Monday, July 27, 2009

The Benefits of e-Invoicing

The benefits of e-Invoicing or electronic invoicing are well documented, but worth repeating as e-Invoicing can help companies solve a number of problems and reduce costs quickly and substantially.

  • The average time it takes a company to process an invoice to approval is 23 days, however, best-in-class companies that have automated invoice receipt (inbound) and work flow have been able to reduce this time frame to as little as five days.
  • The average DSO (days sales outstanding), according to Aberdeen in 2007, was 59 days, laggards was 63 days, leaders were 45 (leaders have automated e-Invoicing among other efficiencies). This shows that the average DSO is significantly reduced when your customers can accept integrated electronic invoicing.

Here are some additional points:

Many companies now seek to implement compliant e-invoicing on the back of existing B2B strategies. Significant benefits are immediately available if done right.

Gartner Group estimates the cost of producing a paper invoice is $5.00, while an electronic invoice is only $2.00, a 60% reduction. They also see a decrease in customer disputes and inbound calls. They estimated that 60% of customer service related calls are related to Invoice dispute. The reduced customer service calls are often not considered in the ROI, but are very real.

Additional benefits of outbound e-Invoicing services are:

• Immediate cost savings as processing time, postage fees, material, printing, enveloping and delivery are eliminated.
• Speed up the invoicing process - customers receive their e-Invoices often in seconds, rather than days through the postal service.
• Predictable ongoing costs thanks to transaction-based fees.
• Increased process transparency and data security due to online archiving.

What does e-Invoicing look like? Electronic invoicing can be in the form of an EDI message, custom B2B electronic file, or as simple as a link in an email that points back to an archived PDF or includes an attached PDF of the invoice. Much of the savings can be accomplished for the sending company using any of these means. However, if the invoice recipient can fully integrate the e-Invoices, then processing is even faster and will have less errors due to re-typing. This will help the invoice sender lower their DSOs (days sales outstanding).

ERP vendors like SAP, have e-Invoicing strategies that utilize applications like Netweaver PI connected to a preferred global e-Invoicing service provider that helps manage all the international tax and legal compliance issues, so the process remains simple for the sender.

Email me if you would like to discuss any of these points in more detail.

OK, so the savings are quick, documented and real. How does a company implement e-Invoicing? Here are a few articles I would encourage you to read.


Thursday, July 16, 2009

Removing Complexity from SAP EDI and B2B Processes

I had a conversation with a large Oil and Gas company today about complexity in the areas of EDI and B2B processes. They have, like many large companies, acquired different subsidiaries which run different ERPs and have different EDI translators. A quick review of their IT infrastructure easily uncovered huge amounts of complexity and costs associated with operating, supporting and maintaining these multiple disparate systems.

Who can fix this complexity? Is it the EDI department? No, the EDI department usually is task oriented and rarely can say NO to the business. Their tasks sound relatively simple. Take the data from an ERP or database application, map it to an EDI translator and send it out to the trading partner in an agreed upon file format and communication protocol.

So where is the complexity, who owns it and who can fix it? The complexity is in the integrations of data with the multitude of database applications and ERPs, and supporting the various file formats that the business units agree to support. The challenge is in developing, managing and documenting all of these integration scripts. This is often outside of the responsibility of the EDI department, but never really embraced by the software development teams in IT either. It is a kind of NO-MANs land. No one wants to own it. Software developers will grudgingly develop an integration script, but only if they are promised it is a short term project. The second it mostly works, the developer moves on to sexier development projects - leaving an undocumented, and poorly supported integration script to be found and deciphered next year by the next unlucky soul. These undocumented integration scripts grow like weeds in July. After a few years, there are hundreds and thousands of these scripts just waiting to be broken by an upgrade or process improvement somewhere which will bring IT to its knees fast.

The complexity involved in supporting all the various business processes and data requirements of dozens of different database applications and ERPs can be enormous. Companies need to either develop specialized database applications to help manage all of the integration scripts or buy some specialized application (I have never seen an application that does exactly this, except one I wrote myself many years ago).

Added to the complexity of managing hundreds and even thousands of internal integration scripts is the data and file format requirements that the business units agree to support with customers and suppliers. One simple electronic purchase order which can easily be mapped and supported by an EDI expert, suddenly becomes a nightmare when the business unit agrees to support a different file format for every customers' purchase order process. These kinds of complexities have a name - "combinatorial explosion!!!!" Multiply all of the different database systems and ERPs that all require different data and processes, with an understaffed EDI department and business units agreeing to support hundreds of different file formats for simple processes. HELP! No wonder EDI departments are often considered slow and unresponsive. They are shell shocked and buried alive in complexity!

