When Kansas won the NCAA men’s basketball championship in April, it confirmed the tournament predictions of many basketball experts: Memphis wouldn’t and couldn’t win the championship because of their poor free throw shooting.  It just took Memphis to the last minute of regulation in the championship game to prove those prognosticators right.  Yes, up by 3 points with handful of seconds left, Memphis could have called time out and set up a defensive play designed to stop Kansas’ last second drive in regulation.  Yes, Memphis could have fouled Kansas and forced them to take the ball out – thus wasting precious seconds.  And, yes, Memphis could have fouled again, forcing 2 free throws that would have stopped Kansas from attempting a 3-point shot.  All of those things could have helped them win the game.  But in the end, missing 3 of their last 4 free throws in regulation really did Memphis in.  Free throws: the most basic and fundamental skill in basketball.

Memphis was a flashy team with a penchant for “Sports Center highlights”.  And they were very, very good.  They won an NCAA record 38 games this year, and came down to the final seconds of regulation with a chance to win their 39^th game and a national championship.  But in the end, Kansas will be remembered as champions and Memphis will be relegated to the sports trivia books as the team that has won more games in a season than any other, yet it didn’t win the championship.

So what does this basketball story mean to us? No, I’m not going to rename B2B as “ball-to-basket”.  But it is Memphis’ failure to get the ball in the basket on their free throws that should catch our eyes.  Information Technology historically has a reputation – often well deserved – for focusing on flashy technologies – the cool moves, the next-big-thing, the fun stuff, the technology equivalent of the “Sports Center highlight” while ignoring the mundane fundamentals of aligning with and supporting the business.  However, these fundamentals, these “free throws” of business, are what wins our championships – improving stakeholder equity and increasing customer satisfaction.

Recently Tony Friscia of AMR Research wrote a nice piece (You’re Not Tiger Woods!) in his executive newsletter “Above the Noise” suggesting that implementing fancy technology solutions without having sound business practices is like the average golfer purchasing a new driver and expecting to radically improve his or her game.  Only if you have sound business practices already will you find value in your investment and only if you are already very skilled and disciplined in your game – like Tiger Woods – will you really benefit from the new driver technology.  In fact, the executives Tony speaks with routinely indicate that they receive no or negative ROI on back-office software “investments”. 

Similarly, this article, penned by yours truly in 2005, draws parallels between golf and B2B mistakes we’ve made over time.  The short of it is that even with all the new technologies, golfers scores haven’t improved in 30 years as they ignore the fundamentals of the game to instead go for the flashy big drives.  As I work with companies, I find that many continue to ignore their fundamentals.  Whether this is ignorance, willing actions on IT’s part, fear of IT in the CEO/CFO/COO seat, or something else, business basics are neglected as IT departments go for the flashy new technology.  Tony’s findings and mine are echoed in an article in CFO-IT a few years back that found that close to 70% of purchased software becomes “shelfware” – applications purchased but whose functionality isn’t utilized.

I have never been a big Colin Cowherd fan, but on April 21, 2008, he made a great point on his radio program.  Success, in sports or in business, is more about having the right culture than it is about anything else.  He pointed to sports and to the University of Wisconsin as an example and how its football fortunes turned around with the arrival of Barry Alvarez because of the culture he instilled.  Likewise he mentioned successful leading companies that have struggled after their CEO was changed and the new CEO didn’t understand and work within the culture of the business (or perhaps the business didn’t change to the CEO’s culture).  Overall he made a compelling argument.

Likewise, John Dvorak made a compelling argument in his 2004 column entitled “The Myth of the Disruptive Technology” which questioned Clayton Christensen’s ideas of disruptive technology.  I support John’s view and, though I am not partial to guns, suggest an analogy to the gun advocates’ saying that “guns don’t kill people, people kill people.”  I’d say that “technology can’t fix business, people can fix business”.  The corollary is that technology can cripple a business if it is lacking the right culture and processes to take advantage of it.

