NOTE:
One of the speakers
at the TUG Meeting of Members on
EXTOL
Copyright
© 2003
All rights
reserved
EXTOL International, Inc.
(201) 847-1200
www.extol.com
the
Larstan Business
Reports,
an
independent editorial firm
based in
Editor
Lane
F. Cooper
Writer
Patty
Brown
Part 1:
Executive Summary
Over the next time
frame through to 2004, we expect to see a surge of activity in “strategic EDI”
initiatives among mid-sized companies – defined in this white paper as
companies with annual revenues well under $1billion, and which find themselves
under serious IT resource constraints.
In so doing, we will see a new dynamic at work in the adoption of EDI in
corporate
Traditionally,
mid-sized players have reacted to the demands of their large customers, and
have done little to harness the capabilities of EDI to achieve strategic
results from their investments in this technology.
But maturing
enterprise applications, along with new offerings from technology partners, and
a better understanding of the competitive imperatives and opportunities that
EDI offers to mid-sized enterprises is changing this dynamic. In so
doing, the mission of EDI has evolved beyond simply supporting traditional
transaction sets based on the American National Standards Institute's X12
committee (ANSI X12), or the United Nations EDI for Administration, Commerce
and Trade (UN/EDIFACT). The EDI of the
immediate future must have software-based intelligence that can dynamically
support inter-corporate business operations under a variety of business and
technical settings, while interacting intelligently with myriad flavors of
eXtended Mark-up Language (XML) that are becoming a standard element in major
enterprise application systems.
As a result, EDI is
providing mid-sized enterprises with a strategic opportunity to increase the
quality of service they can provide to their buying community and increase
their communication with their own supply partners. Simultaneously, strategic
implementations of EDI are saving these companies millions of dollars.
This white paper
provides a brief overview of the issues and success factors that must be taken
into consideration by mid-sized enterprises exploring strategic EDI, and
presents a close up on how one innovative company has implemented this
technology to advance its strategic objectives.
Part 2:
Strategic EDI and
the Mid-Sized
Electronic data
interchange (EDI) has reached a stage of development in corporate America in
which it is finally offering powerful proactive opportunities for mid-sized
businesses—defined in this white paper as companies with annual revenues of
between $75 million and $1billion, and which find themselves under serious IT
resource constraints.
Until recently, the
growth and development of EDI has revolved around the “hub-and-spoke” dynamic
in which large and influential players in a channel of distribution persuade
smaller trading partners to adopt this form of electronic commerce or risk
losing the opportunity to do business with these hubs.
This has in essence
created two tiers of EDI players:
But a combination of
factors that revolve around maturing technologies, services and business conventions
are interacting to create extremely powerful opportunities for IT
resource-constrained organizations striving to do more with less in a more
effective manner.
…Enabling Developments
Falling integration
costs, maturing standards and the increased flexibility offered by developers
of inter-enterprise technology are providing companies with the tools to
harness EDI to achieve strategic business objectives. Fifteen years ago the costs of undertaking an
enterprise-wide initiative to integrate incoming transaction sets (highly
structured documents like invoices, purchase orders and advanced ship notices)
would have been too costly, required more technical skills than were available,
and created a level of corporate disruption that would have been difficult for
many mid-sized enterprises to cost-justify.
“There
appears to be a level of convergence happening between the integration
technology market and the application server market. Indeed, many companies are
asking their EDI vendors to address these integration challenges with a single
product. Customers are not concerned about whether this integration is done
through transaction management at the presentation layer or if it’s done
through an EDI server or through XML to an application interface. The business
problem for customers is the same,” says John Derome,
an analyst with Boston-based Yankee Group.
The commercialization
of the Internet, and the growing trend toward “web-enabling” most, if not all,
mission critical enterprise applications has created a technical environment
that has drastically reduced the communications costs, integration complexity,
and time required to accomplish substantial integration of enterprise
applications. This has reignited interest
in the benefits promised by EDI among these companies.
“That
is why mid-market enterprises view EDI as a new strategic opportunity to
increase the quality of service they can provide to their buying community or
increase their communication with their own supply partners,” says Derome.
Indeed, today’s
mid-sized enterprises have focused their technology dollars on proven
technologies and are looking for ways to get more out of the existing
technology investments. Both EDI and the
Web fit the bill as proven technologies nicely, making the idea of
strategically combining the two technologies to solve the problem of “expensive
integration” an enticing one.
But what exactly does
it mean to implement EDI strategically?
Instead of reacting
in a tactical manner, which generally entails installing a translator in the
network to meet a customer’s purchasing demands, companies are focusing on:
·
The process of
communicating with their suppliers; and/or
·
The process of
providing superior service to customers.
