This is a transcript of a GXS webinar with Jean-Luc Faye of Michelin about Michelin’s global B2B operations and how they are using cloud B2B to manage their international operations. To view the webinar please click here.
Today’s manufacturing industry has spent the last decade expanding into emerging markets around the world and the supply chains and logistics networks to support these operations have become incredibly complex.
A highly scalable and flexible cloud based B2B platform provides the ideal infrastructure to support global manufacturing operations and this webinar will highlight how Michelin uses cloud B2B integration to support their international operations
Jean-Luc Faye is a member of Michelin’s worldwide EDI service centre and is responsible for the delivery of EDI services across Michelin’s global operations. Jean-Luc has worked for Michelin for two years and prior to working for Michelin he was supporting EDI related projects at companies such as Danone.
Mark Morley heads the GXS global go to market manufacturing strategy and has extensive experience working with global companies looking to expand operations in international markets.
We will begin by providing an update on key trends affecting today’s global manufacturing industry, then we will discuss why companies have been so keen to extend their supply chains into some of the emerging markets and the challenges faced by companies looking to establish a presence in these locations.
Jean-Luc will then provide an introduction to Michelin’s global operations and how they use cloud B2B to manage their international operations. The webinar will also discuss how GXS helps the global manufacturing industry, removing complexity for companies looking to establish new operations or on board trading partners in an emerging market.
We will include a brief introduction to GXS Managed Services and how a mix of simple to use B2B tools combined with state of the art community management tools can help to support the expansion of a manufacturer’s supply chain into a new market. Finally we will conclude by discussing some of the key benefits of deploying a cloud based B2B platform for managing international expansion projects.
So let us begin today’s session by looking at some of the key macro-economic and manufacturing trends around the world and how these are impacting today’s supply chains.
Today’s manufacturing supply chains have had to overcome a number of challenges over the years. External forces such as the recent global recession, human rights issues relating to Chinese production plants, natural disasters such as the Japanese earthquake and Thailand floods through to the Omni channel effect which is changing the way in which consumers purchase products. These are just a few of the reasons why today’s manufacturers are restructuring their supply chains to meet these new demands.
To try and address all these issues, manufacturers have had to build increased levels of flexibility into their global supply chains and ensure that they can scale their operations to meet the need of the market. Restructuring of supply chains, consolidation of IT infrastructures and increased sourcing from the emerging markets has meant that manufacturers have to become more responsive to changing market conditions.
From a global supply chain point of view, the automotive and high tech industries have been the most impacted by the issues shown on this slide and yet these industries have been able to successfully turnaround from the poor position they were in a few years ago.
Over the last decade, western manufacturers have expanded their operations into emerging markets such as China and India. Enticed initially by low labour costs and access to a vast pool of workers, these companies prospered for many years. Now with increased wage rises and strikes in China, combined with the natural disasters in Japan for example, some companies have decided to near shore production back to their home markets. Moving forward it will be China that leads the continued globalisation efforts, setting up new plants in Brazil and Thailand for example, but one major issue they face is being able to understand regional B2B standards and on boarding new suppliers quickly.
If a company is looking to establish a manufacturing facility in Brazil for example, they will need to on board trading partners quickly, integrate to corporate business systems and work with different regional B2B or EDI standards, whilst at the same time adhering to local business laws or regulations. Manufacturers need to work with a B2B vendor that can help remove the complexity of establishing an operation in a new market, a vendor who can work with them on a truly global basis through a single cloud based B2B platform.
So as you can see on this slide the manufacturing sector is truly global in nature and supply chains need to have flexibility and scalability built to support expansion into new markets. Being able to partner with a B2B vendor that can help remove the barriers of doing business in any country worldwide, especially when trying to understand country specific regulations with regards to e-invoicing, can provide a significant competitive advantage in the market.
Many western manufacturers have spent the last decade expanding their operations into China. Initially led by the automotive industry, today many different manufacturing companies have set up operations in China. Over the past couple of years Chinese workers have started to demand more pay and benefits and in some cases they have gone on strike causing significant disruption to global supply chains. This continued unrest and uncertainty has caused some western manufacturers to reconsider their operations in China and in some cases re-shore production back to their home markets.
