EDI

The Most Popular B2B Protocols As Chosen By You

We had a “standing room only” crowd at our recent GXS webinar, “How to Determine the Best Communications Protocol for B2B Integration.” In an easy-to-understand manner, John Radko, GXS Chief Technology Strategist, described the communications protocols available, the key attributes of each one, and how they work. During the webinar, a couple questions that stood out because they were submitted by multiple attendees were: “Which protocol is the most popular? Do you have any statistics?” It just so happens that we had already planned to conduct a poll to find out those answers. Attendees were presented with the following question: Which Protocol Do You Use for B2B Today? Answer options included AS2, FTP/VPN, SFTP, FTPS. Below are the real-time results:     AS2 and FTP over VPN were used most often by the webinar audience. These results were consistent with the trends we see at GXS.     Look at these charts that illustrate the percentage of new clients that chose each of the protocols at signup between 2008-2010 and 2011-2012:     As you can see, between the years 2008 and 2010, 40% of our customers chose FTP/VPN and 30% chose AS2. SFTP and FTPS were selected by about 10% each. The remaining 10% chose one of all the rest of the protocols we offer.       But, the picture changed between 2011 and 2012. AS2 took the #1 spot, selected by 34% of customers; FTP/VPN dropped to second with 27% of new customers; SFTP moved up from 10% to 24%; FTPS more than doubled in popularity – it moved up from 10% to 12%; and only 3% of our new customers selected one of the other protocols.   Want to get the answers to more of your B2B Communications questions? Select one or these webinars – you can listen to the recording and get copies of the slides and transcripts: How to Determine the Best Communications Protocol for B2B Integration AS2 or FTP: What’s Best for Your Company OFTP2 – A New Communications Protocol for the Automotive Industry

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GXS Named 2013 ISQA Award Winner by Avago Technologies

The global semi-conductor industry has faced numerous business challenges in recent years, especially during the most recent economic downturn when many companies were forced to restructure their operations to reduce costs. Today’s semi-conductor industry continues to face a number of challenges, including: Working across a highly competitive market where price is no longer a differentiator Needing to diversify quickly into other sectors such as automotive where the ‘connected car’ is driving exponential demand for new electronic components Highly cyclical in nature and heavily driven by changing consumer demand Complex business environment with a need to support a global and varied customer base These challenges have led many high tech companies to re-evaluate their ICT and B2B strategies and one such company is Avago Technologies. Avago Technologies is one of the world’s leading providers of innovative semi-conductor solutions with 40,000 global end customers and a portfolio of 6,500 products. With co-headquarters in North America and Singapore, Avago had net revenues of $2.4B in 2012. Avago’s success is dependent on being able to build a fully flexible and scalable B2B infrastructure that can support its international operations. When Avago decided to re-evaluate its B2B strategy, the overall goal was to introduce a one-stop shop for the end-to-end delivery of B2B, bridging the gap between customers/partners, business functions, processes, and information technology. Avago had three key objectives when defining its B2B programme, namely: Develop and drive strategic B2B programs to achieve optimum supply chain performance Reduce operational costs through improved process efficiency and greater proliferation of B2B tools across the extended enterprise Make it easier for customers to do business with Avago by meeting their individual B2B needs GXS Managed Services was chosen to provide a single integration platform between Avago and their global trading partner community. To highlight GXS’ key contribution to Avago’s growing success around the world, GXS was presented with the Avago Technologies IT Supplier Quality Award (ISQA) Winner of 2013. GXS was selected ahead of other industry leaders such as Cisco, Google and Wipro for its consistent and excellent performance for Avago. There were a number of strategic decisions for Avago to select GXS: GXS is one of the few established companies in the market that offers a completely outsourced B2B solution on a truly global basis Supports a wide range of B2B and industry specific standards that allows Avago to implement B2B transactions with almost any document standard used by Avago’s customers Offers support for a wide range of connectivity options / protocols that allows Avago to connect with almost any customer worldwide High dependency on a reliable vendor as 90% of Avago’s revenue goes through B2B Avago is one of many high tech companies to use GXS Managed Services and in the semi-conductor industry alone, 70% of the Top 20 companies in the world are connected to GXS Trading Grid®, the world’s largest cloud integration platform. Avago has been able to utilise GXS’ knowledge and experience in the high tech industry to integrate their B2B platform across their global business processes. To read more about this significant award, please read our recent press release by clicking HERE

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Are You Easy to Order From?

Do you offer your customers an online B2B shopping site? Does it display the unique SKUs (part numbers) and pricing for individual accounts? Does it have an Amazon.com like simplicity to it? Do customers have to login into the online shopping site directly? Or can they “punchout” from their e-procurement application? Once an order is placed, can your customers make changes to their orders online? Or do they have to call or email someone? Can they cancel their orders (or requests) on this website? Did you answer “No” to any of these questions? How would your competitors answer these questions? Would they say “Yes” to any of the questions you said “No” to? If so are they better positioned to grow their business with strategic accounts than you are? What about orders placed via EDI? Can your customers send you purchase orders electronically? Do you accept just EDI or other XML standards as well? Can customers send you changes or cancellations to orders via EDI/XML as well? Or just the original PO? How Many Can You Support? How fast do you respond to orders placed via EDI/XML? Can you respond within 60 minutes if requested? 30 minutes? 15 minutes? 5 minutes? If you can only fulfill part of an order how do you communicate it to the customer? Do you call them or send them an electronic message? What if your customer doesn’t want to order from you at all? What if they want to use a Vendor Managed Inventory (VMI), consignment or other supplier-led program? Are you able to receive weekly, daily, hourly updates on inventory positions at their plants, stores and warehouses? How long does it take you to transform their data, run it through your algorithms and calculate replenishment quantities? Now let’s talk technology. For those orders that you accept over EDI or XML, how many ways can you receive them? Can your customers send them over a third party EDI network (VAN)? Can they send them over AS2? FTP? FTP with SSL? FTP with SSH? RESTful API? How Many Ways Can You Accept an Order? What if the customer wants to send you an order with a credit card number? Do you support the PCI standards required for exchanging credit card transactions? What if a customer requests to send information using a network protocol you have never even heard of? Do you tell them “No?” Or do you figure out how to go make it happen? Would your sales organization agree with how you just answered that last question? Now, let’s dig a little deeper – How flexible are you when it comes to communicating via EDI and XML? You accept EDI or XML, but is it your EDI or their EDI? In other words – Do you specify which documents to send? Do you specify which fields are required? Do you specify how to populate the fields? What happens if the customer doesn’t agree with your specifications? And even if they do agree, is dictating specifications really very customer-friendly? What if the customer doesn’t want to send you EDI or XML? But rather some other type of file? Are you willing to take whatever they send? Keep it honest – Would your sales organization agree with how you just answered?

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Which is Best for Your EDI Program? FTP, SFTP, FTPS, or AS2?

