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Poor planning around EDI and B2B implementations can cause major delays and unanticipated costs for ERP implementations.  A large percentage of the data that is used by ERP's like SAP come into the system from their trading partners.  If this data, via EDI or other B2B messages, is not moving then the system does not work.  This can mean a multi-million dollar implemenation can ground to a halt if the EDI implementations were not aligned with the ERP project.

Most SAP or other ERP upgrades, consolidations, customizations or the adoption of new business processes will break or change the existing EDI and B2B integration scripts.  Often the IT and Business Managers do not understand how significant these changes, and how wide spread the impact of these changes will be for the B2B processes.  The time and resources needed for this effort are often over looked and unplanned.  Once the impact is realized, it translates into delayed implementations and higher project costs.  For more information on these implementation costs and risks read here.

As companies increasingly become integrated into business networks (communities of customers, suppliers, logistics partners,etc) not unlike people and social networks, the dependency on modern, efficient EDI and B2B communications also increases.  Without the data, the business process stops.

Effective planning as to the impact of ERP upgrades on the EDI and B2B processes is needed in advance.  The purpose of many ERP upgrades and implementation projects is to reduce costs and simplify IT environments as described here, but costs savings and ROIs can disappear quick if the project scope is unknown, the effort unplanned and the costs not covered in the budget.

Related Articles:

• http://b2b-bpo.blogspot.com/2008/12/sap-outside-four-walls-supply-chains.html
• http://b2b-bpo.blogspot.com/2009/03/what-does-it-mean-to-have-sap-centric.html
• http://b2b-bpo.blogspot.com/2008/12/who-in-company-needs-edi-and-b2b.html

Often, when people think about EDI/B2B standards, they think of decades old technologies, file formats and communication protocols. This has some truth, but the real value of EDI/B2B standards is not in the technology and formats, but in the intellectual assets represented in the content of the standards. Often file formats can be developed over a few months, but the content in the EDI standards often takes decades of detailed research and analysis to define, develop and codify.

I have had the opportunity to participate in many industry EDI standards meetings where the details of an EDI Transaction Set were discussed. The process never ceased to impress me. EDI experts often know more about a business process than just about any other position in the company. Why? They must understand exactly what business data is needed, where it comes from, where it needs to go, and how it will be used. They must understand each step in the work flow to understand how business data can be moved, approved and reviewed. They are often involved in the process of creating new business processes to meet the requirement of a customer. They must understand how the data is entered into the system, what database stores the data, who owns the data and what the data means in the context of the business process.

Often the experienced EDI expert also knows what other customers use similar EDI transactions, what is similar and what is different about the data requirements of the different business units, divisions and geographical areas. This knowledge is an extremely valuable institutional asset and must be recognized and protected.

It is very easy and common in large companies to forget about the intellectual assets in a company. "Re-creating knowledge that a company already possesses is a time and resource consuming activity," writes author Thomas Gale in the white paper titled Reusing Intellectual Assets. "As companies increasingly compete on the basis of knowledge, they must improve their methods for reusing intellectual assets." EDI experts are often one of the richest sources of intellectual assets in the entire company.

It would be a wise strategy to have a database application that served as an EDI repository and registry for all information related to a trading partners and their EDI messages and content requirements, but it is very rare for an enterprise to have the foresight and resources to build this repository. Today, these tools are mostly found in EDI managed services companies. They have the volume and business model to support tool development and strategy execution. For companies that do not have these internal resources, think 2 or 3 or 4 times before laying-off your experienced, EDI experts. The intellectual assets inside their heads take many years to replace.

EDI experts are not just communication and format specialists, rather true EDI experts understand not just the syntax of an EDI file, but the content and semantics of the content and how it is used. If a company must reduce the size of their IT and EDI departments due to economic issues, think about outsourcing the EDI operations to a professional EDI/B2B managed services business, but keep the EDI experts in-house as their knowledge is critical and very useful in the areas of business process design, supply chain management, logistics, orders-to- cash, procure-to-pay just to name a few. They often make exceptional business analysts, systems analysis and customer IT liaisons.

Today nearly all Business Managers are working without experience. They have never experienced the challenges and difficulties that they face today in the world markets. These are uncertain times. Much about the economy and the market climates are unknown, but there are some things that we can know and use to make decisions.