In other words, these
companies are asking strategic questions like:
Instead of focusing
on the transaction sets (at best a tactical area of interest), these companies
are now focusing on a higher level of abstraction. If the reactionary – or
tactical – approach to using EDI on the supply side revolves around reducing
the cost of sending purchase orders and invoices, then the
strategically-focused company is more interested in building a system that
allows them to extract information, send it to partners and make EDI a
transactional component of a broader business solution.
This strategic focus is having a dramatic effect on the
actual mission of EDI. There is
decreasing interest within this segment of the market to implement software
that simply converts traditional transaction sets based on the American
National Standards Institute's X12 committee (ANSI X12), or the United Nations
EDI for Administration, Commerce and Trade (UN/EDIFACT) to a flat database
file.
"The EDI implementations of
the immediate future must be sophisticated enough to dynamically support the
seamless flow of business transactions under a variety of business-rule-based
settings. Moreover, they have to
interact intelligently with the different flavors of extended Mark-up Language
(XML) applications that are becoming a standard element in major enterprise
management systems," says Charlie Scasserra,
Vice President of Sales for EXTOL International, Inc., a provider of EDI
transformation and business integration solutions.
Many of the mid-tier
companies that are making strategic investments in EDI today are companies that
have been involved with EDI for some time. Most were required to implement EDI
solutions by large trading partners early on.
They invested in tactical point EDI solutions and are now making more
strategic, long-term decisions.
These companies are
no longer implementing EDI simply to respond to a large trading partner’s
demand—they are interested in improving the efficiency and accuracy of data
exchange with as many of their trading partners as possible.
“In
does not matter what industry you are in—healthcare, banking, manufacturing
consumer goods or industry supplier—EDI-enabled business solutions can deliver
strategic benefits by pursuing
'best-practice' business-to-business e-commerce initiatives. This means they must combine data from
disparate sources and access applications across platforms within and between
corporate boundaries to harmonize processes so that people throughout an
inter-corporate community of interest can do their jobs more effectively and
efficiently,” says Dennis Bonagura, President of
EXTOL.
This view is borne
out by analysis from the Yankee Group, which contends that there are seven
functional categories critical to achieving successful business-to-business
integration programs (see chart).
Without this strategic approach to EDI
companies will find themselves engaged in an endless loop of duplicated and
unnecessary manual processes and data entry that is prone to delays and
error. But beyond the substantial
clerical/administrative benefits, EDI technology often plays a critical role in
broader strategic solutions. For
instance, mid-sized companies in the retail or wholesale industry can leverage
their EDI investments by enabling direct shipments from their web sites.
Strategic entry into
EDI provides mid-sized companies with an opportunity to increase the quality of
service they can provide to their buying community and increase their
communication with their own supply partners. Simultaneously, strategic
implementations of EDI are saving companies millions of dollars in time and
overhead costs.
|
|
Features |
Benefits |
|
Communications |
·
Dynamic Communications Recovery ·
Multi-Network Communications (VAN, Internet, Direct) · Script-driven Communications |
·
Guarantees delivery of information ·
Improves EC system flow ·
Leverages evolving communications technology ·
Minimizes implementation costs ·
Eliminates dependency on specialized expertise |
|
Reporting and Audit |
·
Real-time Tracking ·
Comprehensive Auditing and Reporting ·
Graphical Analysis Tools |
·
Improved management control of business processes · Online resolution of discrepancies by business users without IT involvement |
|
Administration |
·
Standard-to-Standard Conversion ·
Archive and Restore ·
Browser-Based access ·
Multi-level Security · Wizard-based set-up and administration |
·
Resource-free migration of standards lowers cost of
ownership ·
Wizards and browser access lower deployment costs, reduce
IT Support workload, and improve customer-service levels ·
Multilevel security protects sensitive information and
provides positive control of user access |
|
Operations |
·
Support for Multiple Environments ·
Multi-Tasking ·
Platform Interoperabiity ·
Support International Standards (eg.
