This year is proving to be a year to remember for many companies, and for their suppliers and customers. News has rocked the world as macro-economic events coupled with natural disasters like the earthquake in Japan, Thailand’s floods and hurricanes in North America have left some supply chains in pieces. With 2011 coming to end, it’s a good time to reflect on some of the major themes that have dominated supply chain integration this year, and how businesses have been responding to these trends.

This blog is the first of two that I am writing on this topic, so watch for part two shortly.

If we start in Europe, the Eurozone crisis has left some suppliers struggling with the uncertainties. Fluctuating exchange rates coupled with credit being difficult to obtain has led to some companies cancelling contracts with suppliers, whilst some suppliers are forced to turn down new contract opportunities as workforce cuts begin to take effect. In response to this uncertainty some customers are restructuring their supplier base in an attempt to avoid disruption – in some instances this has led to re-allocating existing contracts to suppliers in more stable economic regions, whilst in others it has meant localising supplier activity in order to increase control.

Localisation of supply chain networks has also been a by-product of recent natural disasters. For example, this year’s earthquake in Japan caused major disruption to supplier networks which led to significant revenue losses around the world. With over $109 billion in economic damage as a result of natural disasters in 2010 according to the UN (based on a report by the Center for Research on the Epidemiology of Disasters (CRED), this year’s events have led to some businesses becoming increasingly wary of dealing with suppliers that may be far away and unreachable in extreme conditions.

For example, some of our UK customers are moving manufacturing operations closer to home and likewise some customers in Japan are looking to work with Japanese suppliers that are local to their central operations, rather than placing key contracts with suppliers around the world.

Whilst reallocating supplier contracts to another territory may not seem that difficult, finding quality suppliers in unfamiliar regions can prove to be difficult. Once they are sourced, this is just the beginning of the process. Large companies need their suppliers to interact with them electronically. When a supplier changes a price for a particular product the buyer’s procurement system needs to be updated automatically. When a buyer changes their sales or manufacturing forecast the supplier’s demand planning system needs to be synchronised electronically. When a supplier ships an order the buyer needs to have visibility to the location of the inventory while in transit. Routine transactions are the most critical for automation. Purchase orders and invoices should be exchanged via EDI or XML technologies rather than over the phone or e-mail. The latter are not only time consuming and expensive, but error prone as well.

Unfortunately, establishing electronic communications between business partners is a complicated and time consuming process. There are many different variants of EDI and XML standards. The largest companies each implement these “standards” differently. Small suppliers typically lack the budget, resource or expertise to exchange data electronically. Specialised B2B e-commerce vendors have tools, experience and best practices that can help reduce the challenges associated with on-boarding. By managing enterprise communities this way, GXS has been able to reduce the time taken to onboard suppliers by about 60% when compared with traditional models and this is something that seems to be really appealing to companies this year as the hunt for new suppliers in different regions has really taken hold.

2011 has been a taxing year for supply chains across the world, and with both foreseen and unforeseen opportunities and challenges arising all of the time, the marketplace will continue to change. The ability to respond to these changes with agility and ease is critical to success from both a reputation and competitive perspective – regardless of which vertical industry a business falls into – and automation of B2B e-commerce will continue to be a key enabler of flexibility and scalability for businesses globally.