SAP's Business Network Transformation strategy and recent investment in an automated business exchange is designed, for the first time, to solve these problems - at least for SAP customers. It is a new and much simplified and standardized paradigm for SAP EDI and B2B.

SAP's Netweaver PI can facilitate the internal enterprise integration of all of the various components of SAP and aggregate the integration of data into one set of standardized interfaces that can be pre-developed and stored in the ESR (enterprise services repository). These standardized sets of business processes and integration points, connected to the automated business exchange, eliminates the need for internal integration scripts, their development, maintenance and support. This greatly simplifies EDI and B2B projects and significantly reduces the costs of implementing EDI.

The automated business exchange, that SAP now co-owns, runs an SAP-centric hub. The automated business exchange utilizes SAP's Netweaver on its network which enables it to integrate with all other SAP customers through a Netweaver PI-to-PI connection. Once an SAP customer is connected to the automated business exchange, they gain access to the 40,000 plus companies that are already connected and supporting a huge library of B2B business processes. The 40,000 are growing expoentially now as the network effect kicks-in.

SAP's new paradigm for EDI and B2B removes the complexity of integrations, standardizes processes, reduces costs, enables rapid on-boarding of large numbers of trading partners and addresses the remaining issue that causes uncontrolled complexity which is supporting large varieties of different EDI standards and trading partner required custom file formats. In SAP's new strategy, once an SAP customer connects to the automated business exchange through Netweaver PI, IDocs or tRFC, the exchange as a managed EDI/B2B service provider takes over the management of the infinite number of different file formats and communication protocols required by trading partner communities.

Let's review - Integration complexity is now resolved as there is a simple and standardized way of integrating with an EDI/B2B system (operated by the automated business exchange co-owned by SAP) via Netweaver PI, IDocs or tRFC. Netweaver PI can also integrate all the back-office applications into an enterprise service bus architecture (eSOA) so data can be shared as well. The automated business exchange (operating in a cloud computing environment) already has over 40,000 connected companies that can be accessed by connecting once to the exchange.

Every new company that connects to the automated business exchange can be available, with permission, to exchange data with all other connected members. This SAP-centric network effect means that for the first time SAP EDI and B2B data exchanges are guaranteed to get easier, faster and simplier each passing month as the network expands and the library of pre-developed and pre-integrated business processes and data exchanges grows.

If you would like to discuss any of these points in more detail please email me.


Wednesday, July 8, 2009

Organizational Strategies for EDI and B2B

This week I was onsite with a large multinational company discussing their SAP, supply chain and EDI environments. Participating in these meetings were over 30 people from 5 different parts of the business that were geographically distributed around the globe. In the course of our discussions we learned that many different departments in their organization had their own EDI systems, EDI/B2B staff and unique integrations to their ERPs. Often, the same location even had more than one EDI system. There were different systems for connecting with banks, suppliers, customers, e-Invoicing, transportation and customs. The multitude of EDI systems not only represented an enormous and unnecessary expense, but also a hugely complex integration support and maintenance burden for the company. These kind of EDI and B2B environments can cripple companies in many unexpected ways.

EDI and B2B systems and departments can be complex and expensive. They require many resources across the organization and need continual support, maintenance, upgrades, integration work and 24x7 EDI message monitoring. For more details of the IT and business resources needed to run an EDI system read this article. For details on the information required to implement and support EDI read this article.

It is a best practice, and simply a good business strategy to consolidate, simplify, reduce inefficiencies and avoid redundancies where possible. Companies often experience efficiencies and cost reductions by operating their EDI and B2B systems in a shared services center environment where the EDI systems can be consolidated and utilized by all departments. You can read more of this concept for EDI/B2B here. Sometimes these consolidation efforts involve utilizing a managed EDI/B2B services company that can efficiently provide these services at a lower cost and with a higher service level. SAP has made significant investments in this strategy recently.

To better understand the work required to run an EDI operation follow this link. I wrote this article from personal experience as an EDI Manager for a large electronics manufacturer. This next article link identifies 14 challenges companies should understand about EDI operations and EDI strategies.

It is understood that EDI and B2B connectivity is required in today's business world, and with a good strategy and forward thinking there can be real and measurable cost reductions and competitive advantages realized with a good program in place.

If you would like to discuss EDI strategies you can email me here.