EDIFACT, TRADACOMS) |
·
Increases system reliability ·
Safeguards system availability ·
Fast information delivery ·
Ensures customer satisfaction ·
Eliminates processing bottle-necks ·
Protects EC System investment ·
Reduced IT Administration costs ·
Facilitates global deployment |
|
Content Management |
·
Compliance Checking ·
Content-Based Routing ·
External File Lookup and Record Update ·
Business Rules-based Processing |
·
Guarantees transaction integrity (including XML) ·
Optimizes business processes ·
Reduces transaction cycle-time ·
Automates information flow and maximizes system efficiency ·
Accesses corporate knowledge base to improve efficiency ·
Speeds deployment and reduces implementation cost by
easily accommodating your business process |
|
Notification |
·
Automated Notification ·
Electronic Reconciliation ·
Real-Time Processing · Messaging Support: FTP, e-mail, EDI, application-to-application |
·
Proactive knowledge of delivery information ·
Expedites problem resolution and maximizes customer satisfaction ·
Accelerates real-time web-based commerce ·
Speeds
deployment and reduces implementation and custom programming costs
|
|
Data Integration |
·
Application Program Interface ·
Legacy Conversion Utility ·
Proprietary Format Support ·
Support for all X12 transaction sets ·
Support multiple versions of ANSI X12 transaction sets · Any-Many Mapping Technology · Automated Mapping |
·
Improves technical and process productivity ·
Speeds time to market ·
Open access to EC data ·
Leverages investment and lowers cost of change ·
Reduces complexity and need for custom programming ·
Expands control to all business transactions ·
Speeds implementation time by eliminating custom
programming ·
Maximize business opportunities |
Part 3:
An Implementation
Impact Analysis
As mid-sized companies
evaluate how best to implement EDI in their organization, analysts say that
executives should always consider their long-term goals and the business
objective for the connectivity solution. As a rule, companies should first
consider the impact that the EDI implementation will have on core competencies
rather than worry about which transaction sets should be automated. Companies should understand the business
problem they’re trying to solve by asking questions like:
Companies that are
truly looking for strategic returns on investment from EDI should also
aggressively analyze what new business capabilities are going to be enabled as
a result of the implementation.
According to Paul Lemme, Senior EC Consultant,
Connective Commerce Corporation,:
“Many
IT groups fail to remember that a lot of people and many departments in the
organization can benefit from having more timely and accurate information at
their fingertips. Customers often lose sight of this when they are merely
meeting supplier requirements. While an EDI implementation will undoubtedly
affect the relationship with suppliers, it will also have an effect with many
in the organization, including customer service, accounting and material
acquisition,”.
This makes selecting
an EDI technology partner extremely important.
Analysts recommend that companies consider their prospective vendor’s
ability to integrate EDI with existing application infrastructure. They should carefully assess a technology
partner’s ability to quickly deal with mapping and connectivity challenges,
since this will determine how effectively the EDI initiative can grow as the
enterprise infrastructure evolves. This
is also critical for establishing digital relationships with as many trading
partners as possible as quickly as possible.
…Success Factors
There are a number of
steps companies can take to successfully implement and manage ongoing EDI
initiatives. We sat down with Tony Baran, Chief
Executive Officer of EXTOL, who outlined the following guidelines.
…Measuring Progress of Strategic EDI
In terms of tracking
performance of an EDI system, one important performance metric revolves around
the amount of time it takes to implement an EDI solution. There’s obviously a
big difference between technologies that take six months to a year to implement
and those that require three to six months.
Also important are
the number of people it takes to implement a product and whether outside
consultants are required. Questions mid-size enterprises may want to ask
include:
Another measure of
the success of an EDI implementation is the management of the system after it
has been installed. Once it’s up and running, the issue of maintaining the
system should be self-sufficient and require minimal staff involvement.
Mid-market companies
must, in short, find strategic technology partners who can not only address
technical issues associated with translating EDI transaction sets and mapping
them to flat files; they must find a committed partner who understands and
appreciates the business imperatives of the extended enterprise, and help
develop and support a strategy the feeds EDI data into mission critical
enterprise applications.
Part 4:
Krispy Kreme Bakes Waste out of Business Process with EDI
Krispy Kreme's committment
to high product quality and sound business management has translated into a
balance sheet that has rapidly made it a darling of Wall Street. It has been refreshing for investors to see a
company post real profits with tangible deliverables. Consequently, the company is seen today as an
innovator in a mature and established industry that is not known for innovation.
A case in point: when
the industry dismissed the idea of nationally distributed freshness as fanciful
thinking, Krispy Kreme
stuck with it. The company put in place
a production and delivery system that guarantees the freshness of the 3 million
baked goods it makes per day (over 1.3 billion a year), at any of its own
stores or retail partner outlets throughout the country.
The secret to the
company's success has revolved around how it harmonizes the competing interests
of product quality and profitability. By
delivering only what each outlet can sell within a four-hour shift, and then
following up with fresh shipments a few hours later as demand permits, the
company has rendered the notion of a stale Krispy Kreme product an oxymoron.
That has taken care of product quality.
The quest for
profitability has pushed the company to become a very sophisticated supply
chain management operation. But as the
company’s products exploded onto virtually every regional market in the
country, Krispy Kreme executives
sought to implement best-in-class e-business strategies to help automate and
manage their aggressive national roll-out without sacrificing quality.
Krispy Kreme's freshness imperative
produces astronomically high volumes of transaction traffic. The tidal wave of invoices, purchase orders
and remittance information that are processed every day—often several times per
day—has stressed both the IT and financial management infrastructures of the
company. For instance, just one of its
major grocery partners, Kroger, generates over 10,000 invoices per week,
nationwide.
