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

Looking to travel to China for the Olympics? Your flights in August might be better than they were last August.  Chinese airlines have been ordered to improve customer service and reduce flight delays before the Olympics.  The Chinese government has also required that overbooking of flights be stopped and that extra aircraft be available at 6 major airports in case of problems.But air travel isn’t the only thing that might need some help when it comes to the Olympics.  Word is that some companies have quietly been told to make sure they stock up before the Olympics because there is no guarantee that Chinese firms will be able to ship during the weeks preceding, during and immediately after the Olympics.  Ugh. Talk about a supply chain hiccup.

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? 

Bell Rings.  Dog Salivates.  Food is served.

Bell Rings.  Dog Salivates.  Food is served.

Bell Rings.  Dog Salivates. 

Retailer implements “compliance requirement”.  Suppliers squirm.  Minimal necessary steps are taken for supplier to meet the new requirements.

Retailer implements “compliance requirement”.  Suppliers squirm.  Minimal necessary steps are taken for supplier to meet the new requirements.

Retailer implements “compliance requirement”.  Suppliers squirm. 

The retail supply chain is broken.  Suppliers into retail pay almost 2% of their gross sales in compliance-related deductions.  And we’ve reached the point – long ago, actually – where suppliers will not do anything for their retail customers unless there is a stick involved.  Carrots need not apply. 

The problem is that this model has encouraged most suppliers to ignore initiatives that could increase their bottom and top line – changes that would be beneficial to the supplier.  These initiatives are sometimes presented at a low level without strategic level discussions – and presented in an adversarial way via compliance requirements.  And suppliers get so many different ones from across their customer base that it is hard for them to rationalize all of these into a comprehensive program that will make sense – and profits for them.  The end result is “letter of the law” rather than “spirit of the law” adherence to retailer requests from all but the largest and/or most ingenious of suppliers.  Data synchronization becomes manual data entry into web forms or spreadsheets.  So much for machine-to-machine communications.  ASNs are sent but are built from Invoices rather than warehouse and shipping information. 

What should be a mutually beneficial relationship is often not.  Even if there is a high-level strategic agreement, that message can get lost as it trickles down to those responsible for execution on both the supply and buy sides.

Retailers want their suppliers to succeed.  Suppliers want their customers to be successful.   Can we simplify in order to make it easier to succeed?  Can we leverage more B2B transaction types and reduce the complexity in each?  Perhaps actually using standardized documents rather than documents that break standards?  Can we all focus on a subset of data for synchronization – perhaps physical specifications and price – and leave the rest for later?  Can we agree on at least a common lexicon for all terms so we aren’t all talking about the same thing in different terms?

What do you think?

During my techie days, I was a very late riser.  Today?  I usually get up with our dogs around 5am.  I truly believe these early risings are good for me.  They get my brain working early and I get to see the sun rise.  It lets me think about things that are best not considered in the dark of night.  Things like how companies like to re-invent the wheel with regards to B2B rather than learn from their internal experienced staff.  This leads to thinking about things like manual portals replacing machine-to-machine automation.  Why is this happening?

I have my theories.  The cheeky answer is “because it can”.  More reasonable ones might include:

1.       Executives liked the reporting they got from portals which were being used for SMB suppliers.  They asked for the same from their automated trading partners, and it was simpler to just tell the large suppliers to use the portal rather than implement similar reporting off of the B2B feeds.

2.       The need to address Sarbanes-Oxley drove the need for quick, unified reporting.  This is similar to #1, but the driver is a bit different.

3.       Companies thought “hey, wouldn’t it be cool to have one way in which we deal with all our suppliers?”

4.       Businesses forgot the reasons they moved to automated transactions like EDI in the first place – faster, more reliable, fewer errors and less costly business execution. 

To be honest, I strongly believe that portals have their place.  Trading partners that can’t or shouldn’t automate (seasonal, few transactions) for instance.  Another is for the sharing of incidental information or information that doesn’t lend itself well to traditional B2B transactions.  They are superb for such situations.  Portals have also shown the value of good reporting in the B2B space – something most EDI and IT departments just haven’t addressed when it comes to traditional automated B2B transactions.  That reporting – that visibility – is needed by the functional business units.  But it just doesn’t make sense to use manual portals for high volumes of transactions – especially if you start asking for all the usual documents – PO, Invoice, Ship Notice, Change, Forecast, etc.  That’s a lot of manual effort shoved right back into your supply chain costs.

I first learned about this most recent migration from automated to manual processes when I was working with the Electronics Industry Data Exchange Association (www.EIDX.org), part of CompTIA.  We did a survey and wrote a white paper on the subject.  If I recall correctly, those surveyed indicated that automated transactions were their preferred way of doing business, but they also indicated that they were seeing a reduction in automated transactions and increases in manual transactions across their trading partner communities.

Based on the fact that the survey went to B2B/EDI folks, it supports my personal findings that these folks are not involved in the decisions to move automated suppliers off of EDI.  They just see a decrease in transactions and learn after-the-fact that the supplier has been moved.  Or they learn from the supplier when they receive a call saying “are you guys crazy?”  But, hey, this is very similar to the disruptive “solutions” sold by Commerce One (and Ariba, too, early on???) in the late 1990s and early 2000s.  Those you integrated to the buy side but early suppliers had to replace their EDI purchase order feeds with manual portals.  When you get hundreds or thousands of orders each day, that’s a lot of warm bodies you need to add to your staff, a lot of potential errors from re-keying data and a significant chance for delays in fulfilling the order.

I spoke to the head of North American operations for a well-known high-tech brand at the time of the EIDX survey and he indicated how important he felt B2B/EDI automation was and how he wanted as much automation as possible with his suppliers.  He directed me to his point man on supply chain execution for further talks.  That gentleman told me in no uncertain terms that he didn’t want to deal with the setup, change and testing of automated suppliers and getting them up on a portal was the way his company would handle things.  His suppliers subsequently had to hire staff or outsource the relationship with this company because of new need for manual data entry.  Somewhere margins decreased and costs increased.

What an amazing disconnect between the C-level and the operational level of the business.  What a short-sighted view of supply chain management.  I wonder if this is why the company saw its position erode and its ability to meet customer demand diminish thereafter?

What do you think?  Is it crazy to swap automated processes for heavily manual ones?  Is it better to receive forecasts automatically, process them and then send an automated response or is it better to print it out, hand enter it into manufacturing systems, do an MRP run, print it out, and then hand enter it back into the portal?  Is portal reporting that valuable?  If so, why not develop and deploy similar reporting for your automated B2B instead of migrating everything to the portal?  Am I missing something here? 

I recently spoke with a retail supplier that indicated a retailer was asking them to move from EDI to a portal.  Have you experienced this too in the retail supply chain?