Progressive Distributor - ISA 2007 Issue - Making business sense out of eBusiness

Making business sense out of eBusiness

by Paula Giovannetti

The ISA eBusiness Implementation Guidelines are now available. The document, written by representatives from ISA member companies specifically for the MROP industry, is intended to help support the business process of buying and selling industrial supplies between manufacturers and distributors.

The eBusiness Guidelines were written to help all ISA channel partners take unnecessary expense out of the order-to-payment cycle and optimize business automation. As stated in the introduction, “The ISA eBusiness Committee is sensitive to the fact that many trading partners have limited technology resources. The committee is also mindful that inefficiency and cost must be removed from the entire supply chain, not merely handed off to other parties. Methods of item identification and electronic business transactions must be as simple as possible, while still obtaining the objective of better, faster business processes.”

eBusiness vs. eCommerce
Electronic commerce originally was a blanket term used to describe all electronic tools, such as e-mail, Web portals, smart cards, electronic data interchange (EDI) and, basically, anything using computers. The description for electronic commerce has now narrowed to denote selling products over the Internet. Terms such as eBusiness and business-to-business (B2B) describe automated business processes within a company and the electronic exchange of business information between trading partners.

The ISA guideline does not cover selling trade items to business partners or end-consumers via Internet Web stores or e-catalogs. The guidelines are focused on eBusiness technologies. At the risk of taking the glamour out of electronic business systems, we are basically talking about data entry and data validation. We receive an electronic purchase order and make sure the data is correct. We validate part number, unit of measure, price, order quantity minimums, discounts, customer credit history, inventory availability, shipping windows, and so on. The data can automatically go to our open order system when there are no exceptions.

Why eB guidelines
We’ve long understood the benefits of letting computers help process purchase orders, shipments and invoices. When programmed correctly, computers can do amazing things. But when set up improperly, they make mistakes faster than we can fix them. Computers are good at performing tedious and complex tasks, when those tasks are always executed in exactly the same way and carefully programmed into the software. Computers are not good at handling exceptions and diversity, especially when associates in our companies, who may not be full-time computer programmers, must create a different configuration for each trading partner to handle a purchase order or invoice.

Computer systems have become very sophisticated and capable. I like to compare them to automobiles. I remember changing the master cylinder on my ’67 Jeep. But if I look under the hood today I’m lucky if I know how to check the oil. I have no business under that hood; that’s for professionals. We have great people in our companies trying to customize enterprise resource planning (ERP) software to meet the needs of every customer. It doesn’t lend itself to stability or sustainability. Somehow we must build these tools into our applications at the factory (by the software vendor) so we can focus on business processes, not programming. Creating best business practices for our industry will help us achieve this goal.

Optimizing systems
The best way to optimize our systems is to create guidelines that allow us to handle common business transactions in common ways. Two popular ways of trading purchase orders and invoices electronically are via a Web site and through EDI. Smaller companies (and their larger trading partners) have gravitated to using Web portals to check for purchase orders and enter shipping information. For many companies, this is sufficient. But this method will not scale as a company grows, and will always require human intervention. Associates must be cross-trained, employees make data entry errors, security may be a factor when an associate leaves the company and still has access to customer Web sites, and so on. The level of quality is only as good as the people using the system. With EDI, however, programs can be written and tested to achieve a higher level of speed and accuracy. The volume of transactions can increase without an increase in personnel.

EDI is mature
EDI is a mature and stable eBusiness tool. Tens of thousands of trading partners have created successful business applications exchanging documents in EDI. However, many think that EDI can be expensive. This is due, in large part, to the creation of trading partner-specific and complicated EDI maps. The eBusiness committee strives to design EDI maps that are simple and straightforward, yet robust enough to sufficiently conduct business in the MROP sector. Rather than have every company design EDI transaction sets from scratch, the ISA eBusiness Committee has done the work for you.

Guidelines vs. standards
We rely on standards every day. Standards determine everything from the rise on a stair to the threads on a bolt. When we use standard bar codes, we can purchase bar code printers and scanners, knowing they will work for all of our trading partners. We distinguish our individual companies based on performance, price, and quality, not the format for a shipping label or a purchase order. When manufacturers must handle a different purchase order format for every distributor, it makes them difficult to process and adds unnecessary expense to the supply chain for everyone.

It is important to recognize the distinction between guidelines and standards. Standards call out specific measurements, tolerances and methodologies that all parties follow. Guidelines are not hard-and-fast rules that must be followed to the letter. To the extent that all trading partners in an industry can do things in a similar manner, they all benefit from increased efficiency. The ISA eBusiness Implementation Guidelines identify best business practices regarding the electronic exchange of business data and item identification. Participation is voluntary. The purpose of the guide is to enhance the ability of all industry members to compete more efficiently and effectively to provide better value to the end-customer. Individual companies remain free to make independent, competitive decisions.

The ISA eBusiness Implementation Guidelines include a simple, but formal Change Request Process which gives suppliers and distributors a vehicle for feedback as well as a mechanism for adding business functionality. It is important to set a democratic tone for the users, who must be an integral part of the guideline maintenance process as they test the principles in the guidelines with real world implementations.

The open supply chain
eBusiness guidelines are critical today because we conduct business in a global and open supply chain. When a product leaves the physical domain of the owner, it is a best business practice to assign unique trade item numbers, logistics serial numbers, ship-to location numbers, and bill of lading numbers. This facilitates tracking, inventory management, shipping, receiving, customer service and returns by trading partners, transportation carriers and third-party warehouses and others in the supply chain. The ISA eBusiness Implementation Guidelines will help you understand how to get started.

Paula Giovannetti, director of eBusiness for the Industrial Supply Association, will give a presentation entitled “Making Business Sense out of eBusiness” at the ISA Industrial Supply Conference and Trade Fair.