In my last blog, 5 Considerations When Deciding on Internet Communications Protocols, I highlighted the key factors you should consider when selecting the best Internet protocol (IP) for your company when exchanging EDI documents: data security, message management, ease of setup and use, and interoperability. Now, let’s take a look at how each of the most commonly used communications protocols – FTP with VPN, SFTP, FTPS, and AS2 – addresses those factors. FTP (File Transfer Protocol) with VPN (Virtual Private Network) – FTP was the first robust, reliable file transfer protocol developed and is still used today by many businesses, particularly for file exchange within a company. However, FTP by itself does not provide the security needed for document exchange with other companies over the Internet. For this reason, businesses that use FTP use it in conjunction with VPN software to provide the security layer needed. However, neither FTP by itself nor FTP with VPN provides non-repudiation or message management. Moreover, interoperability may be an issue because there are many different ways of implementing VPN on your system, as well as possible differences in versions of VPN. Although FTP with VPN does not address all five factors, you can use it to connect to an EDI Network Services Provider which then provides the non-repudiation, message management and interoperability required. SFTP (Secure File Transfer Protocol) and FTPS (File Transfer Protocol Secure) – Both SFTP and FTPS are secure Internet protocols. The major difference is in how each provides security and performs encryption. The security layer used by SFTP was developed by the Internet Engineering Task Force, while the security layer used by FTPS was developed by the Internet browser company Netscape. Both protocols encrypt the data while in transit, keeping it safe while moving over the Internet, and then decrypt it upon arrival at its destination. However, neither provides non-repudiation or message management. As with FTP with VPN above, interoperability is a major issue, and again you can use either to connect to an EDI Network Services Provider, which then provides the non-repudiation, message management and interoperability required. AS2 (Applicability Statement 2) – AS2 was developed specifically to overcome the limitations of the other security protocols noted above. In addition to providing a high level of data security, it addresses non-repudiation, message management and interoperability. It was developed by the the Internet Engineering Task Force (IETF). The major boost to its usage was when it was mandated by Walmart as the only acceptable communication protocol for suppliers wishing to do business with them. Its usage soon spread to other major businesses. Let’s look at how AS2 addresses non-repudiation, message management and interoperability. Non-repudiation – AS2 uses a system of keys to ensure non-repudiation. A private key is used by one business to encrypt its digital signature (a special identity code) on a file being transmitted. That company’s public key is provided to all its business partners for use in decrypting the digital signature. No other key will work, thus verifying the identity of the sender. Interoperability – AS2 is backed by the Drummond Group, an organization that certifies that versions from different vendors are compatible. Thus, you are guaranteed that if you buy any two products from the list of Drummond-certified products that they will work together well. Message Management – AS2 provides a status message called the Message Disposition Notification (MDN), which informs you that the transmission was successfully received, decrypted and verified. There are several challenges to a successful AS2 program. AS2 is a “push” protocol, meaning documents are sent as soon as they are available and the business partner must be ready to receive them. The recipient’s server must be up and running 24×7, with personnel ready to troubleshoot any communication issues. In addition, management of the private and public keys used for non-repudiation and security adds another layer of complexity to its operation. Moreover, because AS2 is much more sophisticated than the other protocols, a highly skilled staff will be needed to support it. In summary, you have several choices when selecting a secure communication protocol for your EDI documents. AS2 best addresses all the key requirements, but requires a higher level of commitment. Because of its full functionality, many companies opt to use AS2 for exchanging EDI documents for both their direct connect partners and to connect to an EDI Network Services Provider for the rest of their partner community. If you use one of the other secure protocols, then use of a Provider should be considered in order to address the gaps in capabilities. If you’d like to learn more, you may be interested in viewing this webinar, “Which Communications Protocol is Best for B2B Integration?” during which you will learn more about the specific challenges around B2B communications decisions and alternatives.

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5 Considerations When Deciding on Internet Communications Protocols

In order for two computers to exchange files (internally or across the Internet) you will need file-handling software that follows certain communication rules (protocols). If you communicate directly, you and your partner must use the same communications protocol.  Just as two speakers of different languages (for example, one who speaks only English and one who speaks only Japanese) cannot hold a conversation, two computers using different communications protocols cannot exchange data with each other. If you communicate directly with many partners, each of which uses a different protocol, you will need software that supports each one of those protocols.  This is why many companies decide to work with a B2B Network Services provider — to shield them from all of this complexity. There are five key factors you should consider when selecting the best Internet protocol (IP) for your company: 1.      Data Security When you are dealing with documents that contain sensitive data, you must be sure that while they are being transmitted through the Internet, they are safe from anyone who may try to intercept and read them.  Each IP communication protocol takes a different approach to securing information. Some protocols encrypt everything in the transmission (channel encryption) while others encrypt only the actual data (payload encryption). 2.      Non-repudiation Repudiation refers to the ability to confirm that a document was actually sent by the sender as indicated within the file being exchanged.  This also serves as proof if a business partner denies sending you a document.   3.      Message Management When you exchange documents with business partners, you need to know if they were successfully received and decrypted. For example, a major factor in determining whether you get paid is whether your customer received the invoice.  Or, if you’re trying to plan for the arrival of a shipment at your receiving dock, getting a shipment notice is crucial. Thus, confirmation of receipt for EDI documents is extremely important for businesses to operate efficiently. 4.     Ease of Setup and Use Different protocols may necessitate different levels of resources to install and monitor its operation on day-to-day basis. 5.     Interoperability Many software vendors offer versions of each particular protocol.  However, versions of the same protocol provided by two different vendors may not be able to communicate with each other.  So, when you and your partners select a protocol, you must be sure of interoperability. Whether you are a supplier being asked to communicate with your customers or you are a customer initiating programs with your suppliers, you should consider these factors when making your protocol decisions.  If you’d like to learn more, you may be interested in this webinar, How to Determine the Best Communications Protocol for B2B Integration.

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Manufacturers – Are You Easy to Do Business With Electronically?

What does “easy to do business with” mean?  It means – Are you able to do business with your customer in the way they prefer?  Can they order from you however and whenever they prefer?  Can you ship to them wherever and however they prefer?  Can they pay you however and whenever they prefer? Large companies, especially the big multi-nationals, are on a quest to fine-tune every aspect of their operations.  They relentlessly pursue automation and efficiency in their procurement, supply chain, warehouse, transportation, accounting, treasury, customer service, human resources and information technology initiatives.  When they have to make exceptions to these processes for a particular vendor it breaks their model.  It adds cost.  It adds complexity.  It substantially increases the opportunity for error.  And it substantially depositions you relative to competitors who can do business the way the customer wants. The famous Staples Easy Button Being easy to do business means offering the flexibility to do things in the way the customer prefers.  For example, can you ship mixed pallets of merchandise to your retailer’s distribution center if they request it? Being easy to do business with also means you do not force your customer to change their behaviors or processes to accommodate you.   For example, do your customers have to modify their warehouse management or accounts payable systems to accept EDI transactions from you? Although flexibility is the most important aspect of being easy to do business with it is not the only one.  It is also about speed. If your customer asks you to start a vendor managed inventory program, but it takes you nine months to comply – that is not being easy or responsive.  It is being slow.  If your customer wants you to start sending invoices electronically in Latin America, but it takes you twelve months to comply – that is not easy or responsive.  It is sluggish and inflexible. Being easy to do business with electronically requires you to have flexibility in your Business-to-Business (B2B) electronic commerce capabilities – the way you share product catalogs and prices; the way you exchange sales and production forecasts; the way you exchange orders and acknowledgements. Being easy to do business with electronically can be an important source of competitive advantage.  A 2010 study from Supply Chain Management World found that 89% of manufacturers believed that the flexibility of their B2B e-commerce programs enabled them to differentiate themselves from their competitors on service.  Of the same group, 88% believed that the strength of their B2B e-commerce program was important to growing their business at key accounts.   You can read the full study.

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How Cloud B2B Integration Enables Michelin’s International Operations

Michelin is one of the largest tyre manufacturers in the world, in fact much of their €21billion revenue comes from the aftermarket retail sector rather than direct sales to OEMs. With Sales Operations in 117 countries, 69 production facilities in 18 countries and 115 000 employees, Michelin is a truly global operation. To support their operations, Michelin has had to stretch their ICT and B2B infrastructure into many different countries around the world and it is becoming difficult to manage their B2B environment on a day to day basis. Today’s automotive industry is expanding into new emerging markets such as Vietnam and Thailand and this will put further pressure on companies such as Michelin to manage the expansion of their B2B platform so that they can support their customers in these regions. For the past two years Michelin has been migrating their European B2B platform to a GXS Managed Services environment. This provides Michelin with a cloud based B2B platform that will be able to support their global operations. GXS recently produced an on demand webinar which looks at how cloud B2B integration supports Michelin’s international operations. This webinar was recorded in partnership with Jean-Luc Faye, IS Functional Domain Manager at Michelin and myself. Jean-Luc is tasked with managing Michelin’s global EDI strategy. This webinar also highlights the key components of GXS Managed Services and the benefits that it brings to Michelin’s operations. I would like to thank Jean-Luc and Michelin for their kind co-operation with producing this on demand webinar. To view the webinar, please CLICK HERE.

