Supply chain management: Oracle and E2open partner to turn a product into a solution

I’m not the smartest guy in the world, but every once in a while I notice that I’m hearing the same sort of thing from a couple of vendors, put two and two together, and come up with a trend. Of late, I’ve noticed something I’m calling “from product to solution.” In fact, it’s going to be one of our lead features in the December issue.

The trend is this: For years, materials handling equipment manufacturers made and sold products. They were conveyor manufacturers, rack manufacturers, conveyor and sortation providers or AGV suppliers. It was up to you and your consultants to figure out how to make best use of them in your operation. The result was a lot of custom (read expensive) designs.

In the last year, vendors have started talking to me about selling solutions. Some equipment providers have figured out that once they create a design for a case picking solution in a beverage warehouse, there’s no reason to reinvent the wheel for the next beverage customer. Or maybe not even for the next customer doing case picking. Maybe that design constitutes a repeatable solution that they can plop down in warehouse after warehouse. If so, they can spread the cost of research and development across a number of customers, and bring down the cost for everyone.  

The same holds true for technology providers. That was driven home the other day when I spoke to Derek Gittoes, vice president of logistics product strategy for Oracle, and Lorenzo Martinelli, senior vice president with E2open, a supply chain collaboration platform. We were on the phone to talk about a new partnership between the two companies for transportation management.

The idea behind the partnership is this. One of the ways a customer lowers its freight spend with a transportation management system is by sharing information electronically with their shippers. But, in the past, a TMS provider like Oracle only provided the software. “A customer would have to invest separately in technology to make those electronic connections,” Gittoes says.

That’s where E2open comes in to play. As a Web-based, on-demand collaboration platform, their model is to provide to provide the connections to support processes that span companies. Over the past ten years, they’ve built an electronic network that connects about 75,000 trading partners, including nearly 400 shippers, according to Martinelli.

The idea then is that the two companies can now go to market together as a total solution: Oracle provides the transportation management software and E2open provides the connectivity to shippers. Martinelli says E2open can bring a new company onboard for about $1,000, and then charge a subscription fee of $2,000 to $3,500 a year for unlimited transactions. Better yet, if you want, you can do the whole thing in a web-based, on-demand model, since Oracle will sell the software in a traditional licensed model (you buy it and install it on your server) or in an on-demand model (Forget the upfront fee. Oracle will host it and charge you a subscription fee just like E2open).

As we talked, Martinelli said something that caught my attention. “In the past, we worked with companies on a project basis,” he said. “What we’re doing now is to standardize those connections and productized them.” In other words, what used to be a custom one-off product is now becoming a standard solution that E2open can roll out across customers. Likewise, the goal of this new joint offering with Oracle is to take something that used to be a project – loading software and then separately creating a trading partner network – and turn it into a solution that reduces the cost for everyone.

It’s a trend I plan to keep an eye on in the coming year.