I believe that getting your supply chain automation right – whether you are on the buying or selling side – is about getting your culture right.  And that culture has to support appropriate best practices, not just hot technologies.  And true cultural change depends on having your people buy into what you are trying to do.  It isn’t easy, but it will bring the biggest benefits to your company.  Finding an experienced partner to help in developing and executing those best practices can certainly help, as well.  It may be that the outsourcing trends for IT services – and more recently for B2B services – are a reflection of companies realizing that they can control costs and reduce risk better through a partner motivated to provide success through business “free throws”, not technological “Sports Center highlights”.

It is amazing that thousands of companies have tried to implement global data synchronization yet studies show that the data is still as bad after the project as it was before – perhaps even worse.  One retailer employed a consulting firm to audit the products and data they receive for inaccuracies and they kept multiple consultants busy (perhaps they still are busy) doing this work.  Why would companies continue to pursue stakeholder and customer limiting technologies and practices?

Perhaps retailers and their suppliers feel “in for a penny, in for a pound” is the appropriate approach when it comes to global data synchronization.  My colleague, Melanie Ligons, even puts it as “in for a pound, in for a ton”.  After all, the standards groups will continue to work to make things better, right?  Well, yes.  But how long will it take?  There are things companies can do today to address their real problem – bad data – and not wait for the standards groups.  Another colleague, Steve Keifer, recently wrote (Consumers - Not Retailers - will drive adoption of Data Synchronization) that SAP, Oracle and others have built significant master data management functionality into their solutions.  Of course, it takes a significant investment – both in terms of money and in human resources – to effect the cultural, process and technical change necessary to implement such functionality.  Yet it takes more effort still to modify corporate behavior to want to fix this problem.  The solution may be more costly than the ongoing problems caused by bad data.

It might be, however, that it only looks more costly.  Ongoing analysis at some companies reveal that fixing the bad data problems they face (and almost all companies are facing them) will have substantial positive impact on their businesses.  One electronics company makes between 300 and 400 million parts per day. These are created and shipped to customers to be put into products.  Imagine if you have wrong information – about the components themselves or about the orders for those components.  The mistakes could be costly to both the electronics company and it customers.  Thus, they have embarked on a strategic data management plan that includes technical, process and cultural change.

Still, this company and many others might benefit as much from an externally resident data firewall that protects the company from both bad parts data and inaccurate supply chain data – and does so for both inbound and outbound information.  The electronics company mentioned above has analyzed its internal information and found that, depending on systems and product lines, between 35% and 50% of its data has errors, missing attributes or mismatches.  In addition, they estimate that 50% of their data comes from outside their business.  When this much data originates outside the enterprise, a business is depending on its partners to get the data right, so that the enterprise’s business decisions are based on both complete and accurate information.  Yet I’ve not heard of many companies that perform data audits on their suppliers.  If you audit them for the quality of components and resources, wouldn’t you want to make sure the information about the components – and the information used in developing/producing the components – was accurate, too?

Companies that utilize GXS solutions that provide product and transaction data quality do just that.  They make sure that product information is accurate BEFORE they let it into their businesses.  And they make sure their business transactions adhere to their strict business rules.  This helps make sure that not only the data is accurate, but shipments are more likely to be accurate as well.  And to be on the safe side, companies use these tools for outbound data to make sure their customers and, in the case of retail, their consumers are getting the right information and products.

I usually don’t talk about GXS products in my blog, but felt it was important to do so after participating in the Electronics Industry Data Exchange Association’s (www.eidx.org) spring conference last week.  During the conference it became clear that at least the high tech companies understand the magnitude of the challenge of bad data – and that changing formats from EDI to XML as the retail industry did – is not the answer.  Catalog data format is irrelevant if the data is bad.  They are looking for solutions and companies like Oracle, SAP, GXS and others presented how their solutions work to solve the real business problem of bad data.  In the retail industry, companies like Best Buy in the US and 3663 in the UK have embraced data quality solutions as a principle aspect of business transformation that will ensure their customers have the right information and the right products.  These are the pioneers, though.  Most retailers are relying on global data synchronization to share information and magically fix their data, too.

Yet how can it?  When most users of global data synchronization are inputting data manually, using spreadsheets or web forms that provide little to no data quality validation, retailers are receiving information rife with keystroke entry errors.  And those suppliers that do automate global data synchronization (so that their data is truly synchronized with their customers – a novel idea!) are rarely embarking on data governance and stewardship programs to make sure the data they synchronize is accurate.

