Hope you are having a wonderful holiday season, full of peace and joy — but courtesy of a recent customer visit, I learned it is not at all restful for some elements of the retail supply chain…

Many people don’t realize that much of the supply chain activity (ordering, forecasting, etc) is in the distant past when “Black Friday” hits after Thanksgiving — but it is.  Aside from the understandable need for advance planning, there is the small fact that information may fly around at the speed of light, but goods for store shelves must still be shipped great distances!  But modern supply chain practice goes far beyond just orders, and not every category of good must be shipped thousands of miles.

Some retail goods that are produced (or warehoused significantly) closer to their ultimate markets have the ability to respond do “demand signals” much more rapidly.  This can be because the goods are shipped by air, or manufactured locally (”locally” meaning within reach of high speed transportation), or warehoused in different regions that are capable of supplying one another.  Traditionally the domain of industrial parts that were JIT (just-in-time), it appears that key consumer goods are now capable of rapid response to demand.

This is of particular interest to me because of the role played by rapid information exchange — especially consumption and forecast data.  As goods fly off the shelves, that information is shared back into the supply chain, which then scrambles to refill the void.  This is an especially lucrative practice for goods that experience enhanced value during the first several days they are on sale, like music, books, movies, and video games (software, not the consoles — alas, see Steve’s column for the realities of complex hi-tech gadgets….).

Assuming you buy that such items can be more flexibly resupplied than many other goods — why the surge in demand?  This was the piece I didn’t understand, but GXS is not a consumer goods company.  The recent swelling of gift card sales, combined with retailer skill in attracting shoppers in the post holiday season has made the few days after December 25th some of the biggest shopping days of the year!  The only challenge is that those stores have been heavily shopped right up to Christmas Eve, and need to be replenished as much as possible to capture all that spend.

It seems that Christmas comes both early and late for retailers, and in those categories where the supply chain has the shortest latency, information can maximize profits for businesses, and satisfaction for customers.

Happy Holidays!

From time to time I like to blog about the work GXS is doing with partners, especially SoftwareAG webMethods and Microsoft (because I am involved in those).  Every so often, I’ll get asked why we partner, and why we don’t “build our own technology”, so I thought I would share something of our philosophy around technical partners and why it is important to understand the partnering philosophy of the software and services providers you use.

Firstly (mostly because I work in engineering and hope my colleagues will continue to return my calls), we do “build our own technology”, quite a bit of it in fact.  We have hundreds of engineers around the world working on software and services to make doing B2B easier and more productive.  In just the last few architecture reviews I’ve led, I’ve seen a new generation of technology to do translation more easily and efficiently, a completely revamped system for tracking the flow of XML data through our services, and a set of shared services that enables companies doing Global Data Synchronization to synchronize data (data pool management, or DPM).  Some days there is so much going on that it is challenge to keep up.  What I did not see — and had better not see — is someone building a database, an application server, or a new publish and subscribe bus for generalized messaging.  The reason is that if we are building core general purpose technology like that, we are not building the specialized technology that has made us successful.  There are too many opportunities to add value to our customers’ operations to squander them on proving we can build a better web serve than the Apache Group or Microsoft (which we can’t…).

Secondly, everyone partners, they just call it “sourcing”.  Last time I checked, ERP systems needed operating systems, databases and networking software.  You can call it sourcing, but when you decide to build your software on a given database technology (for instance), you have a new partner whether you like it or not.  Independent companies usually leave OSes, database, etc to the major players because those products can now be more efficiently provided, and it enables them to focus on the pieces where they can bring extra value.  I don’t know too many companies that would buy a software product that required its own, proprietary operating system these days (full disclosure, GXS once helped create the time-sharing era — working with Dartmouth — by writing an operating system, but only because the ones we could buy didn’t support time-sharing…).  Even folks marketing “software appliances” are tending to build on either a Windows version or a Linux distribution for this reason.

