Behind the scenes of on-line sites for ordering products, e-fulfillment today doesn't look much different on the collaboration front than fulfillment without the "e". For the most part, e-tailers taking orders on-line fill them from warehouse stock or else pass on the request to a supplier that drop ships the part or product from its warehouse. Manufacturers doing e-procurement may share forecast information but companies still tend to deliver shipments based on plan rather than on-line demand.

Indeed, except for the exchange of forecasts between trading partners, there's little collaboration between suppliers to furnish on-line product or material demand.

"Collaboration has been limited to information sharing around demand and supply forecast," says Scott Pulsipher, director of solutions for supply chain software vendor Yantra Corp. (978-513-6000, www.yantra.com). "They can't collaborate around execution of orders and order fulfillment. The limitation is the existing IT infrastructure, which was optimized for internal processes."

However, a few daring pioneers have begun efforts to break new ground in this area. But a synchronization of on-line order demand with production has a number of hurdles to overcome before true collaboration becomes a reality.

"No one has the confidence yet in the supply chain to risk the revenue for my company on how well my supplier reacts to filling an order each and every time," observes John Fontanella, an analyst with AMR Research (617-542-6600, www.amrresearch.com ). "We're not seeing you order one product, you make one. It's still being buffered by inventory."

The dot-com merchants that take orders over the Internet from consumers would seem to be the most logical candidates to collaborate with their suppliers. But today most cyberstores either ship from stock on hand in their warehouse or else have their supplier drop-ship the item. As a result, the inventory sits at the supplier and the order is transmitted to the supplier who ships to the consumer.

Cooking.Com (310-314-8367, www.cooking.com) is typical in this regard. The successful e-tailer of culinary products and specialty foods ships most of its product from its own warehouse. "We do some collaboration with drop-shipping orders for fresh food shipments," says Bryan Handlen, Cooking.com's vice president of logistics

But such coordination is really information sharing between retailer and supplier, and doesn't qualify for the meaning of true collaboration. "It really involves information sharing on an order," explains Yantra's Pulsipher. He adds that most dot-coms have to share information to arrange with a supplier to drop ship an item. "There's not a lot of true collaboration going on," says Pulsipher. "Customers or suppliers are merely managing orders via on-line mechanisms'.

Nevertheless, some direct to consumer on-line merchants are moving toward automatic replenishment. When a quantity of an item falls below a certain level in the retailer's warehouse, it triggers an order for resupply.

Global Sports Inc. (610-491-7000, www.globalsports.com) has set up automatic replenishment with five of its suppliers, says spokesperson Patricia Henderson. Global handles Website design, merchandising, customer service and fulfillment for such retailers as The Sports Authority, Dick's Sporting Goods and Bluelight.com to name a few. "Basically, we tell them how much we want to always have of each style in stock," says Henderson. "When we sell down to the preset number, it restocks by automatically generating a P.O. that fills us back up to the set number."

Yantra's Pulsipher says that on-line merchants are wary of collaboration because of the cost implications. "In the B2C (business to consumer) environment, it drives up the cost of fulfillment," he explains. "If I allow a customer change delivery date or up order quantity, it blows out the cost structure for the fulfillment process."

In the business-to-business (B2B) market, companies handling on-line orders have taken hesitant steps toward collaboration. In certain industries such as high-tech, some pioneering manufacturers have reached agreements based on a forecast with their suppliers to replenish stock once buffer inventory falls to a preset level. "Companies have reached an agreement for a level of service based on inventory and replenishment," explains Joshua Clark, president of Softchain Inc. (www.softchain.com, 650-259-8190.) "They need a forecast to determine that replenishment level," he says.

Some trailblazers are going to the next level, striving to incorporate real-time demand to revise forecasts. However, the early adopters in this area don't really distinguish whether the order comes on-line or the old-fashioned way via a phone or fax, notes Dave Tompkins, vice president of marketing for WorldChain Inc. (www.worldchain.com, 510-897-5200). "However that order is captured, whether through a Web site, phone, or EDI (electronic data interchange), it is sent back through the supply base," says Tompkins. "They (the suppliers) have visibility and the OEM (original equipment manufacturer) has immediate visibility to the inventory that exists at the suppliers."