1. Companies must reduce operational costs as sales are shrinking
2. Companies must become more efficient at each task and process
3. Companies must learn to operate with fewer FTEs (full time equivalents)
4. Companies must consolidate operations and systems to lower costs
5. Companies must standardize systems and processes to reduce complexity which causes higher TCO (total cost of ownership), support and maintenance costs
6. Companies must inventory internal systems to maximize their use and therefore their original ROI
7. Companies must shed non-core operations to reduce costs and increase staffing flexibility
8. Companies must focus their brightest minds on core value and competitive advantage processes and projects. With fewer FTEs, brain power must be focused on what will enable the company to survive and prosper, not on mundane and routine non-core operational issues
9. Companies must focus on improving cash management - reducing DSO, recognizing early payment discounts from suppliers, reducing inventory, reducing transportation costs through better management visibility, etc.

In these uncertain times - we can be certain that the items listed above will help.

My background and expertise is in the areas of business process automation through B2B and EDI means. Keeping the above list in mind, here are ways companies are trying to address the above issues in the realm of EDI and B2B:

1. Many of the world's largest companies are now using managed services companies, B2B exchanges and EDI hubs to operate some or all of their EDI and B2B operations for less costs than operating it in-house. Companies certainly need their ERP system to send and receive electronic data interchanges (EDI) or other B2B electronic files (flat file, XML, CSV, etc.) with their customers and suppliers, but once the processes and integrations are understood internally they believe they can use managed services more efficiently and for less costs by sharing the effort with other exchange or hub members.
2. Staff Reallocation: Your internal EDI teams are often some of the most experienced and knowledgeable people in your IT department on the subjects of business process automation. Their skills and knowledge are often better focused on designing and supporting new business processes that provide competitive advantages, rather than in EDI mapping, maintenance, support and operational roles. The majority of effort spent operating and supporting an EDI system offers no competitive or strategic advantages. The value comes from ramping up EDI implementations that can reduce admin costs, increase supply chain visibility, reduce invoice processing costs and enable business process automation. Again, the value is not in the maintenance, support and operations, but in the implementations of new business processes and trading partners that will help the company's bottom line. If an EDI and B2B department could spend 90% of their time on-boarding new business processes and trading partners then the company would be maximizing the value of EDI and B2B. If an EDI team is spending 90% of their time in EDI support, maintenance and operations then the company is not recognizing the value and getting the optimal ROI from their efforts and limited resources.
3. B2B Hubs and EDI Exchanges: Take advantage of other companies' work and investment. There are EDI managed services providers that already have tens of thousands of companies connected to their EDI exchanges. By connecting once to the B2B exchange or EDI hub, you can often access thousands of pre-defined and pre-configured EDI messages. Find ways to save money by reusing the hard work and investment others have already made.
4. Greater ROIs: Your best EDI staff should be focused on automating more business processes so there is a greater ROI on EDI and B2B services. So often companies only automate EDI and B2B communications with less than 10-15% of their trading partners which minimizes the ROI not maximizes it. Focus on automating the other 85-90%. Extending automated business processes to larger numbers of your customers and suppliers where there are easy, obvious and understood ROIs and efficiency gains.
5. SAP Strategic Alignment and consolidation: If you are an SAP customer, consider aligning your EDI and B2B strategies with SAP's EDI and B2B strategy for Netweaver PI. Understand their strategy and Netweaver EDI and B2B road map and ensure your strategy takes advantage of your investments in SAP. SAP has been developing and is now implementing some very interesting EDI and B2B solutions through SAP BPO partners using their Enterprise Services Repository, Netweaver PI and Global Data Types to change the paradigm about how EDI and B2B is implemented. Ride the coat tails of SAP's investment and strategy. If you use SAP it would be important to understand this strategy and how it might benefit you.
6. Core Competencies and Processes: Invest in your core competencies and processes (manufacturing, R&D, distribution, sales, marketing, services, etc) that provide survival and a competitive advantage. Today companies are choosing to outsource non-core tasks and processes to call centers, phone utilities, water utilities, waste water utilities, Internet providers, electrical utilities, etc, because they offer a higher quality service for less money than operating it internally. EDI and B2B is now available in a less expensive and more reliable utility model as well through many EDI hubs and B2B exchanges.
7. Consolidations: Many companies have multiple ERPs and multiple EDI systems in different divisions and in different geographical areas. Often these are redundant systems brought into the organization through mergers and acquisitions. The concept of an EDI Shared Services Center has relevance here. For the same reasons consolidating multiple instances of SAP and other ERPs to the fewest instances possible makes sense, likewise reducing the number of EDI systems to as few as possible also makes sense. The reasons are reduced costs, consolidated expertise, better management visibility and standardized integration strategies.
8. Agility: Companies must be able to move fast and change paradigms as new markets open or close, supply chains expand or contract and the economy grows or shrinks. The more inflexible a company is, the more difficult it is to keep up with these rapid and unpredictable changes. In today's economy, inflexibility equals vulnerability to market conditions. Flexibility comes from the ability to act fast. Often when it comes to operational issues, acting fast means being able to contract for services to accomplish a near term objective. Having an EDI and B2B strategy and system in place that allows either an in-house effort, or a contracted managed service approach gives the company the maximum flexibility to grow or contract based upon market conditions.

