Future of B2B trade: open digital business networks
Digitalization is set to disrupt the traditional business-to-business operating models with real-time information and interaction. The relationships between buyer and supplier organizations are evolving as the digital business network in Europe and beyond is developing, but how far along are we on the journey toward digital selling, buying, and paying in B2B trade?
In this blog, Heikki Pulli, Sales & Marketing Director at OpusCapita, discusses the development of digital business networks with supply chain expert Antti Kojola, Business Development Director at Gartner.
Digital business networks, B2B ecosystems, digitalization of buyer-supplier relationships – how would you describe the reality behind these terms?
Antti Kojola: For a long time, the interactions between suppliers and customers were linear chains. Today business operations are more diverse, and companies operate in a network of suppliers, partners and customers. In this environment, looking in one direction at a time simply does not suffice. Businesses need to have 360-degree visibility to optimize their own operations and enable smooth cooperation in the network.
Heikki Pulli: It has been estimated that up to 80 percent of all information that a company needs to run their supply chain efficiently is inside their partners’ systems. Digital B2B networks arise to enable the exchange of different trade documents between all parties and to make the needed data available for streamlined, digitalized processes both for the buyers and suppliers.
Antti Kojola: It is important to make the difference between the terms digitizing and digitalizing, which still get often confused. Digitizing is continuing to do the same thing, but electronically: for example, instead of a fax, you send your order as an EDI message but the process stays the same. Digitalization is a chance to do things differently and create new value while doing so.
Where are we today?
Heikki Pulli: A good example of an evolving digital B2B ecosystem is PEPPOL, the European network for e-procurement and e-invoicing. PEPPOL is an open many-to-many network, and as such it enables effortless electronic exchange of transaction documents, supporting the automation of source-to-pay and order-to-cash processes. As the European public sector is getting ready to comply with the new EU regulation that obligates them to receive e-invoices, interest in PEPPOL is rising, and not only in business-to-government trade.
Antti Kojola: The world has moved beyond generalizations, and it is harder to differentiate between the forerunners and the laggards based on geography, for instance. Today, within a same industry or region, there are companies that are at the front line of the digital transformation and there are companies that are only now starting to wake up. At the same time, there are processes that take long to change even if the capabilities are already there. For example, in Finland, e-invoicing has been commonplace in B2B trade for a long time but the waybills are mostly still on paper.
What is the importance of transparency in digital business networks?
Antti Kojola: In supply chain management, the concept of a control tower has been a hot topic for almost a decade. It basically describes the search for new ways of operating that are needed to create visibility, collaboration and automation among trading partners. The role of openness and transparency is not only to bring forward all the necessary information but also to make sure that the right parties have access to it and can act on it to make the whole chain more efficient and for example prevent disturbances in the supply chain.
Heikki Pulli: This is why establishing open digital business networks is so crucial for the future global trade. A four-corner model as the basis helps to create the greatest efficiency for B2B transactions: both the buyer and the supplier are free to choose their own service providers and can exchange business documents from product catalogs to orders and invoices in a single network with all their trading partners. This is also the ideology behind PEPPOL.
What does the future look like? Let’s fast forward to the year 2025.
Heikki Pulli: Whatever happens with PEPPOL, I doubt one network will be enough. I believe similar efforts to build standardized B2B networks will emerge in USA and Asia, for instance. Most likely the global B2B ecosystem will in the end be shaped out of broad geographical networks, and service providers will help companies to overcome the remaining boundaries for harmonized global trade.
Antti Kojola: It is not easy to bet on the winning horse. Typically, a standardization effort in some area, such as PEPPOL now, will lead to the creation of a new, rival way of doing things. Looking at any technological development, standardization has always been a trigger to speed up the progress. We have now reached the point in time where we are able to create the transparency in the supply chains. We have the data – what it all comes down to is who will be capable to take advantage of it.