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Many businesses wrestle with the question of where best to exchange electronic documents (purchase orders, invoices, status, etc.) with their suppliers and customers. There are a variety of options, but basically it comes down to either using a 3rd-party Value Added Network (VAN) or directly connecting to trading partners using the internet. Originally businesses conducted Business-to-Business (B2B) eCommerce through Value Added Networks (VAN) using some form of Electronic Data Exchange (EDI). VANs are still a viable option, but B2B eCommerce has now expanded to the internet where trading partners exchange electronic documents directly in a variety of formats to include EDI / EDIFACT.

Considerations for Exchanging Electronic Documents over the Internet or Through VANs.

There are many factors to evaluate when deciding to use a VAN or use EDI over the Internet. Below are some key considerations.

• Costs. VANs usually cost more and charge by the transaction. The more volume you have the less cost per transaction, but the overall costs go up as your transaction volume increases. Doing EDI over the Internet does require technical expertise. This cost in technical expertise will increase depending on the number of trading partners and types of transactions. Transaction volumes are not usually a major cost factor when it comes to EDI over the internet.
• Security. Every business that exchanges information with other businesses needs an on-going data security program. VANs have a lot of security expertise. The question is how much security do you need for your data, and how much outside security expertise do you need, if any.
• Flexibility. VANs increasingly offer more and more value added services. These B2B eCommerce and supply chain information services can provide you a lot of flexibility and even a competitive edge. At the same time a long-term, fixed-cost contract with a VAN can become a severe constraint as lower cost alternatives over time become available for B2B eCommerce services.

Deciding Whether to Use a VAN or the Internet. There are no easy answers, but here are some rules of thumbs:

• Small Company With Small Number of Trading Partners. Tough choices. Many times your large trading partners will have several B2B eCommerce options for you and even assist you with getting setup for free. Just ask. A third-party consultant, a VAN, buying EDI software or, if you have a programmer on staff, may be an option. Need to evaluate the startup costs and on-going costs. Again, ask your largest trading partners for advice. Many times, large companies have a whole web site dedicated to helping trading partners get setup to exchange electronic documents.
• Medium-Size Company A third party consultant or software as a service (SAAS) vendor that caters to your industry and your major trading partners may be the best answer. Medium-size companies should look for every opportunity to exchange electronic documents over the internet. VAN charges for small and medium companies can be expensive. If you have an IT staff, it is also time to start building up your expertise to exchange EDI, XML, or proprietary-formatted documents over the internet. As the number of your trading partners grow, you should look for every cost-effective opportunity to setup trading partner relationships directly in order to exchange electronic documents over the internet.
• Large Companies With Hundreds of Suppliers. Invest in IT staff and software to exchange business documents over the internet. Software includes EDI translation software and managed file transfer software. Maintain relationships with one or more VANs. As a minimum, use VANs for connectivity with suppliers that are not cost effective to connect over the internet and with major trading partners that opt for a VAN / B2B eCommerce portal only solution. Additionally, VANs are offering more value added services such as supply chain information services and software, data synchronization, and matching services such as matching purchase orders and invoices. Some of these offerings may be cost effective or offer you a competitive advantage.

Many businesses do not use B2B eCommerce interfaces such as Electronic Data Interchange (EDI) or other methods to exchange electronic documents with suppliers and customers. There are many reasons for this. The primary reasons are inertia, resistance to change, inhibited by the technology, and not realizing the B2B eCommerce opportunity.

B2B eCommerce Definition. B2B eCommerce in its essence is an interface, an electronic interface between two or more businesses to exchange business documents. Common electronic business documents include purchase orders, shipment status, and invoices.

The Missed Opportunity Costs of Not Doing B2B eCommerce. Many businesses do not use B2B eCommerce interfaces such as Electronic Data Interchange (EDI) or other methods to exchange electronic documents with suppliers and customers. If you are a small business, this may be fine, but if you are a medium or large business this is costly. Not using B2B eCommerce costs businesses in a lot of ways. The three largest missed opportunity costs include increased labor to process business documents, increased time-to-market cycle, and increased payment cycle. These costs are not missed revenue opportunities, but are costs that go directly against the bottom line.

The B2B eCommerce Opportunity Questions. If you are not using B2B eCommerce, ask yourself the following questions.

• Could you decrease your administrative costs if you did not have to manually process purchase orders?
• Could you reduce your inventory and increase your order fulfillment rate, if you automatically exchanged electronic business documents with your suppliers and customers?
• Could you decrease the average time it takes to fulfill a customer order if you did not have to wait and process paper documents?
• Could you ship and receive products and orders faster, if you had electronic document interfaces with your transportation carriers?

If you answer yes to any of these questions, it is time for you to implement one or multiple B2B eCommerce interfaces with your suppliers or customers. Sometimes all you need to do is ask your suppliers or customers if they already do B2B eCommerce interfaces with other trading partners.

Take the Initiative to Identify B2B eCommerce Opportunities. With a little analysis and with a little help you should be able to identify specific B2B eCommerce interface opportunities that benefit your business. These are opportunities that will go right to your bottom line by reducing labor to process business documents, reducing time-to-market cycles, and reducing payment cycles. Read more about the benefits of B2B eCommerce.

Sometimes it amazes me how little has happened in the last 10 years in regard to B2B eCommerce. One of the biggest challenges is with large businesses exchanging electronic business documents with “mom and pop manufacturers worldwide”. Many large retailers, manufacturers, and service providers have deployed extensive B2B eCommerce networks, but has it really helped small and medium businesses join the “B2B revolution”?

The B2B eCommerce Supplier Challenge. It almost makes me cry when I come across a small supplier that is trying to be EDI compliant with a Big Box retailer. These suppliers have to incur all types of expense and grief to meet the EDI requirements of a Big Box retailer.

Sometimes the suppliers get help from a compassionate Big Box retailer that provides a free EDI client communications application. The challenge with this is that many suppliers have to hook up with three or more Big Box retailers. Now, the supplier, big or small, has to wrestle with different B2B eCommerce technologies like XML, EDI, Secure FTP, AS2, and so on. Besides this they have to make sure the electronic documents and their business processes are compliant with their various business customers. Most of these suppliers do not have an IT staff, so they end up outsourcing the EDI work at great expense, muddle through it, or just give up.

Most of these suppliers just want to receive an electronic purchase order, and then send an electronic advance shipment notice, and then provide an electronic invoice to their business customer. Does B2B eCommerce have to be this hard?

A B2B eCommerce Solution for Suppliers. In a perfect world, it would be great if all “mom and pop” suppliers had free EDI communications client software that could hook up with any large business trading partner. This way a supplier could use the same software to exchange electronic documents. Today suppliers must use multiple B2B eCommerce solutions to hook into multiple, proprietary B2B eCommerce networks.

Is a Standard B2B Client Software Too Simple? The basic B2B processes between all suppliers and retailers are fairly simple - 850 < -> 856 < -> 810 (purchase order, advance shipment notice, invoice). A free EDI communications client software program could have one standard data format for all suppliers. Large businesses could then map to the standard format or provide the client software a map to create an EDI document to their specifications. The supplier could then just use the B2B client software, select “Big Box 1 850 Purchase Order”, and start generating EDI documents compliant with their business customer.

If I was Bill Gates, I would just give away free client EDI communications software to all suppliers, and then let all the big manufacturers, retailers, and service providers integrate with it for free. Am I dreaming …