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"Inovis is a leading provider of on-demand Business Community Management solutions that empower companies to transact, collaborate and optimize communications with
every facet of their business communities. By standardizing and automating mission-critical business interactions, companies can dramatically reduce the complexity and cost of supply chain communication."
Source: Inovis
Accelerating Trading Partner Performance
Trading Partner Performance is also known as :
Trading Partner Performance,
Trading Partner Performance Management,
Accelerating Trading Partner,
Trading Partner Performance Management TPPM,
TPPM Supply Chain Compliance,
Trading Partner Intelligence Service,
Trading Partners Optimize Results,
Trading Partner Integration,
On-Demand Supply Chain Management,
Supply Chain Software Technology,
Supply Chain Trading Partner Performance,
Supply Chain Management Trading Partner Performance,
Supply Chain Management Systems,
Supply Chain Data Trading Partner Intelligence Service,
Web-Based Technology Trading Partners,
Partner Transaction Error,
Trading Partner Transaction Sheet,
Manufacturing Retail Trading Partners,
Trading Partner Integration Compliance,
Performance Measurement Strategy,
B2B Trading Partners.
How retailers and manufacturers can unlock working capital
with on-demand supply chain software.
Introduction
One in five That's how many partner transactions have at least one error. That is an
amazing statistic, particularly given the extraordinary leaps in innovation across the
global supply chain during the past two decades. During this time, best-in-class
supply chains launched more than a few enterprises to the tops of their categories,
as a "flat world" enabled product to be sourced and delivered cheaply and quickly.
But lagging behind these advances is one of the industry's
darkest secrets: persistent data quality issues between trading
partners continue to trigger claims, delay inventory, drag down
margins and lock up working capital.
The impact to a retailer or manufacturer can be dramatic.
Defective invoices can have 3-4 times the days sales outstanding
(DSO) of a clean invoice. According to Accenture, some
companies have 25% of the money owed them tied up in
disputes at any given time.
Ultimately, companies are "leaving money on the table" in their supply chain due to
problems in partner compliance and forced to tie up working capital to handle the resulting
payment lags and inventory buffers. Common approaches to improving trading partner data
quality, such as supplier portals and private exchanges, have fallen short as they don't
provide a way to monitor and fix transaction quality.
Fortunately, some innovative retailers and manufacturers are solving these problems with a
new breed of on-demand supply chain software. These services represent a unique
approach by combining lightweight, subscription-based software (eg., salesforce.com) with
the depth of real-time transaction monitoring and remediation.
This whitepaper examines the challenges facing retailers and manufacturers in managing
trading partner data and introduces the advantages of on-demand supply chain solutions.
Table of Contents
- Introduction
- Challenges in Trading Partnerships
- Examples of Compliance Errors
- The Business Impact of Compliance Errors
- Alternative Approaches
- New "On-Demand" Solutions
- Success Stories
- What to Look For: A Checklist
- About Inovis
Challenges in Trading Partnerships
It's a given today that companies rely heavily on their partner networks to lower costs,
accelerate sales and help differentiate the products. This is true for both the multi-channel
retailer sourcing overseas and the high-tech manufacturer pushing the limits of lean
inventory methods.
But as the physical supply chain has stretched ahead in innovation, it has left in its wake
persistent data quality issues in supplier transactions that continue to impact both
companies and their suppliers.
As background, partner transactions typically involve exchanging standard format
electronic files. The electronic data interchange (EDI) format is still the standard and is
transported over the Internet, private exchanges or value-added networks (VANs). The
two major EDI standards include EDIFACT (outside US) and X12 (US). Common
documents include advanced shipment notifications (ASNs, EDI 856), invoices (EDI 810)
and purchase orders (EDI 850).
How did we get into this mess?
At a basic level, this is a situation where the game has changed but systems and tools
haven't kept up. To respond to market demands, the supply chain has vastly improved but
gotten more complex and companies are still leaning on legacy tools and enterprise
resource planning (ERP) systems to improve trading partner transaction quality.
A number of factors contribute to the challenge of managing trading partners:
- Complexity. Today's retailers and manufacturers must deal
custom SLAs for each trading partner and a proliferation in item
numbers (SKUs). The VANs that were so useful for scaling
transaction volumes do little to help improve compliance and
data quality.
- Off-shore sourcing. 9 of 10 US manufacturers (>$50M) are
relying on China for sourcing5, as low-cost-country-sourcing
(LCCS) continues as a best practice. But with low-cost comes
unpredictability, delays and compliance issues: 1 in 5
international shipments are out of compliance with order or
routing instructions.