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5 Ways Cloud B2B Integration Makes Procurement’s Life Easier

In my previous procurement related blog I discussed some of the significant challenges facing today’s global procurement teams. I highlighted a couple of reports, one written by Cap Gemini that focused on how consumer based technologies are likely to impact the procurement organisation moving forwards. The report highlighted that 40% of procurement organisations are involved in augmenting their practices with ‘digital tools’. Digital procurement, or more simply using B2B tools to automate manual based processes, is an area that is going to become more popular across procurement departments in the future. To be honest I would expect the figure of 40% to be much higher today as cloud based B2B technologies can streamline the operation of a procurement team as well as contribute towards the bottom line. In my earlier blog entry I highlighted a number of issues faced by today’s procurement teams and how cloud B2B integration could help address some of these challenges. This blog will look at the five ways in which cloud B2B integration can make procurement’s life easier. The cloud enables procurement teams to do business with any trading partner, anywhere in the world. Comprehensive on-boarding services allow a procurement team to reach out to potentially 100% of their trading partner community and ensure that they can exchange business documents electronically with them. Using a comprehensive on-boarding service, such as the one offered by GXS, makes it easier and quicker to work with trading partners located in emerging markets such as China, India and Brazil. Trading Partner ramping times can be significantly decreased and costs associated with connectivity testing etc can be significantly reduced as well. Cloud collaboration platforms enable all of your supplier contact information to be held in a central repository, so that you can communicate more accurately, more often and hence foster greater collaboration across your trading partner community. Procurement teams have traditionally held supplier information across multiple business systems, spread sheets and databases. This information can potentially become out of date very quickly, for example a key contact at a supplier may leave the business but none of the procurement systems have been updated to reflect this change. How much time and effort would it take to enter a new contact name or update an address across multiple procurement systems? Would it not be easier to push the responsibility of maintaining up to date contact information back on to the supplier concerned and may be make it part of their contract to update their own details as soon as any changes are required to their contact information? Cloud based community management platforms can not only maintain up to date contact information, they help to improve day to day communications and provide traceability of all outbound communications with a trading partner community as well. All of this can be achieved through one centralised contact database which if necessary can be integrated to other business systems, such as ERP platforms so that contact details are up to date and consistent across your entire business. Regardless of the size of your trading partners, or their technical capabilities, there are B2B enablement tools in the cloud that ensure that no trading partner is left behind. Whether connecting with suppliers, customers, banks or logistics providers, cloud based B2B tools simplify the process of exchanging information between these trading partners and your procurement organisation. As part of the on boarding process it is possible to quickly determine the technical and connectivity capabilities of each and every trading partner and then assign a B2B enablement tool to help with the exchange of electronic information. The cloud provides a single point of entry into your procurement department, whether through a web form based environment or one that utilises a Microsoft Excel based platform to exchange B2B information, the cloud offers a single integration platform that anyone across your extended enterprise can use. The cloud offers procurement departments a wide range of hosted applications that require minimal IT infrastructure involvement so that you can automate more business processes and remove extensive amounts of paper. You can deploy these hosted applications either ‘off the shelf’ or with some form of customisation, for example integrating with other back office business systems or tailoring the web forms to incorporate company speci9fic branding such as logos. Either way, hosted applications provide a convenient way for your trading partners to be integrated more tightly with your procurement processes. For example being able to track the progress of an order or implement full traceability of all interactions with each and every trading partner. The light weight nature of hosted applications means that your trading partners, in most cases, will simply need an internet connection to get access to your cloud based applications. Once you have on-boarded your new trading partners, captured their contact details, deployed B2B enablement tools and given them access to your suite of hosted applications, the final area that procurement teams should be considering is support. Working with a global community of trading partners requires a follow the sun, multi-lingual support service to allow supply chain issues to be resolved proactively before they impact your procurement processes and ultimately your business. Establishing a multi-lingual helpdesk is beyond the reach of many companies and this is a key area where a vendor such as GXS can bring real value to the management of your trading partner community. B2B outsourcing, via a cloud integration platform such as GXS Trading Grid, provides procurement teams with a ‘one stop shop’ in terms of enabling and managing a community of trading partners. Many companies take a step by step approach to deploying cloud based services and this can be achieved with the five areas described above. Cloud B2B environments offer procurement teams a significant step change in how they enable and manage their trading partner communities. Using a cloud based approach to community enablement and management takes away the day to day concerns of looking after a potentially global, diverse group of trading partners. For more information on how GXS can help move your procurement processes to the cloud, please visit www.gxs.com.

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Focus on Regional Banking: Meeting the Needs of Increasingly Sophisticated Commercial Clients

Regional Banking On the Rise North American Regional Banking experienced a resurgence coming out of the financial crisis of 2008. According to SNL Financial, average Return on Assets (ROA) and Return on Equity (ROE) for banks with assets between $20B and $360B exceeded the results for the “Big Four” commercial banks (JP Morgan Chase, Bank of America, Citigroup, and Wells Fargo). Regional banks attract small and mid-sized businesses who want a more personalized approach or who want to reduce their reliance on the big banks for credit lines. In serving middle-market commercial customers, regional banks serve a profitable niche sometimes overlooked by the global banks. However, regional banks often have limited technology budgets and may lag behind the biggest banks when it comes to the technology required to meet the needs of their increasingly sophisticated commercial clients. Meeting The Technology Needs of Middle Market Clients Your commercial customers are becoming increasingly sophisticated as a result of international expansion, treasury technology improvements and shifting markets. This sophistication translates into more demanding communication requirements from middle market commercial and small business banking clients. Meeting the technology needs of middle market commercial clients is critical to regional banks. Ernst & Young publishes an Annual Cash Management Services Survey summarizing results from banks that actively market treasury services to wholesale customers. As shown in the graphic below, for banks in the “Peers 2 & 3” category (assets less than $87B), 40% of their fee-based cash management revenue comes from middle market clients. These commercial customers are expanding their usage of electronic products such as information reporting, ACH and EDI payments, wire transfers and purchasing cards. Somewhat surprisingly, in addition to the traditional payment types, North American middle-market commercial clients are also initiating SEPA Credit Transfers and SEPA Direct Debits for Euro-denominated transactions. Even the old cash management cash cow, information reporting, is undergoing a transformation. Commercial clients are demanding that their banks transmit balance and statement transactions in SWIFT MT 940/942 or ISO 20022 XML formats in place of the traditional BAI2 format. And those same clients are initiating payments in SWIFT MT and FileAct file formats. What’s a Bank to Do? To maintain and command a greater share of the growing middle-market segment, regional banks must be well-versed in the complexity of corporate-to-bank connectivity including SWIFT integration options and support for an increasing variety of file formats and product interfaces. And this is not a one-time exercise, financial messaging standards and file format are ever-evolving and keeping up is challenging. There are several options that regional banks should consider to increase their ability to meet a broad set of needs and requirements. We’ve posted a 30-minute webinar that covers Regional Banking industry trends, connectivity options, SWIFT for Corporates, and relevant case studies to help you learn more about corporate-to-bank connectivity including support for the growing variety of financial services file formats and product interfaces. Let us know if you have any questions or would like additional information.  

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We need a Snapchat Model in B2B Integration

For those not familiar with Snapchat – it is a mobile application that allows users to share photos, videos, audio, text or drawings with other users.  The difference between Snapchat and Twitter, Facebook, Vine, Instagram and the other 15,000 social media applications on the market is the duration over which users can view the message.  Snapchat messages are designed to be viewed for a very short period of time – between one to ten seconds.  After the ten seconds the message is purged from the Snapchat server and the Internet.

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Could 3D Printing Support the Introduction of ‘Zero Length Supply Chains’?

