Despite Eqos's encouraging growth, increasing momentum, cumulative savvy, and indisputable experience as a provider of global sourcing and supplier management solutions for the retail supply chain worldwide (please see the previous parts of this series: One Vendor's Quest to Garner a Global Sourcing Ecosystem, A Retail Sourcing Suite Built on Experience, The Secret of One Vendor's Success in the Retail Supply Chain, and How One Sourcing Vendor's Offerings Are Bolstered by a Wealth of Services), it would be shortsighted not to acknowledge the challenges that still loom on the horizon for Eqos (http://www.eqos.com).
Eqos is, after all, still an up-and-coming company with a blossoming client roster (especially outside the UK), and with many product enhancements and improvements yet to be developed and launched. As such, the vendor still lacks global name recognition. Thus, many of the first few “proof of concept” customers came from the UK market.
As for penetrating the US market, fierce competition has already come from TradeStone Software (see A Well-designed Solution for Sourcing: Its Technological Foundation and How It Works). Like Eqos's solution, the TradeStone Suite is also a scalable, multitiered, server-based enterprise application built on the standards-based Java 2 Enterprise Edition (J2EE) development model, with support for Web services and extensible markup language (XML) that is leveraged for integrations (see Understand J2EE and .NET Environments Before You Choose.)
The two vendors' offerings and aspirations appear to be similar, with each vendor sometimes being “accused” of copycatting the other's messages and offerings. Yet in their efforts to keep up with each other, the companies are in fact validating each other, as well as the market in general. However, the companies are approaching the market from different perspectives. While Tradestone is a relatively new software company, Eqos has evolved from its heritage as a consulting company with a collaborative platform into a provider of standard application service provider (ASP) hosted solutions.
The issue of expanding the footprint occurs because of the intricacy of global trade and international logistics—an intricacy that stems from having to involve so many parties or intermediaries and their accompanying processes. Namely, buyers, foreign sourcing offices, and agents that have to deal with targeted suppliers (contract manufacturers) in terms of bidding processes, contract negotiations, product sampling, quality and safety, the tracking of advanced shipping notices (ASNs), shipment status, regulatory compliance, financial settlements, supplier scorecards, bid comparisons, and so on, is only one part of the entire process.
But what about the other accompanying processes involved with compliance and testing partners, local and international third party logistics (3PLs), customs, financial institutions, distribution centers (DCs), individual stores, and so on? Accommodating and enabling freight forwarders, non-vessel operating common carriers (NVOCCs), consolidators, customs house brokers, export management companies (EMCs) and export trading companies (ETCs), shipping associations, shipping brokers, shipping agents, export packaging companies, etc. further complicates the picture. For more information, please refer to APICS Certified Supply Chain Professional (CSCP) Learning System, Module 2: Building Competitive Operations, Planning and Logistics, 2007.
Also, the market in which all global sourcing vendors operate is characterized by early adopters, and it is rapidly evolving. A company of Eqos's current stature and means will be challenged to maintain its competitive position against competitors having significantly greater financial resources, name recognition, and other resources. The market is highly fragmented, and the intensity of competition can be expected to increase in the future, where competition might come from in-house development efforts, consulting companies, other software companies, financial institutions, logistic companies, customs brokers, forwarders, and third party development efforts.
As user companies continue to embrace the value of broader sourcing and global trade management (GTM) solutions, software vendors will often be looked upon to provide leadership and to add more value to the entire order life cycle, including purchase order management, total landed cost modeling, insurance and claims, import and export compliance, security regulations, and more seamless integration with invoice reconciliation and trade financing systems.
Given user companies' awareness of their need for GTM solutions and the like, there is a plethora of point solution providers that specialize in narrow areas of this growing yet fragmented market. Such areas range from landed cost calculation, retail product lifecycle management (PLM), visibility and event management, collaboration, export compliance, trading document generation, hazardous material handling, supply chain and production planning (see Production Planning and Scheduling Software for the Textile Industry: Unknown Frontiers), lead times, pricing or inventory optimization, and distribution order management (DOM), to more complete transportation management capabilities—just enough to muddle the message and nibble at the potential revenues of full-fledged retail sourcing players. For a slew of potential competitors in the market, see Challenges and User Recommendations for a Global Trading Solutions Provider on a Roll.
Eqos would likely point confidently to its focus on supermarkets and hard-goods and soft-goods retailers, its happy customer references, and the comprehensiveness of its solution, complete with business process management (BPM) and business intelligence (BI) enablement. However, even if not as well-versed and successful as Eqos is in these areas, some of the larger market players will likely be able to creep into a number of enterprises and reduce the share of the Eqos's account dollars.
While generalist sourcing vendors like Ariba and Perfect Commerce might not have the retail expertise per se, they might still cause the slowdown or postponement of some executive decisions. Additionally, given SAP's recent ecosystem push to recruit the “SAP Powered by NetWeaver” and “SAP Certified by NetWeaver” partners (see Multipurpose SAP NetWeaver), it might not take long before the giant partners up (or eventually acquires) with some of the above providers, thus creating a barrier of entry for Eqos and its contemporaries to its vast install base. The same could only be expected from Oracle given its recent appetite for acquisitions and for rolling them into the Oracle Fusion platform. And let's not forget the retail industry incumbent JDA Software of i2 Technologies.