- Supply chain velocity. Competitive pressures and process
breakthroughs have accelerated the physical supply chain. But
while the gap between "order", "deliver" and "invoice" has
shrunk to days, the payment processing time (45-60 days) is
still at 1960s levels.
- Hard-coded connections. Many companies attempt to tightly
integrate their partners into their internal systems, "hardcoding"
the communications and processes into their legacy
enterprise resource planning (ERP) systems. Whether the
integration is email, XML, electronic data interchange (EDI) files
or RosettaNet, for many companies, each partner integration is
a multi-month process.
Examples of Compliance Errors
As opposed to managing thousands of electronic transactions between trading partners,
categorizing the types of errors is quite easy. A simple way is to place errors into one of two
buckets: "document errors" refer to errors WITHIN an electronic document, while "process
errors" refer to errors ACROSS documents.
Here are some common compliance errors, that left unchecked, can wreak havoc
with inventory and financial systems:
"Document Errors"
- Missing data, such as missing vendor ID or ship-to field in
the ASN.
- Incorrect data, such as Pallets without at least one Pack
or Item listed or PO numbers that are alphanumeric when
numeric is required.
- Late or Missing data, when inventory arrives before the
ASN data.
- Wrong carrier, where transportation is out of compliance
with the routing guide.
"Process Errors"
- Unlinked ASNs and Purchase Orders, with conflicting
vendor IDs, PO numbers, quantities or ship-to locations.
- Invalid charges, or invalid fee codes, within invoices.
- Multiple ASNs per PO, when only one is allowed.
- Missing shipments, where an order is overdue but no
shipment received.
- Missing items, where an ordered item is not in the
shipment.
The Business Impact of Compliance Failures
The problems in data quality and compliance trickle down eventually to the financial
statements. Some of the common impacts are shown below.
- Tied up Working Capital, with resources tied up to finance
inventory and receivables. Companies have up to 25% of the
money owed them tied up in disputes at any given time.
- Higher Costs, particularly in distribution centers, who deal
with inventory delays (trucks sidelined) and staffing
reconciliation worklists. For retailers, it costs $40-$400 to
reconcile errors tied to late ASNs, missing vendor IDs,
unlinked purchase orders, and short shipments.
- Reduced Revenue, due to customer out-of-stock. Errors in
outbound transactions can tie up a customer's inventory and
increase the likelihood of the customer missing sales due to
short-filled orders or out-of-stocks.
- Higher Inventory, due to unpredictable inbound supply
chains. Some companies resort to a 48-hour lead time buffer
of inbound shipments as a result of unpredictability in port
congestion and customs.
- Lagging competitiveness, from the lack of ability to quickly
on-board new partners and get access to must-have product
lines.
Alternative Approaches
Retailers and manufacturers have taken a patchwork approach to partner compliance, often
leaning on legacy systems and manual processes.
- Supplier portals have web front-ends for partner selfservice
that often speed up the on-boarding process, but are
typically unlinked from post-launch transaction quality and
ongoing vendor performance.
- Manual on-boarding processes slow down partner
certification to a crawl and burden retailers with poor data
quality.
- Private exchanges and value-added networks (VANs)
provide a scalable network "pipe" for passing partner
transactions, but fall short in terms of monitoring the
underlying business activity, data quality and partner
compliance. And with the rise of the Internet, analysts say
"the end of the traditional VAN era is here".
- Vendor chargebacks are a widespread and often effective
tactic to make partners accountable for poor data quality.
However, chargebacks on their own typically do little to incent
partners to fix the underlying compliance issues.
New "On-Demand" Solutions
Using on-demand software for trading partners, some global retailers and high-tech
manufacturers have seen some dramatic improvements in trading partner compliance,
working capital and costs.
These enterprises are not only seeing fast ROI and documenting millions of dollars in
savings, but they also have a framework to remediate the root-causes of compliance issues
for all trading partners.
These services help accelerate ROI, minimize cost of ownership and simplify integrating to
the trading partner systems. Some take a lifecycle approach, with a broad solution linking
each stage of the partner lifecycle (onboarding, monitoring and scorecarding). This breadth
provides a system of record for continuous improvement in repairing compliance errors.
Why On-Demand Software?
For years, enterprises have used on-demand software in the sales and marketing process,
getting fast ROI from services like salesforce.com. This is a web-accessible service with
monthly subscription fee that does not require software to be installed on premise.
And now, enterprises are reaping similar benefits with on-demand software for the supply
chain. 96% of supply chain executives say on-demand software provides better or the same
ROI as license and install applications.