Wage costs are rising so quickly that even the domestic manufacturers in China are looking to set up production in alternative countries with Thailand and Vietnam receiving the bulk of Chinese investment at the moment.
The Chinese government is keen to spread the wealth across the country and so whereas foreign investors would be incentivised to locate to the East coast, companies are now being offered far greater tax incentives for locating their manufacturing operations further west. The main issue with this strategy is that the logistics infrastructure to support this move west is still being built.
Finally, as well as learn about western manufacturing best practices, Chinese companies are keen to learn about western IT related best practices and they are able to do this through the joint venture companies that are being setup across the country.
So in summary western companies will still look at opportunities for setting up operations in China, but it won’t be for cost cutting related initiatives alone, it will be related to setting up strategic partnerships that will help explore business opportunities in other regions of the world.
Brazil is currently receiving a very high proportion of inward investment, mainly across the automotive and high tech industries. From an automotive perspective the Brazilian government has raised their import taxes so it becomes much cheaper for car manufacturers to source parts for their vehicles from within the country rather than importing from other countries.
So as Ford, VW and Nissan setup new plants in Brazil it has meant that their key suppliers have also had to setup plants in the country. Even in the high tech sector contract manufacturers such as Foxconn are building new plants so they can build consumer electronic devices for export into the lucrative North American market.
Brazil is proving to be a popular destination for the Chinese automotive manufacturers with JAC motors and SAIC already having built plants in the country. Compared to other markets such as Europe, the Chinese automotive companies know they will find it easier to sell their cars into the Brazilian market. Brazil will continue to be a key growth market for manufacturing based companies over the next few years and hence is likely to see a high proportion of global investment in new manufacturing plants.
India, as with China has always been a key manufacturing hub with a high proportion of goods being manufactured for export. Low labour costs combined with a highly skilled workforce provides the ideal location for having labour intensive products such as machined castings manufactured.
The growth in industries such as outsourced services have contributed significantly towards increased consumer wealth across the country, with some consumers buying their first car for example. There is a steady shift towards more products being manufactured for domestic consumption rather than for export. That said many manufacturers regard India as a key export hub, especially into the Far East Markets.
India has a unique challenge in terms of logistics as it is land locked to the North of the country by the Himalaya mountain range which means that most manufactured goods are exported through the coastal deep sea ports, this adds considerable time to the delivery of manufactured goods to their final market.
India is unique in that ERP systems are widely used to support larger enterprises and EDI usage is very low when compared to other emerging markets such as China and Brazil. Many business processes are conducted through manual based processes so there is a great opportunity for introducing automated B2B processes.
Across the emerging markets there are a number of common trends in terms of B2B adoption levels. Until recently there has been a preference to deploy behind the fire wall software solutions however in terms of working with global manufacturers this was proving difficult to continue working this way. Therefore many companies are taking the hybrid platform approach, using cloud based services when they need to work with global business partners and software based solutions for working with in country trading partners.
The emerging markets are still keen to learn about B2B best practices from their western business partners. For example in China, the Chinese partner in a Joint venture operation is keen to learn about both western manufacturing processes in order to improve the quality of their products and how to implement IT and B2B infrastructures to support these operations. Some Chinese domestic manufacturers have now gained such confidence in their own processes that they are able to expand their own operations into other markets such as Brazil; this trend will grow stronger over the next few years.
Even though many companies in the emerging markets are beginning to adopt western B2B standards such as EDIFACT and ANSI, the creation of bespoke XML based standards is still proving popular in some companies. Many companies still believe that they can develop their own XML standards far more quickly than it takes to deploy western standards, however even though XML is internet based there are so many different XML standards entering the market that it is actually proving to be a major barrier to doing business on a global scale, hence why there is a shift to evaluating western B2B standards.
It is one thing setting up a new production line in a new country but being able to on board trading partners and offer local language support is another barrier that companies must deal with when working on international expansion projects. Working with a B2B vendor who can provide multi-lingual language support and on the ground on-boarding and implementation skills can provide a significant competitive advantage in the market.
