Back in August 2003, I wrote a report titled “The Emergence of Supply Chain Operating Networks (SC-ON).” I recently reread the report and I was struck by how relevant the content remains today. Here is an excerpt of the executive summary:

Companies are no longer masters of their own destiny. They’re dependent on suppliers, service providers, customers, and many other external parties to succeed.

Whereas in the past business processes were relatively self-contained, today they’re highly distributed across time, geographies, and trading partners. Business processes are also becoming more dynamic, flexible, and creative as companies try to differentiate themselves in the market and achieve financial success.

In addition, mobile resources (inventory, assets, and people) are playing a more critical role in supply chain management as cycle times and product lifecycles continue to decrease and companies become more services oriented.

Unfortunately, many companies are struggling to operate efficiently and cost-effectively in this environment because (among other things):

• Many external partners are small and mid-sized businesses (SMBs) that do not communicate electronically and lack the ability to automate their internal processes, thereby constraining the overall responsiveness and efficiency of supply chains.
• Poor interoperability of software systems, which creates integration challenges that are generally costly to implement and maintain.
• Many companies lack the ability to track and manage mobile resources or they haven’t effectively integrated this flow of information with their other enterprise systems and decision-making processes.

A new class of hosted, network-based solutions is beginning to emerge that addresses these issues. ARC calls this category Supply Chain Operating Networks (SC-ON) which is actually the convergence of several existing technologies and services [including trading partner connectivity, mobile resource management, and software-as-a-service transportation management and global trade management systems]. 

I was reminded of this report when Descartes (an ARC client) unveiled its “federated platform” at the Council of Supply Chain Professionals (CSCMP) Annual Conference in late September. According to the press release, “This federated platform unites hardware, software, networks and a community of logistics organizations to help to manage resources in motion. The ‘state of things united’ platform enables participants to work together to automate multi-party business processes and share critical information to accelerate productivity improvements and cost savings.”

Art Mesher, Descartes’ CEO, goes on to say, “We believe that three existing markets are converging: mobile resource management; supply chain execution; and global trade management. As these markets intersect, a new Resources in Motion Management Systems category emerges. It’s in this congruence where we are focusing our business strategy.”

It doesn’t matter if you call this convergence Supply Chain Operating Networks, Resources in Motion Management Systems, or something else. What matters is that you understand why this convergence is important. I don’t have the time or space to provide a detailed analysis today, but if I had to boil it down into a few bullet points (or Twitter postings, if you prefer), here they are:

• Companies will finally get out of the connectivity business, which no manufacturer, retailer, or logistics service provider would ever (or should, in my opinion) call a core competency (see “An Overlooked (But Critical) Component of Transportation Management Systems”).
• Data quality will improve dramatically, saving supply chains billions of dollars in labor, excess inventory, expedited transportation, and other costs.
• Enhanced network-level visibility and business intelligence and analytics capabilities will enable faster and smarter collaborative business decisions, and leaner and smarter collaborative business processes, between functional groups and trading partners.

So, what exactly defines a Supply Chain Operating Network? Here are some of the important attributes I highlighted back in 2003 (with a few edits):

• Provides [software-as-a-service] functionality in a “many-to-many” networked environment and users are billed monthly, quarterly, or yearly based on frequency and scope of usage.
• Has a well-defined process for quickly and cost-efficiently contacting, educating, training, and activating thousands of trading partners, specifically small and midsized businesses.
• Facilitates the exchange of documents and information, such as purchase orders, advanced ship notices, invoices, bills of lading, status updates, and [import/export documents and information], between trading partners [and regulatory and customs agencies]. Supports a wide variety of formats and protocols, including traditional EDI, Web forms, flat file, AS1 and AS2, and FTP.
• Facilitates the exchange of wireless information across multiple formats, protocols, [and devices], including GPS, cellular networks, and RFID; offers software functionality to more effectively manage mobile resources. 
• Has a well-defined process and IT infrastructure to achieve and maintain high data quality.
• Provides software functionality via the network that enables trading partners (suppliers, carriers, customers, etc.) to execute specific activities, such as confirm receipt of purchase orders, send ASNs, print barcode labels, rate and tender shipments, print shipping documents, track the location and status of mobile resources, and other related activities. Software architecture must be component-based, leverage Web services technology, and be specifically designed to operate in a many-to-many networked environment (i.e. can inherently support multiple business processes and supply chains).
• Serves as a central registry of information, such as product catalogues, classification codes, carrier profiles, [and trade content] that enables the synchronization of databases and business processes across trading partners.

Descartes is not alone in pursuing this business strategy; other software-as-a-service vendors in the logistics space are thinking along the same lines, which is good because it lends credibility to the cause. From my perspective, although much progress has been made over the years, Supply Chain Operating Networks are still a work in progress, and customers (for the most part) are still in the education phase. But I expect the evolution of SC-ON to continue, and perhaps accelerate, in the months and years ahead. Mergers and acquisitions, partnerships, and start-ups will drive further convergence of network providers and solutions, while the success stories of early adopters will eventually capture the attention of fast-followers and laggards.

Will I feel good about this prediction six years from now? I guess we’ll have to wait and see.