B2B purchase order tracking
Entomo's product suite is designed to track and manage purchase
orders after they've been created in a corporate (ERP) system. The
suite is an outside-the-firewall hosted solution that provides transmission
of orders to suppliers, visibility into order status, analytics,
and full order history.
About Entomo
Entomo was started in one of the wettest places on Earth (Seattle)
by two men who had come there from one of the driest (the deserts
of Northwestern India): the founders, Sunil Pande and Sanjay Chatterji
met at the Birla School of Technology in Rajasthan.
The idea for Entomo comes out of both men's work in high-tech manufacturing.
At places like Intel or Tektronix, where they had worked, so many
orders are created, then changed, then changed again, that just
keeping track of them is a real challenge. Faxes could be sent out,
but were they received? Were the change faxes received? Did the
promised shipment actually go out?
Pande and Chatterji wanted to address this problem by creating
what is now called SRM or private e-marketplace software for direct
materials. Unusually, they built a prototype in 1998 before getting
funding; by November 1999, they had funding and a beta customer.
Another round of funding came in November 2000, and they expect
yet another placement in early 2002.
Today, they have 36 employees, 5 clients who are using the software,
and another 3 or 4 who have bought it. They are privately held and
therefore do not report revenue figures.
Customers
The announced Entomo customers (using or purchased) include:
- Atlas Copco Wagner, a manufacturer of mining equipment. (Atlas
Copco Wagner is a division of the Swedish multinational Atlas Copco)
- Wacker Siltronic, a manufacturer of pure silicon wafers for the
electronics industry, a division of Wacker-Chemie GmbHo NACCO Materials
Handling Group, a manufacturer of lift trucks, a division of NACCO
Industrieso Merix Corporation, a manufacturer of printed circuit
boards (PCBs)
- Landscape Structures, a manufacturer of playground
equipment
What these customers have in common (and what makes Entomo
attractive to them) is that their business model does not tolerate
the normal levels of inefficiency, ignorance, and error that are
considered normal when managing purchase orders. Some have small
lot sizes and hence high volumes of orders and a high risk of shutdowns
or failure to deliver if orders are not fulfilled. Some have long
lead times and need to keep close tabs on order status. And some
change their orders frequently, so they need to keep track of what
happened as the orders changed.
Industries
The background of the Entomo founders is in high-tech manufacturing,
and their software was designed to solve a problem that occurs there.
However, their actual customer base is spread across many industries.
The common denominator, as noted above, is the need to manage the
full purchase order lifecycle.
The Entomo data model is based on a superset of EDI standards,
so any customer that uses "standard" EDI for its industry
should be able to use Entomo as a starting point. However, adaptation
of EDI standards to particular industry segment requirements and
translation of EDI messages for particular company requirements
must be done at implementation.
The Product Suite
Entomo sells two software products: SmartHub SRM and SmartBridge.
Pande describes the suite as Lotus Notes for direct procurement,
plus EDI, plus analytics. This is pretty good shorthand for what
the products do.
SmartHub is a hosted, private e-marketplace that takes in purchasing
transactions (POs, scheduled releases, etc.), stores them, distributes
them to suppliers, and keeps track of what happens to them.
The transactions can be initiated in SmartHub or modified there,
but the typical source of the transaction is an ERP system, which
is the system of record. (Orders initiated in SmartHub are fed back
to the ERP.)
The transactions are typically for direct materials, but NPI (new
product introduction) orders are a focus for some customers, and
spare parts orders could also be handled.
The designers of the product came out of an environment where orders
change frequently (an average of three times). A focus of the product,
therefore, has been to keep track of the changes. SmartHub preserves
a history of changes to the orders; it also provides the ability
to attach unstructured data to the transactions, which allows people
to add explanations of the changes or comments about them.
Because of this need to preserve history, SmartHub is the primary
conduit for orders after they leave the corporate system. "We
want the buyers to turn off their fax machines," says Pande.
Suppliers can get the orders via a browser by logging into SmartHub.
Or the orders can also be fed directly into the suppliers' systems
using SmartBridge.
Responses to orders are communicated in the same way, either entered
into a browser or sent directly via SmartBridge. In the latter case,
Entomo is an EDI-substitute, taking the order/response and sending
it to the receiving system.
Since each installation of SmartBridge at a supplier is effectively
associated with only one customer, EDI translation issues are handled
on a case-by-case basis.
The basic transactions supported are basic POs, blanket releases,
ASNs, and Receipts. The ASNs and Receipts are treated as part of
the PO history. Some alerts, like missed ship notice, are supported.