But it goes beyond the traditional economics argument — aside from the partners we need to run “on”, there are partners we need to run “with”.  Most iPod owners would be less ecstatic with their devices if they didn’t work with the computers that they owned, or did not work with non-Apple headphones, speakers, etc.  Likewise, nobody upgrades to new operating systems like Windows Vista of Apple’s Leopard if their software is not going to work — thus partnerships are caused by the customer’s irrational insistence that products work in their world, not just the nice demo center where everything is made by one company.  I feel strongly about this because our best partnerships today share one key element, customers that want to use the partner’s products together.

GXS’s partnering philosophy is simple, we are in business to help companies share data and conduct business processes with their partners (customers and suppliers) — and we work with partners that help us accomplish that.  Sometimes we work with technology partners like BEA, IBM, EMC, Red Hat, Egenera, etc because it is far less expensive to our customers than us doing it ourselves; and sometimes we work with firms that have already earned our customer’s business, like SAP, Oracle, SoftwareAG and Microsoft.

But we don’t partner with everybody, and for a very good reason.  In truth, it is often “easier” to build your own solution from scratch than to work with partners, because you have complete control down to the code.  Partnering at a deep technical level (like the various web services APIs to the GXS Trading Grid we offer) is a long-term commitment, and embedding someone else’s technology means integration work which is harder than straight development (though usually faster and less expensive).  Years and years of integrating with customers’ systems has given us the confidence and experience to select and integrate key partners.  Not every company has the skill and experience to work with technology partners, but I would encourage most companies to stick with those that do.

If you hired a contractor to build your new house, you might be alarmed if he or she brought an ax or starting making his own bricks — and relieved if instead you realized he or she showed a knowledge of the best “subs”.  It’s my hope that the people asking me why we partner will start asking their “technology contractors” why they don’t…

I’ve been thinking lately about how data is transformed from one form to another, and the people that do that and the tools they use.  Traditional discussion around DSLs is kind of an arcane — but important — computer science notion, but I think it really applies here.  But first:

DSL == Domain Specific Language

Or at least it does in this context (my apologies for those of you reading this over a digital subscriber line), but not in the normal usage.  I was in GXS’ Advanced Application Integrator (that is our translator) Training two weeks ago, and ever since I’ve been pondering the age old question (at least in the EDI world), why do people use high-end translators instead of just coding?  My own background is in software development, so I am sympathetic to this question, but it is really from my on-again, off-again hobby of woodworking that I found my answer.  If you are going to do something often enough, a specialized tool makes sense.  In woodworking, there are many fine tools for doing joinery (strongly joining two pieces of wood together — usually with glue), such as mortise machines (kind of a specialized drill-press), pocket hole jigs, dovetail jigs, etc.  I would argue that in the world of data manipulation, specialized tools are domain specific languages.

[]
    VAR->OTCurMsgHierID = VAR->OTHierarchyID
    VAR->OTPriorEvar    = SET_EVAR(”HIERARCHY_KEY”, VAR->OTHierarchyID)
    ;VAR->SupplierName  = $MsgCompanyName  ; optional if used
    ;VAR->SupplierCode  = $MsgCompanyCode  ; optional if used
    VAR->OTCurMsgStd    = $MsgStd
    VAR->OTCurMsgCommID = $MsgCommID
    VAR->OTPriorEvar    = SET_EVAR(”TARGET_MODEL”,  $MsgOutMdlName)
    VAR->OTPriorEvar    = SET_EVAR(”TARGET_ACCESS”, $MsgOutAccName)
    VAR->OTAttachName   = “OTTrg.att”
[ VAR->OTCurMsgStd == “ANA” ]
    VAR->OTCurMsgType   = $ANAMsgFileFormat
[ VAR->OTCurMsgStd == “EDIFACT” ]
    VAR->OTCurMsgType   = $EFTMsgType
[ VAR->OTCurMsgStd == “X12″ || VAR->OTCurMsgStd == “TDCC” ]
    VAR->OTCurMsgType   = $X12MsgType

[ VAR->OTCurMsgStd == “A2A” ]
    VAR->OTAttachName   = STRCAT($MsgOutAtt, “.att”)
 

Whoa!

