EDI for ROI

The True Value of Electronic Document Exchange

This week I have been fortunate to begin working on a project with a very large FMCG supplier. The project is to integrate supply chain messages with their logistics suppliers. This project involves their SAP system, a number of haulier back office systems plus warehouse management systems. 

This project shows the true value of complete supply chain integration. Why? Because not only does this project revolve around business process improvement but it also shows a direct link between the supply chain and the turnover/profit of the FMCG company and its supply chain partners, the hauliers. The improvements being built in the integrations with the hauliers will reduce costs for the hauliers, for the FMCG company and the final document in the chain, the Proof of Delivery (POD), leads directly to the invoicing of the client. By having this document integrated rather than retyped the reduction in errors will reduce the need for crediting notes and queries. The improvement in the speed of receiving the POD in to the SAP system will mean the FMCG company can invoice earlier and in this size of organistion that one or two days improvement can mean a significant cash and bank interest benefit. 

The project will involve a variety of file formats, some Electronic Data Interchange (EDI) formats, some flat files and some XML. The various formats will be to suit whatever each individual supply chain partner requires. The FMCG company using SAP will have one format to suit them, each haulier will have a format to suit their system therefore minimising the amount of extra effort required by both sides of the supply chain equation. The communication protocol will also be flexible, but AS2 will be the preferred method due to security, non-repudiation and reliability. 

Because of the benefits the FMCG company has identified in the project they are implementing this project in the most professional way I have seen over the past eight years. With input from SAP users, technicians and the haulier companies to ensure the success of the project. being involved in the project will be one of the highlights of 2010 for me. 

The Christmas Holiday, For Some

During the Christmas holiday period, for the majority of us, it is a time to relax, concentrate on home and family and enjoy a few days rest from work. However, when discussing with our customers their requirements for Support Desk availability over the festive period it becomes obvious that there are a large number of people that will be working, even on Christmas Day. 

Firstly, our servers are hosted at Rackspace to ensure that we can provide a service to our customers that runs 24/7/365. The servers are constantly monitored by Rackspace and so Rackspace engineers will be working throughout the Christmas period. Our thanks certainly go out to them because if they didn't do it, we would have to. 

Next comes our support team, their only day off is Christmas Day, and even on that day one of us will be monitoring our systems and software to ensure they are running correctly and efficiently.  

One of our customers, the NAAFI, serving the UK's Armed Forces will be working on Christmas day and we wish them and all the serving members of the Armed Forces, wherever they are, a safe Christmas. 

Another customer, NFT, will be loading their lorries on Christmas day for deliveries on Boxing Day because, in the UK at least, the operation of logistics for retailers only pauses for Christmas day, it does not stop. 

These customers and more will be using the First B2B service to exchange messages, even on Christmas Day which is why we have invested in the infrastructure with Rackspace. 

Once Christmas day is over it is back to normal for the large majority of our customers. What used to be a 3 or 4 day break in the middle of winter has become a one day break for the majority and a no day break for some. 

Personally I am very grateful to those that work on Christmas day, the Armed Forces, Emergency Services, logistics companies (I am bound to need something from a retailer on Boxing day for our family get together that I forgot to buy earlier this week) and Rackspace.

I wish you all the best for the festive season and hope you get at least some little break between no and the New Year. 

GXS and Inovis to merge...

Hot of the press an announcement that GXS and Inovis are to merge. Following hot on the tail of the BT EDI*NET closure announcement it may be big news in the Electronic Data Interchange (EDI) world but not that surprising. 

The traditional EDI market is dying, replaced by internet based transactions using non EDI Value Added Network (VAN) communications methods such as AS2, FTP(S) or even HTTP(S). These communications methods SHOULD be cheaper (Not always the case unfortunately), faster and more reliable. Indeed we have been involved with a household brand replacing the GXS EDI VAN with a secure FTP comms process. The results of a one month, 4500 document trial was that the Internet based FTP service was more reliable than the VAN and the time the files arrived at the trading partners showed that the configuration improved the speed the documents were delivered by approximately 10 minutes. 10 minutes may not appear to be much but in this case for a given document type (Delivery Notes) that is the difference between the document being present in the system when the goods arrive and not being present, which saves both the recipient and the sender of the data a lot of manual effort. We have now moved to all documents being exchanged via the Internet based process, saving time, money and frustrations from VAN failures.

