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Case Study

Guess? Corporation

Headquarters: Los Angeles, California

http://www.guess.com/

In January, 1999 the management at the clothing manufacturer Guess? committed to taking a leadership position in the apparel industry by embracing e-commerce. The first area they attacked was the supply chain because of its payback and cost containment virtues. The design was to create a specialized vertical portal for the common use of employees, suppliers, and retail partners. In effect, Guess? acts as an application service provider for smaller manufacturing and retail companies in the apparel industry.

But big technical and operational changes don't come easily. Bryan Timm, the CIO, and Craig DeMerit, the director of technology of Guess? recognized that they would need help in many areas of hardware and software and they also knew that the initiative would need broad support within the company. Their strategy included sending senior management to Silicon Valley to visit the upper management at Cisco and get a commitment to the project. They developed similar partnerships with Microsoft for software and with AT&T and SurfNet for connectivity. After investigating both Ariba and CommerceOne, they decided to acquire the CommerceOne software through PeopleSoft, a channel partner of CommerceOne.

This system is strategic for Guess? and its ROI is difficult to measure. Sure, Guess? will have better control over the cost of indirect goods, everything from floor wax to computer paper, and direct goods, the fabric and zippers. There should be good savings in both areas. But the real benefit of the system is that the company can extend its chain of suppliers to manufacturers of finished goods used by Guess?. This allows Guess? to uphold standards of quality in the raw materials and to influence manufacturing processes. In the end, this system cuts the planning, manufacturing, delivery, cycle time.

Inside Guess? the supply chain management system particularly changes the job of purchasing agents. They move from administrative details to working with suppliers to develop strategic sources and to managing relationships with suppliers for better efficiency of delivery and pricing.

Suppliers interact with the Guess? portal through a browser. Special functions enable the suppliers to upload catalogs, price lists, and inventory lists. Old habits die hard with many small suppliers, so often they elect to receive purchase orders through a fax generated by the portal software. They can elect to receive purchase orders through electronic document interchange, CXML, or email.

Each user of the Guess? portal sees a customized set of Web pages. All users enter the system after a check of their rights with a VeriSign server. The system displays the pages within the user's rights. Because this is an integrated portal, the same screens can lead to corporate email, scheduling, messaging, and human resources applications. The company has many road warriors managing its worldwide retail operations and, according to Craig DeMerit, the mobile users have really bought into the value of the portal.

DeMerit feels that it will be easy to scale up the portal system. The Microsoft IIS Web server software runs on multiple Compaq Intel-based servers running NT with distributed load balancing running under Cisco's Local Director. Plans call for balancing Web servers across multiple locations for even better system availability. A suite of application servers runs the PeopleSoft software with Windows NT and Microsoft SQL Server on clustered hardware. The application servers use multiple Xeon CPUs and at least 2 gigs of RAM. An Enterprise Storage system from EMC Corporation provides high availability centralized data storage.

Overall, the IS staff as Guess? takes a large role in project management, tries to get by with as little customization as possible, and relies heavily on their experienced system suppliers. That formula has resulted in an automated system that controls costs while leading the old and established apparel industry into e-commerce.

Ventro Corporation is a blossoming B2B market maker conglomerate with five operating companies: Chemdex in life sciences, Promedix in specialty medical products, Broadlane in high volume hospital and medical supplies, Industria Solutions (http://www.industria.com/) in process plant equipment, and Amphire in the food service industry. Ventro bills itself as a builder of vertical marketplace companies, so it competes with and cooperates with companies acting as market makers, buyers, and sellers.

A new entry in the marketplace software arena, Firmbuy, started its service in early 2000, but its backers include iPlanet E-Commerce Solutions, a Sun-Netscape Alliance (which includes AOL), and other deeply connected companies. Firmbuy focuses on what are termed indirect purchases. Indirect goods are those that don't go directly into a manufactured product such as the supplies consumed in the maintenance, repair, and operation (MRO) of a corporate infrastructure. Direct goods go directly into finished products. Ariba and CommerceOne have a strong presence in the indirect procurement business, but they also focus on buying direct goods.

Buzzwords

MRO—Maintenance, repair, and operations. The common materials acquired through e-purchasing. MRO costs are indirect costs. Typically, many employees can purchase MRO products.

Commerce One Services

When you sell products in a B2B marketplace, the marketplace service companies make tools available that help you list your goods and take orders. On a CommerceOne Marketsite, here are some of the hosted applications used by suppliers. These hosted applications require a Web browser for access and will enable suppliers to manage their orders and update their catalog content at the CommerceOne MarketSite:

  • Catalog Management

    Catalog Management is a simple and quick process to update product and service catalog information in the CommerceOne MarketSite.

  • Order Management

    Receive, view, and manage purchase orders securely through a standard Web browser. Sort and search existing purchase orders to match specific business processes. Update purchase orders in real-time, so customers can quickly check order status through their electronic procurement applications.

  • Price Management

    Adjust pricing for your buyers in real time to ensure your customers of the best possible deals!

  • Inventory Management

    Keep your customers current with your latest inventory of your products and services.

The Ariba ORMS and ORMX software packages enable system designers to establish e-purchasing applications. The Ariba Network platform is a Web-based B2B meeting place that includes value-added services such as supplier content management and access to all manner of dynamic pricing models. The online system ties into the Ariba Internet Business Exchange and Ariba Market Suite, which contain specialty business exchanges and auctions in business areas that include consumer products, energy, financial services, transportation, and many others.

Similarly, Market Web is a well-established cluster of trading communities linked through the use of Commerce One software modules. A professional organization or similar group using Commerce One services sponsors each open community. If, for example, your company is a hospital or a physician's office, it might be a buyer on the Market Web Healthcare trade zone. Membership in a trade zone allows your employees to search general and specialized product catalogs online and to place orders within limitations set by your management. Typically, all that any individual sees of an e-purchasing system is a few customized Web pages. Indeed, simplicity for both the supplier and consumer is the goal of e-procurement.

If you're a supplier, each of these trade zones lets you connect once to hit many markets. Your catalog and order forms are available across many trade zones. Buyers pay $0.25–$2 per order, depending on volume. Suppliers list for free, but they must contribute the resources to keep their price, catalog, and inventory information up-to-date. Yes, suppliers would be smart to be in Ariba, Commerce One, and other public trade zones, but fortunately maintaining the catalogs and price lists in each zone isn't a technically difficult job.

While trading communities can work for suppliers and buyers in companies of any size, if you're big enough, the suppliers will come to you. But be aware that there's not much sense in setting up your own system if it's not tightly integrated into your manufacturing and accounting systems and that integration doesn't come cheap. If you can't think about budgeting $300–500K for a customized supply chain system, stay with a vertical community.

Often, large enterprises, governments, or institutions can provide so much business that each one is its own market maker. California State University, Fullerton, for example, created a marketplace using CommerceOne to handle about $25 million worth of purchasing annually. Single enterprise marketplaces like the one at CSUF or the similar one at UCLA probably handle a broader selection of products than those targeted at the raw materials and equipment for a specific industry, so they're sometimes called a horizontal marketplace.

 

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