What the heck was that?  That is a small sample of the powerful DSL that lies at the heart of the translator.  (I promise, no more code in this entry… I just figured it could make the abstract idea of a language built for a specific purpose a bit more concrete…)

The idea is that if you have a well-understood problem that requires “power tools”, you can maximize the productivity of people by giving them a language that is built to be immensely powerful for that problem, but not really do much else.  Back to my woodworking example, I think of the powerful dynamic scripting languages (like Python, Perl, or — very hot right now — Ruby) as a saber saw.  Cuts curves, but not too tight; cuts straight cuts, but not too straight, etc.  But a DSL like those of traditional data translation tools are more like a scroll saw — made to cut elaborate curves and create beautiful woodwork, in any shape and form imaginable, but not really intended for any other cutting task (for the woodworkers out there, commercial grade translators may actually equate better to a band saw — because of speed and “scalability” — but lets not get carried away with this…).

Dropping the metaphor for a moment (because no woodworking tools do this…), translators also completely eliminate certain work, liking parsing “envelopes” for standard transactions (envelopes are the outer layer of data that contain “meta” information like sender and receiver, document id, ids for batches/groups etc).  Because the translator knows that you probably use popular forms of EDI (like X12, EDIFACT, RosettaNet, etc), it can identify them and handle the common parts.  What is more, because standards are frequently used differently by different partners that you work, translators maintain databases about partners, standards, and “customizations” (that is the polite way of saying that your partner — of course you don’t do this — has “mis-used” a standard).  Another major area of assistance is with something called “looping”, or “loop control”.  B2B documents tend to be sent in groups of transactions, transactions have line items, items can have sub-lines, etc.  When you write code to process a file format, you handle all of this for yourself, but when you use a translator, you can often accomplish this just by describing the structure (okay, I have a PO, and it needs a line item, which better have a SKU and a quantity… if it doesn’t something is wrong, so stop working on that doc and move on to the next one…). 

This doesn’t seem like a big deal, but it actually is.  To give you an idea, we operate over a hundred B2B operations on behalf of customers, which means operating hundreds of ftp servers, dozens of SAP bridges, etc.  But while doing this we are managing over 10,000 maps (what we call the DSL “programs” we use for transforming data) — which is why we need power tools.  What’s more, people that use managed services tend to have pretty complicated data formats, and pump data like you wouldn’t believe.  One of the hardest things to explain to folks is why large scale any-to-any translation is different than the “hello world” variety of XML translation most developers cut their teeth on.  Also — of course — translation is generally two way, so you need to be able to translate between any two formats, even those that are completely different.

But won’t growing standardization help us with this (and yes, I realize the grizzled e-commerce veterans out there are choking with laughter)?  Yes actually, it does and will continue to do so — by constraining the problem.  The “D” in “DSL” is domain, as in “problem domain” — meaning that our challenge is contained within some kind of boundary.  Without standards, translation technology would enjoy no advantage over a general programming language.  Standards contain the problem,  but multiple standards are part of the problem, so there you are.  In truth, this whole issue will go away if folks out there in the world will all agree on how to do everything (processes), and how they are going to exchange information (data formats) — so needless to say we will have this stuff with us forever.

So if specialized tools rule, and standards make them possible, at least this is a boring, mature market, right?  Well, we have been playing in this space for over a decade and have added three new patents around this technology in the last 18 months alone!  And lest you think this is a dressed up add for our product, know that this is a vibrant and competitive space with many fine products.

So here is a holiday toast to the humble translator and the technically skilled developers that uses it …

Thought leaders from across GXS bring you what we have seen in the industry during 2007 and what we can expect to see in 2008 based on the research, news, trends, industry discussions and our observations. Here is a list of our top predictions for B2B e-commerce in 2008…  

B2B Strategies  

1)     SaaS Platforms will ignite Global Innovation  

Prediction by GXS’s Chief Technology Strategist, John Radko  

The barriers to entry for providing services to a global audience are on the verge of collapsing completely from an infrastructure perspective. As the costs of infrastructure software has fallen due to both economies of scale and open-source initiatives, the last barrier has always been the cost of setting up and operating an infrastructure to handle the computing, networks and storage—and now that infrastructure will be available in a service format. Not only are several very innovative infrastructure services now available, but a fiercely competitive market appears to be forming, centered around Amazon (S3, SQS, EC2), Microsoft (Live Services) and Google.  