Over the last six months the ‘3D printing’ industry has received significant coverage in the global media, commonly being described as the ‘the next big technology to hit the consumer market’. However this is not new technology, when I was studying at Cranfield University in 1992, a couple of PhD students were just starting their own business in this area. In the early 1990s, the technology was called ‘stereolithography’ or ‘rapid prototyping’ but it still used the same fundamental process of curing layers of polymer or plastic based materials to form the final shape of the object being produced. From a business perspective 3D printing has revolutionised the manufacturing process and I for one believe that it is in the manufacturing sector rather than the consumer market where 3D printing will continue to see wide spread adoption. There are a number of issues which will prevent mass adoption across the general consumer market: Even though the cost of 3D printing machines has come down considerably from when I was at University, the machines are still relatively expensive for household use The platform used to create the 3D models is relatively small in size which will restrict the kind of models that can be produced The technology comes from the manufacturing industry where engineers work tirelessly to create intricate 3D CAD models that can then be made in these machines. The average consumer will not have access to 3D CAD software on their home PC to design their own models. One option could be to use an outside design bureau to create the 3D model on the consumer’s behalf. Without access to 3D CAD software, consumers could purchase a small 3D laser scanner to create an external representation of the shape they want to manufacture, but even this technology is not widely available to the general consumer The only option that is really open to the consumer market at the moment is to download their 3D models from an online library or catalogue. This could be seen as being too restrictive and the lack of involvement with creating your own models will inevitably mean that ‘domestic’ 3D printing machines will be consigned to the back of the garage within no time at all. So now that I have tried to bring a sense of reality to the proceedings in terms of how 3D printing will apply to the consumer market, let’s now take a look at what it could mean for the manufacturing industry. For many years the aerospace and automotive industries have been using 3D printing technology to produce prototype parts. These ‘rapid prototype parts’ were being used as part of concept models to test form, fit and function before the final products were produced. Manufacturers have been making physical models of future products via wood and any other material that could be easily formed, for many years. For example one aerospace company in the UK made a complete wooden mock-up of their jet engines so that they could use it to test hydraulic pipe and wire harness runs. As 3D CAD modelling and visualisation technology improved so the need for wooden models started to disappear. However 3D printing once again brings physical models into the lime light as they can potentially be used in the aftermarket sector, let me explain by way of a simple example. A small plastic housing on a hydraulic pump cracks, you identify the failed housing in an online 3D parts catalogue from the supplier, you then download the 3D model to your PC and then using the 3D printer at your office, you proceed to manufacture a replacement part, quickly and easily with no fuss at all. Clearly this process would only work for certain types of parts but the ability to download the 3D CAD models and then manufacture locally brings immense time and cost savings as part of the service management/replacement of critical components. No external supplier to deal with (in terms of manufacturing the replacement part), no need to wait for a logistics provider to deliver the part, bearing in mind the broken piece of equipment could be anywhere in the world and no waste of material as the 3D printer will only manufacturer an exact copy of the failed component. In fact one of the terms that I have heard recently to describe 3D printing technology, is ‘zero length supply chain’ which when you think about it nicely sums up the technology and perfectly fits this particular scenario. To take this process one step further with the so called ‘Internet of Things’ gathering pace, what if a failed part is proactively identified using sensors on the equipment, ie differing flow rates (may be caused by a leak of fluids) outside a specific tolerance may highlight that the housing is about to fail. Information about the failed component is instantly relayed to a local 3D printer manufacturing hub which automatically downloads a 3D CAD model of the component and then proceeds to manufacture the ‘failed’ component before it actually fails, if you follow this! The first time the operator becomes aware of a potential problem is when they receive an automated email from the piece of equipment saying that a component is about to fail and a new part has been manufactured and is awaiting installation. Combining the Internet of Things with 3D printer technology has the potential to completely transform the management of serviceable machines such as power generation equipment for example. I will add one caveat to this in that 3D printer technology has until now really only been used at the rapid prototyping stage rather than really using for mass production of parts. But assuming that the 3D printers can produce parts to a repeatable quality, which meets various testing criteria, then there is no reason why the process I have outlined above could not one day become reality. Now this may all sound far-fetched but a number of companies including GE Software, Cisco, IBM, Infineon and many others are working together to try and make the ‘Industrial Internet’ a reality. In fact, only a few weeks ago the top ten companies involved in making the Industrial Internet a reality formed an alliance which is to be sponsored by the US government. It wasn’t too long ago that real time, sensor controlled, intelligent, machine to machine communications was regarded as science fiction and here we are today investing billions of dollars to develop such internet connected technology. One thing is for sure, the global manufacturing industry is heading for exciting times! Speaking of the future, just after I drafted this blog entry I found a news item relating to a 3D fax machine. Imagine two 3D printing machines connected together but one has a built in 3D scanner. You place an object in one device, it is scanned, the 3D scan data is transmitted to the remote 3D printer and the object is then produced. Sounds too good to be true?, find out more HERE. So how will B2B systems play a part in this new heavily automated world?, a world where the physical supply chain, in this example, almost disappears and all information is exchanged in an almost instantaneous, closed loop way. From a B2B perspective, how will remotely printed 3D parts be accounted for in an order management system and how will they be paid for?, how will 3D CAD models be exchanged securely from one location to another?, how will 3D CAD models be hosted in online catalogues, how will Big Data be exchanged between the machines and the central IT systems? and how will replaced parts be tracked and updated across an ERP platform? So as you can see, B2B certainly has a part to play in this new and emerging area and the application of B2B in the world of 3D printing and the ‘Internet of Things’ is an area that I will expand upon in a future blog entry. In the meantime and just to show how 3D printing has hit the news headlines this year, here are a few innovative examples of its use: Full size, running replica of an Aston Martin DB4, consisting of thousands of small, 4 by 4 inch, 3D printed parts. The parts once glued together will form a mould from which a fibre glass body will be manufactured. Buttercup the duck was born last year with a backward growing foot. The foot was amputated and a replacement foot was created using a 3D printer. In early August, the space and electric car entrepreneur Elon Musk announced plans for a new rapid transport system called the Hyper Loop. Within hours the open source designs were downloaded and a 3D printed model of the proposed train and station platform were created.

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Top Ten Trends That Will Impact High Tech Supply Chains in 2014

The global high tech industry is currently going through a period of immense change. From restructuring global supply chains through to diversifying operations into other industry sectors, companies across the high tech industry are having to embrace new technologies and new markets in order to survive. So I thought it would be useful to summarise some of the key trends that will impact global high tech supply chains for the remainder of 2013 and the first half of 2014. If you would like to understand some of the trends that are likely to impact the automotive industry in 2014, then please CLICK HERE to read my predictions…… Consumer demand for tablet devices is changing the face of the PC industry, not only are PC sales continuing in a downward spiral but the structure of the tablet related supply chain is very different to those suppliers found in the PC supply chain. This is due to the difference in components used in tablet devices. The tablet market is also driving increased innovation and development costs across high tech suppliers, for example the introduction of flexible OLED displays. High tech suppliers are diversifying into other industry sectors, one example is the automotive industry where consumer demand for connected vehicles is providing new opportunities for companies such as Qualcomm who are designing bespoke semi-conductors for next generation in car entertainment systems. In future, there will be a greater emphasis on in car software with Apple expected to license their IOS platform to allow car manufacturers to improve the interaction with vehicle systems. Increasing interest in wearable high tech devices, a potentially lucrative new sub-sector of the high tech industry where Google, Sony and newcomers such as Jawbone are starting to introduce new, wearable devices. This provides a great opportunity for the high tech component supply industry but at the same time presents challenges as components have to be scaled down in size even further and there is a much stronger emphasis being placed on extending the battery life of these devices. The so called ‘Internet of Things’ is providing another sub sector for high tech companies to diversify into. Improving machine to machine (M2M) communications is driving the need for connecting more devices to the internet and being able to remotely monitor equipment such as power generators or wind turbines. GE, IBM, Cisco and Infineon are some of the leading companies who are starting to explore new business opportunities in this particular market. There is an increasing shift for software companies to develop their own hardware. Microsoft was one the first to do this by introducing the XBOX console. But now Google, Facebook and others are keen to either work with external hardware partners or acquire other companies. For example Motorola Mobility has just released the Moto X phone, but this company is owned by Google. Software companies do not have a direct supply chain as such and they certainly do not have production facilities. So this presents a strong opportunity for the contract manufacturing industry as Google and others will be reliant on these particular companies to bring their products to market. New regulations being introduced in 2014, for example Dodd Frank, will make high tech companies and their suppliers more accountable to ensure they do not use any conflict minerals in their electronic components. Every company submitting a filing to the SEC in North America in May 2014 will have to prove they do not have conflict minerals in their supply chains. This means that companies will have to improve the way in which they assess their supply chains and improve day to day management of key contacts at every company across a high tech supply chain. This will become increasingly important as we move into 2014. As production costs start to rise in China, more high tech companies will continue to look at alternative manufacturing locations. Taiwan, Vietnam and Thailand are expected to grow their respective high tech industries considerably as they attempt to attract inward investment from the world’s leading high tech companies. The Japanese high tech industry has primarily been built upon home grown software based ICT infrastructures. Recent natural disasters have led many Japanese companies to rethink their ICT and supply chain strategies. Moving into 2014 it is expected that more Japanese high tech companies will look to upgrade older legacy ICT platforms and it is very likely that more companies will adopt cloud based services in order to support their rapidly expanding global operations. The PC industry is expected to contract still further with consolidation and merger and acquisition activity expected to rise significantly. Whereas the software companies are diversifying into the hardware space via their contract manufacturers, traditional PC manufacturers such as HP and Dell are expected to adopt/acquire more service based solutions to help maintain or better still increase revenues. China is expected to continue globalising their own high tech operations by acquiring distressed assets in other markets. Lenovo is a good example of a Chinese manufacturer acquiring an established business and this trend is likely to continue as we head into 2014. Whereas many western manufacturers have expanded their operations into China over the past two decades it is expected that Chinese companies will now continue the globalisation trend as they look to acquire recognised high tech brands in other markets.

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Is Your Supply Chain Ready for the Dodd-Frank Conflict Minerals Reporting Law?