When expanding into a new country, companies need to do a full assessment of the utilities and logistics infrastructure that are available in the country concerned. Many countries such as China and India have received significant inward investment but quite often the local governments are slow to respond to investing in infrastructure improvements. So power supplies are interrupted on a regular basis and if a telecommunications infrastructure exists then it will probably be via a very slow dial up connection, if that connection can be maintained for any period of time that is.
In some cases it has been quicker for some countries to implement high speed mobile networks rather than fixed line services and so some countries have taken the lead in mobile commerce as all their day to day business is conducted through the mobile networks. This however can only be considered as a stop gap situation as many western companies are demanding reliable telecommunications networks as a key condition to setting up a presence in a new market.
The barrier to establishing a presence in an emerging market is raised even higher when trying to identify in country logistics partners to work with. The fundamental problem, especially in remote areas of India and China is that the road and rail infrastructure simply does not exist. It is one thing being able to find a suitable manufacturing location but if you cannot export the goods or you suffer from constant interruptions with your logistics network then it will be difficult to setup a cost effective manufacturing facility.
Now let me introduce you to our guest presenter Jean-Luc Faye who will discuss how cloud B2B integration supports Michelin’s international operations
Thank you GXS, It is a pleasure to take part in this webinar. Michelin is a tyre manufacturer with a truly global presence in many different market sectors, for example –
- Passenger Cars
- Motorbikes and bicycles
- Farm Equipment
With a strong local footprint we FACILITATE MOBILITY FOR EVERYONE, EVERYWHERE AND IN EVERY WAY
As a company WE INNOVATE TO FOSTER SAFE, CLEAN, CONNECTED MOBILITY it helps us to be the world leader in manufacturing FUEL-EFFICIENT TIRES. Michelin has a global presence with Sales Operations in 117 countries, 69 production facilities in 18 countries and 115 000 employees
To meet Michelin’s objectives of dynamic growth over the 2011-2015 period, Michelin can capitalise on such SOLID COMPETITIVE ADVANTAGES, AS ITS TECHNOLOGICAL LEADERSHIP, SUPERIOR PRODUCTS AND SERVICES, DEMONSTRATED BRAND APPEAL, OPERATIONAL EFFICIENCY AND ROBUST BALANCE SHEET
As a business, Michelin has for key strategic goals, namely to:
- Innovate to meet customer needs more effectively
- Drive strong, diversified growth
- Enhance Competitiveness
- Ensure responsible growth
There are a number of growth drivers for our business:
- A truly global R&D
- The right tire for anything on wheels
- The Michelin brand and the overall brand portfolio
- Maintaining employee professionalism and commitment
As a company we have a number of corporate objectives to achieve by 2015, for example to offer ten days of training for every employee, ensure that 33% of new hires are women, excluding production operators and increasing sales growth by more than 25%
Our current business figures show nearly 21 billion euros worth of net sales and 2 billion euros operating income.
Slide 23 shows what our European B2B platform looked like back in 2011. The environment was made up of many different EDI network providers, desktop EDI software and a need to integrate to back office legacy systems. We were managing many different connections out to our trading partner community which included a mix of VAN, Internet, and ENX, the private automotive network in Europe and ISDN connections. We were using a mix of communication protocols and other regions around the world had similarly complex B2B environments. The lack of flexibility in our B2B platform was restricting our ability to move into new markets quickly.
The target architecture for the Michelin Group is to move from the numerous EDI and B2B solutions that we had before to a simpler and rationalized solution set. The aim is to rationalise to two providers, Syntesys for bank connectivity and GXS for everything else. GXS, through their Managed Services will be managing B2B communications with all of our external business partners such as suppliers, customers and raw material providers. Connectivity to GXS is provided by BizLink from GXS and we will be connecting to BizLink through our MS and Pelican comms formats and connecting to both GXS and Syntesys via AS2. As you can see this is a much simplified environment that will give us the flexibility that we need to manage our international operations. We can focus on our core competency of manufacturing and selling tyres and we can leave the B2B to the experts, GXS
Implementing GXS Managed Services aligns perfectly with Michelin’s global IS strategy, namely to:
- Use off the shelf standard solutions versus customised packages
- Increase use of SaaS solutions and integrate in a secure and efficient way with our backend information systems
- Deploy faster everywhere with minimal disruption to the business
Moving to an outsourced environment has not been an easy road and yet the benefits far out way the difficulties, namely to:
- Provide a future proof and modern global B2B Platform
- Offer a scalable and flexible platform providing a broad range of options in terms of global connectivity and formats
- Implement a global e-Invoicing solution to meet local tax and compliance regulation changes
- Finally to utilise multilingual support and trading partners on-boarding anywhere in the world
What are the plans for the future? Well we all agree at Michelin that B2B integration is an enabler for business value creation and this will be achieved by:
- Finishing the European migration to GXS Managed Service
- Planning for the migration of the B2B/EDI solutions based in North America, Asia and South America to our Managed Services environment. This will provide us with a single, global B2B platform for managing our business operations.
