Cloud

Cloud EDI Meets Trading Partner Challenges Head-On

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Anyone who uses EDI for B2B transactions knows the benefits of the technology. They are also well aware of the challenges: on-boarding new suppliers, introducing new and revised documents and specifications, dealing with integration and technical issues and maintaining the overall solution.

Despite the practice of large trading partners (“the hubs”) mandating EDI, many small suppliers struggle to comply even when facing fines or loss of business, largely because of the misconception that traditional EDI is just too expensive and complicated for most small businesses to adopt. This failure to comply often leads hubs to make exceptions to their EDI-only rule and accept the manual exchange of documents by fax or email — a practice that causes inefficient, error-prone business processes that impact both trading partners.

Fortunately, hosted Web-based EDI form solutions have emerged to meet these challenges head-on. The cloud-based SaaS approach removes the barriers of EDI adoption for small businesses and provides a viable, easy-to-use model for hubs eager to bring all of their suppliers into their EDI “fold.”

The cloud EDI model

Cloud EDI follows the Software-as-a-Service (SaaS) model, where a third-party vendor hosts EDI software on its servers and provides access to it for a monthly fee based on usage. Like all SaaS solutions, this model makes it easy to benefit from software without capital investments or putting a demand on the IT staff to install, maintain and manage it. The cloud-based SaaS model significantly lowers the barriers to adopting software, keeping it running and, if it’s delivered as a Managed Service, also eliminates end-user support issues for customers.

Cloud EDI solutions also deliver a better, more modern user experience because they are typically based on the latest Web-based technology and present EDI in a familiar, readable format, making EDI very easy to learn and use. They can provide an environment that is as familiar to end users as email; and because the solution is Web based, EDI is available anytime, anywhere.

Many feature customizable interfaces and languages on a per-user basis and include custom templates for different types of documents for specific trading partners. To reduce errors, most of these solutions automatically validate the data entered into the documents, enabling reuse across customer and trading partner specifications. Some solutions even support advanced features such as bar code label generation, import/export capability and multi-user support, as well as rich reporting and auditing capabilities.

Benefits to suppliers

Many suppliers — especially small suppliers — struggle with EDI. When a large customer — or hub — says they must be EDI compliant to do business with them, they traditionally have to invest in EDI software. Since many small suppliers either have no IT department or have only a small one, having to find a solution and install and maintain the software is expensive and, often, difficult. Moreover, most small suppliers don’t want to learn EDI, write maps or do integration. Because of this reluctance or lack of in-house capability, many small suppliers simply drag their heels, hoping the hub will allow them to continue manual methods, even if they have to pay penalty fees for non-compliance. Under extreme circumstances, the supplier will simply cease to do business with the trading partner (or vice-versa), losing out on what may be a critical revenue stream for the supplier.

Those who do invest in EDI software have to create EDI that meets the hub’s specifications, commonly referred to as a trading partner implementation convention (IC). These ICs are usually provided electronically to the supplier in the form of an implementation guide. If the supplier doesn’t have the expertise to do this in-house, they contract with someone who does. Many times, they also have to pay a third party to test their ability to accept and acknowledge inbound EDI as well as produce EDI that is compliant with the trading partner’s EDI system. Finally, because many on-premise EDI solutions for suppliers are outdated, they are cumbersome to use and there can be a steep learning curve, especially if the supplier is expected to understand the underlying standards used to represent business concepts.

Contrast this to using a Web-based EDI solution hosted in the cloud. In such a scenario, the supplier simply contacts the cloud EDI provider and signs up for the service. Because the EDI provider supports thousands of large trading partners, chances are, they may already support the trading partner specification required.

Another benefit to many cloud-based providers is an easy-to-use, forms-based interface for working with EDI, eliminating or at least reducing the amount of EDI a supplier must be able to understand. When that’s the case, the supplier can exchange EDI documents with its hub within a few hours, and in some cases even faster.

If the provider hasn’t already created the EDI forms representing the implementation specifications for the desired trading partner, the supplier may be asked to pay a reasonable one-time fee for them to be developed. Even when this up-front charge is necessary, the cost of using a cloud-based EDI SaaS solution is much lower than hosting one on-premise and allows suppliers to quickly and effortlessly comply with trading partners’ EDI mandates.

This type of solution is tailored to help small suppliers meet the challenges of working with EDI in a way that is meant to increase their productivity and allow them to meet trading partner requirements. An added benefit is the relatively low cost to scale and add new trading partners in a turnkey way.

