Skip Stein
Consulting Services

Electronic Commerce - Issues for Commercial Enterprise

By Skip Stein

Management Systems Consulting, Inc.


I have been specializing in global commercial enterprise wide EDI application interfaces for the past several years.  I have worked with some of the major companies in the commercial EDI arena and developed transactional interfaces with current Enterprise Resource Planning (ERP) tools.  In order to successfully implement an EDI transaction based enterprise solution, a complete understanding on the business functions of the companies involved is necessary.  An understanding of the Electronic Business Flow Management (EBFM) concepts and dynamics is required to understand and document the transaction dynamics involved in an electronic trading partner relationship. 


Key to this understanding this critical component of electronic commerce is that the process will forever change the business enterprise.  It is absolutely critical to understand how the business dynamic of production, distribution, receipt of product and payment processing will be affected throughout the enterprise.  Furthermore, it is paramount to understand the inter-relationships between your company and the trading partners you will be linked by these electronic transactions.


Integrating EDI into your business process requires this in-depth understanding of the business rules.  It is much, much more than a simple creation of an EDI 'map' (the component that translates transaction documents electronically into a standardized format for electronic exchange).  Since many of the normal controls will now be encompassed by an electronic process, well documented and understood automated controls have to be implemented to compensate for the manual controls rendered during the manual or semi-automated transaction processing operation.  These controls need to be designed by a professional who understands the business process flow (material handling, manufacturing, distribution, and accounting) as well as the technical requirements of the EDI process.  If there is not sufficient expertise within your organization, it is a good idea to consult with experts in the field of EDI implementation to train staff and transfer knowledge into your organization.  Once established in a well-controlled and documented environment, the EDI process tends to be extremely stable and easy to maintain.


EDI systems, building on previous supply chain models like KANBAN and other integrated just in time (JIT) systems, provide an automated approach to address the 'pull/flow' supply chain. This creation of the EBFM business process model is inclusive of alternate supply sources that are dynamically balanced through the inventory and distribution control systems of an organization. This constant information flow from a multitude of sources provides the ability to create an AOT (Always On Time) inventory model. Supply outages, forecast with information from the EDI engines, will be pre-empted by rapid and automatic re-direction to supply alternates. This forecasted supply outage would trigger sophisticated inventory supply engines driven by the EBFM business model to generate additional EDI transactions that will alter existing purchase orders or transportation mechanisms. This process will enable a smooth and consistent performance of both the service and hard goods business cycle from raw materials through manufacturing to final consumptive delivery. 


Many of the major ERP companies have established EDI interfaces within their products.  These interfaces are often ‘flat file’ data constructs that predefine data elements acceptable to each application system.  EDI transactions are ‘mapped’ to these data constructs and then transported (via VAN [Value Added Network], FTP, sneaker-net, or other method) to an application bridging system for processing.  In most cases these interface points are similar to the entry point for manual document processes.  Few if any current ERP/CRM systems design adequately address and incorporate the EDI dynamic of electronic transaction processing between trading partner entities.


A significant area of oversight in many companies is in the financial transaction processing area.  While commercial banks are continuing to ‘wake up’ to modern technology solutions, companies are putting pressure to complete monetary transactions via EDI.  While many companies transmit a standard Invoice transaction (X.12 810 or EDIFACT INVOIC), few outside the retail world have embraced the significant cost savings of the remittance advice (X.12 820/823 or EDIFACT REMADV).  This can dramatically reduce the cost of an Accounts Receivable operation while dramatically enhancing the efficiencies of the shipping/receiving operations; reducing time processing proof of delivery (POD), charge-backs (freight & handling), and other claims related to normal shipping and handling operations.


Major companies have significant efforts underway in the EDI area to deploy EBFM (Electronic Business Flow Management) systems.  Some of these companies are establishing procedures for transmittal of key internal documents utilizing standardized EDI interfaces.  Others are working with industry ‘experts’ to establish standards for document transmittal (Alliance for Telecommunications Industry Solutions).  Other major supplier, distribution and wholesale/retail companies are working with their suppliers (trading partners) to standardize EDI transaction sets.  Many are actually giving away EDI translation products to downstream trading partners to facilitate their own business automation linkage.  Many regional telecommunications operating companies are all progressing from old style file transfer technologies to process billing and inter-connect data to more traditional EDI infrastructures. Some are providing ‘free’ copies of translation tools to regional Competitive Local Exchange Carriers [CLEC’s]) to facilitate billing and collection interface transaction transmittals.


Distribution and freight processing companies (forwarders, consolidators, and distribution warehousing, etc.,) are upgrading their capabilities to work with their global client companies as the information flow dynamics change from document transmittal to information flow (which encompasses the direct information input to intelligent application interfaces without intervention from a third party [automated or human]).  These companies are being tasked to provide ever more complete and more complex information pertaining to product movement (weight, handling, hazardous material, etc.).  While this form and content has been encompassed within the traditional EDI infrastructure and standards, much of it is just now being brought into play by a more general and pervasive group of industry participants.


The newest focus on workflow, and shift from ERP to business flow planning (inclusive of just in time [JIT] inventory) will dramatically impact how the global business community processes information and traditional documents.  The implementation of Electronic Business Flow Management (EBFM) principles will provide extensive cost savings (labor, material handling, in-transit time, etc.) that can be obtained by the proper implementation of these new approaches to traditional EDI.  This is what EDI was always intended to be.  Now with the lower cost of equipment, software and the pervasive use of computer technology, a global EDI infrastructure is being formed.  Although there are international committees of formal groups, EDI seems to be developing on its own as business demands evolve; it is growing out of a realized need and opportunity to enhance the revenue position of the companies involved.  The natural progression towards an Internet approach will coincide nicely with the existing business plans targeting commercial business-to-business as well as retail and consumer applications.