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.
