Wal-Mart and Supply Chain Financing Require EDI

In Saturday's Edition of the Wall Street Journal (November 14, 2009) there was an article called Wal-Mart Program Will Aid Suppliers by Vanessa O'Connell. The article described how Wal-Mart, in partnership with Wells Fargo & Co and Citigroup, have created a new Supplier Alliance Program designed to provide supply chain financing to their suppliers.

I have been involved with similar supply chain financing programs in my role as an SAP EDI consultant. These programs most often require EDI and B2B connectivity to work well. Why? Let me first explain the process. It is all about the supplier getting paid faster. That means instead of waiting 60-120 days for payment from the retailer, the supplier delivers the products and then factors the invoice amount through a participating bank and receives payment within 10-15 days. In this case the interest rate and fees charged by the banks are less because of Wal-Marts participation.

The key to getting paid faster is being able to navigate the retailer's invoice and approval processes faster. EDI and B2B connectivity removes the postal service delay, data entry delay and paper processing components of the process. With EDI the electronic invoice is directly integrated with the retailers' automated accounts payable workflow process.

EDI between the supplier and retailer makes the invoice process go faster. EDI between the retailer, supplier and the bank make the factoring process faster. In order for supply chain financing to work well, it requires a good EDI integration between all parties.

If EDI is not possible with a segment of suppliers, then there are companies like BancTec that retailers can contract with that provide outsourced or insourced services to scan/OCR all inbound paper invoices and to process them so they are entered into the SAP or other ERP system quickly.

SAP users can work with SAP Partners OpenText and Crossgate (SAP co-owns this EDI exchange) to automate and optimize their accounts payable processes nicely. Crossgate provides the EDI/B2B integration and OpenText through their Vendor Invoice Management system can automate the invoice approval processes.

If you would like to discuss these in more detail email me.

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Author Kevin Benedict
Independent EDI, B2B and Mobile Computing Consultant
www.linkedin.com/in/kevinbenedict
http://b2b-bpo.blogspot.com/
http://kevinbenedict.ulitzer.com/
http://mobileenterprisestrategies.blogspot.com/
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EDI, SOA, SAP NetWeaver and Cloud Computing

If you are using custom integration scripts to move data back and forth from your EDI system to your ERP or other database applications, then you are in trouble. The clock is ticking. Business and IT environments change much too quickly these days for any company to be using custom integration scripts.

When I was the EDI Manager of a computer manufacturer I remember studying the spider web of custom integration scripts to see how EDI data got from point A to point B. I remember asking for documentation on the scripts and hearing nothing but laughter. I remember asking what systems would be impacted if a business process was moved from one application to another vendor's application and no one could answer the question.

Custom integration scripts will ultimately damage the business. Why? They are way too expensive to maintain, edit and support. They can not be easily changed and over the years companies can accumulate thousands of them (for a related article click here). Businesses must be able to rapidly change, add and support integrations today.

SOA (Service Oriented Architectures) models for integrating EDI with SAP and other database applications must be implemented. SAP NetWeaver PI is a good platform to implement the eSOA approach to EDI integration. Integrations between the SAP ERP and your EDI system can become services that are stored in the Enterprise Services Repository and available for reuse and editing.

This approach avoids many of the problems caused by most custom integration scripts for EDI. It gives the enterprise the ability to quickly find, edit and use pre-existing services.

Starting in late 2008 SAP has been developing and promoting a new concept for EDI. A network-centric approach to EDI that calls for the use of an EDI Exchange that utilizes SAP NetWeaver in a cloud computing model. All SAP users can subscribe to it and access it using a NetWeaver-to-NetWeaver connection. New Enhancement Packages (SAP updates) will come with pre-developed EDI integration services in the Enterprise Services Repository. It is a very interesting concept that is pointing us to the future.

Here is the biggest problem. Management does not want to hear about fixing something they think works. They don't want to reserve budget to fix what works today even if it is a ticking time bomb. Good Luck!

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Author Kevin Benedict
Independent EDI, B2B and Mobile Computing Consultant
www.linkedin.com/in/kevinbenedict
http://b2b-bpo.blogspot.com
http://kevinbenedict.ulitzer.com/
http://mobileenterprisestrategies.blogspot.com/
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Who Wants Cloud Computing Other Than SAP for EDI?

In this article by Gartner's Thomas Bittman, he answers the question on which industries are most interested in cloud computing. He answers the question by listing the industries that have asked Gartner the most questions about cloud computing.

I am interested in this question as well since SAP has been strongly pushing their co-owned EDI exchange called Crossgate that operates in a cloud computing model.

