New Stanford University Study Confirms Importance of B2B Managed Services for Supporting International Expansion

Over the past few years GXS has sponsored a number of research studies conducted by prominent analyst and educational establishments. Our first study with Stanford University’s Global Supply Chain Management Forum was launched in 2007 and since then GXS has released studies discussing  Total Cost of Ownership (TCO), ERP/B2B Integration and Customer Centric Supply Chains.  The latest study from Stanford University discusses key trends in relation to how B2B Managed Services is being adopted by global companies today. For the purpose of this particular blog I will review some of the key study findings in relation to how B2B Managed Services supports global expansion projects across the manufacturing industry.

The previous Stanford Study was conducted just before the global economic depression established itself during 2008/2009.  At that time companies were just starting to evaluate outsourcing their B2B projects but they were unsure of the exact return that could be obtained from using such an approach. Over the next couple of years the global manufacturing industry experienced significant restructuring, cost reduction and more significantly increased global expansion into the emerging markets such as China and India. Then in 2012, wage rises and strikes started to occur in China causing concern for many manufacturers that had established operations in the country.  This in turn led to the near shoring of some production back to home markets. Now that Chinese companies have become more confident with the products/parts they are manufacturing, and they are of higher quality, they are now continuing the globalisation trend that was started by North American and European companies.

Therefore all of this restructuring and relocation of production plants led to a need to offer a flexible, scalable and extremely agile IT and B2B infrastructure to support such expansion activities. Over the past couple of years in particular, with increased disruption caused by numerous natural disasters in the Far East, some manufacturing companies have completely changed the way in which they have managed their B2B infrastructures.  Most notably in Japan where for years, home grown software based B2B platforms and private network infrastructures have been dominant.  Now, global manufacturing companies of all sizes are evaluating Cloud or Managed Services based B2B platforms and the latest study from Stanford confirms this new trend. So let me just spend a few minutes providing an overview of some of the key results from the new study, especially with respect to supporting global manufacturing operations.

Overall, the study concluded that 96 percent of all companies surveyed felt that Managed Services had added significant value to their overall B2B integration programs. Due to the increased flexibility that a Managed Services platform can provide, 74% felt that they had received significant value from shifting up-front capital expenditure on software licenses and hardware to monthly operating expenditures for Managed Services. In total, 51% of respondents of the study were from the manufacturing sector which is a strong representation for the overall study. One of the highest ranking business drivers from the respondents as to why they would adopt a Managed Service is to improve customer experience.  This is a critical area for many manufacturing companies, especially suppliers, who are challenged to follow their customers into new markets and they are  constantly trying to support their expanded business processes as much as possible.

For example which EDI document is being used in the new region?, which communication protocol is most prevalent? and how easy is it to onboard new suppliers who may have a low speed internet connection? Using a Managed Service approach provides the flexibility to expand or contract a B2B platform in order to support a customer’s global expansion projects. In fact 59% of respondents said that Managed Services helped to navigate their way through the changing requirements often imposed on them by their customers.  This could be something as simple as supporting a different communication protocol such as OFTP2 or AS2, but the company concerned has no experience of implementing these particular protocols.  A Managed Service can help implement or mediate between any EDI document or communication protocol.

68% of respondents said that a Managed Service approach helped with onboarding new customers. This can be a critical requirement especially for the CIO who may be more focused on ensuring that a new ERP project does not fall behind schedule or miss a go live date. Managed Services offers a number of onboarding tools to help remove the complexity of connecting with both new customers and of course suppliers that may be located in other regions around the world, for example in the emerging markets.

Once you have expanded your operation into a new country then you need to ensure that you have the appropriate support to address any potential issues as they may arise. Being able to offer support in the local language and even understanding any local customs or cultural issues can certainly help to get any issues resolved as quickly as possible.  49% of respondents said that local support was a key reason for choosing a Managed Service.

The availability of onboarding expertise and local in country support are two of the most important challenges facing many of the world’s manufacturing companies today. Given that global expansion projects are likely to increase in number rather than decrease, a Managed Service approach can provide a significant competitive and first mover advantage when entering a new market for the first time.

I have only scratched the surface in terms of the findings from the study but if you would like to download your own copy of our new Stanford University B2B Managed Services study then please CLICK HERE.  I will be hosting a webinar in mid-May with a theme around International Expansion and I will be co-presenting with a company that is constantly challenged with expanding into new markets. I will provide more details on this exciting webinar over the next few weeks. For further information on GXS Managed Services, CLICK HERE.