Furthermore, given Eqos's needs and its intentions to broaden its channel abroad and to tackle industries beyond retail (for example, consumer packaged goods [CPG], consumer electronics, or pharmaceutical manufacturers), the vendor might end up with double the amount of investment (expenses) and additional competition from these markets' incumbents.
Turning Challenges into Opportunities
Eqos's strategy, based on its current state of affairs, is to first deliver an expanded solution footprint (Eqos Global Sourcing & PLM) by leveraging its existing assets and continuing with operational excellence. The vendor is also exploring potential alliance partners, and it is working on promoting the on demand-software as a service (SaaS) business model (for more information, please see Software as a Service's Functional Catch-up).
Following this, the long-term goal is to reach a “sourcing-as-a-service,” game-changing initiative by offering the expanded solution value via content partners and “on-the-ground” service partners.
||Reason for Partnering
||Advantages for Eqos
||Advantages for Partner |
||gap in the footprint|
|Sales and Implementation
||global / regional / country-specific systems integrators (SIs)
||sales leads and global reach
||consulting revenues |
||retail-specific consultancies and content providers
||route to market
||new business streams |
||retail enterprise resource planning (ERP) / supply chain management (SCM) / PLM / supplier relationship management (SRM) vendors and resellers
||route to market
||gap in the footprint |
||order / logistics / 3PLs / financial services
||route to market
||gap in the footprint|
Table 1. Eqos's alliance strategy and value proposition
To that end, Eqos has been occupied lately with devising a sound alliance program and strategy in terms of goals, revenues, markets, and channels. The strategy seems to be doing well within the initial phase of identifying target geographic regions (the UK, the US, continental Europe, and the rest of the world) and channels as well as the types of partners (see Table 1). Only time will tell how well Eqos will execute the subsequent phases of recruiting the partners, striking the mutual commitment (to the agreements with spelled-out roles and responsibilities, commitment levels, marketing plans, etc.), and pursuing the joint engagement developments and joint support programs (in terms of education, training, Web-based support, incentives, ongoing relationship management, etc.).
As retail and manufacturing enterprises, in their quest for lower item costs, move their production or continue to source from remote places throughout the world, complexity is inevitably introduced into the supply chain, which often results in bloated, multi-echelon inventories or lower customer service levels (higher stockouts). Companies that need to manage the intricate details of moving their goods across borders (such as trade financing, regulatory compliance, accompanying detailed documents, harmonized tariff schedule [HTS] coding, multimodal carrier handling, brokers management, etc.) might want to look for a full-fledged global sourcing system that is also well-attuned for their particular industry.
Since the Internet has become a commonly used medium for managing such complexity in near real time, enterprises should try to take advantage of sophisticated sourcing tools and processes to share and respond to once-complex scenarios in real time. The idea is to optimize around the unexpected events by becoming more responsive, as the expected ones become the exception rather than the rule.
Since the potential advantages of global sourcing are often hampered by increased supply chain complexity and bloated lead times, prospective companies should investigate the way global sourcing and supplier management tools and practices, like those from Eqos, could help them to enable their supply network flexibility, visibility, and rapid reaction process. Visibility typically has a direct correlation on perfect order fill rate, which ultimately affects margin and profit. The way to fight price pressures and shrinking margins is not always to go for the cheapest remote suppliers, but rather to focus on quality and turnaround time. Sourcing and supplier management processes based on best industry practices should also help retailers with balancing cost, flexibility, speed, and risk in their sourcing strategies.
Being service-oriented architecture (SOA)-based, Eqos's solution allows buyers to build on the infrastructure they already have in place rather than have to deploy a complex new system that most likely has at least some level of duplicate functionality. This system's openness should be used by retail channel masters to court the best trading partners. However, achieving an efficient online supplier management system is a considerable undertaking, and prospective customers should make sure their own “houses are in order” before trying to open up their systems to others in the supply chain and harness open standards.
In addition to overcoming the usual political and cultural issues (such as the onboarding of suppliers, issues of ownership, and trust and competitive privacy issues), there are a number of other issues that need to be tackled, as suppliers are called upon to share sensitive information. In addition to existing, rigid technology standards for exchanging information electronically (although the XML-based systems like Eqos can help here), there are issues concerning the way business processes have long been handled in different companies. Without common standards for information exchange and process integration, smaller companies face sizeable costs if they seek to comply with the online supply chain demands of each of their large retail customers. The malleable BPM-based solutions from retail sourcing providers like Eqos can go a long way toward mitigating these conundrums.
For more general recommendations, please see Zooming into the Clothing Retailer Conundrum.
This concludes the series One Vendor's Quest to Garner a Global Sourcing Ecosystem.
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