Aberdeen analyst Bryan Ball (“The Impact of SaaS on B2B Collaboration Challenges,” July 2012) supports this argument, citing faster implementation time and lower up-front costs as the top two drivers leading supply chain companies to adopt SaaS and cloud-based solutions. He writes: “[SaaS/cloud deployment] lends itself to rapid deployment at a lower up-front cost and total costs of ownership.” [Endnote 1]

It’s clear that most small suppliers just want to get on with the business of doing business. They want to very quickly and economically have EDI in a readable format so they know what the purchase order says so they can then generate ASNs and invoices for sending in an equally readable EDI format that meets their trading partners’ requirements. Very simply, this is what cloud EDI SaaS solutions give them.

Thousands of small suppliers are already using cloud-based EDI solutions in lieu of on-premise solutions or no solution. It gives them an easy, inexpensive way to on-ramp with their large trading partners and exchange EDI documents in the form that meets their specifications. But, there are also benefits for large trading partners when small suppliers use cloud-based EDI.

Benefits to hubs

EDI is critical to supply chain efficiency, and especially important to large trading partners that are buying from hundreds, and sometimes thousands, of different suppliers. Most insist that their suppliers use EDI and rely on a variety of tactics to ensure compliance. Some simply tell their suppliers to become EDI compliant or face penalty fees (or worse). But when a supplier decides they’d rather pay a penalty than invest in EDI software, this strategy backfires. Either the hub refuses to carry the supplier’s product or, more likely, they make an exception to the policy and allow the supplier to continue to use manual methods such as fax and email, which are slow, error-prone and time- and resource-intensive for both parties.

Typically, the hub also ends up having to communicate with suppliers, who in turn are using a wide variety of different EDI solutions with varying degrees of sophistication. Because of this, it’s common for the hub to require each solution to be tested and validated with its EDI system, usually at an added cost to the supplier. In addition to increased costs, getting suppliers on-boarded and exchanging production data can be time consuming.

To make it easier for the supplier, reduce on-boarding time and decrease the number of exceptions a hub might have to make, many hubs host an EDI solution for small suppliers in-house. This takes the burden off the supplier and ensures that all small suppliers are using a single EDI-compliant solution. This equally benefits the hubs and small suppliers, but at a hefty cost to the hub. The cost of hosting EDI software on-premise is expensive and requires the hub’s IT department not only to maintain the software but also to provide support to hundreds, or thousands, of suppliers.

With the availability of cloud-based EDI SaaS solutions, the hubs have another choice: Instead of forcing small trading partners to find their own EDI solutions, or hosting an expensive solution for their suppliers, they can sponsor a supplier enablement program hosted by EDI experts in the cloud. This alternative removes the capital expenses of hosting a solution on-premise and also eliminates the support burden.

In this scenario, the EDI SaaS provider could assist or even completely take over on-boarding suppliers, training and supporting them. Once a partner-specific implementation is created and tested, any supplier can use it by simply contacting the provider. This lowers the barrier for supplier EDI enablement because it makes it easy for suppliers to get on board with an EDI solution. For the hub, it provides a common and repeatable “ready-to-go” EDI system for suppliers that allows them to send and receive EDI that meets the hub’s specifications. Hubs also know they’ll get good data from their suppliers, because the solution has been set up specifically for them.

Aberdeen’s research shows that companies that use SaaS-based B2B collaboration solutions are able to on-board suppliers in 45 percent less time, and customers in 30 percent less time. They are also two times as likely to have a faster implementation time, have a reduced Cash-to-Cash cycle of 10 days or greater than 20 percent, and have a 30 percent less product lead time. [Endnote 2]

A hub’s cost of sponsoring a cloud-based supplier EDI enablement program is recouped in the greater efficiency and accuracy of doing business, the elimination (or avoidance) of the capital expenses of hosting an on-premise solution, and the removal of responsibility for supplier enablement from the hub’s IT department.

Cloud EDI: affordable EDI compliance

Cloud EDI meets trading partner challenges head-on by providing tangible process and cost benefits to both large trading partners and their small suppliers. It makes EDI affordable and easy for small suppliers. For large trading partners, it can actually be the catalyst for 100 percent EDI compliance and paves the way to a more efficient supply chain.

Endnotes:

1,2  Bryan Ball, “The Impact of SaaS on B2B Collaboration Challenges,” Aberdeen Group, July 11, 2012.

Robert Fox is senior director of EAI/B2B Software Development for Liaison Technologies and the architect for several of Liaison’s data integration solutions. He was an original contributor to the ebXML 1.0 specification, is the former chair of marketing and business development for ASC ANSI X12, and a co-founder and co-chair of the Connectivity Caucus.

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