But even beyond base capabilities like storage, platforms offered as services are sprouting up in many additional places like SalesForce.com, Facebook, GXS Trading Grid^®, etc. The next generation of business software and services will be building on these platforms, which will enable them to offer new products faster and at much greater scale. Small companies will be distributed through these channels in much the same way that musicians and performers are channeled through music companies. Beyond just infrastructure, platform companies will provide provisioning, billing, authorization, etc. The best platform companies are already offering the ability for partners that build on them to integrate not only with infrastructure services but also other services built on the same platform—the natural evolution of the current mash up craze, but taken beyond the web.  

The freedom to build services on pre-existing infrastructures offered as a service and priced as utilities will dramatically lower the barriers to entry for innovators, and that will unleash the next wave of innovation.  

   

2)     BPO for B2B Goes Mainstream  

Prediction by GXS Industry and Product Marketing Manager, Ryan Kraudel  

The past two decades have seen a fundamental shift in business models driven by the modularization of the functions of a company and emphasizing focus on the core business functions and differentiators that create value for customers. This has lead to an explosion in outsourcing of business functions that are critical to the business operations, but do not differentiate the business from its competitors. This includes functions such as manufacturing, HR/payroll, logistics and some IT functions. The primary drivers of these outsourcing arrangements have historically been focused on cost-takeout and eliminating depreciating assets. However, we are now seeing new areas of outsourcing driving key top-line revenue and business efficiencies that are shifting the outsourcing focus from cost-elimination to business benefit.  

One example of this is B2B outsourcing, the outsourcing of the people, processes and technologies required to operate and maintain a global B2B e-commerce program. A recent study by the Stanford Global Supply Chain Management Forum has identified key business value from B2B outsourcing that led to an average of 245 percent ROI for B2B outsourcing. These include benefits such as automating more trading partners faster and more effectively with global B2B capabilities and supporting a broad range of B2B technologies, which has a direct impact on customer satisfaction. In fact, the Stanford study showed companies using B2B outsourcing showed an average of 62 percent improvement in customer satisfaction, which directly contributes to top-line benefits such as revenue generation, customer loyalty and customer longevity. These are just a few of the results and benefits that demonstrate why the rapid growth in B2B outsourcing around the world is expected to continue through the foreseeable future.  

   

3)     File Sizes to Multiply in B2B     

Prediction by GXS Vice President of Industry Marketing, Steve Keifer  

There is an increasing trend in B2B towards business partners sharing higher volumes of data packaged into much larger files. Historically, the typical B2B transaction exchanged between companies was on the order of kilobytes. The most commonly exchanged transactions are invoices and purchase orders which are only a few kilobytes in size. However, over the past 24 months, there has been a substantial increase in the exchange of larger files—megabytes and gigabytes in size. The phenomenon is occurring in nearly every industry sector. Examples include product images in retail, check image files in banking, call detail records in telecommunications, satellite images in logistics and CAD diagrams in manufacturing.  

The trend towards larger file transmission really should not be very surprising given the growth in file sizes that we have seen in the consumer segment. For over five years now consumers have been downloading and sharing large audio and video files for home entertainment. With the dramatic decreases in the cost of storage and networking, it is only logical that this trend would extend to business communications as well. In fact, demand for large file transfer in the workplace has increased steadily in recent years. Do you give a second thought to sending a 5MB email attachment to a colleague at one of your business partners?  

