Wednesday, January 28, 2009

Automotive Industry Suppliers are Investing in IT and EDI Process Improvements

Paralyzing economic conditions and budgetary restraints are motivating some automotive industry suppliers to act now rather than later. Nemak, a subsidiary of ALFA, a Mexico-based global manufacturing company that has more than 48,000 employees and operates 75 production facilities located in 17 countries is an example. Due to recent acquisitions of various businesses, Nemak’s operations around the world have more than doubled. As a result of this rapid expansion, the complexity and volume of EDI transactions has also increased. The company had various ERP solutions in place and multiple B2B platforms to support, with no way to centralize EDI coordination and management. The result of these inefficiencies was duplication of work and unnecessary expenses.

Nemak chose Crossgate, the global experts in business-to-business integration (B2B) for SAP, to assist in the consolidation of its B2B operations to reduce complexity and expenses. “Electronic data exchange is vital to the success of business processes in the automotive industry, and we work with over 100 business partners,” said Christian Fischer, Nemak IT Director Nemak Europe & China. “We needed a strong, reliable, competent, and experienced SAP partner to help us implement a fully outsourced global B2B integration service.” After evaluating five potential vendors, Nemak selected Crossgate because they could provide professional B2B methodology and experience as well as a well-developed repository of ready-to-run B2B mappings, a strong SAP relationship, and 24/7/365 support.

Prior to implementing SAP ERP, Nemak’s EDI operations were costly and time-consuming. “With so many B2B platforms to manage, our IT staff was overwhelmed,” Fischer noted. “Two of our most pressing concerns were controlling IT costs and ensuring regulatory compliance for each location. Crossgate helped us consolidate our B2B platforms in alignment with a centralized SAP ERP solution that gave us flexibility to continue expanding our network in a more efficient, cost-effective way.”

Crossgate’s B2B 360 Services will complement Nemak’s SAP rollout by migrating the company’s EDI partners to the Crossgate network prior to the SAP go-live. As a result of implementing EDI Managed Services, Nemak will gain reuse and economies of scale while being able to reposition IT staff to core SAP functions.

The initial rollout project in Nemak’s U.S. and European offices has already been completed successfully. The second rollout is currently underway in a cluster of locations in Europe and the United States. The projected timeline calls for all 28 rollouts on three continents to be completed by the end of 2009 by deploying parallel clusters in Europe and the United States. The project calls for a wide variety of data formats like ANSI X.12, VDA and EDIFACT as well as a number of communication protocols including AS2, oFTP,VAN, HTTPs and others.

“Crossgate is performing very professional project management and implementation work,” Fischer said. “Until now our business sites were all using different B2B solutions without central coordination or involvement. The advantages of using the EDI Managed Services provided by Crossgate will be a tremendous benefit to all Nemak sites worldwide."

Kevin Benedict
EDI/B2B Blog -

Thursday, January 22, 2009

EDI, B2B and Electronic Invoices are Not Always the Answer for Accounts Payable Optimization

I spent much of today working with a large SAP customer who had accounts payable challenges. They were receiving more paper invoices than they could manage. I (being an EDI/B2B guy) immediately thought that converting the paper invoices into EDI or other B2B formats for electronic invoices might be the easy answer. I was wrong. The primary problem was not the numbers of paper invoices, it was a problem of what to do with the data on the invoices.

Many of these invoices were from small service providers and their services were not associated with a purchase order. As a result the Accounts Payable department struggled with the time and effort it took to track down the original person that requested these services. Once found, the person needed to review the details of the invoice and approve it. This process was manual and took huge amounts of time and effort from many different people involved in the AP process. Although the calories burned were a blessing, the problem was real.

The solution to the problem was to implement a "pre-authorization" process so invoices could be associated with a person and approval process. There needed to be a better business process implemented and an automated work flow applied to move the inbound invoices through an approval process efficiently.

The secondary problem was how to handle the large number of vendor inquiries and complaints that resulted from inefficient invoice processing. The solution was to get these suppliers of services on a Supplier Self Service portal where they could monitor the progress and status of their own invoices without overwhelming the Accounts Payable department with calls.

Kevin Benedict
EDI/B2B Blog -

Tuesday, January 20, 2009

SAP and Agile EDI for Supply Chain and Logisitics Management

SAP supply chain and logistics EDI and B2B implementations can often take years. An expensive EDI system must be purchased, installed and staff trained. Supply chain and logistic partners must be informed of your desire to implement EDI (electronic data exchange) and agree to support it. Your trading partners must be prioritized, scheduled and tested. If you have a small EDI team and thousands of suppliers and dozens of 3PLs it will take many years to get your supply chain and third party logistics providers automated.

The key question to ask about the above scenario is - does this effort and time frame satisfy the needs of your business? If not, then you must find a better and more agile strategy that does. Often you can find managed EDI and B2B service providers that have already implemented electronic data exchanges with tens of thousands of industry participants. By connecting once to this EDI Hub you can save considerable time and effort and have a much more agile and on-demand EDI and B2B strategy.

By on-demand, I mean the ability to simply request that the managed EDI and B2B service provider implement an electronic data exchange with a specific set of trading partners and within a specific time frame.

