Breaking Down the Silos: Highlights from E2open Leaders Forum

Abstract

For decades, supply chain analysts and practitioners have been talking about the need to break down functional silos and connect enterprises. However, we’ve seen precious little progress so far, as most organizations remain fragmented. E2open’s strategy for growth is based on actually breaking down the silos—being the catalyst for cross-functional and inter-enterprise integration.

Article

I had the pleasure of attending E2open’s Leaders Forum last week. Here are some highlights.

Supply Chains Are Inherently Cross-Functional and Inter-Enterprise —

As supply chain practitioners well know, supply chain processes are inherently cross-functional and inter-enterprise by nature. Marketing comes up with a concept; engineering designs it and hands it off to manufacturing who builds it ; inventory managers and logistics ensure stock is in the right place ; retail and ecommerce sells it ; logistics fulfills and delivers the order ; service departments repair and/or take returns. All these steps and handoffs are interconnected. Decisions made by one function impact others. Price changes or promotion impacts supply and logistics. An early or late shipment impacts warehouse operations and factory or store plans.

Figure 1 – End-to-end Processes are Inherently Cross Functional and Inter-enterprise


— Yet the Vast Majority of Companies Are Still Siloed

However, the vast majority of companies still operate in functional silos, and they struggle to get visibility and collaboration across trading partners and multiple tiers. This is partly a technical issue, as systems tend to be siloed. But it is even more so an organizational problem, since it is easier just to focus on your own turf that you have direct control over than to adjust your actions based on how they affect other functions and the whole organization. It is hard for people to change attitudes and priorities, especially when KPIs and incentives are focused on individual functional performance, with insufficient regard to the overall impact.

E2open is Focused on Existing Customers as the Source of Growth; That Drives Silo-busting

E2open’s strategy for growth, as well as its technology strategy, pushes it to help customers break down the silos and integrate across functions and between enterprises. Many enterprise software companies — especially ERP or supply chain solution providers — try to break down the silos between functions using technology, often with a dash of change management thrown in. The marketing battles are about who has the better integrated suite and/or tools for integrating with existing systems. However, technical integration is just one piece of the puzzle — arguably the easiest one. The problem of silos is primarily a cultural, organizational, and incentives issue. Becoming a change agent to help companies bridge those divides requires long-term relationships and a deep understanding of the client. Thereby, a sale and account management strategy that builds long-term strategic relationships is required to help break down silos.

Many solution providers focus primarily on ‘big game hunting’ for growth. Salespeople and senior execs alike can get addicted to the excitement of the chase and thrill of closing big new deals. Sometimes the long-term relationship building takes a back seat in the process.

The core of E2open’s strategy for growth is long-term relationship building. They focus primarily, in fact almost exclusively, on expanding the footprint in their existing customers base, rather than closing new logos. This makes sense, given how E2open has amassed a large portfolio of supply chain applications — the largest of any all-cloud solution providers. With those acquisitions came numerous new customers, most of whom have only implemented only one or two of the applications within E2open’s suite. Thus, there is an enormous opportunity for growth within their existing base.

Whenever E2open acquires a new company, they acquire a new technology solution that they can sell to their existing customer base and new customers that they can sell additional components to. In fact, acquisitions are E2open’s primary avenue to acquire new customers. In one sense, those new customers aren’t really new, though, because most of them have had a relationship with the acquired company for years.

The Role of Building and Sustaining Strategic Client Relationships

To make E2open’s growth strategy work requires two key components:

  • Long-term strategic relationships with clients
  • Integrated cross-functional applications with integrated multi-enterprise networks

I haven’t met a company as committed as E2open is to relying almost solely on their existing customer base as the source of growth. About 90% of their growth has been via existing customers. E2open executives told me “we could triple our size without getting one new logo.” 100% of their salespeople are ‘farmers’ — account managers that stick with a handful of accounts for years, building long-term relationships. E2open has zero ‘hunters’ — not a single salesperson dedicated solely to closing new logos. Salespeople are not forbidden from selling new accounts, but new logo deals are not highly incented and must meet certain criteria (such as having an existing relationship at the new account via a partner or a former E2open client that went to another company).

The E2open salesperson’s job is to understand the client, preserve what they have, make sure it is working well, and learn about their client’s whole business to spot opportunities where E2open can help with new capabilities. Culturally this type of selling is a transition for most salespeople. Most of the companies E2open acquires are used to the ‘hunter’ model of selling. With E2open’s model of selling, they need to do the hard work of learning the client’s business inside-out, go beyond the person they know at the account, and build relationships across the enterprise. E2open has thus, over time, built up a natural built-in distribution channel, through many years of relationship-building. That is a differentiator that is hard to duplicate.