Unfortunately, all of the popular IP standards used for B2B lack the features such as compression or checkpoint/restart necessary to support high volumes of large file transfer. As a result, many companies are forced to license expensive, proprietary “managed file transfer” software to support their needs. It is too early to predict what will occur in 2008. But one thing is for sure, with customer demand rising quickly, large file transfer is becoming a mainstream B2B function need rather than a niche technology.  

   

Supply Chain Strategies  

4)    Global Trade, Local Trade-offs  

Prediction by GXS Director of Product Management, Pradheep Sampath  

In recent years, supply chains have been constructed and modified to become nimble, agile, demand-driven and of course global in response to the proliferation of global trade. Global trade will become so mainstream that consumers and organizations will no longer subject themselves to local supply chain trade-offs just because products happen to be sourced a dozen time zones away. Retailers who historically have carried separate sets of inventory to fulfill demand from brick-and-mortar, web and catalog channels will drive to further optimize and unify stock. Manufacturers who have traditionally shipped ocean containers or multi-case lots to automated distribution centers will pledge to streamline their direct-to-consumer shipment of “eaches” to suburbia.  

Manufacturers and retailers alike have for some time evaluated B2B integration platforms that help obliterate the divide between transactions and trade. In 2008, these platforms will no longer be perceived as bleeding edge, but as mandatory tools that oil the global trade engine. Speaking of oil–$100+ a barrel will mandate levels of supply chain efficiency that even academicians have only evangelized behind closed doors. Consolidators, contract manufacturers, customs brokers and suppliers will all strive to exchange logistics transactions that are accurate and actionable. Simple on-demand applications will serve as “windows into global trade” and will enjoy mass adoption, shielding both multi-national corporations as well as four-person factories from complexities of the transactions that define trade.  

   

5)    Physical and Financial Supply Chain Convergence Will Show Early Wins Among Early Adopters  

Prediction by GXS SVP Marketing and CMO, Bobby Patrick  

Leading supply chains will seek opportunities to inject working capital into their supply chains and optimize business performance for themselves and their trading partners. The convergence of the information flows in the physical and financials supply chains will enable financial institutions and logistics providers with new ammunition to benefit their customers and solve real business problems, such as dramatically increasing days payable outstanding (DPOs) for buyers and reducing days sales outstanding (DSOs) for suppliers.  

   

6)    It’s Time. The Greening of B2B  

Prediction by GXS Industry Marketing Director, Bryan Larkin  

In 2008, companies will look at B2B as a way to address their corporate responsibility with respect to green initiatives. Corporate Social Responsibility (CSR) and Environmental Health and Safety initiatives have started to include B2B in their scope, but in 2008 this will become a significant issue for companies. Companies that have not fully automated their supply chain will see that doing so will not only make their business more effective, it will also play a significant part in meeting their Corporate Social Responsibility initiatives.  

   

Best Practices for Success  

7)     Supply Chain Intelligence Is the Next BI  

Prediction by GXS Vice President of Product Management, Andrea Brody  

The demand to make sense out of the B2B transactions that move across the Internet and VPNs will increase 20 percent year over year. Since the movement of supply chain data via EDI and other formats has become mainstream, corporations now want to obtain valuable information from that data by correlating and providing business rules in order to effectively manage their supply chain to improve financial performance and exceed customer expectations. In today’s world of globalization, outsourcing and vertical disintegration, over 80 percent of the events that matter to a business will come from outside of the business. Investments in business intelligence and business activity monitoring software will require operational signals that transcend geographies, integrate widely diverse technology and break the barriers of standards and languages.  

   

8)    B2B Master Data Management: It’s the Data Stupid.  

Prediction by GXS Senior Global Product Manager, Melanie Ligons  

2008 will be the year when companies finally understand that the real challenge holding them back in the automated supply chain is lack of data quality. Information integrity issues associated with products and transactions reduce the ability of an organization to make appropriate short and long term decisions. Corporations have been hording data for years while analysts and consultants told them to do something with it. Now that business intelligence solutions are taking a primary place in the spotlight, companies are realizing that the data they’ve been hording is flawed—and so is the data they are using to run their business on a day to day basis.  

