Consolidating on SAP ERP and EDI and B2B Managed Services Across the Globe to Reduce Costs

This recent announcement about Nemak's consolidation of multiple ERPs onto one centralized SAP ERP and the consolidation of multiple EDI and B2B platforms is especially relevant in these days of cost cutting.

Nemak is 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. 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 and B2B transactions has also increased. The company had various ERP solutions in place and multiple EDI and B2B platforms, teams and locations to support, with no centralization of EDI or B2B integration management.

“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.

Christian went on to describe his evaluation process of SAP's BPO partner companies that could provide centralized B2B and EDI managed services that were integrated with SAP. Nemak chose SAP's BPO partner for EDI and B2B managed services. This BPO partner operates on an SAP Netweaver infrastructure so the integration between Nemak and the manage services could be an SAP-to-SAP SAP integration.

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. SAP's BPO partner 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.”

SAP's BPO partner will help Nemak’s SAP rollout by migrating the company’s EDI partners to the B2B managed services 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 inital 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 X12, VDA and EDIFACT as well as a number of communication protocols including AS2, oFTP,VAN, HTTPs and others.

Relationship Management for EDI, B2B, and XML Integration

It is important to understand how critical certain information is to the EDI and B2B processes when you are automating the extended suppy chain. Automated B2B processes are more than the exchange of standardized transactions through EDI, B2B or XML. It's about developing strong business relationships prior to the EDI transactions and then managing the relationship and B2B exchanges on an ongoing basis. It's about a complex set of collaborations and communications between the various parties and the coordination of their activities to accomplish a successful B2B exchange. It's about supporting these complex relationships and exchanges by the tens of thousands reliably so that business continues to move at the speed of the Internet. Did I use enough buzz words to make Dilbert proud of me?

The following list identifies some of the most important intellectual assets (high value data) that relates to your business network or trading partner communities. These knowledge assets need to be identified, documented, aggregated, organized, stored and managed in order to successfully implement, manage and support B2B and EDI exchanges.

1. Document the internally preferred industry B2B and EDI standards (X12, Edifact or Edifice using AS2, VANS, etc.), EDI implementation guides, XML schemas and web service interfaces by business process and trading partner
2. Document the associated business process and work flow
3. Document vendor and service provider contact and account information
4. Document the employees, consultant’s and/or contractor’s that were involved in this specific implementations and their contact information.
5. Document your trading partner’s EDI or B2B transaction set(s) or XML schemas
6. Collect and store your trading partner’s business documents including trading partner agreements, project schedules, security requirements, relevant business agreements, NDAs, etc.
7. Create, maintain and publish to a collaboration website a task list (specific to each trading partner’s implementation)
8. Document internal problem escalation processes
9. Document vendor information and contact information for supporting EDI and B2B solutions. What is their helpdesk number, email and what is your account number and issue number?
10. Identify and document related servers, hardware and networks
11. Document the owner(s) of the business process on both ends
12. Document the name and contact information of the security and communication personnel in the IT department. Will you be using X12 over a secure VAN or AS2?

All of these unique pieces of information need to be gathered and stored in one location, a secure collaboration site, that allows your EDI and B2B team access. This information is the life blood of EDI and B2B exchanges and departments. Most companies have no centralized repository for this information and it is dispersed on various spreadsheets, databases, paper documents, emails and the laptops of employees, contractors and consultants - chaos reigns! No wonder the EDI and B2B teams in so many companies can't seem to implement more than 10-15% of their trading partners.

Effective EDI and B2B managers will not only have a centralized repository of all of this information and data, but live and manage by it.

Google sites is one option, and can easily be created for secure collaboration and the price is right, free.

EDI Standards Persist in the Face of XML and Web Services

I was asked this question today:

Why is EDI still the standard way companies transact between each other even as the internet has been adopted by most people? Technologies like the internet, XML and WWW have now been around for a while, and yet companies still are transacting via EDI. EDI is not cheap, and smaller companies are reluctant to participate. Does that mean the internet has not really penetrated the corporate world in terms of its back office functions? Is it because of cost of changing technologies? A worry about security? What is holding the embrace of technology in this area?

My Answer:

EDI is not just a technology and format. EDI is the accumulated intellectual assets of 30 years worth of thinking through very difficult business issues. I remember sitting in an EDI standards committee meeting as they debated how to identify the different kinds of sun roofs on a rental car for EDI purposes. Each segment, element and code in the EDI standards represents years of thinking and debating by business experts around the world. EDI is a library of the world's best business data semantics and syntax thinking. Technologies and formats will change every few years, but this intellectual asset will be worth more each year.