SAP has hundreds of software applications, services and solutions.  Why do they seem to be spending significant efforts on a strategy for EDI and B2B communications and support now days?  In the past they left this market up to third party EDI translator vendors and VANs - companies like Sterling Commerce, Inovis, GXS or SPS Commerce.  I can't speak for SAP, but a look at some of their new solutions may shed light on this question.

• SAP SNC (Supplier Network Collaboration)  - Through SNC, customers and suppliers can simultaneously eliminate inefficiencies in their supply chains by synchronizing the flow of information between them. SNC offers a 360 degree view on supply chain collaboration, offering a company ways to effectively collaborate with its customers, suppliers, 3 rd party logistics providers and outsourced manufacturing partners.
• SAP TM (Transportation Management) - With the SAP Transportation Management application, you can share information and combine orders directly with carriers and forwarders over the Internet, so you can integrate business partners into your company's processes and maintain control of plans.

Both of these SAP solutions are dependent on EDI and B2B communications and messages to work.  The solutions offer little value without.  Therefore, you can understand their desire to actively manage and ensure quick, cost effective and reusable EDI and B2B implementations and support for their customers.

As more and more companies are spread across wide geographical areas and utilize contract manufacturers from all regions of the world, the need for EDI and B2B increases dramatically.  I believe SAP no longer wants to remain vulnerable to the quality of third party EDI translator and VAN companies.  They want to ensure their customers have an SAP-centric EDI and B2B solution that supports the requirements of SAP applications.

Late last year SAP invested in and became a co-owner of Crossgate, an SAP-centric EDI and B2B exchange that utilizes SAP NetWeaver technology.  This managed service exchange is now available globally for all SAP users.

If you would like to discuss this topic in more detail please email me.

There are a few barriers to adopting electronic data interchange.

One of the most significant barriers is the accompanying business process change. Existing business processes built around slow paper handling may not be suited for EDI and would require changes to accommodate automated processing of business documents. For example, a business may receive the bulk of their goods by 1 or 2 day shipping and all of their invoices by mail. The existing process may therefore assume that goods are typically received before the invoice. With EDI, the invoice will typically be sent when the goods ship and will therefore require a process that handles large numbers of invoices whose corresponding goods have not yet been received.

EDI which stands for Electronic Data Interchange is the computer-to-computer communication of business documents between companies in a standard format. It is a paperless way to send and receive Purchase Orders, Invoices, etc. EDI replaces human-readable documents with electronically coded documents.

The sending computer creates the document and the receiving computer interprets the document.  Implementation of EDI streamlines the process of exchanging standard business transactions. Companies save by eliminating people cost as well as the cost due to errors and double entry of data.

• Typically, an EDI document begins in a trading partner's business application computer system.
• A document is produced and sent to a specialized computer program that translates the document into a standard EDI format.
• The EDI file is then transmitted, usually via the trading partner's VAN.
• When the VAN receives the transmission, it is sent to the intended recipient's mailbox, identified by its EDI ID.
• The trading partner receives the document from its VAN when it connects and empties its mailbox.
• Through the use of an EDI translation program, the document is translated into a file that will be processed by the trading partner's business application system.
• During the inbound translation process, a new EDI document is transmitted back to the sender to acknowledge receipt of the document.   This new document, the functional acknowledgment (FA), assures the sender that its transmission has been received.

EDI and other similar technologies save a company money by providing an alternative to, or replacing information flows that require a great deal of human interaction and materials such as paper documents, meetings, faxes, email, etc. Even when paper documents are maintained in parallel with EDI exchange, e.g. printed shipping manifests, electronic exchange and the use of data from that exchange reduces the handling costs of sorting, distributing, organizing, and searching paper documents. EDI and similar technologies allow a company to take advantage of the benefits of storing and manipulating data electronically without the cost of manual entry or scanning.