If companies think that data sync alone will fix data problems, then neither they nor the consumers will win.  Quite frankly, consumers are demanding more and accurate data, not synchronized data.  In fact, consumers could care less about the technology associated with meeting their needs.  What they do care about is whether the dimensional information about that flat panel TV can be relied on.  They don’t want to have to take it back.  Consumers want to make sure the food they purchase won’t cause an allergic reaction.  If the data they receive is synchronized, but inaccurate, it is worse than not getting information at all.  To quote Barry Bernstein of SonyEriccson with regards to data: “Missing is easy, wrong is difficult.” If consumers are provided with bad data now, then they will be trained to disregard future information – even information that might be right. 

While some might argue that the global data synchronization standards allow for more information to be shared – including information that was difficult to share with older standards – they will also agree that most companies that are doing global data synchronization today are doing so for only a limited number of mandatory attributes – dimensions, weights, GTIN and such.  Their arguments that GDSN was necessary to allow for all the other information are spurious, at best, and hurtful to global retail business at worst.  GDSN took everyone’s eye off the ball.

In order to get the industry behind GDSN, a variety of organizations, like A.T. Kearney, did research that showed the potential value of GDSN to participant companies.  Yet many of the benefits mentioned ASSUMED accurate data as part of the result of global data synchronization.  In fact, accuracy was the primary result that was expected.  Knowing that synchronized data is still bad, then, there is little to support the business benefits found in all those studies.  Even a new product introduction process that takes less time isn’t valuable if the data is inaccurate.

Data Sync is a nice to have.  Data Quality is a need to have.  Once retailers and their suppliers realize that the two are not the same thing, the need will have to be addressed.  The high tech industry already gets it and is starting with data quality initiatives first. Perhaps retail can learn from them.

This is my third entry regarding the Olympics.  But will it be my last?If you haven’t worked out what you need to regarding the Olympics with your Chinese suppliers by now, it appears it is too late.  Smart carriers have been working with their contacts to secure their capabilities during the Olympics. But factories across several provinces in China will be shut down for some time in order to help clear the air for the athletes and guests at the Olympics (seems normal business travelers, tourists and residents don’t measure up to deserving similar consideration!).    So, you might have shipping capacity, but nothing to ship.

We are entering an age when B2B industry organizations are moving their focus from traditional transaction-oriented programs to higher-order, line-of-business challenges.  It is not that EDI and other B2B standards are not important.  They certainly are.  However, the work done over the last 20+ years has yielded many mature B2B programs.  These mature B2B programs enable B2B teams and interested functional staff to explore new, more value-added functionality for their organizations.  It also has helped shift the financial resources from the order-to-settlement and other mature processes to those value-added functions like logistics visibility, score cards, dashboards and more.

Organizations with mature B2B programs now need the same type of industry group focused on their line-of-business problems as emerged in the early days of B2B and addressed the granular details of the order-to-settlement process.  At the same time, companies with less mature programs still need to leverage the work that came before them in order to catch up and benefit from the traditional B2B functionality as well as the new line-of-business value adds.  Where do high-tech companies turn for help whether they are mature programs or new to B2B?

EIDX, the Electronics Industry Data Exchange Association is celebrating its 20^th anniversary this year.  EIDX is part of CompTIA, the Computing Technology Industry Association, and has long been the go-to organization for B2B leadership in the North American high-tech space.   EIDX has lead the high-tech industry through numerous challenges and changes over the years.  And EIDX understood several years ago that a significant shift was beginning to take place in the high-tech B2B space and it has positioned itself to continue its leadership role in the new, line-of-business oriented B2B world. 

EIDX has embraced the Open Applications Group (OAGI) and is a contributor of business best practices.  OAGI will, in turn, leverage these best practices in developing technical solutions for process-based B2B solutions.  In support of this initiative, EIDX has formed work groups to address important and current industry challenges.  EIDX is also working with EDIFICE, its European counterpart, to help the members of both organizations achieve better automation with Asian suppliers.

Linked here is the EIDX homepage where you can find their annual update detailing the EIDX organizations’ success in meeting their 2007 goals.  If your organization is in the high-tech space in North America, you should be working with EIDX.  If you are in Europe, work with EDIFICE.   If you are in Asia, contact either organization as they are both reaching out to Asian companies today to help provide guidance and best practices in integrating into the global high-tech supply chain.