On-demand software (also referred to as software as a service, or SaaS) outperforms
"license & install" software on three basic levels.
- Faster to implement, with less demand on internal IT staffs.
- Easier to upgrade, as enhancements are automatically
deployed.
- Faster ROI, due to speed of implementation and subscription
pricing models.
Success Stories
Here are some examples of the benefits realized by companies using on-demand trading
partner services.
- Faster on-boarding
A European computing giant had the challenge of migrating
over a thousand partners to a new ERP system. With an ondemand
trading partner system, they sped up partner onboarding
times by 10x, from 9 months to three weeks11.
- Lower DSOs
Errors in the order-to-cash process can double days-salesoutstanding
(DSO) for defective orders, with worse results for
orders with multiple errors. Using on-demand software for
receivables management, Honeywell saved $15M a year and
reduced DSO by 10 days by reducing invoice errors 90%.
- Reduced Out-of-Stocks and Saved Sales
Errors in partner transactions can tie up inventory and
increase the likelihood of missing sales due to short-filled
orders or out-of-stocks. A number of root-causes can trigger
a dispute, such as missing shipment notifications, missed
appointments or shipments unlinked to purchase orders. By
finding and fixing these errors, companies can improve their
customer's operations and ultimately improve their own sales
rates.
- Reduced Freight Costs
It's easy for companies to overspend on transportation costs
on exception processes, particularly those associated with
minimum orders. Often, companies end up paying for freight
themselves instead of customers. By linking outbound
transportation carrier data to order shipments and size,
companies can ensure that they are not overspending on
shipping fees. With an on-demand trading partner service, a
European electronics giant saved $5M in transportation
costs across two carriers.
- Improved Receivables
Disputes over receivables can tie up a significant amount of
working capital and interest expense. According to Accenture,
some manufacturers have up to 25% of the money owed
them tied up in disputes at any given time. Access to rootcause
analysis can take the guess-work out of dispute
resolution and reduce the amount of working capital and
interest payments.
- Underbill Detection
Errors in receivables often go undetected, particularly underbills.
By automating the monitoring across the order-to-cash
process, companies can quickly find and fix root cause errors
relating to underbills and improve the overall level of
receivables.
- Reduced Staffing Costs
Automatically finding and fixing compliance errors ahead of
time can reduce the need to manually reconcile transactions.
One global computing company saved $1M a year in partner
support staff. Another manufacturer saw a 50% reduction in
supplier support staff costs.
What to Look For: A Checklist
Here are a few capabilities to look for when evaluating trading partner software providers.
Platform
- On-demand delivery. A subscription service vs. "license & install".
- Process flexibility. Able to fit to your industry's needs.
- Role-based access. Fine-tune who accesses what data.
- Scalability. A system you can grow with.
- Lifecycle approach. An end-to-end service across the partner lifecycle, from onboarding
through scorecarding.
On-Boarding
- Process templates. A library of models that can be tailored to fit a company's
partner processes.
- Self-service access. Browser access for partners to self-test and certify their
transactions.
- Activity reports. Tracking partner on-boarding status.
Monitoring
- Business activity monitoring. Tracking low-level transactions and impact to highlevel
processes.
- Proactive alerts. Visibility to errors as they happen.
- Root-cause drill-down. Access to individual documents.
- Dashboards. Visibility for key metrics like Rejected ASN Rate, Late/Missing ASN and
Order Fill Rate.
ScoreCarding & Remediation
- Daily worklists. Track remediation tasks by partner.
- Self-remediation. Access for partners to view errors.
- Performance Scorecards. Tracking partner performance by type or process.
About Inovis
Inovis is a leading provider of on-demand Business Community Management solutions that
empower companies to transact, collaborate and optimize communications with their entire
trading community. By standardizing and automating mission-critical business interactions,
companies can dramatically reduce the complexity and cost of supply chain communication.
This foundation of high-quality, reliable and secure connectivity provides real-time visibility
across the order-to-payment lifecycle. The resulting actionable intelligence enables users to
proactively address supply chain issues before they impact profitability, shortening cycle
times, improving productivity and increasing customer satisfaction.
With more than 20 years of expertise, Inovis delivers its products and services to more than
20,000 companies over a wide range of industries and markets across the globe.
Inovis Global Headquarters
11720 AmberPark Drive
Alpharetta, GA 30004
USA
Main +1 404.467.3000
Toll-free +1 877.446.6847
Fax +1 404.467.3730
Email: info@inovis.com