Further issues arise for traditional EDI suppliers from new kids on the block such a Electronic Invoice Presentment and Payment (EIPP). A number of vendors claim this capability and it may be that for the most part this is a case of "The Emperor has No Clothes" but the marketing is good. These vendors claim that EIPP is "better" than EIPP, easier and more cost effective. However suppliers still need to produce the invoice in some data format, send it (often in a  different way to other EIPP vendors) and the costs are often more per document than for traditional EDI.  And to add to the issues each EIPP vendor uses a different pricing structure and the actually act as gate keepers to the customer rather than facilitators (If you want to send this customer invoices then you must do so through us and pay us is a typical refrain). 

If you think about EIPP it is less than 50% of a full procurement and the benefits to the recipient, and certainly to the sender, are therefore greatly reduced. If you want to gain the full benefits of an integrated supply chain then EIPP just does not cut it. Look at the business model, the customers pays and the supplier pays. The supplier does not have a choice but to pay. Why? is it because the customer cannot be charged the full price because the ROI would not stack up?

Finally there is the question of what is the value added proposition for an EDI VAN. It used to be security but you can now get the same levels of security from internet based technologies as outlined above. A few decades ago customers did not mind having to invest in IT resource to create a funny format document and send it by an unusual comms method, but now they want to have a provider that delivers a true value added service, where their IT department can do the minimum required but they can communicate with all their customers and suppliers. For a proposition that provides a real ROI, which customers need in this day and age, the Supply Chain Integrator has to provide open communications methods, value added services such as receipting, master data maintenance, on-line matching and other services.  Services that should mean for the customer (recipient) they receive nothing but valid documents for their system, and for the supplier (sender) any documents that fail are reported instantly, so allowing them to respond today, not in several days when/if the recipient reports it to them. So providing an all round improvement in the Supply Chain.  

BT EDI*NET Closure. Is the era of the VAN coming to an end?

BT has announced the impending closure of its EDI*NET Value Added Network. As a BT EDI*NET reseller First B2B had already started the migration of our customers to our new EDI VAN provider, nuBridges (Complements to them and Aimee and Tony at First B2B, the migrations are well managed and going smoothly). 

Obviously this means existing BT EDI*NET customers need to find an alternative provider and we have already been approached by a number of BT EDI*NET customer to migrate them. So over the next few weeks you will see a mad scramble by other VANS to secure the VAN business from BT users, oh and we will be part of that. 

Actually this is an opportunity for all BT EDI*NET customers to not only move networks but also to start to receive the level of service and functionality that such services should be providing today. I guess the tip here is, although for a lot of organisations an EDI VAN is a necessary evil, you now have an opportunity to demand of your new VAN better functionality. 

The real reason for the mad rush and for you to be able to have improved functionality is that, given more modern and secure file transportation mechanisms that have been enabled by the rise of the Web, EDI VANs that simply move messages from company A to company B are no longer seen as Value Adding. Maybe they should be called EDI Ns because the VA is no longer true. 

In the age of the internet, paying per Kilo-character is archaic. Having specialist networks, that for the most part operate like a large Black Hole where you send data but have no visibility of if it has arrived at the intended recipient is not acceptable. This is YOUR data. YOU should have visibility of that data. That is one of the reasons we chose to partner with nuBridges.

You could also look to replace the VAN with AS2 or SFTP or one of many other transportation methods. This is not always possible, especially with the major retailers, but some trading partners might just agree.  

As an example, working with one of our clients, we have just (together with their customer) migrated from another VAN provider to a Secure FTP service. This is our customers largest customer and also the largest customer in terms of EDI document exchange. Why did we do it? Because we, our customer and their customer were sick of the "Black Hole" nature of the EDI VAN in question. Whenever there was an issue it took to long to resolve because the visibility within the VAN was so limited. Interestingly, when we were performing weeks of parallel testing prior to the migration, we found that the new solution actually exchanged all messages without error whereas the EDI VAN solution had four messages out of several thousand missing. Cannot see the value add in that. The savings in terms of VAN charges are minimal compared with the value of knowing your electronic document has arrived correctly. 

So to all the BT EDI*NET customers out there that need to migrate I say, this is not a problem, it is an opportunity to get a better service for your business and possibly to reduce your costs.

VAT Change Shows the True Value of Outsourced EDI

In the UK our Darling Chancellor of the Exchequer announced with one weeks notice a change to the standard rate of Value Added Tax (A more complicated form of GST for the US audience). This is not the place to debate if such a fiscal adjustment was correct, but as is typical of most politicians his grasp of the realities of business is a little wanting.