 EDIFICE’s next plenary is hosted by Microsoft in Prague on March 5^th and 6^th.  The focus of the conference is “Distribution Channel Management”.  You can reach their sign-up page here.

EIDX’s upcoming conference will be hosted by TI on April 16^th and 17^th in Dallas.  It will focus, amongst other things, on high-tech’s number one issue right now - Data Quality. You can sign up here. 

If you have questions, feel free to contact me using the information below.

Bryan Scott Larkin, member of the Board of Governors, EIDX

518-882-7176

Bryan.Larkin@gxs.com

Inspired by the radio program, Only a Game, I offer up Supply Chain and B2B Haiku.  The program featured Super Bowl haiku this past weekend and I figured if they could do it for football, why not supply chain and B2B?  The suggestions are supported by recent AMR and Stanford Global Supply Chain Management Forum studies.

B2B brings growth.

Increase revenue today.

Stakeholders go wild!

Lower costs, but how?

Supply Chain Automation.

Why wait? Start today!

Stanford says outsource.

High ROI they did find.

Lower your risks, too!

Now, what type of haiku can you do?  I look forward to your responses.

When it comes to managing their EDI infrastructures – especially their maps – retailers have it rather easy.  They define their formats and then tell their suppliers to deliver their EDI documents in that format.  Suppliers, on the other hand, have a significant challenge on their hands.  They have to meet the formats, standards and data requirements of each retailer.  Shoot, many still have to keep translation tables to cross-reference retailer versions of product numbers with their own manufacturer or GTIN numbers.  What a nightmare! 

Just getting started is a challenge, but thinking about the long-term is another problem altogether.  And if the long-term isn’t considered at the very beginning of a project, a substantial amount of corporate risk can be associated with the way a company chooses to create and manage their EDI maps.  In short, there are three primary ways of managing maps.  The first is a one-to-one model where every transaction with every trading partner is handled with an individual map.  The second is a one-to-many model where similar transactions for multiple trading partners are handled within one map.  The final model utilizes a “canonical” method where all data is mapped to an “internal standard” format and then mapped again into whatever output format is needed – and might also include aspects of the one-to-one or one-to-many model – or both.

The One-to-One Model

While many will argue the merits of all of the formats, the one-to-one model provides the lowest risk option for companies.  In the long run it might also prove to be the least costly and most manageable option as well.  Individual maps are created for each transaction for each trading partner.  Where possible, maps are “cloned” or duplicated, renamed, and then used for new trading partners.  Minor or major changes are made to make sure the map meets the customer requirements, and then the map is tested with the trading partner.  All the separate maps require a strong document governance process to make sure everyone knows where each map for each trading partner can be found.  Companies also must make sure each map is referenced in the translation tools that utilize the map.  Though many maps are created, this is the simplest and safest method to create and manage EDI maps. 

The One-to-Many Model

The one-to-many model looks exciting on the surface.  Fewer maps need to be developed because maps are shared across multiple trading partners.  However, each map is more complex – sometimes exceedingly so.  If multiple companies are utilizing one map, conditional statements (“If partner A, do this.  If partner B, do something else”) within the map will most likely need to be made.  While this reduces the number of maps to manage, it means that if a change is ever made for a trading partner, it is imperative to re-test with ALL trading partners using that map or risk transaction failures.  However, it isn’t easy or customer friendly to keep going back to your customers and asking them to re-test a transaction they have tested already.  From a business standpoint, you are left with the option of increasing operational risk (and potentially customer satisfaction) by not testing with every company using the map or absolutely decreasing customer satisfaction by re-testing with each customer.  Neither is a good option, with the former providing potentially catastrophic risk if a mapping problem impacts a major transaction or multiple customers at one time.  Also, when managing documents, it will require a significant effort to document the code in each map to make sure each individual customer’s requirements are called out in the code comments, and then equal efforts to track which trading partner uses which map within the appropriate tools.  A potential mitigating step, exits, however.  That would be to move each trading partner to its own map once they requested a change to their shared map.  Eventually this B2B program would look exactly like the One-to-One Model.