Building Cross-Functional Integration

Selling across functions is difficult when the portfolio of solutions is a grab bag of unintegrated point solutions. E2open’s solution strategy is to build a broad, well-integrated suite of supply chain functionality, with connected networks of trading partners and service partners (e.g. transportation carriers). They have been systematically filling in their functional footprint, step-by-step, by acquiring adjacent functionality. They specifically look for companies that have processes and data that are adjacent to or connected to existing functionality in E2open’s suite. Recent examples include the acquisition of Cloud Logistics, INTTRA, and Amber Road for a suite of logistics and global trade capabilities, and the acquisitions of Zyme/CCI, Birch Worldwide, Entomo, and Averetek for a suite of channel management capabilities.

Building Inter-Enterprise Integration — Supporting the Virtual/Extended Enterprise Business Model

E2open’s CEO, Michael Farlekas, described the evolution from the vertically integrated business model of the mid-20th century, to the virtual enterprise model of today, using Ford’s old River Rouge plant as the example of the former, and the Boeing 787 supply chain as an example of the latter. This transition means that siloed single enterprise systems are no longer adequate. He described the four ingredients E2open brings to address today’s business models:

  • Networks — preconnected trading partners and inter-enterprise processes for suppliers, customers, and third-party service providers.
  • Data — ingesting and harmonizing data from any source; cleansed, normalized, and organized into ‘decision-grade’ data.
  • Applications — a full suite of connected AI/ML-driven supply chain applications.
  • Harmony UI — a unified user interface and experience across all applications, for all participants.
Source: E2open
Figure 2 – Four Main Elements of E2open’s Offering

E2open classifies their applications in six groupings: Supply Management, Collaborative Manufacturing, Global Trade & Logistics, Business Planning, Demand Sensing, and Channel Shaping. They classify their networks into four groupings/ecosystems (aka ‘trading partner segments’): Logistics, Global Trade, Manufacturing, and Channel.1

Source: E2open
Figure 3 – How E2open’s Portfolio of Applications and Networks Fits Together

E2open has developed an architecture, tools, and processes for rapidly integrating the acquired solutions, to ensure there is integration of data, process-flows, and UX across all products. This provides the cross-functional infrastructure to help E2open’s salespeople break down silos and sell across functional boundaries.

A critical step, and one of the first things E2open starts doing when they acquire a solution, is to map all key data from the acquired application into E2open’s canonical data model (aka ‘Integrated Data Model’ or IDM). If the acquired application has data objects or fields that are important for the suite but are not yet part of E2open’s existing IDM, those elements are added to the IDM. Once this mapping is done, the acquired application can exchange data with any other E2open application, with no loss of fidelity or confusion of semantic meaning. This same data model allows mappings and integration to be built for virtually any other existing data source, enabling the suite to integrate with the existing applications an enterprise has. This enables E2open’s ‘land and expand’ strategy. The customer can start with any single E2open application within the customer’s existing environment and integrate with whatever systems the customer has, though the amount of integration effort will vary depending on what the system is.2 E2open sometimes refers to this flexibility to integrate with existing systems as ‘come as you are.’

Source: E2open
Figure 4 – E2open’s Architecture and IDM Enable Integration with Existing Enterprise Applications and Trading Partners

In addition, they have been building out networks of pre-connected trading partners. This includes the supply side network that they have been building for 20 years, as well as newer acquisitions, such as Zyme’s network of channel partners and INTTRA’s network of ocean carriers. Building out networks of this scale, recruiting participants and working out the interenterprise processes, takes a long time. Both the INTTRA and Zyme networks have been over 20 years in the making. E2open seeks proprietary networks which are dominant within the ecosystem; across demand, supply, and logistics networks. They showed us statistics on the size of these various networks.

Source: E2open
Figure 5 – Statistics on E2Open’s Network Ecosystems

End-to-end Integration Advantage

I received several demos of existing and to-be-released functionality in logistics, global trade management, outsourced manufacturing, business planning, and channel management. These provided examples of what is possible once you start integrating the various applications. For example, I was shown the ability for a demand planner to run various scenarios, such as what if I lower the price or run a promotion. Then, once they have found one they like, they are able to check the impact of each scenario on the supply plan, without having to go ask the supply planner to do the analysis. They can see if it is feasible with the existing constrained supply plan, or how big the shortage would be. The demand planner thereby makes smarter decisions, seeing the bigger picture, and can bring more informed options to their supply side counterpart. They can ask more specific and intelligent questions to see if the supply plan can be modified to accommodate scenarios that don’t quite work with the existing plan. They can send those scenarios to the supply planner, who can then use the E2open tools to try and craft a modified feasible supply plan.

The channel visibility and planning functionality I saw was something we would have loved to have had back in my days working for a major computer manufacturer in the 1990s. Back then we were blind to the inventory in the channel. We only knew what we had sold to our immediate channel partners — not how much inventory our channel partner or their downstream tiers were carrying. Product lifecycles for laptops and desktop systems were short, ~9 to 12 months. As we prepared to launch a new version of a product, the goal was to drain the channel almost completely by the time the next version was launched to minimize returns of the old product. However, since we were flying blind, we always guessed wrong, with painful results. Either we would run out of inventory in the channel before the new version was ready (resulting in lost sales and customer loyalty) or be stuck with massive expensive returns. E2open’s sell-in/sell-out visibility and analysis tools help avoid those kinds of problems.