Cloud Computing Comes to SAP, Mobile Handheld PDAs and EDI, B2B Users

Google has just announced they will be offering synchronization and support for Cloud computing for mobile and wireless handheld PDAs and smartphones users including those using the:

iPhone
BlackBerry
Nokia S60
Nokia standard
Sony Ericsson
Windows Mobile

Why is this important? It demonstrates a trend that people are moving away from the view that their desktops or laptops are the center of the universe, to a view that Cloud Computing - their online Google or Yahoo Accounts are the center.

Google has now enabled synchronization directly through any wireless connection to your online account(s). Your contacts and calendars and other Google Apps no longer must be synchronized through a desktop, iTunes account or laptop. This is big news! This functionality permits the concept of a truly untethered mobile computing environment for handheld PDAs and smartphones. The home or work desktop is no longer the anchor weighing you down. You are free to move around the world and have access to your valuable content and applications.

I can't emphasize enough what a monumental change this is for mobile users. The advent of the iPhone and other convergent multi-media mobile handhelds along with synchronization to the Cloud where hundreds of Google Apps exists changes everything.

How does this announcement relate to Cloud computing in the context of EDI and B2B? A similar revolution is happening in the world of EDI and B2B e-commerce. Companies like SAP are untethering the mapping scripts and methodologies traditionally used by EDI translator vendors. This year SAP is delivering new technologies and strategies for EDI and B2B. They are delivering new integration options via SOA (service oriented architectures) models and enterprise services repositories on their Netweaver XI and PI solutions. These technologies will enable SAP users to use external managed services in the Cloud much easier.

SAP's industry components such as SNC (supplier network collaboration), TMS (transportation management systems) and many more are going to be released with pre-built connections into the world of cloud computing. This will allow the complexity and complication of EDI standards, formats and mappings to be uncoupled from the SAP system and placed in the cloud environment where economies of scale and the network effect can be maximized for cost savings and efficiency. This is actually a very interesting study!

SAP's BPO (business process outsourcing) organization is currently working with an SAP BPO partner to utilize these Cloud computing models and strategies to enable SAP users to connect to external EDI and B2B managed services through Netweaver PI connections when it is determined that the TCO (total cost of ownership) for operating an internal EDI operation is too high.

Reducing Errors and Improving SAP Supply Chain Accuracy with EDI and B2B E-Commerce

Over the last couple of years Dow Chemical has significantly increased the amount of automated EDI and B2B E-Commerce transactions they have implemented between their SAP system and key suppliers using a managed EDI services provider. What were Dow Chemical's goals for this effort?

• increase business process efficiency
• improving data quality
• reducing human error
• to identify and eliminate system and process errors
• proactively notifying customers regarding exceptions
• enabling users to meet customer expectations and increase overall satisfaction
• gain better control over their procurement process
• eliminate transactional barriers
• empower their staff to focus on business issues, rather than order processing

It is interesting to note how many of their goals were simply to reduce errors and problems with the quality of their processes. Often these issues were the result of errors introduced into the system by bad data and human error. The more data validations upfront, and the reduced "human touch" on the data once it is in the system, the less errors. Once the data is good, all kinds of filters, alerts and exception monitoring can be implemented. None of these features work correctly if the data is bad, or can be made bad somewhere in the process.

Dow is migrating hundreds of key suppliers to an EDI managed services provider. It is interesting to note that Dow Chemical's has had a mature internal EDI department for many years now. Their stated reason for migrating to an EDI managed services provider are the following:

• to centralize global purchasing operations (consolidation of P2P)
• to standardize global purchasing operations (standardize and simplify)
• allows Dow to quickly add new trading partners
• simplifies maintenance by standardizing on a single platform
• simplifies ERP upgrades - a single connection, through the managed service provider, to external trade partners eliminates complexity and paves the way to an easy SAP upgrade path

Not stated by Dow, but common to a good professional EDI managed services provider is the ability to reuse EDI connections that have already been used by other companies on the services. This can simplify roll-out efforts and reduce costs.