- Offering high value B2B integration services to address our customers and suppliers, along with the global Upstream and Downstream Supply Chain initiative roll-out. This is the IS cornerstone to meet Michelin’s group objectives for 2015
- And finally, building a stronger partnership with GXS to embrace the B2B capabilities that Michelin needs to succeed in a challenging global economy
Thank you for listening now let me hand you back to GXS.
Thanks very much Jean-Luc for providing a really interesting insight into how Michelin uses cloud B2B integration to support your international operations. The next part of this webinar will discuss how GXS helps companies to globalise their operations.
GXS has been supporting the global manufacturing industry for more than 40 years and over this time we have worked with many companies operating across the automotive, high tech and discrete manufacturing sectors. This slide highlights our presence in some of the industry sub-sectors. For example 100% of the automotive companies in the Fortune 500 are connected to GXS, 84% of the Top 100 global automotive suppliers, 78% of the high tech companies in the Fortune 500 and 80% of the Top 10 mobile device manufacturers are connected to GXS.
GXS also works closely with industry bodies such as Odette in the automotive sector and EDIFICE in the high tech sector so that we can work with the industries to ensure that our B2B solutions and services are embracing the latest industry specific standards.
Consolidation & Modernisation of B2B Infrastructures – Extensive M&A activity continues to lead to a need for B2B network consolidation. In many cases a divested operation for example does not have the internal resources to be able to manage a B2B infrastructure or a recent acquisition may need to a requirement to standardise all business transactions onto a single platform. GXS provides the outside resources to help manage your B2B environment so that you can focus on your company’s core competency which is manufacturing goods or products.
Provide Global Interoperability – Increasing requirement to provide connectivity to global manufacturing hubs and private automotive networks. GXS can offer any to any mediation between any communications standard or document format and in addition can help provide inter-connectivity to many private/regional or industry specific networks.
Increase Supply Chain Resilience – Recent natural disasters have led many manufacturers to rethink their supply chain strategies and in many cases they are looking to improve information flow and collaboration with trading partners, establish centralised contact management across their community and undertake risk assessments across their supply chains in order to help identify potential weaknesses that could impact the supply of components to a production facility. GXS Active Community provides the perfect collaborative platform to manage an extensive trading partner community
Improve Support for ERP Projects – Consolidation of ERP instances and upgrade to new modules is driving many new ERP/B2B integration projects. ERP projects are normally the most high profile IT projects going on in many companies today. But what if you had to pull people off an ERP project to help on board new trading partners or fix a broken communications link? GXS has broad experience of integrating with many ERP environments, from SAP to Oracle, through to Microsoft Dynamics. GXS can help ensure that only clean accurate information enters and ERP platform and production related information gets sent out to the appropriate trading partner, such as contract manufacturers. GXS Managed Services can provide the people, process and technology to make your ERP/B2B integration project a success.
Improve Visibility of Shipments – Improve visibility of shipped goods, for example aftermarket service parts, to improve customer satisfaction levels. GXS can provide true end to end visibility, with solutions that can track the lifecycle of an order through to a web based application that allows you to monitor shipments across multi-modal logistics providers and customs and border control agencies. In turn, these solutions can be integrated to other back office platforms such as dealer management systems to help let a customer know when their part is likely to come into stock.
