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The Cloud as an Alternative to EDI

The industry standard for purchasing transactions — electronic data interchange (EDI) — can be time consuming, costly, and labor-intensive for many companies in the supply chain. EDI links are most often custom connections among suppliers, distributors, and customers so that each company's system can read and process the data from other companies' systems.

The problem is almost every EDI connection is unique, so one distributor that carries 200 suppliers can conceivably have 200 EDI connections. There have been efforts to simplify this by standardizing purchasing transactions between companies — such as the RosettaNet initiative — but so far, no single solution has widely caught on.

A technology board within the National Electronics Distributors Association recently met with a company that provides such a solution to the automotive aftermarket. GCommerce is a software-as-a-service (SaaS) company that has developed a “SuperSpec” that translates the requirements of multiple trading partners into one specification, and creates standardized data definitions within the data fields. The SuperSpec allows a company to set up a connection once, and reuse that map for all trading partners. A process built on to the SuperSpec, Internet Data Exchange (IDE), automates standard purchase-order-to-payment transactions. Non-standard transactions such as drop-shipping can be handled through GCommerce's Virtual Inventory Cloud (VIC), built on Microsoft's Azure common cloud platform. Microsoft is a co-creator with GCommerce.

Most attempts to standardize purchasing transactions within the electronics industry have been driven by a single, large supplier or a “members-only” group that developed a technology for its own use. These solutions generally serve the needs of the developers (a small constituency) rather than wholesalers. GCommerce's approach is driven by the needs of wholesalers — president, CEO, and cofounder Steve Smith worked with Wal-Mart.

In the automotive aftermarket, he says, “We started with the largest people in the industry. We said we'd develop a solution for free — and once we had enough economic leverage to direct the market, we got buying groups and trade associations involved.” GCommerce's philosophy is to attract the widest possible base of users first and drive the solution back up through the supply chain (rather than top-down.) Having worked with Wal-Mart, Smith admits to being partial to the wholesale industry, so GCommerce's approach is more distribution- than supplier-oriented.

It's also aimed at being cost-effective: The SuperSpec and VIC greatly reduce the costs associated with setting up trading connections and managing transactions that fall outside the standard practices of a trading network. It's all about cost-effective data management, says Smith. Using the cloud for storing and managing data is already cheap and is more easily scalable than typical solutions. “Our belief is that to make something like this work, everybody has to pull in the same direction,” says Smith. “So we have to make the solution low-cost, and the only way to do this is make it a data-driven, rather than technology-driven, model.” GCommerce derives its revenues from flat-fee transaction charges and providing value-added services such as customization.

Market research firm Aberdeen Group says cloud-based inventory visibility, such as VIC offers, enables trading partners to indicate which parts of their inventory can be shared with other participants; provides real-time access of this shared inventory pool at the point of customer order; and provides the ability to split an order across multiple participants. “This style of cloud-based solution is something that is applicable to any reseller-oriented industry segment.”

By sheer coincidence, my colleague Laurie Sullivan wrote about SaaS and the cloud in her most recent blog: How to Keep an Aging Supply Chain Vibrant. What are your thoughts about the cloud as an alternative to EDI? We'll examine the possibilities in upcoming blogs at here on EBN.

7 comments on “The Cloud as an Alternative to EDI

  1. AnalyzeThis
    January 12, 2011

    Thanks Barbara, I can't believe I was not aware of GCommerce and the Super Spec concept!

    Long-term, I think that some sort of SaaS company will figure out how to do this really well and just dominate. I think it's possible, look at what Salesforce has accomplished in the CRM space in a relatively short period of time.

    But like I said… this is a long-term proposition. I think it will be many, many years until a standard emerges and experiences widespread adoption. However, maybe some industries will adopt something like this more quickly? Who knows, maybe this will work out great for in auto…

  2. DataCrunch
    January 12, 2011

    XML via the Internet for EDI was talked about several years ago as the future for EDI versus the current data formats via VANs (value added networks).  The XML method has not taken off yet and it’s not because it is not a better solution, but for the most part, the current EDI methods in place are already battle tested and just work.  There is no urgency to make a change yet.  The difference with Salesforce.com and offering EDI as a SaaS model is that Saleforce.com can be accessed independently of any integration, meaning it can be used day one.  EDI needs much more coordination, internally and externally.  It’s not as easy to make the switch and their needs to be a compelling reason to do so.

  3. jbond
    January 12, 2011

    I myself love salesforce.com and the functionality of it. I believe using the cloud to replace EDI is an excellent idea. I fully believe it would simplify the ordering process for many companies.

    The only down side I can see is it is going to take a few larger companies to take the initiative and implement this program. Then inform the other companies that they do business with of their success with this process.

    Hopefully as word is spread and more companies implement this system it will become a mainstay.

  4. AnalyzeThis
    January 12, 2011

    I agree that XML feeds for EDI is not a better solution at all. So there's a reason that never took off.

    And you are correct about the main difference between Salesforce and a potential EDI SaaS model is that you can use Salesforce on day one while with an EDI solution, obviously it doesn't do you much good if it doesn't integrate with anything… but I will point out that Salesforce does seem to do a good job already when it comes to integrating with other systems, quickly: for example, if you sell online advertising, it is very simple to sync Salesforce with DART Sales Manager, which in turn integrates with the actual DART For Publishers ad serving platform… meaning it's very easy to use Salesforce to manage the ad sales process from concept to delivery.

    So a potential EDI SaaS platform would need to offer that sort of potential ease of integration as well to be successful. That's no easy task, of course, but if you got some big organizations to support it… let's say Wal-Mart or something of that nature backed one such system (which is something I'm sure Steve Smith is trying to do)… I think large-scale adoption could perhaps become possible.

    Anyhow, even if this doesn't end up being viable, I think it's an interesting idea!

  5. Barbara Jorgensen
    January 12, 2011

    I believe the ease on integration issue discussed is addressed by Gcommerce: as I understand it, they take all of the communication protocols available, along with industry standard specs, and build the SuperSpec around that. The SuperSpec then handles maybe 80% of the transactions–the most common transactions done within the electronics supply chain–and the VIC handles exception management. To set this system up for the industry, it would take the kind of cooperation the automotive industry provided, but all of the major retailers–AutoZone, PepBoys etc., industry associations and finally, the suppliers all agreed to provide the information needed to develop the SuperSpec. This was done free of charge–Gco0mmerce donated this part of the process to the industry–but makes money by charging a small transaction fee–a flat rate–and by customizing links as needed.

    I don't know if that helps–I haven't used Salesforce.com–but I know the setup time is reduced to days from months, maybe faster

  6. SP
    January 13, 2011

    The article was very informative. Its good to learn about the processes used by distribution companies. Would love to know more.

  7. Ashu001
    January 17, 2011

    Barbara,

    You made the following point in your post,

    So we have to make the solution low-cost, and the only way to do this is make it a data-driven, rather than technology-driven, model.”

    I don't think cost competitiveness alone is the clincher for most organizations (to make the switch today). Most importantly you need comfort level for employees with the Software that is going to be set up.Otherwise,it won't see widespread adoption and lead to enormous heartburn for all concerned.

    Regards

    Ashish.

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