Tuesday, December 30, 2008

Cost Reductions in the World of SAP, EDI and B2B Integration Services

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.

Kevin Benedict

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