The Amsterdam company Royal Philips Electronics (408-617-4700, www.philips.com) has forayed into relaying customer forecast information back to its suppliers for forecast revision on one product line made in the United States. Ian Wakefield, director of operations for Philips Components BU Connectivity in Sunnyvale, Calif., says his unit began sharing on-line order information a year ago using a specific product line, its wireless local-area-network components. "We used this new product line to forge new methods and new concepts for supply chain management," Wakefield remarks.

When Philips receives a new forecast from its customer, it now shares that information electronically with its suppliers subject to security considerations. "A customer gives us a new forecast," Wakefield explains. "We can check with our suppliers and check on available-to-promise inventory and capable-to-promise inventory." Wake-field adds that his company intends to expand this program to other company units in the future.

For the most part though, these pioneers are comparing order execution to forecasted demand – a process termed "distributed event management." That practice depends on visibility into the suppliers' inventory. "Now demand and inventory are coordinated real time and then replenishment against demand is monitored real time," says Tompkins of WorldChain. "When there are problems such as a service issue or too much inventory, those are monitored in real time. A violation then triggers an alert."

Although the industry leaders are sharing demand information with suppliers and monitoring forecast against actual demand, they have yet to work together on individual order collaboration. In other words, they have yet to capture an individual order and then break down that order into components and spread those parts requests among multiple suppliers. "That's coming in 12 to 24 months," predicts Chris Caren, vice president of solutions marketing for software vendor, Manugistics Group Inc. (301-984-5763, www.manugistics.com).

Trading-partner collaboration to meet on-line demand still faces a number of technical and political obstacles. For starters, Tompkins notes that trading partners lack the links between computer systems to exchange information. A buyer or retailer has to have the capabilities to send demand information back to suppliers. In return, it would also have to be able to handle information coming back from the disparate software systems of multiple vendors.

In fact, Wakefield says that the integration of the various trading partner computer systems proved the most difficult aspect of Philips' endeavor. "Putting up a collaboration tool was the easy part," he observes. "Integrating it with existing legacy systems was much more difficult than we expected. Most collaboration engines depend on having the legacy transaction system as the system of record (for orders)."

Indeed, data may also have to be scrubbed or translated to facilitate system collaboration. "As information is grabbed from different systems, there will be transaction discrepancies," explains Tompkins. "What the supplier said to the OEM for part number, price and quantity is often different than what OEM said it received." In addition, trading partners would also have to establish and agree upon specific parameters to monitor the execution of fulfillment. "You have to agree on specific parameters around service issues such as lead time or cost compliance," says Tompkins.

But political obstacles may prove more daunting to true collaboration than the technological ones. Trading partners are still wary about sharing information out of a fear that valuable secrets may be exposed to competitors. "There's a hesitancy on the part of many companies to release competitive information," says Pulsipher of Yantra. "I don't want information exposed."

Analyst Dwight Klappich agrees with Pulsipher that most suppliers want to keep the amount and type of stock on hand a secret. "Suppliers don't want to reveal their inventory because they want to use supply and demand to their benefit," says Klappich, a senior program director with the market research firm, the Meta Group (203-973-6700, www.metagroup.com). "There's a lot of business process issues that have to be resolved before collaboration can take place."

Finally, some even question whether it's practical to collaborate on individual orders except for special make-to-order products with high margins such as personal computers. "Customer expectations won't allow this to happen," says Caren of Manugistics. "Procter & Gamble can not make toothpaste to order. I'm not willing to wait a month for it."

Even on those products offering high margins, most manufacturers are unlikely to start entirely from scratch. As a practical matter, they would marry forecasts with real demand to meet Web-placed orders. That's because the manufacturer often depends on the existence of already made subassemblies to fabricate the product for an on-line order.

Building all the required subassemblies from scratch to order would create an unavoidable delay in delivery that many customers would find unacceptable. "You have to forecast demand to build subassemblies to meet customer demand," says Caren. "Otherwise, the lead time to shipment is a timeline that most customers are not willing to wait."

Despite the technical and political hurdles, many industry experts still contend that some brave manufacturers and retailers will pursue a strategy of bringing together their suppliers for collaboration to fill Internet orders. Klappich, for one, says that large companies that dominate an industry segment – dubbed channel masters – will be the ones most likely to bring about the efforts toward e-fulfillment collaboration. "We'll see this first with channel masters who have the ability to leverage its buying power and dictate that their suppliers participate," says Klappich, adding, "but it will be several years before it gets to this."

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