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Managing Business Relationships in the Cloud

Electronic data interchange (EDI) is a mature (some would say ancient) technology. The format is straight out of the mainframe era, consisting of flat files and text tags. To the uninitiated, the content of even the least complex EDI document can seem like an unintelligible ASCII string. But that’s the easy part. The difficulties lie in the way this standardized data format is modified by every trading partner to meet the needs and preferences of the way it does business.

It’s a standing joke that the EDI standard is a customized one, and that the only commonality between one company's EDI purchase order and another's is the spelling of “EDI.” That’s a bit of a stretch, but it is fair to say that every trading partner's document needs to be translated, or mapped, before it can be used by another trading partner. And the mapping of EDI documents is the domain of the specialist responsible for managing the day-to-day operations in the EDI department.

Without that person's expertise, the likelihood of being able to transact business via EDI with a supplier’s customers is slim. That’s because customers — the trading partners that define the documents — often change details within their versions of the documents. And those changes need to be incorporated into the receiving company's EDI maps to translate the documents and fill the orders.

The ongoing maintenance of an EDI system requires the specific skills of someone intimately familiar with both the internal EDI documents and the translator software being used to transform incoming and outgoing messages. And every time a large customer changes its format requirements, its suppliers need to implement the change in their translators. Large buying organizations can have hundreds or even thousands of suppliers making the same changes.

The sad truth is that these changes don’t always happen immediately or even successfully. And those delays and failures cause errors in the supply chain, eventually costing time and money.

The advantage of software-as-a-service (SaaS) based translators is that when a buying organization changes its format, that change is implemented into the translation software maintained by the SaaS provider. All the trading partners that use the SaaS provider to connect to that buyer automatically get the benefit of the updates made in the centralized and shared application. At a minimum, the connection between the buyer and its suppliers continues without error or interruption. But in the bigger picture, the expense of updating a single supplier’s translator application vanishes. Spread those savings across hundreds or thousands of suppliers, and the benefits expand throughout the supply chain.

Of course, letting a centralized staff of experts maintain and monitor a SaaS trading system delivers other benefits based on economies of scale. The staff and the system they support are dedicated to processing the customers' transactions — it is their primary responsibility. This is a significant difference from the role of most corporate EDI managers, who are tasked with several jobs, meaning the EDI system is likely not their prime focus.

All SaaS EDI providers are not equal in their capabilities, the features they offer, or their track records. But when it's time to make the choice between updating a translator or moving EDI services outside the firewall, a SaaS system is likely to be a compelling avenue.

7 comments on “Managing Business Relationships in the Cloud

  1. prabhakar_deosthali
    August 17, 2011

    In my opinion just by moving to SaaS nodel the complications related to EDI won't be solved. EDI is meant for one-to-one business relationship to transfer documents such as purchase orders or sales invoices between two parties. With SaaS also such one-one relationship has to e maintained. hence any changes in the document formats at one end of a relationship will have to get the required cahges doen at the receiving end. The load of this work is only transferred from the local IT department to the Saas service provider.

  2. Scott Koegler
    August 17, 2011

    Well, you're correct to say that the burden shifts from the IT department to the SaaS provider. The difference is that there are hundreds of IT departments trying to make the same changes (and not always successfully or on time), but only 1 SaaS provider making the changes. That's precisely the economy of scale I'm referring to. And because that also removes the work load from hundreds of IT staff and concentrates it on a few staff members at the SaaS provider, the costs are significantly reduced (economies of scale) meaning the costs of the SasS service contracts are typically lower than the costs of maintaining the indivitual system in an organization.

  3. jbond
    August 18, 2011

    It sounds like to me that using a SaaS system that allows the translator to update any changes to allow for seamless interaction makes complete sense. I am surprised that many companies don't utilize this tool. I'm assuming that it's just a matter of time before cloud based services are used more frequently.

  4. Scott Koegler
    August 18, 2011

    There are a surprizing number of companies using this kind of service. But there are still more using traditional locally installed translator apps. I've heard that changing an EDI system is like buying a new refrigerator… You only do so if the old one is broken, you're redesigning your kitchen, or you're moving. In other words, there needs to be a compelling reason to go through the expense and effort to replace an appliance.

  5. hwong
    August 19, 2011

    @jbond

    People are not using the new methods of standardizing EDI transactions may have several reasons: 

    1) people have been doing things traditionally in the old job and it is hard to change. Refer to the book “Who moved my cheese”

    2) supply chain partners do not always want to collaborate because of privacy and business competitive issues. This problem is similar to the supply chain theory CPFR -collaborative planning, forecasting and replenishment concept. Even though researches have shown that CPFR will benefit the entire supply chain, companies are still afraid of sharing too much information

    3) when you no longer need the EDI department, that means people will be let go or transition out to another department. Increase in Productivity also = layoffs

  6. bprince
    August 24, 2011

    @skoegler

    Besides economies of scale, I believe SaaS systems also spreads benefits by standardizing and consolidating data in one source. Like you said, utilizing a few dedicated SaaS staff instead of coordinating with several IT departments limits the number of touches and thus, inconsistency. There's no need for you or your partners to manually update each other and then translate the documents, resulting in errors and wasting time. With SaaS systems, your trading partners receive clean data in a standardized format with which they are already familiar. In the electrical supply chain, we've had great success with bringing customers and suppliers together to create and maintain industry-specific EDI document standards.

  7. Millerarther
    March 7, 2014

    Now as the time passes away more and more competition in the market hitting the business. In that kind of situation its quiet difficult to retain the customer but only good reltionship with cutomer can help to continous grwoth in business. We have seen that several online store are offering mini fridge but a customer will buy from to whom with which he have good experineces.  An expert advice is also quiet important when looking to buy a mini fridge

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