Magazine Article | December 1, 2002

Four Steps To B2B Success

Source: Field Technologies Magazine

Before you start sharing business data outside your enterprise, consider expert advice on how to do it right.

Integrated Solutions, December 2002

Whether it's from your customers, suppliers, or business partners, you've no doubt been feeling the pressure to allow outside entities to connect to your enterprise. Perhaps these outside entities want to share your supply chain data, schedule raw materials to be reordered, or even to complete business transactions automatically over the Web or via a VAN (value-added network). No matter what kind of applications your enterprise uses, you'll want to make sure to heed the following advice regarding how to roll out your B2B initiative the right way.

1. Clean Your Data
Before you can integrate data with outside entities, you have to make sure it is clean and consistent among your various applications. If you're like most medium-sized enterprises, don't expect this process to happen overnight. "It typically takes from two to eight months to clean up your data," says Gary Rush, CTO of ERP vendor Made2Manage (Indianapolis). "And, not all of the changes you need to make can be detected with data cleansing tools. For instance, consider your price lists. If your product price lists for category B customers hasn't been updated in more than a year, someone is going to have to manually update the list so that your costing and business transaction software can process data correctly. As humans reading from printed price lists are replaced by electronic calculating and data processing, it becomes increasingly important to make sure your data is accurate."

2. Credit Check Potential Clients
Prior to the nitty-gritty integration issues involved with joining your ERP (enterprise resource planning), WMS (warehouse management system), or other enterprise applications to your business partners' systems, there are a few key steps that must be taken. First, you'll need to determine how much information you want to hand out to outside parties. Each entity may require a different level of visibility and control of your enterprise application depending on such factors as whether they are viewing your inventory to reorder raw materials or checking the status of a work order to know when to authorize payment.

Prior to forming these relationships, a credit and background check is the first place to start. If a potential B2B partner has a history of missing payments, a few safeguards should be put into place. Besides using credit and background checking information to determine how tightly the customer should integrate with your business, you can also use this information as a factor in determining the pricing of your products or services. Consider, for instance, how much it costs your company to dedicate sales and accounting personnel to pursue customers that don't pay for your products or services. It doesn't make sense to pass these expenses on to your good customers.

There are a few ways to obtain credit checks from prospective clients. One way is to purchase a report from a firm such as Dun and Bradstreet. Another way to check credit history is to purchase software from a vendor such as Inc. (Dedham, MA) that will allow you to see the credit and payment history of your prospects.

After assigning a credit score to your prospective B2B partner, you can more objectively determine the level of responsibility the client can handle.

3. Check For Industry Standards
Next, you'll need to establish a blueprint for determining how the integration will be performed. This includes how data will be packaged, converted, sent, received, and processed. Many industries such as healthcare, insurance, banking and finance, retail, and some types of manufacturing (e.g. automotive and food) have established criteria from organizations like ISO (International Organization for Standardization) that make this process much easier. "In the automotive industry, for instance, ISO blueprints determine the events that need to be broadcast, including the frequency of the broadcast and the electronic format of the broadcast signal," says Theo Voyatzoglou, president and CEO of Cubicorp, LLC (Ft. Lauderdale, FL). "Not only do these blueprints dictate if data should be transmitted via EDI [electronic data interchange] or XML [extensible markup language], for example, they also spell out the business rules for viewing product data, the security issues surrounding the data, and the level of integration necessary for each type of B2B partner."

Most markets have some type of association that can provide the basic framework for establishing a blueprint. Make sure to check for such organizations before attempting to map out your own standards with each of your trading partners, customers, and suppliers.

4. Don't Let EDI Become A "$60K Fax Machine"
While there are several communication protocols used to transmit data, EDI has become one of the most popular - especially with larger companies. However, there are a few important things to know about this standard. The American National Standards Institute (ANSI) has three manuals totaling about 1,000 pages that define EDI standards. That said, "Buried in the middle of the manuals is a clause that reads, 'Any two trading partners can agree to change anything they want,'" says Mike Carnahan, chairman and VP of research and development for ERP vendor ROI Systems (Minneapolis). "This makes EDI one of the most non-standardized standards around." Because of this clause, enterprises have to go through the painstaking task of rigidly mapping data fields for every new partner they want to do business with. One partner may use a PO (purchase order) that has one data element for each of the form's 900 fields. Another partner may dump all 900 data elements into one field and require the manufacturer or supplier to parse the information. Because of this problem and because many medium-sized enterprises often get strong-armed into using EDI by larger customers, the technology doesn't get used to its full potential. "We've seen companies pay $60,000 for EDI software and integration fees to be able to send electronic data to a large customer," says Chuck Wise, director of consulting services for ERP vendor Exact Software North America (Andover, MA). "The problem occurs when these companies don't follow the process all the way through. Incoming data is printed out and then manually entered into the company's ERP system. Essentially the company purchased a $60,000 fax machine." Wise sees two basic reasons why companies shy away from taking the extra few steps to achieve automation. The first is known as the red herring fallacy, which occurs when an employee feels that they are about to be replaced by an automated system and tries to justify why things should not be changed. The company should anticipate this kind of reaction and look for new opportunities for the employee so that both parties' needs are met."

The second reason companies don't use their EDI systems to their full potential is because of the costs associated with using a VAN (costs accrue per transaction) as well as the integration costs associated with mapping data fields with each new business partner. One way to overcome this objection is through the use of open data transmission standards such as Web services, which can be used to transmit data from system to system - with or without EDI. Web services, built on the foundation of XML, provide B2B users the opportunity to more easily map data fields compared to the EDI standard. Additionally, Web services allow companies to do business over the Internet, which eliminates the costly fees of using a VAN. There are a couple things to keep in mind when using XML, however. First, much like we've witnessed with HTML formatting variations (ever find that some Web sites only work with certain browsers?), different formats of XML have come about. While it cannot be assumed that the version of XML you use is the same as that of all your customers, suppliers, and partners, there is a solution to the problem. The W3C (World Wide Web Consortium) has developed a translation protocol known as XSLT (XML stylesheet language transformation) which specifies how source XML documents are to be translated into other XML documents. By installing this software, companies can make all XML formats work together.

In the future, Web services may replace EDI. For now, however, the two technologies can coexist amicably and help enterprises integrate with their B2B partners..