Today’s manufacturing industry has to contend with many different Corporate Social Responsibility (CSR) and compliance related issues but how do supply chain directors enforce their suppliers to adhere to numerous compliance regulations?  One of the most significant compliance issues that will shortly impact supply chain directors across the manufacturing sectors is conflict minerals reporting and this will be the main focus area for this particular blog entry. Raw materials/minerals used in the manufacture of electronic components are typically sourced from many different locations around the world.  One country that considered mineral rich is the Democratic Republic of the Congo (DRC) however it is widely known that the trade of minerals in this particular country is helping to fund extreme levels of violence across the region. This conflict has claimed more than 5.4 million lives since it began in the late 1990’s. Raw materials mining is crucial to the DRC economy, however some mines are controlled by militant groups causing serious social and environmental issues in the region.  Such issues include serious human rights abuse, theft, extortion, forced child labour, deforestation and high taxation of mineral resources.  All of these factors combined have had a negative effect on both the manufacturing industry and the image of the DRC. So what exactly is “DRC Conflict Free”? This is defined as the products that do not contain minerals or their derivatives determined to be directly or indirectly financing or benefit armed groups from the countries highlighted in the map shown above. So which minerals are affected by this ban? Well there are basically four: Cassiterite (tin ore), Wolframite (tungsten ore), Coltan (tantalum ore) and Gold.  Collectively these are known as 3TG (Tin, Tantalum, Tungsten and Gold). The ban on conflict minerals relates directly to minerals sourced from the DRC or any of the adjoining countries listed above. The chart below highlights the percentage of Conflict Minerals sourced from the DRC: Tantalum: regarded as the first conflict mineral and became popular on the back of growth across the mobile phone industry.  Today it is used in electronic components inside mobile phones, computers, video game consoles, digital cameras and as alloy for making carbide tools and jet engine components. Tin: widely regarded as the primary funding source of rebel groups and used in alloys, tin plating, and solders for joining pipes and electronic circuits Tungsten: DRC is the 5th largest producer for this mineral and is used in metal wires, electrodes and contacts which are used in a multitude of electrical and electronic devices Gold: due to its superior electric conductivity and corrosion resistance it is used in electronic, communications and aerospace equipment Over the past couple of years a number of organisations have been formed to help define processes for clamping down on conflict minerals sourcing. In December 2010, the International ‘Organisation for Economic  Co-Operation and Development’ (OECD) produced a document entitled “Due diligence guidance for responsible supply chains of minerals from conflict affected and high risk areas and the supplement on Tin, Tantalum and Tungsten”.  The purpose of this report is to help companies avoid fuelling, facilitating or exacerbating conflict through their sourcing practices or contributing or being associated with serious human rights abuses. The OECD designed a 5 step framework for identifying and removing conflict minerals from a supply chain. From a high tech industry perspective there are two bodies that have been setup to help high tech companies implement the OECD framework, the Electronic Industry Citizenship Coalition (EICC) and the Global eSustainability Initiative (GeSi).  Both of these organisations are committed to improving conditions in the electronics supply chain and all mining activities that fuel conflict are unacceptable. The EICC and GeSI joint working group aims to enable companies to source conflict free minerals through actions including: Implementing conflict free smelter and due diligence programs to verify conflict free minerals down the supply chain to the OEMs Supporting in region sourcing schemes to enable future legitimate trade from DRC and surrounding countries Supporting OECD due diligence guidance and pilot Engaging with stakeholders for collaboration and efficiency Supporting individual company’s assurance processes through information sharing, standard tools and templates For the high tech industry, the OECD defines upstream and downstream as follows: In order to try and remove conflict minerals from global supply chains, the U.S congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act which was signed into law on 21st July 2010.  Section 1502 of the act is a provision related to sourcing, namely conflict minerals. The intention of this provision is to deter through increased transparency of companies sourcing practices, the extreme violence and human rights violations in the DRC and neighbouring countries funded by the exploitation and trade of certain materials. Section 1502 instructs the U.S Securities and Exchange Commission (SEC), in consultation with the US Department of State, to introduce regulations requiring certain companies to submit annually a description of measures taken to exercise due diligence on the source and chain of custody of conflict minerals. All companies submitting filings to the SEC must now complete forms to confirm that they are not using conflict minerals across their supply chain and the first submission is 31st May 2014 and then annually by 31st May each year. Any company, and there are estimated to be around 6000, that files Forms 10-K, 20-F or 40-F with the SEC each year will be affected by this new law. The manufacturing industry is the most impacted by Dodd-Frank with aerospace, automotive, high tech, defence and medical devices sectors being particularly badly impacted. According to Deloitte “the complexity of today’s supply chains combined with lack of visibility into sourcing practices will be one of the key challenges of ensuring that Dodd-Frank can be adhered to”. One such tool that has been developed by EICC is the conflict minerals reporting template shown below which complies with SEC’s due diligence requirements for downstream companies. The Microsoft Excel based reporting template embraces the OECD framework and asks specific questions to ensure that conflict minerals are not used across a supply chain. Having a spreadsheet based reporting tool is far better than a paper based questionnaire that would need to be mailed out to participants across an entire supply chain. The sheer number of supply chain participants is complicated enough but having to distribute the reporting tool to the correct contacts in every company across the downstream supply chain is a big challenge in itself. Given that conflict minerals reporting is now law for North American based SEC filings, it is in a company’s interests to find an efficient way to conduct the reporting process with minimal effort and without disrupting the day to day operation of the companies being asked to complete the survey. There are two key challenges to ensure successful reporting of conflict minerals, firstly ensuring that you have up to date contact information for every company across your supply chain and secondly ensuring that these companies complete the survey questions in a timely manner so as not to delay an SEC filing.  Efficient contact management is therefore critical to the success of this reporting process and hence ensure that a company remains within the law on conflict mineral reporting. Establishing a community management strategy is never easy, especially given the global nature and diversity of today’s suppliers. One of the simplest ways to engage with a global community of trading partners is through a common platform that is accessible through nothing more than a web browser. One such platform is GXS Active Community, a cloud based community management tool that has been designed from the ground up to support people to people interactions across a supply chain. The platform uses a combination of centralised contact management and mass communication tools to allow a company to reach out to their trading partners anywhere across a supply chain. When using this platform, the EICC reporting tool could either be distributed as an email attachment or it could be replicated within the platform’s built in survey module. Therefore any company that has to comply with the new conflict minerals reporting process will be able to ensure that all their supply chain contacts are up to date but more importantly have full traceability over which suppliers have actually completed their submission. Any trading partner that fails to complete the report for any reason will automatically be sent a reminder email thus allowing you to significantly improve response rates and ensure that a SEC filing is completed on time. CSR compliance and risk management are high on the agenda of every CEO and a community management platform such as GXS Active Community can help enforce compliance regulations across a trading partner community. In the very near future, GXS will be developing an on-demand webinar to showcase how a community management platform could be used for this particular SEC reporting requirement, but in the meantime if you need further information on GXS Active Community then please CLICK HERE.

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Benefits of Elasticity in Cloud-Based B2B Integration