The Canonical Model

The canonical model has been pushed since internal integration and enterprise application integration tool vendors tried to move into the EDI market.  In fact, some internal integration companies made the use of canonical models the basis of the entire operations of the backbones of their applications.  The theory is that a company can map their back office systems into a neutral format and then map from the neutral format to any other format needed by a trading partner or other internal system.  Supposedly this helps mitigate risk associated with ERP migrations and cross-application internal integration, but it introduces all sorts of other risks that don’t make a lot of sense for B2B transactions.  For instance, if the field level requirements for a canonical format ever need to be changed, then there is a potential to impact all transactions that use that canonical format.  Also, instead of doing one map for a transaction, a company needs to do multiple maps – one into the canonical format for each back office system and one out to the trading partner.  This, then, is the 1+ map method.  In fact, the canonical model can be seen as a combination of the other two models where a one-to-one approach is used from back office systems into the canonical documents and then either a one-to-one or one-to-many approach is used to go from the canonical model to each trading partner.

While the canonical format might help in massive internal integration projects, it doesn’t necessarily help B2B projects – and can in fact negatively impact them if the tool utilizing the canonical format doesn’t support the same validations and limitations necessary for assuring EDI success.  Finally, the idea that you spend extra time 1+ mapping up front for B2B to minimize ERP migration risks down the road seems strangely off-base, since the cost of re-mapping is usually an insignificant part of any ERP migration.  What should be of more concern is the potential costs of redoing all the maps if the application changes at some point and requires a change to the canonical format, the way maps are built/used, or something else that impacts translation and/or transactions – and there isn’t a big budget ERP project to absorb the costs.

If You Outsource

No matter which model you chose, if you do it yourself, you face the risk of having to redo/revise every map each time your translation software vendor significantly upgrades their application.  Sometimes a transition tool/process is provided, but sometimes the applications change so drastically that wholesale remapping needs to be done.  Choosing to outsource means that your outsource provider will cover those migration costs themselves, reducing your variable costs and potential risks.  And because your outsourcing vendor will eat those costs for all their customers, it is in their interest to make sure the transition to new tools is seamless and cost effective.  And because of SLAs, the risks should be low, too.

Managing Your Corporate Risk

The challenge of managing corporate risk has always been of concern for certain executives, but today risk has become a more common topic.  Combine government regulations (e.g. Sarbanes-Oxley) with industry mandates and activist stakeholders, and C-Suite residents are more risk adverse than ever.  Now might be a good time to take long hard look at your EDI and other B2B operations.  If you are utilizing a one-to-many or canonical method, you might want to consider a one-to-one model when you need to change your EDI infrastructure – or if you are experiencing too many negative business impacts tied to EDI.  If you are considering a change anyhow, ask your vendor how they recommend your maps be done.  The one-to-one model provides the safest method for building and managing maps over time.  If you are looking to outsource, make sure your outsource vendor provides one-to-one maps to minimize risk and maximize value in the long run.

One would think that we’d come far enough in our business lives to outgrow old fashioned means of sharing critical business information  While we don’t necessarily need to utilize the latest and greatest technologies, you’d think we’d at least get out of the dark ages.  Unfortunately we keep slipping back into the past.

What am I talking about?  I found that the lunacy that has taken hold in the high-tech space has oozed into retail.  Yes, my pet peeve, replacing B2B transactions with manual portals, has invaded retail.  Suppliers to the retailer in question know it well.  The retailer has eschewed common sense and asked their suppliers to manually enter ALL product data via a portal.  No option is given for uploading data.  This from a company once a leader in usage of electronic file transfers for product data.

Now, this may not be so bad if it weren’t for the fact that the data being entered includes data for apparel products.  Think about it.  All the different sizes, colors, styles, etc.  And these products are usually seasonal, so all this information is entered once for just a few orders. 

Suppliers have had to hire extensive teams just to provide the product data to this company, or that data gets provided slowly and late.  The competition must be smiling over this one.  A once proud and strong company jettisons industry leading processes and tries to compete, using a manual portal, with retailers small and large who have automated these processes in order to speed new product introduction, ensure accurate ordering, enhance the chance that orders will be fulfilled in a timely fashion, and to reduce costs.  This retailer is increasing their costs, introducing errors, minimizing their chance for accurate and timely delivery and more.  I also understand that from some suppliers they receive product up to 7 weeks after the competition – not good for products with a seasonal sales cycle.