Top Priorities for Companies Today and the Growing Need for EDI and B2B E-Commerce

In the course of my job over the past few weeks I have spoken with a good number of large companies and IT departments many of them using the ERP from SAP. As a result of these conversations I have compiled a list of what companies have been sharing with me about their rapidly changing priorities in Q1. Here is my list:

1. Reducing the TCOs (total cost of ownership) of assets
2. Reducing operational costs (consolidating functions into Shared Services Centers)
3. Consolidating and simplifying IT assets (reducing and consolidating the number of ERP instances, different redundant software solutions and B2B and EDI systems)
4. Developing agile systems that can change quickly based upon changing markets and economic conditions.
5. Achieve the benefits that SOA (service oriented architectures) promised
6. Conversion of manual processes (that require more FTEs) and automating them
7. Converting paper documents to electronic file exchanges (e.g. paper invoices to electronic invoices)
8. Optimize accounts payable processes to reduce processing costs and to realize more early payment discounts
9. Implement e-Invoicing with customers to reduce processing, mailing and customer service costs
10. Working capital optimization - exploring options in the financial supply chain to find and preserve more working capital

It is interesting to recognize that most of these priorities can be positively impacted by efficient business process automation and effective EDI/B2B E-Commerce enablement. The vision of EDI/B2B has long been to replace manual and paper based document exchanges with electronic and automated exchanges of data. The trouble was, it took too much time and effort to achieve the vision using traditional EDI implementation methodologies. Today there is reason to be optimistic.

Service Oriented Architectures, enterprise services repositories, web services, secure Internet communication protocols, matured EDI and B2B standards, and the advent of EDI/B2B managed services hubs are reducing the costs and greatly simplifying the ways business process automation and EDI/B2B implementations can be accomplished.

EDI and B2B managed services companies, like Crossgate, are taking advantages of relationships they have established with large ERP vendors like SAP, to develop solutions that remove integration barriers, extend existing work flows and business processes beyond the 4 walls, and make implementations much faster and less expensive. The economies of scale that can be achieved by large EDI and B2B managed services hubs with tens of thousands of connected companies make them a very compelling alternative for companies. Traditional models of self-funding a complete EDI infrastructure and team internally and implementing multi-year EDI roll-outs is hard to justify in today's climate if there are better and less costly alternatives.

The more that companies embrace and implement SOAs, the easier it is to benefit from the economies of scale and expertise of low cost managed service options that are increasingly in demand in this economic climate.

For more EDI and B2B E-Commerce related blog articles please visit: http://b2b-bpo.blogspot.com/

SAP, the Total Cost of Ownership and Business Agility in the World of EDI and B2B

Today the concept of Total Cost of Ownership (TCO) is on every one's mind. Costs must be reduced and the complete costs associated with a project or solution over a given period of time must be carefully analyzed. If the software solution has a license cost of $250,000, but the implementation and support services for the first year is $1.2 million, then the TCO is $1.45 million. What about the second and third year? How do upgrades of other connected software components impact the TCO?

There is depth of thought in this statement from Gartner - Systems that are "built to change" are more valuable than systems that are "built to last." What does Gartner mean by this? Here are my interpretations:

1. Design and develop IT models and systems that allow for reuse, like you would find in a services oriented architecture model. Services can be added, published queried upon and consumed without the complete rewriting of your IT systems. Services can be reused by others and costs and time can be saved.
2. Design and publish end-to-end workflows and automated business processes. Make this information available to a wider audience so reuse and so full knowledge of the processes can be shared, debated and improved.
3. Replace hard coded and undocumented customized code (coded but not documented by someone who left in the late 70s). Standardize on exposed and documented services that can be improved, reused and understood by all in IT and at the helpdesk. It makes revisions and improvements fast, inexpensive and possible.
4. Simplify and standardize on business processes and a service oriented architecture that allows manageable improvements to separate components without impacting the entire IT infrastructure. Standardization of processes can simplify the entire system and reduce maintenance and support costs (TCO).
5. Consider the TCO - total cost of ownership. Yes, one programming guru may be able to code a custom solution in three weeks and save some time on this one project, but the total cost of ownership may be enormous over time to support this undocumented and custom code. Standardized and simplified environments have lower TCOs and allow for rapid improvements.
6. Consolidate systems and simplify - a well designed relational database model, optimizes the speed and performance of a database application - it is a beautiful piece of art. IT systems should practice the same art. Reduce the number of databases, redundant applications and multiple instances of the sames application. Simplify, simplify, simplify.

I have seen companies that have had eight different EDI systems, staff, integration technologies and EDI tool sets within the organization. The costs associated with these redundant systems was huge!

I was an EDI Manager of a large electronics company in the past. In meeting after meeting I would hear reasons systems could not be changed or improved because to change one part, would destroy the integrity of the entire mess. The result was often to employ more people and more manual processes in order to avoid touching the "mess." This increased costs, errors, time delays and prevented improvements. The opportunity costs of not touching the mess increased every month and every quarter.