Here is the list from Mr. Bittman:

1. Financial services (12%)
2. Manufacturing (10%)
3. Business and management services (10%)
4. Telecommunications and equipment (9%)
5. Government (7%)
6. Insurance (6%)
7. Oil, gas and electric (5%)
8. Professional/specialized services (5%)
9. Schools and education services (4%)
10. Food (4%)
11. Retail (4%)
12. Healthcare (4%)
13. Media (3%)
14. Chemical and pharmaceutical (3%)
15. Military and National Security (3%)
16. Freight services (2%)
17. Energy management (2%)
18. Membership organizations (2%)
19. Commercial physical research (1%)
20. Other (4%)

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Author Kevin Benedict
Independent EDI, B2B and Mobile Computing Consultant
www.linkedin.com/in/kevinbenedict
http://b2b-bpo.blogspot.com
http://kevinbenedict.ulitzer.com/
http://mobileenterprisestrategies.blogspot.com/
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SAP EDI, Inovis and Cloud Computing

SAP and Crossgate (the EDI Exchange that SAP co-owns), are not the only companies talking about EDI in a cloud computing environment. Inovis' chief technology officer was recently quoted saying the following, "Our customers are dealing with a perfect storm of rising partner transactions, governance mandates and reduced staff and budgets. Our B2B cloud integration platform has gotten great feedback as a flexible way to solve these challenges, both for today and tomorrow," said Erik Huddleston, Inovis chief technology officer.


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Author Kevin Benedict
Independent EDI, B2B and Mobile Computing Consultant
www.linkedin.com/in/kevinbenedict
http://b2b-bpo.blogspot.com
http://kevinbenedict.ulitzer.com/
http://mobileenterprisestrategies.blogspot.com/
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Crossgate Rises to the Top Category of EDI Service Providers

In this blog article by Rob Guerriere on the recent Forrester report called B2B Service Providers 2009 he talks about the fact that several German EDI companies have quickly risen to the top. Crossgate, a company co-owned by SAP, is one of them listed.

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Author Kevin Benedict
Independent EDI, B2B and Mobile Computing Consultant
www.linkedin.com/in/kevinbenedict
http://b2b-bpo.blogspot.com/
http://kevinbenedict.ulitzer.com/
http://mobileenterprisestrategies.blogspot.com/
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SAP EDI is a Community Effort

EDI is all about communicating with a community of business partners, service providers and customers. It is not about internal operations and IT infrastructure, but external. It is about your ability to externally communicate business information in the easiest and most cost effective manner to conduct more efficient business.

Traditionally, SAP EDI in large companies with many customers, service providers and suppliers required many internal IT resources, computer servers, security processes, EDI consultants, EDI software systems and hundreds of internal meetings to set-up. This was all before any EDI data was being transmitted. Once all of the internal EDI infrastructure was installed and ready, long and expensive multi-year trading partners implementations could begin.

The challenge with the traditional methodology is that business processes and trading partners change faster than you can implement EDI transactions with them. Just when you finish getting your largest suppliers connected, you acquire a new company and must start over with a new implementation effort. It is very rare that a company can implement EDI with more than 20% of their trading partners. That means 80% of trading partners continue to conduct business using slow paper based processes.

If each SAP customer continues to attempt to implement all of their EDI themselves, it will never succeed at replacing paper systems. Business changes faster than EDI transactions can be implemented.

What is the answer? The community of SAP users must all work together. Like farmers joining together to gather a harvest before the rains.

If each SAP customer could benefit from the EDI implementations that other SAP users have already completed, then the community could provide huge benefits. What would this look like?

1. There would need to be a central hub or exchange where all of the connections from trading partners to SAP customers could be registered and stored.
2. This list of registered trading partners, business processes and supported data formats would need to be available for querying by all members.
3. The registered connections would need to be reusable by other SAP users. This requires that all trading partners' supported data formats and standards be translated into a canonical data model.
4. SAP users would be able to create 1 connection per business process into the hub and then take advantage of the canonical data model to send and receive data from all of the SAP communities' trading partners.
5. To reduce costs, EDI experts at the hub could manage all of the IT infrastructure, operations and support.
6. SAP users would simply connect into this SAP community hub in a cloud computing environment using IDocs, NetWeaver PI, tRFC or web services once per business process.

If 1,000 SAP users registered and connected 10 trading partners per month on the SAP Community hub, you would have 10,000 connected trading partners in 4 weeks, and 120,000 in one year. This phenomena is called the network effect. It is a network-centric approach to EDI and the one that has the best chance of maximizing the value of EDI and B2B data exchanges and reducing the largest amount of paper from the system. It is the green method and the lowest cost method.

In the network-centric method of supporting EDI, SAP customers could eliminate internal EDI infrastructure, hardware, software and headcount. Simple NetWeaver PI connections to the community hub is all that is required for conduct EDI and B2B.

This evolution of EDI from internal departments and expensive infrastructure to low cost external services is similar to the evolution of electricity. In the early days of manufacturing when electricity was first used, each company needed to invest in and operate their own private power generation plant to supply electricity. This investment and effort stopped once communities formed electrical co-ops and utilities that could supply services to the entire community. EDI has reached this mile post.

Last year, SAP began this move by investing in an EDI Exchange for SAP users.

For a related article see: SAP and the Big Switch

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Author Kevin Benedict
Independent EDI, B2B and Mobile Computing Consultant
www.linkedin.com/in/kevinbenedict
http://b2b-bpo.blogspot.com/
http://kevinbenedict.ulitzer.com/
http://mobileenterprisestrategies.blogspot.com/
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