Many of today's manufacturers and distributors are EDI-capable only with their trading partners that produce a high volume of transactions. On average about 80 percent of an organization's business-to-business transactions occurs from only 20 percent of their trading partners. Consequently, EDI makes a lot of sense to automate and standardize the information exchange between these businesses. The issue now lies in the remaining 80 percent of their business-to-business trading partners. Although these businesses represent only 20 percent of their transactions, they are 80 percent of their costs to process these transactions. In this scenario, it makes sense to leverage the existing EDI infrastructure and integration by extending it to the Web.
One current project is to enable Vtech Ltd., a manufacturer and distributor of toys, phones, and computers, to use the Web and EDI-enable their smaller retail customers, therefore lowering Vtech's cost of doing business.
The electronic orders are received from the Web and processed through the same existing EDI stream used for the EDI-capable trading partners. The investment into EDI integration can be leveraged by extending its role to interact with EDI-based Web applications and documents.
The buyer now has more timely information at their fingertips. Order and shipment information about a current open order is available over the Web, along with the history of past orders. Pricing changes to the order system are updated quickly by integrating the order system with the EDI price catalog document.
The EDI transaction used was a purchase order (document identification code 850) to create the order. A purchase order acknowledgment (document identification code 855) is used to confirm, reject, or accept the order based on validation with the legacy system for data such as possible ship dates, terms, pricing, product codes, etc. The price catalog (document identification code 832) is transmitted to the Web applications from the legacy system to update inventory items, delete inventory items, or add inventory items.
One of the goals of this implementation is to use the same pipeline used for EDI because the legacy integration is completed. As you can see from figure 6, the processing of these Web documents into Vtech's legacy application is simple. The small to medium-sized trading partners are usually of a lower volume transaction, so the manual entry of information over the Web is acceptable, especially when useful status and reporting information is made available to the retailers. Over time, the high-volume trading partners, currently using the legacy network of private VANs, will migrate to the Internet. The cost savings are tremendous. Budgets for VAN services by many large businesses can and do exceed $1 million annually.
As manufacturers extend their electronic commerce capabilities via the Internet, they too can sell directly to the consumers and retailers with Vtech's example. The logistics of distribution can then be moved to public warehouses that will handle the distribution for the manufacturer without marking up the price. In return the manufacturer can increase its profits and at the same time sell the goods at a lower price. Many fear that this will dis-intermediate the business of their suppliers. The suppliers will always maintain their position if they offer value-added services on top of the products they are marketing. This is a valid expectation by the manufacturers and by the suppliers themselves. Suppliers are responsible for keeping pace with advancements in technology, process, and service to best represent the manufacturers; otherwise, the manufacturers will seek new, modern-day suppliers or alternate methods to distribute their goods.
Atlas Cold Storage is a public warehouse for frozen goods and stores goods for multiple manufacturers; therefore, they have knowledge of the goods ordered. This makes Atlas a perfect extension of the electronic commerce arm of the manufacturers as well as a perfect consoli-dator of information for both the buyer and the seller.
The EDI transactions to facilitate the movement of inventory include warehouse ship orders, stock transfers, and shipping advice. Furthermore, the EDI product activity document (transaction identification 852) can be used to link into a buyer's point-of-sale system. This allows for suppliers to determine real-time stocking levels of the buyer and implement vendor managed inventory and report on product sales to the manufacturers to assist with their production scheduling.
When the information is presented to the buyers, they will receive consolidated reports on their inventory cycles for all products supplied by the agent. This is a service benefit to the buyer; otherwise, they would have to go to each manufacturer separately to attain such information. The manufacturer also benefits from this service by virtually outsourcing this function along the supply chain to the supplier. For Atlas, the extra service benefits both buyer and seller and further ensures their necessary position of the agent in the supply chain. Agents who do not provide such creative and valuable information services face the danger of being replaced by others that will provide this type of service as a competitive advantage.
To Be Continued