as customers demand more channels (for example, in-store, Web, direct mail, etc), more delivery options, and more information throughout the fulfillment process. Other potential synergies have apparently come from both companies leveraging SOA principles to allow customers to incrementally adopt new capabilities as an industry or customer dictates. Furthermore, Sterling Multi-Channel Selling is built on an architecture that supports deployment as on-premise or hosted managed service provider (MSP) offerings. Sterling Commerce's offerings were part of its efforts to provide a wide range of deployment choices for its customers. We would expect to see Sterling Commerce leveraging its parent, AT&T, and offering more managed services offerings for Multi-Channel Selling.
The Comergent acquisition not only gave Sterling Commerce's suite a strong front-end customer experience, including well known configuration and pricing capabilities, it was also seen to leverage the industry-specific expertise of each company. For Sterling Commerce, this meant benefiting from Comergent's manufacturing, high-tech, and telecommunications expertise, and for Comergent, this meant benefiting from Sterling Commerce's retail expertise. Through this, Sterling was able to better address MEC challenges for those industries. Sterling Multi-Channel Selling has a large customer references with tier one high-tech manufacturers, such as NEC Solutions America, Hitachi Data Systems, Symbol (now Motorola)Haworth, Toro, and Pitney Bowes—as well as Life Technologies and GlaxoSmithKline in life sciences, and companies like Gates and Goodrich in automotive and aerospace (A&D) respectively. Other notable customers of Sterling Multi-Channel Selling (about 175 in total) included organizations such as Quantum, CF Industries, Boston Market, DIRECTV, and RCN.
Enter Sterling Selling and Fulfilment Suite
In the next step of its evolutionary, in late 2007, Sterling Commerce announced the availability of the Sterling Selling and Fulfillment Suite, a revamped solution designed to managing complex inquiry-to-cash cycles in the manufacturing, retail, distribution, and communications sectors. The idea behind the suite is to further remove the barriers to successful customer and supplier interactions by providing a single view of marketing, lead management, selling, orders, inventory, delivery, and supply—plus returns, repairs, and settlement across the supply chain. It is a modular solution for the execution of complex order life cycles, addressing both the selling side (including the "market", "sell", and "order" processes) and fulfillment side (such as, the "source", "procure", "distribute and replenish", and "fulfill" processes).
The Sterling Selling and Fulfillment Suite aims at simplifying the multifaceted inquiry-to-cash cycle by delivering the applications and technology to manage demands from virtually any channel, for any mix of product and services, and for any supply base. It is a set of applications for managing the inquiry to cash sub-processes consists of seven solutions. In addition to Sterling Order Management; Sterling Warehouse Management; Sterling Transportation Management; and Sterling Supply Chain Visibility, this application set also includes Sterling Catalog and Offer Management; and Sterling Configure, Price, Quote (CPQ), which stem from Comergent. These are described below.
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Sterling Catalog and Offer Management. This solution enables companies to transform how they market and sell products and services across all channels. The solution improves business responsiveness by allowing business users to easily create and manage product and service catalogs, and build complex offers. It also helps companies target offers and promotions, as well as retention programs through every available touch-point to meet and adjust to changing customer and market demands. Sterling Catalog and Offer Management aggregates products from multiple vendors into a single catalog, and gives companies full control over product pricing and catalog updates. It also includes parts assembly capabilities—to manage all aspects of ordering product parts. With Sterling Catalog and Offer Management you can easily and quickly create and administer complex offers—all available through the various ways they reach their users.
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Sterling Configure, Price, Quote (CPQ). Again as the name implies, this solution guides prospects, customers, partners, and internal users through the process of finding, configuring, and ordering complex products and services in a Web-based, self-service environment. It offers pricing capabilities that allow companies to determine the appropriate pricing based on customer, customer segment, region, contract, or any other criteria they define, while the quoting capabilities automates building quotes based on pricing rules and selections made during the configuration process. Sterling CPQ provides a seamless mechanism to automate the creation, negotiation, and approval of quotes for prospects into orders.
Latest Product Additions
Along with the introduction of the suite, Sterling Commerce also brought in new capabilities in both the selling and fulfillment solution bundles, starting with the availability of Sterling Inventory Replenishment, a new product in the Sterling Multi-Channel Fulfillment suite that enables companies to create collaborative replenishment processes with their trading partners. Key inventory strategies, such as lean manufacturing (see Lean Manufacturing: A Primer), vendor-managed inventory (VMI), and collaborative planning, forecasting and replenishment (CPFR), are difficult to execute because there has been little visibility into trading partner information, while the development of joint plans and forecasts is labor-intensive. Thus, Sterling Inventory Replenishment focuses on reducing this complexity, and instead effectively executes these strategies by creating a collaborative environment for inventory planning that analyzes daily inventory and sales information, automates the purchase order generation process, and delivers an optimal inventory plan with the capability to execute the plan.