For years the retail and CPG space have struggled with new ways to share product data, only to be dismayed by the exorbitant costs and miniscule returns. High-tech manufacturers scoff at the idea of trying to adopt the Global Data Synchronization Network because they see it for what it is: just another way, using another technology, to share data. Sharing data isn’t the issue. Making sure companies have complete and accurate data, and then keeping it that way, is the real challenge.  

Leading companies will step up to the plate in 2008 and address the data quality issues by taking the first steps towards implementing solid B2B Data Management programs. They will follow in the steps of a few groundbreakers that have already paved the way. These data governance initiatives will need to address cultural, process and technical roadblocks that keep companies from successful supply chain execution. Most important will be changing the cultural aspect, as data accuracy will need to become part of the fabric of the business. The processes can be defined and supported by technology, but adherence and commitment will be the key to eliminating data quality problems.  

While numerous tools have been introduced to address information management over the past several years, the focus of the tools themselves, those selling the tools and the analysts covering them have been primarily on utilizing the tools to provide workflow for managing the flow of a subset of data within an enterprise (think Product Information Management in the B2B Data Management space). Now we are starting to see (Gartner 30 November 2007 - Methodologies: Blueprints for Success With Data Quality Improvement) the focus of analysts shift to actually addressing data quality. Smart executives will listen because this is something they can get their hands around. If the decisions they are making are based on flawed data, if the financial statements they are signing are based on inaccurate numbers, if the deals they are agreeing too might not be what they think they are, then they and their companies are in trouble.  

   

9)    e-Invoicing Adoption Continues to Skyrocket  

Prediction by GXS Senior Marketing Manager, Rochelle Cohen  

2008 will see a veritable explosion in the adoption of e-invoicing to help businesses automate their accounting processes. Businesses are increasingly applying technology to automate their procure-to-pay process and gain the dramatic business benefits that have been documented in numerous case studies and benchmarks. When e-invoicing is integrated with automated workflow and e-payments—which over 90 percent of large enterprises are doing or planning to implement—it enables companies to not only reap significant hard dollar cost savings from reduced operational costs associated with handling paper, but also to take advantage of discounts that can add millions of dollars to the company’s bottom line. Furthermore, more companies are taking advantage of the opportunity brought about by this “perfect storm” of automation to gain even greater savings by leveraging prorated discount structures or discounts negotiated once invoices are ready to be paid.  

Further fueling the adoption of e-invoicing are electronic invoicing legislation, such as the EU Council Directive 2001/115/EC which allows the electronic invoice to serve as the legal invoice in the European Union, and the availability of third party service providers that now offer a broad range of translation, protocol mediation and regulatory compliance services. These services enable companies to overcome the barriers that have prevented 100 percent trading partner participation in the past. For example, now even small trading partners can participate in e-invoicing programs without changing their current processes. And, suppliers are beginning to welcome the opportunity because they recognize the benefits they too will receive; this is particularly true when buyers promise faster payments in return for electronic invoicing. Furthermore, buyers who do business with international suppliers can rely on the third party service provider to ensure that varying local government regulations are satisfied. 2008 will be a breakthrough year for e-invoicing. The business case is clear, technology options providing seamless integration with in-house are readily available and the e-invoicing adoption rate has been growing steeply and steadily.  

   

Marketing  

10)   B2B Service Provider Blogs Become More Common and More Personal  

Prediction by GXS Global Product Manager, Justin Duewel-Zahniser  

Dialog with customers through blogs will increase, whereas using blogs as a medium for company promotional content will decline. Companies are increasing the use of blogs as an avenue for communicating with customers and the market, as evidenced by new supply chain vendor blogs started in 2007. Companies traditionally begin blogging externally in the Marketing organization since the focus there is naturally on external communication. In 2008, customers will continue to engage blogs as an avenue for dialog with their service providers and the value of provider blogs will become more evident in organizations outside of Marketing. Additionally, blogger voices from the user community will begin to increase and take on more authority in the space, consistent with what has been happening in politics, fashion and media.