The underlying data model for the Entomo system is the EDI message,
so all of the data contained in an EDI message can in principle
be kept in the order history, and changes in any of the data can
be recorded.
As a practical matter, though, users do not want to see all this
data, so some attention has been paid to creating user-specific
or role-specific displays and setting up analytics that make it
easy to display the relevant information. Alerts can be set up using
mathematical rules, but of course the kind of nested dependencies
that occur in real life are harder to model.
With a system that is good at tracking changes, it is important
to be able to find the changes. The threaded diff method that Entomo
uses is very effective when the number of changes is relatively
small or when the changes occur in the same fields (e.g., order
date). But for really complex changes, they can be hard to manage.
We have not reviewed the product fully, but we believe that the
order history, alert, and order tracking features are more useful
when there are many, many orders that change once or twice, and
the basic problem for both buyers and suppliers just to keep track
of what happened.
The product does reporting on the transactions; it can also report
on such things as how many times a supplier has missed shipments
in the past. Entomo's picture is that the commodity manager will
use these reports and the alerts in deciding what work to do next.
Value
The direct materials SRM packages can provide value in three different
areas:
- By automating the order delivery process, they reduce processing
effort, reduce the risk of orders going astray, and reduce lead
time (slightly).
- By providing order visibility to both buyer and
supplier, they permit both sides to reduce safety stock and/or lead
times, since uncertainty surrounding the delivery is reduced.
- By
giving commodity managers or expediters the ability to track, recall,
cancel, or change orders, they reduce the labor required from commodity
managers and reduce uncertainty in supply.
Entomo can claim that it provides all this value. The question
for potential users, however, is whether the value provided is worth
the investment. Companies where the cost of managing orders is high
(e.g., in high-volume, long lead-time, or highly changeable order
environments) are the most likely to get a reasonable ROI from the
product.
Entomo offers a business impact analysis to potential customers
in which they set out the estimated ROI.
Assessment
POSITIVE: The attention to order history and the ability to attach
comments that explain changes in orders will be an "Aha."
to the companies that need it. Customers have been able to use the
product for applications well beyond the nominal capabilities of
the product. One customer uses it for VMI. Another uses it to create
blanket orders and then releases the order within SmartHub.
NEGATIVE: Being a substitute for fax/EDI can be a real barrier
to supplier enablement. Our impression is that most customers will
want to use this product only for the 10 or 15 most important suppliers.
Suppliers that use fax only will not be able to take advantage of
most of the facilities. (Obviously, the buying company can still
print out the order and fax it to the supplier.)
The screens we saw (may not be fully representative) used somewhat
unusual terminology and data structures; in all probability, installations
will require customization.
The handling of the order history and the commodity manager's work
management were more appropriate for relatively simple environments
than for large corporations or complex ordering situations.
For the number of customers it has, Entomo has a surprising amount
of experience with integrating ERP systems, having done integrations
with SAP, Oracle, JDE, and QAD. Obviously, more experience would
be better.
BOTTOM LINE: Value is available from this product; and the companies
who need the product will recognize the value. The order history
can be an important differentiator, but potential customers should
review the capability carefully to make sure it is actually useful.
Competitive Landscape
The biggest competitor to any direct procurement e-hub is the native
ERP system. Most ERP companies now offer supplier portals that at
the very least provide visibility to suppliers. To compete, an e-hub
package must offer some level of guaranteed delivery or superior
order management.
As noted above, Entomo's order delivery capabilities are limited,
though SmartBridge does offer more than anything one can get from
the ERP companies. Anyone looking simply for PO automation and guaranteed
delivery should look at Exemplary or at the e-hub products offered
by companies like Manugistics or i2.
(CommerceOne and Ariba also offer e-hub products that guarantee
delivery, but they are designed to be used with an e-procurement
on-ramp, and the capabilities do not actually extend beyond auto-fax
for suppliers that are not e-enabled.)
What would make Entomo superior to an ERP system in the area of
order management? In any company where there is a lot of variability
in the purchase order life cycle (that is, frequent changes in the
order data or in order status), Entomo provides much greater ability
to manage and track the variability. Most ERP systems don't track
much of what happens to an order and track changes poorly.
As noted above, for some companies, it will be just the ticket.
However, since Entomo is not the system of record and since its
comment/alert/work management system is fairly rudimentary, it may
not compare well with a more robust order management system like
SupplyWorks, which have focused more on creating a commodity manager's
workbench and less on managing history.
For other SRM company assessments, see our archive.
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