Cloud B2B integration

Elasticity is one of the core principles of cloud computing, but how does it apply to B2B integration?  Much like any business application the demand for exchanging B2B transactions varies based upon the time of day (or day of year) within different industries. A cloud-based B2B integration platform can enable customers to scale up and scale down their utilization of processing, memory, storage and bandwidth capacity to meet maximum or minimum loads. To better understand the need for elasticity in B2B let’s explore a few real world examples from vertical industries. Elasticity in Grocery Consider a typical day in the life of a grocery retailer. Grocery stores have a high turnover on many of the products sold in their stores. As a result there is a need to replenish inventory on a weekly (or sometimes daily) basis. Orders are typically communicated via EDI messages sent to suppliers. Suppliers typically send an acknowledgement to the purchase order. And when the goods are ready to ship they will send an Advanced Shipment Notice followed by an invoice. During business hours there is a steady flow of purchase orders, acknowledgements and invoices back and forth with suppliers. Around 5PM transaction volume drops off significantly as headquarters personnel leave for the day. However, after the stores close (9PM or 10PM) activity begins to surge. Each store uploads their daily Point of Sale information to headquarters, which then consolidates and forwards the data onto critical suppliers. Point of Sale files provide details on which SKUs were sold, in what quantities, and in which stores. Suppliers use this data to fine tune their manufacturing forecasts and marketing efforts. Point of Sale files can be quite large, sometimes over 1GB in size. As a result, both processor utilization and bandwidth capacity are maximized from 10PM into the early morning. Elasticity in Banking Financial institutions such as commercial banks have a different utilization pattern. Throughout the day corporate clients submit payment instructions for wire transfers, employee payroll or Automated Clearinghouse (ACH) processing to these banks. Transaction volume is steady from 9AM in the morning when payment clearinghouses open for operations into the early afternoon at which volume starts to spike. Most countries have payment cutoff windows in the late afternoon (4PM or 5PM) after which any funds transfer instructions received will be processed the following day. Many companies wait until shortly before the cutoff windows to upload their payables files to banks (due to procrastination or the desire to hold on to the cash). As a result a late afternoon spike in volume occurs. Shortly thereafter banks begin to distribute end of day statements to their corporate customers. These statements provide a detailed account of all the debits and credits to a company’s various bank accounts. Throughout the evening and the night there is almost no load on the system as the payment clearinghouses are closed and most employees at the corporate customers are off work. As you can see there are periods of steady load on the system during business hours followed by a high volume at end of day. Banks have to build out their B2B integration infrastructure to support the peak load although the system is only at capacity for 1-2 hours a day. Elasticity in High Tech System load variations not only vary during the course of a single day, but also across the span of a year. Consider high tech manufacturers. Manufacturers of data center equipment such as servers, storage devices, networking and telecommunications equipment often experience different utilization patterns for B2B integration every month. End of quarter periods are usually quite busy for these OEMs as the sales team race to process orders to meet their sales quotas. As a result the last few days of a quarter might experience a considerably higher volume of purchase orders being processed than average. New product launches can impact B2B utilization as well. Consider consumer electronics OEMs that make video game consoles, tablet computers or mobile phones. In advance of a major launch there will be a high volume of purchase orders, shipment notifications and invoices being exchanged with customers and suppliers to build up inventory within the channel. The high system load might continue for the first two to three months after the product launch if the product proves to be very popular. The Christmas holiday season is usually the peak selling period for consumer electronics.  As a result, the steady state load for B2B transactions might be two or three times the average daily volume experienced throughout the rest of the year. So within high tech there are months with a very predictable, steady load on the system, but also months in which utilization surges. High tech OEMs have to build out their B2B integration infrastructure to support the peak load even though the system may only be at maximum capacity two months out of the year. Cloud-based B2B integration platforms offer a more economical alternative to corporate IT departments. Utilization of the platform can be scaled up and down as transaction volume moves between peak and steady-state. Cloud providers which service a variety of industries and/or geographies can more economically load balance traffic to achieve higher average hardware utilization. For example, peak load time for a bank in the United States is late afternoon. But at this same time in Asia there is nearly zero load in banking transactions. Combining customers from the US and Asian banking sector onto a multi-tenant B2B platform results in a much higher utilization level. Peak load for a grocery store is the middle of the night. But at this same time there is nearly zero load for automotive manufacturer whose plants are closed. Combining customers from two different industries onto a multi-tenant B2B platform can also achieve higher levels of utilization. Read more here.

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Public Sector e-Invoicing to Become Mandatory in Europe

The European Commission recently proposed a directive on e-invoicing as part of ‘end-to-end’ e-procurement. The proposed directive and communication can be found here, but if you are feeling a little reluctant to read through these documents, here is a quick breakdown. Paperless public administration is a key objective for the European Union and e-invoicing promises to help achieve the promised cost savings and efficiencies – as a taxpayer myself, this is a good thing. The Commission recognises with this directive that e-Invoicing is part of their overall electronic procurement strategy. This is eminently sensible of course, e-Invoicing is intrinsically linked to supply chain activity across the procure-to-pay and order-to-cash lifecycles and placing invoicing within the context of procurement makes a lot of sense. Ask any e-invoicing service provider – Procurement is always a key stakeholder. This new directive if adopted will accelerate the previously agreed timescales so that e-invoicing will be mandatory in the public sector, for all member states, by approximately 2016. The basis of the directive has been the consultation with interested parties, including the current EC multi-stakeholder forum (EMSF) on e-invoicing (which I attend) and a perceived challenge in standardisation issues. Those of you who are regular readers of my blogs will understand my ‘elation’ at the prospect of another standard. But for now, I will keep my powder dry, so let us read on… So let’s cut to the quick. If the directive is adopted then all EU contracting authorities and contracting entities will be obliged to accept electronic invoices that comply with a new common European invoicing standard and the Commission proposes a new CEN working group be set up that will develop this new standard. OK, a new standard – who cares about standards? It’s not that they are not a great idea, who wouldn’t want to interoperate over a single standard? It’s just that they are such a good idea everybody has a go at creating their own, which means what? Lots and lots of standards… Ok, maybe I’m being harsh (once again) as when participating in the EMSF the general agreement was on a semantic approach. Let’s take a closer look at the text. “The European standard for the semantic data model of the core electronic invoice should build on existing specifications, including in particular those developed by European or international organisations such as CEN (CWA 16356 and CWA 16562), ISO (Financial Invoice based on the ISO 20022 methodology), and UN/CEFACT (CII v. 2.0). It should not require electronic signatures. Such European standard should define semantic data elements referring to, in particular, complementary seller and buyer data, process identifiers, invoice attributes, invoice item details, delivery information, payment details and terms. It should also be compatible with the existing standards for payments in order to allow for automatic processing of payments.” If this is done right the new standard will be at a semantic level that will incorporate existing international standards. So in theory this will simply mean all these existing standards can be re-used… in fact, UN/CEFACT II already has this. So maybe it isn’t a bad idea after all, and in reality a major percentage of government spend is for in-direct materials, which is a very simple supply chain process, so maybe it will work. However, the one area that the Commission is particularly concerned about is the engagement of SMEs in e-procurement and e-invoicing. Under the new directive SMEs can develop a solution that meets the standard, create some kind of connection and send the invoices themselves, but I find this scenario having little mass-market appeal. It is my experience that SMEs don’t care about standards. They don’t have the technical resource, they can’t find an ROI for an integrated solution (unless they are a supply chain SME) and this is why many studies show us that the predominant method of e-invoicing for SMEs in Europe is sending a PDF document attached to an email – easy, fast and cheap. What does this mean? This provides is an opportunity for service providers to develop solutions that meet the new standards. Whether this is fully integrated EDI, quasi-integrated PDF to data, or simple web-forms, as long as an SME can purchase a solution ‘off the shelf’, or is embedded into existing accounting software, at a price that is competitive – then the problem is solved.

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A Sample EDI Document Flow in an ERS Program in the Automotive Industry

As promised in my last blog, How EDI ASNs Enable Evaluated Receipt Settlement (ERS), here’s a look at the wider set of EDI documents typically exchanged in support of the Evaluated Receipt Settlement process in the US automotive industry.  Below is a diagram and description of a typical document flow and how each document is used. OEM sends the following ordering documents: Blanket Purchase Order (ANSI 850) – Orders goods for the coming year.  This order includes the pricing negotiated with the supplier.  The pricing is used when OEM evaluates the amount due to the supplier.  The goods are not shipped immediately.  They are shipped upon receipt of the Shipping Schedule. Material Release (ANSI 830) – a weekly forecast of OEM’s requirements for the next several months.  The estimates for the first several weeks are solid and OEM commits to those.  However, estimates on their requirements for later weeks are subject to change in subsequent 830s.  Suppliers now understand what to prepare to manufacture. Shipping Schedule (ANSI 862) – A daily or weekly notice to suppliers on what to ship on which days. OEM’s Supplier: Sends the Advance Ship Notice (ASN) (ANSI 856) upon shipping goods according to the Shipping Schedule.  There are many of these per day in support of OEM’s Just-In-Time program in which goods arrive in time for their use in the manufacturing process. Generates and affixes Bar Code Labels to the trailers/cases/boxes, enabling the goods to be scanned and be used in an automated receiving process at OEM’s receiving dock. Once OEM receives the ASNs, they process the goods received at the receiving dock.  Receiving dock personnel scan the trailers/cases/boxes, providing automatic update to OEM’s application system of exactly how many items were received. NOTE: If the goods arrive on a truck prior to arrival of the ASN, the goods are not accepted or processed.  Trucks will need to wait until the ASNs arrive.  Hence, suppliers must be vigilant about sending timely and complete ASNS.    OEM sends the following documents to its suppliers: Application Advice (ANSI 824) – notifies the supplier of the results of the analysis of the data processed by the OEM application system.  All data fields on the ASN are checked for validity and adherence to OEM requirements. Receiving Advice (ANSI 861) – if applicable, notifies the supplier of receiving discrepancies or quality problems on the receiving dock or at the point of use for various conditions, such as: Overage to the ASN (856) quantity Shortage to the ASN (856) quantity Receipt of material with no corresponding ASN Material returned to supplier (e.g. defects or over shipments) Material scrapped by OEM with supplier authorization Notification to the supplier to adjust YTD cum shipped Remittance Advice (ANSI 820) – notifies the supplier that an EFT payment has been made. Dummy Invoice for European suppliers only – provides suppliers the documentation they need in order to adhere to VAT laws. Want to learn about how the ERS process operates in the steel industry?  Read this white paper – B2B e-Commerce Adoption Across the Global Steel Industry