The change should be relatively simple, just change the VAT coding in your system so that the Standard Rate is 15% as from midnight on 1st December 2008. However as with any tax change the practicalities are a little different. The basic rule is straightforward, if the Tax Point Date (The Date at which the Tax is calculated) is after midnight on 1st December 2008 then the rate of tax to be applied is 15%, before that date and time it is 17.5%. But note that this is NOT the date at which the invoice is sent or received, it is the date at which the taxable service/sale took place. Therefore, according the the rules you can send or receive an invoice up until 14th December 2008, that has a tax point date of 30th November 2008.

It is also worth noting that for credit notes the rule is that, no matter when the credit note is raised, if the credit is for a product or service charged at 17.5% then the credit note most refund VAT at 17.5%.

Now most ERP systems can cope quite easily with this change, especially when they are processing paper invoices, because a human being can make a choice as to what rate of VAT to apply (15% or 17.5%), however for electronic invoices it is more difficult because somehow you have to be able to marry the correct tax code from the sender to the correct tax code for the recipient. And of course there are many different ways and codes companies can and have implemented.

But here is the great advantage of an Outsourced EDI solution. One of the old fashioned on site EDI solutions sent me a copy of a four page document on changing their systems which your IT team had to do, and this assumed that the change you made were in line with those of your trading partners.

Our customers, and I assume the customers of other Outsourced EDI providers, had a much easier task. Firstly we asked our customers what they intended to do (add a new VAT code, stay with one VAT codes etc), then we asked the trading partners (where required) what they intended to do and finally if any changes were required, the support team at First B2B Limited dealt with it.

So here is one of the main advantages of Outsourced EDI, at least with First B2B Limited, we helped our customers take the pain out of Mr Darling's little tax change for them, and their trading partners.

The Market for Integrated Electronic Document Exchange

We attended and sponsored the 7th Finance and Accounting Shared Services and Transformation conference this week. Our intention was to both present our message about electronic document exchange to a wider audience and to learn more about the market for Electronic Document Exchange, companies experience of it and what successes companies had observed.

This was an eye opening experience. I guess I believe too much of the marketing hype. The messages we received were that, whilst some companies are dipping their toe in to receiving electronic invoices, very few are actually using electronic document exchange to drive through long term improvement to business process. One reason for this is the EIPP (Electronic Invoice Presentation and Payment) movements focus on invoice only. The only driver for this appears to be reducing headcount in accounts payable rather than looking at the entire procure to pay process. This is a huge opportunity missed.

For example we have been the technology partner for COINS etc, the largest electronic trading exchange for the construction industry in the UK, for 6 years. Whilst we have some very good technology and services, equally important has been the drive of COINS, in their ERP system, to look at the entire business process and help construction companies not just reduce the cost of typing in an invoice but also to show how changes to business processes can greatly improve procure to pay for all parties in the transaction  for the long term.

Likewise outside of construction we have worked with organisations in Logistics, such as GM², that have changed their business processes to offer a greater level of service to their customers. The NAAFI in the uk have evolved new business processes using electronic document exchange that greatly improves there purchasing and streamlines the process for their suppliers.

One of the messages from the conference is that EIPP, because of its limited focus, has done few favours for long term benefits for its customers. Such a limited focus will lead to short term cost reductions but for the long term you need to look to the full process.

 

Real Return on Investment from IT projects

In my previous post I mentioned that I had been working on literature identifying the benefits gained from Outsourced EDI, EIPP, SaaS EDI, Shared Service EDI or whatever the current buzz phrase is. We wanted some facts we could use to both understand how companies benefit from the use of EDI and to be able to clearley show how other companies could gain from their experience.

One thing that came out of the investigation was a clear Return on Investment (ROI) from fully integrated electronic exchange of documents. I had read a Stanford University study some time earlier that said ROI of 250% was not impossible from the use of outsourced EDI but I wanted to find out for myself.

In particular I wanted to make sure that we were achieving that sort of ROI for our customers, and if so how were they identifying the value, was it based on measurable facts or a feeling.

We asked our customers to identify what savings they had made using activity based costing, then to do the reverse and estimate the cost of replacing EDI with manual effort, and finally we asked them to estimate the costs of implementing there existing EDI connections internally. These are all measurable items. We also asked them what kind of business process improvements they had found, over and above the savings on manual data entry.

Some of the case studies can be found at www.firstb2b.net

The outcome; well not surprisingly for such an august body Stanford University were correct. We have seen customers quoting ROI of over 200%, of service level improvements for their customers and of substantial cost savings.

Our target now is to add even more benefits for our clients, based on what they think they can gain further from Shared Service EDI.  

Some meetings just add excitement to business

Not really on EDI this one, but it is about business.