Sterling has also started to bundle their enterprise integration and B2B integration offerings with the Selling and Fulfillment Suite, along with a library of modules that accelerates and simplifies the integration with the most popular ERP and best-of-breed SCM solutions to help customers achieve a quicker time to value as well as consolidate these processes on to a single platform. This approach is expected appeal to IT departments as they struggle with multiple platforms/products to manage the internal integration with applications and external integration with supply chain partners.
Sterling Selling and Fulfillment Suite Recap
To recap, Sterling Commerce's product offerings now apparently include quite a few SCM solutions outside its traditional EDI and e-commerce communication realms. While each of these point solutions has a unique focus and its own traditional customer base, the company's target market—large multinational businesses—often require solutions from several of these categories. In summary, Sterling Selling and Fulfillment Suite's potential key benefits appear to be
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increased user companies' revenues by expanding B2B and B2C sales channels while enabling a higher customer experience;
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reduced fulfillment costs, thanks to more efficiently orchestrating the sourcing and delivery of goods and services across multiple systems and partners; and
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improved business responsiveness through greater visibility and business process adaptability.
Furthermore, as application service providers (ASP) and managed service providers (MSP) hosting technology matured (meaning that ASP is not a "dirty word" any more), Sterling Commerce saw some vindication. Generally though, the SCM vendors it acquired had realized most of their revenues from licensing their software on-premise, and related implementation and maintenance services (except Nistevo that was on-demand basically "from the word go"). Today, while still selling many products under the license model, Sterling Commerce offers some of its products, in part, on a SaaS (multi-tenant) basis, but mainly on a hosted MSP basis (in a dedicated, single-tenant manner). The future direction of Sterling is certainly inclined towards SaaS delivery. As a reminder, under the SaaS model, the software is installed, operated, and maintained on vendor-owned servers, which are monitored and maintained by vendor personnel. While the software is still configured and integrated to the customers' needs, implementation, and integration challenges are substantially reduced (see Software as a Service beyond Customer Relationship Management and Sales). Under this approach, a customer's monthly subscription and hosting fee is substantially less than the typical one-time license fee, but over the life of the subscription Sterling Commerce can generally produce equivalent or greater revenue. The lower up-front costs and integration hurdles tend to reduce customer approval requirements and shorten sales cycles. All revenues associated with subscriptions are apportioned over the life of the arrangement, including software licenses, set-up services, and implementation services. This should eventually result in more stable and predictable (albeit deferred) revenue for Sterling Commerce.
Nothing Grand Comes Without Challenges
Sterling Commerce has a good vision; an intriguing product roadmap; an established growth record and path, with, in part, a recurring revenue model in the offing. It also has a proven management execution; a successful M&A track record; a loyal, blue-chip customer base; etc. One can nonetheless imagine how colossal the job has been for the company (with no prior expertise in some of the acquired realms) to cohesively enhance its product portfolio, and how challenging it might be in the future. The road between devising a compelling value proposition and delivering it (with all current moving parts working in synch) is certainly long and winding. While all its acquisitions were "thoroughbred" SCM applications providers, Sterling Commerce had long been an infrastructure supplier offering integration, EDI, and GDS solutions. This in itself may be problematic for some prospects—especially those suffering from FUD (fear, uncertainty and doubt) "courtesy" of Sterling's competitors. Although EDI and integration are integral to supply chains, Sterling Commerce must still contend with doubt about whether it, as an EDI provider, can become an SCM expert almost overnight. Moreover, Sterling risks the perception that it will become a direct competitor to enterprise resource planning (ERP) vendors. If this perception pervades, then its partnerships with existing application partners could fade, as the case was with its QAD's partnership for the Sterling Gentran EDI integration product.
In addition to brand recognition in the SCM application space (where almost everyone still associates Sterling Commerce with EDI or GDS), another major difficulty of Sterling's application strategy is in possessing enough domain specific knowledge to compete (i.e., create a product, market, sell, and support it) to compete with application vendors that have supply chain processes "in their blood". To be fair, Sterling Commerce has taken a wise approach and moved strongly into the application space by largely keeping the domain experts of its acquired companies. Still, some organizational integration growing pains (in addition to products' integration) are expected to persist for some time to come.