But how and why is this happening?  Perhaps a loss of institutional knowledge is the key.  An IT team with little experience in the apparel B2B space is probably part of this company’s problem.  Loss of institutional knowledge is a problem that many companies will face – to their own detriment – as we move forward.  Mergers and acquisitions may create some of these situations, but the sense I’m getting from a few smart resources is that B2B staff members are becoming increasingly grey in their hair.  This means as people are promoted, let go, or retire, companies will be left with young, inexperienced people with no understanding of technicalities of transaction management or mapping, little knowledge of the subtleties of trading partner management, and no sense of history when it comes to the long row we’ve hoed in the EDI fields over the last 30+ years.  Taking the quick and dirty way out to put up a portal may reduce IT costs, but it increases overall business costs substantially.

An AMR analyst noted to me earlier this year that there is a lack of university and other formal educational programs focused on B2B here in the US.  There is also a dearth of reasonably available industry B2B training.  This means that folks with little experience are being handed the keys to the corporate B2B infrastructures and finding the easiest way out – building portals and then telling the suppliers to stop the antiquated electronic messaging so they can use the cool, manual web forms with a dancing mouse on them.  Ok, I made up the dancing mouse part. 

As I’ve mentioned previously in this blog, I think portals are great for trading relationships where one company is unable or unwilling to automate, but for heaven’s sake, if you can execute automated transactions, do so.  The tough thing for most inexperienced people to understand when tossed into an EDI role is that the goal of B2B is to support the best execution of the business.  Unfortunately if they fail to understand legal and operational requirements, if they get caught up in technical rather than functional needs, they can end up “executing” the operation of the business (pun intended).  Unfortunately, I know from experience that this lesson is lost on many executives as well, so the real danger comes when the bad decisions from the inexperienced in the B2B role are supported by, rather than questioned by, the members of the C-suite.

I was recently reminded of the story from the 1980s or 1990s where a software company started paying its programmers to find and fix bugs.  If I recall the story properly, the incentive program was halted rather quickly (within a week or two) after at least one programmer received a hefty bonus through purposefully creating and finding extra bugs. 

In an incident closer to home for me, I worked with a dotcom retailer that incented its merchandisers by the number of new suppliers that were brought on – not by the profitability of those relationships.  This led to infamous deals like one with a man that sold small numbers of Beanie Babies from his garage.  The dotcom merchandiser proceeded to purchase full page ads in USA Today and several newspapers in the largest US cities to sell the Beanie Babies at fantastic prices.  Unfortunately the “supplier” had about 300 Beanie Babies “in stock” and those were sold out in about an hour’s time, however the products weren’t put in an out-of-stock state on the web site for some time after that, thus disappointing many, many customers and forcing the company to find much more expensive suppliers to fulfill as many orders as possible – at a loss to the dotcom.

A more strategic impact of that merchandiser incentive program was the fact that legitimate supplier relationships were negatively impacted as well.  It would take weeks to get fully automated relationships set up with suppliers (such as the biggest brand name computer manufacturers), and just as we got our supply chain ready for significant volumes of transactions, the merchandisers would strike a deal with a competing supplier – thus earning a bonus for the merchandisers, weeks of manual transaction management for the supplier management team, and significant efforts for the supplier.  Meanwhile, the fully automated supplier was left with no promotions and limited orders, since there was no further compensation coming to the merchandiser.   And the EDI team was left to implement a new trading partner with the company seeing little value come from their efforts to implement the previous supplier.  This was an ongoing issue.

But what, you may ask, prompted me to think of these things?  Well, I’m familiar with suppliers that have compliance departments whose leaders wish to grow little fiefdoms.  They don’t want to eliminate compliance errors altogether because their team might shrink.  But I recently heard an amazing tale of incentives that stunned me.  One supplier compliance manager requires everyone in the compliance department to negotiate away each year the equivalent of their own salary.  These people are now incented to make sure as many supply chain errors as possible occur in order that they can cover their salary each year.  This means never fixing the problems identified via root-cause analysis – if such analysis is even engaged in.  Thus the problems recur so they can negotiate away some of the penalty again and again. 