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Financial Services International Expansion: Using Global Expertise to Meet Local Needs

I recently published a blog post titled “International Expansion in Financial Services” discussing how banks are supporting the needs of multi-national companies through expansion into new geographies. Meeting the needs of demanding corporate clients in remote geographies can be challenging for global, national and regional banks. Banks challenged with meeting unusual global requirements frequently turn to specialized providers in those geographies with global reach and local expertise.  Here are some examples of unique client requirements by geography and how GXS’s extensive experience in financial services enabled their banking partners to cost-effectively meet their clients’ needs. Europe: EBICS — The Electronic Banking Internet Communications Standard (EBICS) is a communications protocol developed by the ZKA (German joint banking authority) and first implemented in Germany and France to replace the aging FTAM and ETEBAC X.25 protocols retired on June 30, 2012. The protocol is used to transfer data from a customer’s treasury management systems and the bank’s processing systems. As discussed in an earlier GXS blog, EBICS is just one of several host-to-host connectivity methods that a bank’s clients may use to transmit payments and receive transaction data. Another factor driving adoption of EBICS is that it is a SEPA-compliant protocol, a payment scheme being rolled out across the euro zone.  GXS launched EBICS-as-a-Service for financial institutions that do not want to invest in building an internal EBICS technology infrastructure and client delivery organization. SEPA — The Single Euro Payments Area (SEPA) integration initiative provides a set of harmonized payment schemes and frameworks for electronic euro-denominated payments. Facing an implementation deadline of February 2014, both banks and their corporate customers must migrate euro-denominated credit transfers and direct debits into SEPA-compliant formats. This migration is being discussed in many forums including the EuroFinance SEPA conference held earlier this year. That event highlighted the challenges facing banks as corporates struggle to modify ERP and other treasury systems to produce the SEPA required ISO 20022 XML formats. GXS is working with banks and corporates to route and transmit payment files for IBAN enrichment, SEPA direct debit mandate management, and SEPA payment factory applications. South America: FEBRABAN CNAB – For Brazilian low volume domestic payments, banks use the FEBRABAN (Federação Brasileira de Bancos) CNAB (Centro Nacional de Automação Bancária) 240 file format to digitally exchange information with their clients for a variety of products and services including payments, collections and account statements. As financial services firms such as Bank of America and U.S. Bancorp’s Elavon subsidiary expand into Brazil, they must deal with both domestic payment formats as well as the official Brazilian language, Portuguese. GXS’s Brazilian financial services experts, headquartered in São Paulo, work with both global and national banks to facilitate client connectivity, including customized solutions for the Brazilian market.    Asia-Pacific: ZENGIN – The Zengin Data Telecommunication System is a Japanese electronic interbank system developed by the ZENGINKYO (Japanese Bankers Association). The Zengin system processes domestic banking transactions, such as remittances and transfers, from Japanese financial institutions. In order to connect to the Zengin system, many banks and corporates need to use a Zengin TCP/IP adapter. GXS has provided Zengin connectivity for clients for several years and continues to see demand for the Zengin protocol from global firms expanding into Japan. AS4 – Although AS4 (Applicability Standard 4) is a global B2B messaging specification, its adoption is receiving a boost from an Australian initiative called “SuperStream.” In July 2011, the Australian Government began its implementation of SuperStream, designed to improve back office processing for government retirement benefits. The new data and e-commerce standard underlying the initiative establishes certain technology requirements including the use of ebXML3/AS4 (electronic business XML version 3.0) and AS4. GXS is working with its clients in Australia during the phased implementation of SuperStream. Corporate-to-Bank Connectivity: Want to learn more about global payment systems, standards bodies, file formats and communications protocols? Check out CorporateToBank.com’s Resource pages.

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How EDI ASNs Enable Evaluated Receipt Settlement (ERS)

Just as with the Cross-Docking, Drop-Shipping and the Direct Store Delivery processes described in earlier posts, the ASN document is an important component of a successful Evaluated Receipt Settlement (ERS) process, also known as “pay-on-receipt” or “self-billing.” ERS is a business process in which goods are purchased and paid for without exchanging an invoice.  Rather, upon receipt of goods ordered, the buyer confirms the shipment accuracy (i.e., right products, right quantities) and sends payment to the supplier based on the pricing in the purchase order.  Thus, because invoice processing is eliminated, the procure-to-pay process is greatly streamlined.  This approach was pioneered in the United States by the automotive industry with high-volume, trusted direct materials suppliers and has since been widely adopted throughout other manufacturing sectors.  The use of electronic communications between the buying company and its ERS suppliers helps ensure the smooth flow of accurate and timely data along with fast product delivery leading to an overall efficient ERS process. So, what is the role of the ASN in an automated ERS process and how does it help?  The process begins with the buyer sending an EDI Purchase Order to the supplier. The supplier receives the order, prepares the shipment, and affixes barcode labels to the boxes or pallets and ships.  The supplier also sends an ASN containing the details of the order to be received.  Upon receipt of the ASN and the shipment, the buyer’s receiving personnel scan the barcode labels, which are then automatically matched against the original purchase order and the ASN to automatically calculate the payment. Finally, the buyer sends the payment via electronic funds transfer or paper check to the supplier.    The use of the ASN streamlines the efficiency and accuracy of the receiving process at the receiving dock. Instead of having highly-paid employees perform a slow, error-prone, manual receiving process in which they verify the quantities of items received, identify any discrepancies and record them, the receiver can simply scan the barcode on each pallet and confirm that it matches the ASN.   So, what do you need to ensure the effectiveness of ASNs in your ERS process?  Electronic Purchase Order Collaboration – enable 100% of ERS suppliers to receive electronic purchase orders. Large companies may be enabled via traditional EDI, while small and medium-size businesses may be enabled using other technologies, like web forms. Advance Ship Notice (ASN) and Bar Code Labels – enable 100% of ERS vendors or distributors with the capabilities to send ASNs via EDI or web forms. Look for solutions that also allow you to generate and print the bar code labels for shipments. Data Quality Management – The ASN is one of the most complex supply-chain EDI transactions. Look for a service that includes configurable rules that can ensure that every message is validated for both standard- and customer-specific information. There are actually many more documents that are typically exchanged in ERS process beyond the basic ones described above.  In my next blog, we’ll take a look at a sample EDI document flow in an ERS program in the automotive industry.

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Why Every Chief Procurement Officer Should Modernize Their B2B Infrastructure