Also to be fair, the vendor aims at delivering its applications through integrated, high-performance technologies designed for maximum compatibility with its customers' existing disparate systems and computing environments. Its underlying platform is based on the latest open standards (to facilitate integration with CRM, SCM, and ERP systems, portals, and legacy enterprise systems). It also provides some tools necessary to derive better (ROI for its customers. Some of these are real-time configuration and distributed administration for greater business flexibility; and easy-to-use web interfaces allowing business users to modify workflows; and multilingual capabilities for international deployment, with fairly high-performance, cost-effective, reliable, and scalable operations. By positioning the Selling and Fulfillment Suite and Sterling's B2B integration offerings as enablers to connect, communicate and collaborate across multi-enterprise supply chains should help to differentiate them from other best-of-breed supply chain vendors and ERP vendors offering supply chain suites.
Integrating these should enable so many companies still stuck with a mix of SAP, Oracle, Infor, and other ERP systems across their divisions to build business processes, automated all the way from order capture to fulfillment and payment. One of the major attractions of Sterling's new, configurable package is that it allows for detailed feature configuration that aligns the system with business needs, and has configurable security, which operates throughout the levels of a system, from encryption of network traffic to business-oriented authorization policies. Whereas it would take many "man-months" to tweak multiple ERP systems to align with multi-channel and multi-enterprise order and fulfillment processes, this system comes largely pre-configured. For example, e-storefronts can typically go up and live for categories of merchandise in between 90 to 120 days.
Yet dynamic multi-enterprise supply chains require even more sophisticated solutions to connect enterprises with their suppliers, partners, distributors, dealers, and customers, as to better coordinate and optimize business processes, accelerate revenue, lower costs, and improve customer service. A type of a composite application framework (CAF) that is based on SOA principles should enable the delivery of tailored solutions without the typical cost, development, and time required for customization (see Architecture Evolution: From Web-based to Service-oriented Architecture). With such a framework, customers will eventually be able to combine application services in Sterling Commerce and third party products to create new solutions that more precisely address particular business problems. Like its former peers, Yantra and Nistevo, Comergent users, too, should be able to adopt the Sterling business process platform, which currently includes business intelligence (BI) frameworks, business process execution language (BPEL), alert monitoring, and business activity monitoring (BAM). For more details on some of the above features, see Business Activity Monitoring—Watching The Store For You and Understanding SOA, Web Services, BPM, and BPEL.
However, more concrete details and products are needed to see how well-rationalized this framework and platform will be for all Sterling Commerce products. Given how much thought and excruciating effort it has taken for even the likes of SAP to deliver on its (ongoing) SAP NetWeaver business process platform (BPP) promise (see Multipurpose SAP NetWeaver), one can only imagine the magnitude of the still-outstanding work for Sterling Commerce. There are even some indications that SAP is starting to de-emphasize NetWeaver's role at least for external integration purposes.
Functionalities that are either non-strategic to selling and fulfillment or are overlapping will present additional caveats in this regard. For non-strategic features (coming from Comergent, such as marketing campaigns), Sterling will have to maintain separate research and development (R&D) and sales and support expertise and decide whether to maintain them in the future. Regarding some overlapping fulfillment functionality between Yantra and Comergent, the decision will have to be made as to which one will be rewritten into the integrated suite going forward, and how well served current users will be by such standalone products (with separate data and process models). Some customers may not necessarily opt for the next-generation integrated Sterling Selling & Fulfillment suite.
In fact, Sterling Commerce would not be the only company with such a noble idea, since many enterprise-level companies have espoused similar undertakings—from SAP and Oracle with their respective SAP NetWeaver and Oracle Fusion Middleware platforms, and Click Commerce with its composite application framework (CAF), Manhattan Associates Supply Chain Process Platform to i2 Technologies, the supply chain player, with its Agile Business Platform (formerly Supply Chain Operating System [SCOS]). For instance, Sterling's selling and fulfillment proposal is indeed similar to i2's, which is a standards-based open architecture that offers organizations a way to run collaborative and planning supply chain tools within the enterprise and across the extended enterprise for real or near-real time supply chain visibility.
Competition Is Notable—And Diverse
This brings us to the fact that the market for such products is intensely competitive, subject to rapid technological change, and significantly affected by new product introductions and the market activities of other industry participants. There are relatively few barriers to entry in the Internet-based software market, and one should expect competition to persist and intensify in the future. Sterling Commerce currently has four possible sources of competition: 1) the in-house development teams of its potential clients; 2) large SCM, CRM and ERP vendors; 3) infrastructure and platform providers; and 4) various niche ISVs. Given its recent expansion into selling and fulfillment, the vendor's competition has intensified, and now comes from many directions, as indicated in the non-inclusive table below:
SOURCE:http://www.technologyevaluation.com/research/articles/one-vendor-s-exploit-of-marrying-infrastructure-with-selling-and-fulfillment-applications-19552/
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