Support Expansion into Emerging Markets – With the introduction of new global manufacturing hubs, companies are looking for ways to on board their long distance suppliers as quickly and smoothly as possible. GXS offers a broad range of community management and on-boarding tools. From desktop EDI software, through to web forms and even a solution based on Microsoft Excel.
When entering a new market, especially one of the emerging countries, there are a number of B2B specific challenges that need to be addressed:
There will typically be very limited B2B knowledge and skills available within an emerging market, GXS has dedicated B2B resources in all the key emerging markets, including on the ground support to help with both implementation and on-going support
Quite often trading partners in the emerging markets will be using manual, paper based processes and therefore to encourage participation in a supply chain it is crucial to offer B2B tools that even the smallest company can use via a simple dial up connection. GXS offers a number of B2B tools, depending on the technical capabilities of the trading partner concerned, from web form solutions through to Microsoft based tools. Ensuring that you can achieve 100% participation in your supply chain activities will either make or break your international expansion plans.
When entering a new market you may be forced to embrace local standards, for example the new e-invoicing standards in Brazil or supporting the many XML based standards that have emerged in China. GXS offers any to any mapping capabilities and we can therefore remove the complexity of supporting numerous document types in different countries around the world.
Finally, one last challenge is trying to get problems resolved quickly as they arise, whether during the implementation phase of a new B2B platform or after the platform has gone live. GXS offers a 24/7 follow the sun multi-lingual support service, so no matter where you are looking to do business you can be assured that problems associated with your B2B platform are resolved as quickly as possible.
This slide highlights the key features of the GXS Managed Services platform. In the case of Michelin’s Managed Services platform, GXS manages everything to the right of the red dashed line, i.e. all external connectivity to trading partners and all document translation requirements.
GXS’s B2B Managed Services is a strategic partnership that empowers your business with the most comprehensive technology to automate and streamline your B2B e-commerce transactions, combined with the best people and processes for managing your B2B programs and connecting with your entire trading community—no matter the location, size or B2B technical capabilities of your business partners. B2B Managed Services include:
Global Systems Management—GXS performs all day-to-day management of the B2B infrastructure, including systems health monitoring, data backups, network management, systems administration, database management and application support.
Visibility and Alerting—Gain enhanced visibility into your B2B transactions utilizing a comprehensive suite of Software as a Service (SaaS) products that provide better visibility and collaboration between customers, suppliers and business partners. Services consist of business activity monitoring for error alerting and reporting, usage reporting, document and acknowledgement tracking, problem detection and resolution, and root cause analysis.
ERP Integration—GXS provides a range of services for enterprise integration from complex document mapping, such as SAP IDoc format, to managing business partner relationships and monitoring data quality. We offer B2B and ERP integration to any of the following ERP systems: SAP, Oracle, Microsoft Dynamics AX, Infor and Epicor.
Data and Process Intelligence—Drive data quality and business process integrity by automatically monitoring in-flight data and identifying errors within individual transactions and across long running business processes, such as order to cash. This rule driven service uses compliance guide and business rule modelling to capture business impacting exceptions and track key performance indicators (KPI’s). The service includes validation, exception management, and analytics and reporting to deliver a heightened level of visibility.
Mapping and Translation—B2B mapping specialists manage all data-mapping and translation tasks, perform change management and issue resolution and process critical production map changes on-demand to ensure map quality. GXS performs mapping of data structures from the format of internal applications such as Microsoft Dynamics, SAP or Oracle ERP to the formats required by external business partners such as EDI (ANSI X12, Tradacoms, and EDIFACT), XML and RosettaNet.
Partner On-Boarding—GXS provides the ideal combination of experienced implementation professionals and robust tools to rapidly on board all your business partners on your behalf to ensure full participation in your company’s e-commerce programs, including data synchronisation, AS2/Internet EDI, VAN migrations, EDI and supply chain visibility.
Program Management— Experienced B2B Service Delivery Managers work with you to ensure implementation success and will also provide day-to-day project management activities ranging from oversight of all production activities including status reports and resource orchestration to help manage change request activity and production incidents.
24X7 Monitoring and Resolution Support— GXS provides you with a dedicated Production Services team to proactively monitor all processes and business transactions that flow through your production system. 24X7 support includes translation monitoring, exception management and incident management, in addition to monitoring system availability, capacity, performance and utilization, file latency and conducting server, application and interface health checks.