Today’s Chief Procurement Officer (CPO) faces a number of challenges relating to the improvement of procurement processes across manufacturing, retail or service operations. A recent report from A.T Kearney identifies four primary challenges on a CPO’s agenda, measuring performance, increasing influence, becoming more strategic and attracting and developing talent. The procurement department is typically responsible for selecting, on-boarding and managing suppliers on an on-going basis whilst at the same time ensuring they meet cost reduction targets, achieve high quality standards and offer high levels of customer satisfaction. But quite often, outside influences such as supply chain disruptions, changing macro-economic market conditions combined with fluctuating consumer demand levels means that the process becomes one of the most complicated aspects of running a business. Today’s CPO is typically given a number of board level objectives, three of the most important being to: Reduce costs across the supply chain in order to boost top and bottom line growth Maintain high levels of Corporate Social Responsibility (CSR) Increase levels of green and ethical sourcing The IT infrastructure required to support today’s procurement operations has been built up over many years, primarily with behind the firewall software which has been heavily configured to work with complex internal business processes and systems such as ERP platforms. The increasing need to build flexibility in to today’s supply chains has presented a unique challenge for IT departments around the world, namely how to expand B2B infrastructures to support globally dispersed operations and diverse groups of trading partners whilst at the same time provide the flexibility to scale up or scale down the infrastructure as the business need dictates. Cap Gemini recently conducted a study on the CPO which highlighted how many consumer based technologies are likely to impact the procurement organisation moving forwards. In fact the study highlighted that 40% of procurement organisations are involved in augmenting their practices with digital tools to: Broaden and expedite communication with partners and suppliers Automate and integrate procurement tasks and procedures Enable procurement professional to work anywhere, anytime The survey highlighted that many companies have restructured since the most recent economic downturn and procurement organizations have got into a routine of trying to do more with less. Cost reduction continues to be a key focus of purchasing organizations with 75% of survey respondents highlighting it as a focus area. Interestingly, 30% of respondents highlighted that innovation will be a future focus and finally environmental and supplier issues remain top of mind with 33% of respondents indicating that ‘green’ procurement initiatives are also a key focus area. So how can ‘Digital Procurement’ (using B2B tools and services) help improve the management of today’s procurement processes? Survey respondents said that forward looking CPOs believe that innovative based capabilities such as predictive analytics, mobile solutions and virtual procurement technologies (such as cloud computing platforms) will not only deliver incremental value to their organization but will also become a core requirement to drive a competitive edge in a changing and demanding business climate. In fact 47% of respondents are turning to advanced technologies to stay ahead of globally intensifying competition. With the emergence of innovative solutions, leading companies must do more than automate their purchasing transactions to remain competitive. They need to arm their decision makers at all levels with accessible and actionable data and insights and enable collaboration unhindered by geography. Finally the study highlighted that 26% of respondents are boosting their virtual procurement capabilities by integrating social media and cloud based technologies with in-house resources. The study also highlights that companies are looking more positively towards cloud and on-demand solutions to accelerate time to value in their procurement organisations. Software as a Service (SaaS) and on-demand solution options can be deployed more quickly, they are scalable, secure and help to promote common practices across the organization while saving on traditional on-premise hardware and run-time licenses. It is expected that more companies will adopt virtual procurement capabilities, moving away from proprietary and on-premise solutions as they strive for a lean and flexible operating model. In short, by combining mobile, social, Big Data and cloud based capabilities, companies can empower their employees and improve collaboration and visibility to better serve their client base. In order to adopt these new technologies, Cap Gemini recommends taking a three phased approach for implementation: Develop a roadmap for digital procurement outlining how each emerging technology aligns with their company’s organisational structure and enterprise goals Deploy through a thorough change management framework to address the impact of new technology on their organization and workforce and how best to use it. Establish an innovative culture and environment for procurement The increased use of B2B solutions and services presents a major opportunity for CPOs to enhance strategic decision making and workforce efficiency, while elevating procurement’s internal profile within the enterprise. The global nature of today’s procurement organization, for example sourcing from the emerging markets, presents a unique set of business challenges which can be broken down as follows: How does an IT department extend support for these new trading partners? How do you ensure that you can exchange business documents in a timely manner? How do you offer local language on-boarding and on-going support? How do you integrate remote trading partners into your ERP platform? How do you manage trading partner related contact information? How do you maintain business continuity during a period of supply chain disruption? How do you manage risk, compliance or corporate social responsibility (CSR)? How do you ensure that goods can be delivered on time and to the correct location? How can customer satisfaction levels be improved where the ‘customer’ in this case is the CPO’s own manufacturing department, retail outlet or service centre? Cloud B2B solutions and services can help to address many of the afore-mentioned issues and they will become a central part of Digital Procurement platforms moving forwards. The term cloud computing has been in use since 2010 and many CIOs around the world thought that it would be another IT trend that would diminish over time. Three years later however and the cloud is becoming an integral part of today’s business environments. Many companies have found that the cloud offers significant benefits over behind the fire wall software, however they have taken a step by step approach to implementing their first cloud based platform. In many cases, companies have implemented ‘hybrid’ IT environments which means they still get to use and retain the investment they have placed in their behind the fire wall software environment but where required they also get access to a highly flexible and scalable platform that cloud solutions and services can provide. Today’s IT and B2B environments are in a state of transition, moving from older manual or behind the fire wall processes to automated, globally accessible infrastructures. Modernizing procurement processes and moving towards a more automated business environment will allow today’s CPO to achieve their corporate objectives, namely: Introduce a greener more sustainable supply chain through the removal of manual, paper based business processes Increase customer satisfaction levels by being able to get the right information to the right place at the right time Improve internal business processes through the use of a single, globally available B2B platform that helps to foster collaboration across the extended enterprise Reduce costs and improve the efficiency of the procure to pay lifecycle and offer a platform which can scale according to the growth of the business or the macro-economic conditions of the market Ensure that more accurate information is flowing through back end business systems such as ERP platforms GXS has an extensive suite of B2B solutions and services that will help a CPO modernize their procurement processes and achieve their corporate objectives. GXS can help companies address many B2B challenges, but here are the five key ways in which we can help modernize a procurement process, namely offering: Comprehensive on-boarding services to ensure that you can trade electronically, anywhere in the world A range of B2B enablement tools to ensure that no trading partner is left behind and you can trade electronically with any supplier around the world, irrespective of their technical capability Offering a collaboration platform that allows all supplier contact information to be held in a central repository and more regular supplier communications and fostering greater collaboration A range of hosted applications that allows business documents to be exchanged electronically with minimal IT infrastructure and hence removing extensive amounts of paper from the supply chain Follow the sun, multi-lingual support services to allow any supply chain issues to be resolved proactively before they impact your procurement operations This blog entry has introduced some of the challenges faced by today’s CPO and in subsequent blog entries I will expand on the five areas listed above to provide more information on how GXS can provide a seamless, fully scalable B2B platform that allows a CPO to work with any trading partner around the world.

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International Expansion in Financial Services

GXS recently sponsored a report from Fieldworks Connections, titled “A Rush and a Push and the Land is Ours”, about the challenges UK retailers and brands face as they look to escape slow growth at home and expand abroad. Companies in advanced economies are accelerating their international expansion ambitions, looking to capture sales growth in geographies that are demonstrating GDP growth. In its April 2013 “World Economic Outlook Update“, the International Monetary Fund (IMF) projects 3.3% global GDP growth for 2013, but as shown in the graph below, this growth is being driven by emerging markets in Developing Asia, Latin America and the Caribbean, and the former Soviet Republics. U.S. based multi-national companies provide one example of foreign market expansion. The Business Roundtable (BRT), an association of chief executive officers of leading U.S. companies, published a report titled “American Companies and Global Supply Chains Networks” in January 2013 detailing foreign market growth for these firms. BRT found that foreign market growth is much faster abroad than at home. Over 1999–2009, BRT states that value added across all their foreign affiliates grew at an annual average of 7.0% versus an annual average of just 1.7% for their U.S. parents. Average growth was 8.4% in Brazil, 22.8% in China, 24.9% in Eastern Europe and 26.8% in India. Another example of international expansion is evidenced by global mergers and acquisitions (M&A). According to Dealogic’s “Global M&A Review for 2012“, global M&A volume finished up 2012 with the highest quarterly total since late 2007.  Cross-border M&A was up 3% year-over-year in 2012, boosted by 30% growth in the Americas, with the highest volume of M&A activity in EMEA. As multi-national companies expand into new geographies, their corporate treasurers are looking to their financial services providers to support their international expansion activities. Strategies to support multi-national corporates vary, particularly between global banks and their smaller national and regional bank competitors. To support transaction banking clients, many global banks expanded into key geographies by obtaining commercial banking licenses. At the top of the 2013 Fortune 2000 list, ICBC operates in 39 countries and has a  network of 1,630 foreign correspondent banks in 138 countries and territories. Citi provides services to 65,000 corporations in 140 countries, with transaction services offered in over 95 countries. HSBC Bank, operates in 60 countries and territories, with a focus on emerging markets. JPMorgan Chase has a presence in 39 countries and maintains more than 3,000 global correspondent banking relationships. Other examples of recent global bank expansion include: Bank of America (United States) and UBS (Switzerland) receiving banking licenses in Brazil JPMorgan Chase (United States) and Morgan Stanley (United States) winning approval to form securities joint ventures in China ICBC, Bank of China and the Agricultural Bank of China receiving approval from the Federal Reserve to expand their operations in the United States Itaú BBA Securities (Brazil) launching a USD-based securities lending and repo business Deutsche Bank (Germany) re-affirming the importance of growth in Asia Pacific and the Americas in its “Strategy 2015+” plan Citi (United States) and Standard Chartered (UK) plan offices in Iraq to support global power, oil, telecom and construction clients In order to meet the needs of larger commercial customers, national and regional banks usually partner with global banks who supply correspondent banking services and private-label cash management solutions.  Correspondent banking services typically include treasury management, credit services, foreign exchange, international trade and finance, and investment management. Providing private-label services for banks is a strategic focus for US-based BNY Mellon. Meeting the needs of demanding corporate clients in remote geographies can be challenging for global, national and regional banks. They frequently turn to specialized providers in those geographies, like GXS, who have international reach and local expertise. In my next blog entry I will provide examples of challenges faced by banks in their international expansion efforts, and how specialized expertise helps them to meet the needs of their multi-national corporates.

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