…EDI in Financial Operations: Reducing Days Sales
Outstanding
But when executives
decided to develop a next-generation electronic data interchange (EDI) strategy
to address the transaction-intensive challenges of its national expansion, Krispy Kreme once again bucked
conventional wisdom. Rather than
automating the documentation associated with product flow (purchase orders and
invoices) which is how the vast majority of companies first jump into EDI, Krispy Kreme pursued a more
sophisticated—but more impactful—effort to automate
its financial operation.
The effort—and the
risk—paid off. Six months after
launching its very first full-fledged enterprise-wide EDI initiative by tracking
remittance data, the ensuing acceleration of cash flow produced a 100 percent
return on investment (ROI)—including all costs associated with the acquisition
of iSeries computer platform hardware and software.
Krispy Kreme attributes almost 50
percent of its ROI to time saved in posting of checks and processing remittance
information from its banks.
Specifically, the company has cut its days sales outstanding (DSO) from
between 7 and 8 weeks, down to 2 weeks.
Moreover, the company
is taking advantage of new management tools available to the market that allows
the finance and accounting staffs to process a greater percentage of its
transactions in a completely automated fashion, even as it puts in place
technology-enabled processes that let staffers handle transactions which do
require human intervention in a more efficient and accurate manner.
"When
one check from wholesale customers covers an average of 1,000 invoices,
accuracy, accountability, and time spent waiting means a lot," explains Greig Radford, Manager of AS/400 Technology at Krispy Kreme.
The company automated
and centralized the accounts receivable (A/R) process using the EXTOL
Integrator, an EDI transformation software application product designed for the
AS/400 platform by EXTOL International, Inc. The new automated and streamlined
process has allowed the company to manage rapidly growing transaction volumes
with the same accounting staff.
"Fewer
procedures means less errorsand
less time wasted. Krispy
Kreme has been able to reallocate much of their A/R
staff to more profitable activities for the company, and is now able to post
money through its banks, and clear transactions from its books more
quickly," says Radford.
With a major
bottleneck removed through automation enabled by EDI, the company then turned
its attention to the challenge of getting its trading partners, some of which
are literally "mom and pop shop" retail operations, to do business
with Krispy Kreme
electronically.
…Reducing Errors/Cutting Time
Prior to the EDI
initiative, Krispy Kreme's
corporate and retail partner stores kept sales records on uncoordinated PC
systems. Weekly sales reports would be printed out and mailed to customers
individually. “The process took a long time, left room for lots of mistakes. Tracking and auditing records was complicated
and unreliable,” says Radford.
"Turn
around time at corporate headquarters in
With 205 stores (and
climbing) spread through out 30 states, and outside distributors (like
supermarkets), Krispy Kreme
needed an e-business solution that could trade transactions across a variety
platforms.
…The EXTOL Solution
Krispy Kreme needed an EDI solution that
could be quickly implemented, and was easy enough for its personnel and trading
partners to start taking advantage of right away.
“We
selected EXTOL because it was a proven product for the iSeries environment, and
it could integrate EDI data with our existing applications, including
internally designed systems,” says Radford.
EXTOL’s Integrator accommodates Krispy Kreme’s dial-up connection method, and allows the company
to process transactions with all of its vendors, customers, and financial
institutions. The installation of EXTOL's Integrator
was completed in a matter of days, because the application's user friendly
interface didn’t require extraordinary IT staff resources to set-up.
Part 5:
About
the Sponsor
About EXTOL International, Inc.
EXTOL International, Inc. has
become the market leader in electronic commerce software for the mid-market
enterprise by delivering business integration solutions that are rapidly
deployable and have a low cost of ongoing ownership. EXTOL has established a reputation as a
leading provider of comprehensive B2Bi software applications for the AS400, NT
and Unix platforms by delivering e-business software applications featuring
superior integration, communications, commerce management, and end user access
features.
EXTOL Integrator is a high
performance EC system able to execute the critical partnership management,
processing, and integration requirements necessary for a competitive advantage
in a wide array of industry and business settings including traditional X12 or
EDIFACT-based EDI, the new frameworks of the XML initiatives and web
transaction management. EXTOL Portal
utilizes IP technology to deliver partner connectivity and management at less
than half the cost of traditional VANs. EXTOL Secure provides the internet
communications supporting most popular security standards, including AS1, AS2,
Secure Sockets Layer (SSL) and digital certificates.
With over 600 customers, EXTOL has
been named to the Inc. 500 two consecutive years, ranked in the Software 500,
and recognized by Deloitte and Touche for three years
in a row as a member of the nation’s Fast 500.
EXTOL is also an IBM Business Partner.
Additional information about the company can be found at www.extol.com.