In short, GXS provides Michelin with a flexible and scalable B2B platform that is able to support their business operations anywhere in the world.
Over the past few years GXS has undertaken a number of research studies to help validate the return on investment for deploying a Managed Services based B2B environment.
One of our latest reports from the Supply Chain Management Forum at Stanford University, released earlier this year, highlighted that 96% of respondents said that Managed Services added significant value to their overall B2B integration programs.
– 68% agreed that Managed Services helped improve the efficiency of on-boarding new customers
– 59% agreed that Managed Services helped enable a reduction in B2B integration costs
– 74% agreed that replacing capital expenditure with a monthly fee was valuable to their business
– 59% agreed that Managed Services helped to better meet/respond to change in customer requirements
Community management is at the heart of any international expansion project and GXS takes care of both the data integration and the person to person interactions across your extended enterprise.
At a high level GXS Active Community looks after the people to people interactions across your supply chain, I will expand on this on the next slide.
In addition GXS offers numerous small business enablement tools, backend integration to enterprise business systems and expert on-boarding to look after the education, enablement and testing of new trading partners to your B2B platform.
When companies think about B2B enablement they immediately consider the technology aspects first and then try and sort out the people aspects afterwards. However for international expansion projects to be successful the people aspect of community management needs to be embraced from day one of the project.
Traditionally there have been many issues with the people aspect of community management projects, namely:
- No single source of supplier information, different business systems will have a different level of detail of the trading partner concerned
- Minimal automation of supplier setup & registration, typically done in an adhoc manner as and when new trading partners need to be on boarded
- Continuing need to on board suppliers faster, in order to meet tight go live dates for customer projects
- Reduce supplier on board and management costs
- Monitor supply chain risk & performance
- Legal & Regulatory compliance
One way to resolve many of these issues is to implement a cloud based platform called Active Community. This is essentially an enterprise community management tool that delivers people and process solutions across GXS Trading Grid. It helps to align people and processes with transactional B2B.
GXS Trading Grid, the world’s largest cloud integration platform, has traditionally focused on moving data from one location to another. GXS Active Community on the other hand has been designed from the ground up to manage the people to people interactions across a supply chain, an area that many companies tend to forget when extending or restructuring their supply chains.
From establishing a centralised contact database for your trading partner community, through to deploying risk assessments, GXS Active Community improves the way in which you interact with your suppliers on a daily basis. Whether working with contract manufacturers in China, distributors in Eastern Europe or working with third party logistics providers in South America, GXS Active Community can provide a single global platform that can help improve the flow of people related information across your extended enterprise.
The second part of community management is ensuring that you can get 100% of your community on-boarded or connected to your B2B platform.
You need to try and ensure that your trading partners have access to the right B2B tools according to their technical capabilities and size of their business.
Whether you are trying to on board a small supplier in the Far East who may need to use a web form based service, a medium sized business requiring integration to a back end accounting package or a large supplier with multiple instances of SAP, GXS can provide the correct B2B tools and integration services to ensure that you are able to exchange B2B information electronically with every member of your trading partner community.
Cloud based B2B integration offers many advantages when connecting globally dispersed operations such as those within Michelin, namely:
- Ability to scale a B2B infrastructure according to the needs of the business
- Improves remote on-boarding and on-going collaboration with global trading partners
- Removes complexity from the supply chain
- Allows your business to respond more quickly to changing customer requirements or market demands
If you would like to learn more about how B2B Managed Services could benefit your company then please take a look at our dedicated website www.b2boutsourcing.co.uk, where you will find a lot more detailed information.
If you would like to learn more from our latest B2B Managed Services study with the Supply Chain Management Forum at Stanford University then please visit www.gxs.co.uk/stanford.
Finally if you would like to learn more about the international challenges faced by companies then you may find our latest executive study of interest, you can download your complimentary copy of the report from www.gxs.co.uk/fieldworks
This brings us to the end of this session, thank you for taking the time to watch this webinar. If you should have any questions regarding GXS or our cloud B2B integration offerings then please contact us via the details shown on this slide.