I have got to say I am not a great one for meetings. I like them to be brief, to the point and to have an outcome. I find, if not carefully controlled, a lot of business meetings are not like that, they are long winded, meander and there is no follow up; but you do get nice biscuits and coffee.

Today was different. I had a meeting with one of our non executive directors, one of two I class as a mentor. The agenda was mainly focused around marketing and product development, which should amount to one and the same. I have been shut away in a darkened room recently working on marketing materials, product direction and adding more value to the EDI experience for our customers.

I have been working sometimes in isolation, sometimes with colleagues and sometimes with external organisations such as customers and software developers. It has been an eye opening experience. Sometimes you can just get too close to the workings and never get your head up to look around you. This gave me a chance to look around.

What has come out of this is several pieces of literature around how companies benefit from Outsourced EDI, looking at trends such as EIPP and information on business process improvements from EDI. We have also developed specifications for several enhancements for our outsourced EDI solution aimed entirely at adding value for our clients and their trading partners.

So, having done all this work I took it to my mentor, the non executive director I mentioned above. Some people just have a clarity of vision. Yes he has many years experience in software companies and has been very successful in his own right, but I am still impressed how he can take an idea, grasp it and take it to the next level.

I came out of that meeting buzzing. We had taken the work of myself, my colleagues and outside companies, improved it, set a path for the next stage of developing the ideas and defined a clear set of next actions. If you are running a business and looking to grow that business then I can really recommend either non execs or mentors. 

There was only one downside; All the actions are allocated to me. I have no idea how that happened. I think I still have some things to learn.

We implemented ISO 9001 and were accredited last year, which is unique in the EDI/EIPP arena.

As I have blogged before ISO 9001 is not mainly about current quality but about a continuous improvement process for your business.

The fruits of that process are now coming to bear. We are just about to roll out the latest release of our SaaS EDI offering. This new offering has added operational improvements, speed improvements, and customer interface improvements. Some were internal ideas and some were from customers, but all were continuous improvements highlighted via the ISO 9001 process.One of the improvement will offer a new service for our users that adds a new dimension to the benefits of EDI over the normally paper document exchange.

When we issue the release later in August we believe that it will lead to improved customer satisfaction, reduced support issues, improved mapping performance and so increased profitability. All down to a strategy that included ISO 9001, in itself a great continuous improvement suggestion.

Unconnected with EDI

This is slightly off topic but....

Business has a role to play in the community that it exists in. I was thinking about this on the train back from an Institute of Directors course today. It is not really a responsibility in a legal sense although of course there are rules regarding the environment, HSE etc., but it comes from the fact that if a business exists in a community then it should do what it can to help the community. After all that may well be where its next employee is drawn from.

As with most companies we give a certain amount to charities, one for example that provides information packs to local schools on drug awareness.

However one community involvement that we started last year and have continued this year is our sponsorship of a local juniors cricket club, Grindleford. The juniors season has just ended and it has been terrific to see children from age 7 to 14 enjoying the sport of cricket. There is a huge amount of effort put in by members of the club, in their own time, to provide the children with the opportunity to both train, and take part in competitions.

What has been really pleasing this year is that the number of children involved has grown so that now over 35 children are benefiting from the health and social benefits that team sport brings. The do not just come from the village but from miles around.

Given the UK's preoccupation with “out of control youth”, seeing the enjoyment 12 weeks of cricket training and matches has given, just by offering the children something to enjoy on a regular basis, has been superb. If more companies invested in such schemes we may help alleviate the problem of bored kids, just help give the kids something to do. Not all of them will turn in to the next Freddie Flintoff but they all enjoy it and the cost per head is negligible.

The Seed of Truth for EDI.

EDI is only as good as the quality of the data. This appears to be overlooked in a lot of rather simplistic approaches to EIPP. Hence, if the only transaction is an invoice then the accuracy relies on the supplier having first translated the customer's order requirements in to their own ERP system correctly. In turn the accuracy of the purchase order is reliant upon the customers having the correct pricing and product codes in their back office system.

 

In discussion with a customer the other day they explained how they take the issue of getting the supplier data correct so seriously that they have a department that has sole responsibility for this. They sell over 30,000 different products and this is just about a full time job.

 

Together with ourselves this is a target for EDI. We are working with the clients and the suppliers to make the adoption of the suppliers products and prices automatic. The savings to the customer are self evident, but the suppliers will benefit by receiving accurate purchase orders, preferably electronically.

 

This accuracy will benefit all parties. We call the starting point of the accuracy “The Seed”. The closer “The Seed” is to the start of the process, the better the entire process. The more benefit for all.