The "mess" can destroy the entire company. The "mess" prevents improvements and new business models. The "mess" can become such a barrier that the entire company can be pulled down by it.

EDI and B2B systems are no different. I have seen many SAP environments where the large number of customized IDocs and custom integration scripts became the "mess." The many different database applications that needed to be integrated with the EDI system created a complex series of interwoven custom maps, scripts, APIs, databases and triggers.

I have heard of entire SAP upgrades being postponed or delayed because the upgrade would break the EDI "mess." The "mess" began to dictate to the business how things would be done. Improvements, cost savings and efficiencies began to suffer.

There are many more stories we can all tell. The vision of SOA, SAP's Netweaver PI and the vision of SAP's Business Network Transformation for EDI and B2B is intended to address many of these pains. We just need to figure out how to rid ourselves of all of the old baggage before it destroys us.

****************************************
Kevin Benedict
EDI/B2B Blog - http://b2b-bpo.blogspot.com/
http://www.linkedin.com/in/kevinbenedict

Cloud Computing, SAP and Data Integration for EDI and B2B

In the blog article by David Linthicum titled, The Importance of Data Integration in the Era of Cloud Computing, he describes some of the issues that companies face when trying to outsource key business processes to the cloud.

"...many enterprises are not accounting for the costs and complexities of doing data integration between the clouds and the enterprise, and since they are typically moving to cloud computing providers for the cost savings, you need to consider that as well. In some instances, moving to a cloud provider could actually cost more, when considering the data integration costs."

I agree with David. In the context of outsourcing EDI and B2B to a cloud (managed service provider) there needs to be a very efficient way of connecting to the cloud if you want to save money. Crossgate has developed their B2B managed services offering on SAP's Netweaver PI infrastructure. Why? Crossgate (as a company that SAP has invested in) focuses on providing managed B2B and EDI services to SAP users. Therefore, Crossgate can simplify the integration between SAP users and the Cloud by pre-establishing Netweaver PI to Netweaver PI integration.

The Economy and Outsourced Manufacturing, B2B, EDI and Complexity

It is common now days for manufacturing companies to be researching the merits of outsourcing more of their manufacturing to contract manufacturers. Part of this research is understanding how to actually exchange data, in real time, with contract manufacturers. Adding more fax machines, administrative staff and spreadsheets is not a good way to reduce costs and ensure quality and efficiency. Let's discuss some of the challenges with contracting manufacturing to distant shores:

• Distance
• Time zones
• Languages
• Cultures
• Holiday schedules
• Visibility
• Quality
• Currency exchange rates
• Different international B2B and EDI standards
• Work ethic
• Political environments
• Security
• Lack of business process automation
• Lack of EDI/B2B capabilities

It is critical that companies that use contract manufacturing automate the exchange of data as much as possible to avoid the introduction of more human errors that are the results of data entry mistakes and language misunderstandings. There are enough challenges already without adding more complexity.

When manufacturing was down the corridor or across the parking lot, the sales team could meet directly with the operations, procurement, supply chain and logistics teams in a conference room and plan production. If the production is on the other side of the world, these discussions need to be in the form of automated machine-to-machine data exchanges (i.e. EDI/B2B messages) that precisely communicate all requirements.

In addition to accurate communications, the manufacturer must have visibility into the extended supply chain of the contract/outsourced manufacturer. Can the contractor get all the parts, at the right time, to fulfill the order? Can all the logistics be arranged to deliver the products in the right place at the right time?

With all of this complexity it is mandatory that good supply chain systems like SAP's Supplier Network Collaboration be in place to manage it. It is also necessary to have a very good and solid EDI and B2B system in place to manage the data exchanges with your business network or trading partner community. Don't underestimate this challenge. If a manufacturer asked their EDI Manager what it would take to support the communications with contact manufacturers they would likely answer like this:

• I need more EDI staff
• I need more training
• I need more servers
• I need more customer service
• I need more help desk folks
• I need more testers
• I need more EDI mappers
• I need to rewrite many of our integration scripts to make them more reliable
• I need more DBAs to help with integration
• I need more communications and security staff
• etc

The idea of contract manufacturing is to find ways to reduce manufacturing expenses. Greatly expanding your IT and EDI staff is not helpful to this cause.

There are new paradigms of delivering B2B services that SAP is working on today. SAP's BPO (business process outsourcing) organization also has some recommendations as do the SAP Netweaver PI team. In order to recognize the benefits of contract manufacturing and extended supply chains there needs to be a different strategy and cost model than traditional EDI implementations afforded.