So much for helping the company meet the corporate goals of stakeholder equity, customer satisfaction and operational efficiency.

This is unique in my experience.  Is it in yours? 

In my EDI career, I reported to at least four departments.  These include IS, Technology/Development, Finance and Operations.  Some of my direct managers included a CFO, a CTO, VP of Operations and IS Director.  In fact, I reported into three different departments within one company in the span of just two years.  My wife sometimes says to me “You’re weird.”  Perhaps the schizophrenic EDI life has something to do with it. 

This schizophrenia abounds in the EDI world.  Because of it, many EDI teams become the proverbial “red-headed stepchild” of their organizations.  Occasionally departments fight to have the team under their auspices.  Often they fight NOT to have it.  Sometimes the EDI team reports into one organization and has dotted line into one or more other organizations.  Having a confusing role makes it hard for the EDI team to get appropriate attention – or funding.  It also makes it hard to do their job – or even figure out what their job is.

In the early days EDI reported into senior level staff.  These days you are more often likely to find them 4 or 5 steps away.  After they stabilizes base transactions, the distance from leadership and the marginalization within the enterprise keep EDI teams from being involved in the next step.  Some might argue that maintaining the “B2B pipe” is the extent of the EDI team’s role.  However, having done all the root cause analysis and process definition, and because they so often straddle technology and functional roles, EDI teams are exactly the folks that should be leveraged for implementing refinement to EDI functionality to allow better compliance and smoother supply chain operations.  They should also be called upon to implement corporate compliance programs (which, by the way, look very similar to the types of metrics and controls EDI teams have used for years).  Instead, we’re finding companies in the high-tech space dropping EDI and other automated transactions and moving their suppliers to manual portals.  Scorecards are being implemented in retail but EDI staff is not involved when their companies undertake these initiatives.

EDI teams just don’t get any respect!  Do you?

What isn’t going on in your business, but you think is?  Where are you re-inventing the wheel – even though you probably have years of knowledge tucked away in another department?  What departments are not talking to one another that should? What is all this costing you, your supply chain, and your customers? 

One area is bad data.  If you are like most companies, you live with it and assign an entire team – perhaps multiple departments have entire teams – to address the results of it.  You could fix it up front, but, hey, why bother?  Just wait and address everything once the damage is done so you can truly assess the value of correcting the problem.  If you are like most companies, you experience the same problem over and over again and just resolve the resulting issues, but not the underlying problem.  Hey, good move.  That’s job security for a few people.

Another area is compliance penalties.  I know the cultured term is “expense offset” or “deduction”.  But quite frankly, let’s call it what it is.  Suppliers are PENALIZED by their retailers for poorly executing business transactions.  Shoot, suppliers are penalizing themselves as well!  Sometimes this occurs because of bad processes.  Sometimes this occurs because two people or departments refuse to talk to one another.  I consulted with a retail supplier that had revenues around $800M/year.  $300M of business was done with one customer.  They paid $10M in penalties per year to that retailer.  I asked the compliance department the cause of those penalties.  The answer?  They said that EDI was an expensive way to do business.  When asked to elaborate, they told me that every time they invoiced the customer, they were billed $500 by the customer.  Why was this?  It turns out that the retailer penalized the company if an invoice arrived before a shipment.  All the invoices arrived before the shipment because the company’s ERP created an invoice at time of shipment and the EDI system was immediately given the invoice which was then sent, with little delay, to the retailer.

The EDI team was sitting with me during this discussion and it was a revelation to them.  The compliance folks had never spoken to the EDI team.  They had assumed that the $500/invoice was just the cost of doing business and had never questioned it.  The EDI team minimized future penalties by immediately putting a 3 day hold on all invoices.  A better choice would have been to send invoices based on the receipt of a delivery notice from the carrier, but hey, the 3 day wait probably cut 80% of the early invoicing penalties and it was a quick fix.  If they have net profits of 10%, this fix probably added 10% to the bottom line. ..and a hefty bonus to one or more executive’s compensation!

This type of situation occurs in every company.  The question is how do you combat it?  How do you keep the impact to a minimum?  Or do you just live with it?