Kevin Benedict
Blog on EDI/B2B Issues -

Friday, January 9, 2009

SAP Users - Negotiating EDI and B2B Formats

In the SAP Insider article entitled, "Is Your Organization Still Focused Only on Labor Costs?" Bernhard Fischer and Steve Sprague discussed how to optimize financial supply chains with electronic data exchanges among other points. They point out that one of the key challenges for organizations is negotiating electronic exchange documents and formats with their suppliers and buyers. Why is this a key issue? Let's discuss:

There is a phrase, "combinatorial explosion" that is relevant here. It refers to the massive chaos that can result if you try to support too many different custom electronic file formats and integration maps in EDI/B2B. You ideally want to receive one standard electronic invoice from all suppliers, and you want to send one standardized electronic invoice to all buyers. This keeps it all simple, efficient and manageable. However, in the real world, you may need to support hundreds of different supply side and buy side electronic invoice formats. This causes huge problems, expenses and impacts your ability to support and grow B2B/EDI connections over time. This reduces you ability to optimize your AP processes and efficiently invoice your customers.

I have seen many cases where companies simply could not afford to continue growing their EDI/B2B because of the "combinatorial explosion" of supporting thousands of custom integration and EDI maps. How can this be avoided? You can be your supplier's biggest customer and demand (i.e. negotiate) to use your standard electronic invoice, and then you can negotiate with your customers and explain how you can give them the best pricing if they agree to accept your electronic invoice format. But again the real world abruptly awakens us from our fantasy.

The point is - it is very important for companies to try to standardize, consolidate and simplify their business processes, services, IT systems, ERPs, EDI systems and supported EDI formats. Many business managers don't realize that agreeing to the use of a suppliers, or a customer's custom EDI formats can lead to complete chaos over time that can negatively impact growth, efficiencies and profits.

SAP's Business Network Transformation strategy is designed to fix these problems and to standardize and simplify EDI and B2B for the SAP supply chain, logistics, orders-to-cash, and procure-to-pay processes and other processes using SAP Netweaver XI.

Kevin Benedict

Shared Services Centers, EDI, B2B and Business Network Transformation

Shared Services Centers (SSCs) refers to the provisioning of services in one location that were previously done in multiple locations within an organization. This an interesting trend that often involves a transformation within the organization. Often companies with various divisions, departments and geographical locations would maintain many different Accounts Payable teams (as an example). If a Shared Services Center strategy were implemented, you would see the consolidation of accounts payable services into SSCs. This SSC would provide AP services to the rest of the organization.

The SSCs strategy often involves reengineering and transforming many different parts of the organization. Let's discuss a few of them.
  1. When many different Accounts Payable departments and responsibilities are consolidated into one SSC, people will be made redundant.
  2. The phone numbers, mailing addresses, contact people etc, may change
  3. The AP processes in place in many locations may need to be replaced with scanning and OCR technologies that will permit invoices and other business mail to be scanned at or near the place of delivery (mail room) and forwarded to the SSCs. How do you transfer or forward the mail received in the Atlanta mail room to the SSC in Seattle or Munich? You digitize the data so it can be processed in your ERP anywhere in the world.
  4. Scanned/OCR documents need to be processed and entered into an automated work flow that would enable the SSC to have visibility to the information where ever they may be located around the world. Someone needs to design and develop this automated work flow process, data cleansing and data verification process.
  5. The different software applications, ERPs and EDI systems that were in place in all the different locations should be consolidated into as few as possible that can be supported by the SSCs. You do not want to simply transfer the existing chaos to the SSCs. Ideally the SSC for Accounts Payable would be working with just one ERP and would be exchanging electronic data with trading partners via one EDI system or B2B platform.
  6. Part of the reengineering that needs to take place when implementing an SSC strategy is to move from paper payments to automated electronic payments, and from receiving paper invoices to receiving electronic invoices. This allows the SSC to support large geographical areas quickly and cost effectively via electronic data exchanges with trading partners. SAP's Business Network Transformation strategy is relevant here. It is intended to reduce the number of EDI systems and costs that are required in traditional EDI and to reduce the complexity of support EDI/B2B.
  7. e-Invoicing and digital signatures that support the requirements of various tax authorities can be managed centrally in the SSCs and the service provided by the SSC or by professional e-Invoicing managed services providers.

The SSC strategy is intended to reduce the duplication of efforts, save money and reduce complexity. Often the purpose of maintaining multiple accounts payable teams, systems and locations was to support different businesses, processes, tax authorities, accounting systems and geographical requirements. If these inefficiencies are to be reduced, consolidation must take place in many areas. All internal business functions can be reviewed and analyzed to indentify areas of duplication and inefficiencies that may benefit from the implementation of a SSC.

All of these transformational steps require strong leadership. Leadership that can stomach the challenges and resistance that accompanies any major transformation and reengineering effort.

I read a good paper on SSCs from JPMorgan.

Kevin Benedict

Wednesday, January 7, 2009

Microsoft on EDI, B2B and Cloud Computing

I don't know how you feel about Microsoft, but we must admit they have many smart people on staff. Bob Muglia, Microsoft Divisional President has recently shared his thoughts on EDI, B2B and Cloud Computing in this article.

Here are some of his most interesting comments he made on the value of cloud computing.

"The other class that I think is really interesting is anything that involves working in partnership with others: supply chain sorts of applications, business-to-business, Electronic Data Interchange, those sorts of classes of applications in which you need to connect multiple organizations, and you need to deal with authentication, and you need to deal with network connectivity. "

This sounds like SAP's Business Network Transformation strategy and their views on simplifying EDI and B2B via SAP Netweaver PI and cloud computing through EDI managed services provider partners.

Kevin Benedict