Source: E2open
Figure 6 – Channel Management Dashboard Screenshot from Live Demo
Source: E2open
Figure 7 – Channel Sell-In/Sell-Out Analysis Screenshot from Live Demo

Mars’ Formula for Cross-Functional Digital Transformation

An example of an E2open customer busting silos was highlighted in a presentation by Mars, the $35B manufacturer of confectionery, pet food, and other food products. Mars described its ‘Project Mississippi,’ a digital transformation initiative to create a demand-driven supply chain. Initially they were more worried about getting the right technology. But, as the project unfolded, they found that technology was only 20% of the answer. Ensuring they had the right processes was another 20% and the biggest piece was change management, representing about 60% of the total effort. In the old culture, the silos were adversarial. Those on the demand side would ask “why can’t you just make what I ask you to make” and those on the supply side would ask “why can’t you get the forecast right.

A big part of change management was providing clarity of roles and helping all of the functions become ‘enterprise thinkers,’ breaking out of their silos. Mars developed process maps across six different previously siloed functional areas, to show how they fit together and impacted each other. The end-to-end process maps show the handoffs and the points where discussions occurred to work through issues. In building the ‘organization of the future,’ they are redefining analysts’ and planners’ roles, responsibilities, and capabilities. They are now looking for supply chain expertise and business acumen in their planners. They need planners to understand the implication of their decisions across the supply chain.

Mars’ Approach to Breaking Down the Silos

The first step was to get demand planners and supply planners talking to one another, having team meetings, and learning to appreciate what challenges the other side is dealing with. They developed joint KPIs to drive cross-functional behavior. For example, salespeople’s compensation was in part dependent on forecast accuracy and getting refined demand information from the customer to contribute to an accurate forecast. To help in adoption of the new technology, Mars provided education, training, and explanations to make sure planners were comfortable when going live. User adoption so far is good.

They have HR involved in the background, making sure the changes are sitting well with employees. They do surveys to see if the employees understand what they are doing and why. They are making course corrections as they go through the process. And critically, they moved the physical location of the offices of demand and supply managers so that they are sitting next to each other. All of these together are helping to break down the silos. Mars said, “it is a work in progress, after so many years in silos.

Leveraging Data

A big emphasis was on using data analytics — leveraging the ‘rivers of information’ they got from retailers, demand signals from other sources, and information from suppliers — to make better decisions. They gained visibility at an item/location/week level to drive demand and supply alignment within their S&OP process. E2open helps them rapidly pull together the information, do what-if analysis on different scenarios, and converge on the best scenario. They are using E2open demand planning for both short-term and long-term demand sensing. JDA is their system of record and they use Anaplan for visualization. They also use E2open for multi-echelon inventory planning and optimization.

Maintaining Executive Sponsorship and Support

It was important to maintain sponsorship at the highest level, continually convincing and reminding senior executives why this is the right road in order to keep the investment coming. There are always other priorities competing for the same money, time, and attention. A big part of maintaining executive support and investments is building on success. Sponsors like seeing good results. For Mars, this included a 26% reduction in short-term forecast error3 and a 15% reduction in long-term forecast error. Those who have spent their careers trying to eke out a few percentage points of improvements in forecast accuracy will recognize that these are significant improvements. Mars is also expecting significant reductions to inventory and improvements to service level.

E2open’s Path to Growth and Adoption

E2open has grown, largely through acquisition, from just over $100M in revenue in 2016 to now over $350M in annual revenue. This makes them the largest pure-cloud supply chain vendor.4 For companies that are serious about achieving end-to-end integration and breaking down silos, E2open’s solutions will likely be on the shortlist. As E2open continue to fill in their portfolio of solutions, it will be harder to find another platform that contains as broad a footprint of supply chain functionality (both supply and demand side). The combination of 1) a broad range of integrated applications and 2) inter-enterprise networks providing data from ecosystem partners is a key to breaking down the barriers between functions and across supply chains. Their approach to account management is difficult for competitors to replicate, since it represents a cultural shift in sales and account management/relationships. E2open has carved out a path that is unique along several dimensions, and they appear well positioned to continue to play a key role in busting silos and connecting enterprises around the globe.

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1 I suspect the taxonomy of network ecosystems may evolve over time, as they acquire more networks. That has happened with their applications taxonomy, as they have acquired new solutions. — Return to article text above
2 I.e. popular systems, such as SAP or Oracle ERP, for which E2open already has built connectors will be easier, provided those systems have not been highly customized. At the other end, legacy proprietary systems will require more effort to integrate. — Return to article text above
3 Measured as Mean Absolute Percentage of Error (MAPE) — Return to article text above
4 There are larger non-cloud supply chain providers, such as JDA, which has over $1B in revenue. SAP and Oracle’s supply chain revenue is also substantial, but harder to separate from the rest of their revenue. — Return to article text above


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