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Challenges to Business Network Transformation and Supply Chain Collaborations

Business Network Transformation is not easy today, and it is projected to become a much bigger challenge for companies. Recently the Aberdeen Group reported that IT departments are under increasing pressure to improve B2B collaboration as multi-enterprise supply chains are rapidly expanding.

Emerging multi-enterprise supply chains and extended customer networks make it critical for companies to have a strategy that is scalable and that enables the efficient automating of the communications and business processes between trading partners so there can be real-time collaboration. The answer is not to hire more staff, spend more time on the phones, and process larger numbers of paper documents. Business Network Transformation requires a different strategy and plan to quickly automate these data exchanges using emerging B2B/EDI/XML strategies, methodologies and technologies that are flexible, efficient and cost effective.

Let’s identify some of the common challenges businesses face with their EDI/B2B efforts today:

  1. Typically only 10-20% of trading partners are connected to the business network via EDI/B2B, causing slow, error prone and expensive paper based systems to continue to be maintained. This delays actionable information from reaching decision makers, reduces visibility and limits real-time collaboration between supply chains, customers, LSPs, etc .
  2. 80% of the typical EDI/B2B department’s time is dedicated to maintaining existing B2B connections and EDI systems, this limits the opportunity to automate new business processes, on-board new trading partners and integrate more B2B messages. Without these the business units are not able to achieve their automation and collaboration targets.
  3. I have seen many cases where the “tail is wagging the dog”. The limitations of the company’s EDI/B2B capabilities dictates what the business can accomplish. This is not a desirable or sustainable condition as it can impact the ability to deliver efficiencies, reduce costs, implement new and improved business processes, provide better customer support and the ability to realize profits.
  4. Point-to-Point mapping of custom EDI/B2B messages create difficult, expensive and time consuming integration projects. The larger the number of trading partner’s in your network the higher your risk of a “combinatorial explosion” of mappings and integrations that are nearly impossible to document, maintain and efficiently support over time
  5. Point-to-Point mappings and integrations break when changes are made to the data sources (Point A) and/or data destinations (Point B). Many companies support hundreds and even thousands of point-to-point integrations that can be broken by updating applications and databases. This IT integration problem alone has stopped or delayed many companies from updating and improving their software systems and IT infrastructures which prevents them from achieving the benefits of improved business systems and processes. Most companies upgrade or update their ERP systems every 5-7 years. This is a predictable problem that needs to be addressed at the highest levels.
  6. EDI translator costs, server costs, VAN fees, annual maintenance fees, training fees, changing EDI/XML standards and specialized high-costs EDI staff result in significant yearly costs that often fail to generate the anticipated ROIs in the expected time frames
  7. Backlogged EDI/B2B IT integration projects prevent the rapid on-boarding and integration of new acquisitions, business processes, customers and extended supply chain networks. This causes delays, poor customer support, lack of compliance and the implementation of costly, slow and error prone manual paper processes as a substitute for efficient processes
  8. To take advantage of many emerging multi-enterprise supply chains, companies are required to collaborate with an increasingly large number of trading partners in near-real time. In order to participate, companies need to be able to quickly and cost effectively connect via EDI or other B2B data exchanges. The inability to quickly support these requirements may eliminate your ability to participate in these business opportunities and processes.
  9. Sometimes the EDI/B2B department is unresponsive to the needs of the business units and this prevents the business unit from reaching their financial or performance targets. This is a common IT bottle neck and weak link in the business process chain that needs solved.
  10. Many companies have a decentralized IT environment with multiple EDI/B2B systems and specialized supporting staff in different divisions, locations and business units causing duplication of expenses, integration projects, mapping, staffing and support that is unmanageable and unsustainable in the long term.
  11. Limited or no reuse of mapping and integration work with point-to-point configurations result in costly projects that become increasingly problematic to support.
  12. EDI/B2B implementation methodologies with limited or no reuse capabilities does not become more efficient over time. Efficiencies and scalability can only be realized when the ability to reuse the work is incorporated into the system, and standardized processes, maps and integration methodologies are utilized. The increasing demand for more customer and supplier B2B integrations means that this is a growing problem that needs resolved quickly – business network transformation.
  13. Often a company’s high profile strategic plans for business network transformation and supply chain collaboration are delayed and/or not achieved because the IT department is unable to meet the requested time lines due to other priorities, existing IT development projects and limited IT budgets and resources
  14. Many companies conduct business across multiple vertical industries that may require different EDI/B2B standards, content and data formats. Supporting a large number of different B2B standards and industry requirements may add substantial costs in training, specialized personnel and additional technologies.

These are a few of the common issues many companies face in managing their B2B/EDI efforts and capabilities. There is a consensus among IT analysts that the ability to connect rapidly and efficiently with greater numbers of customers and suppliers using B2B data exchanges is an absolute requirement. There is a growing sense of urgency to resolve many of these challenges.

SAP’s 2008 emphasis on business beyond boundaries and focus on business networks, business network transformation and extended supply chain collaboration is timely and needed. I see the developments on Netweaver PI, Enterprise Services Repository, Global Data Types and recent efforts to help clients solve B2B challenges as good progress in the right direction.

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  • The artlcle is really good !Its indeed need of the hour to have B2B exchanges where the Companies can have less operational costs and the B2B exchanges can operate at lesser costs since the volume of operation will be high. This will be advantageous for both suppliers as well as the supply chain partners.i firmly believe this will happen in near future.I
    • It is not just making a better EDI “mouse-trap” that is the answer.  There needs to be a strategy in place that eliminates paper, even from your smallest trading partners.  There needs to be a 360 degree view of communications outside the 4 walls of an SAP shop.  Business Network Transformation is about transforming, changing old and out-dated EDI/B2B implementation methodologies.  To optimize the ROI from a full EDI/B2B strategy, one must be able to cease or greatly reduce the paper based environment.  Far too many companies simply add the expense of an EDI shop to the expense of the paper driven environment.  There is no true transformation.  This is a perfect example of the use of “naked” technology.  Naked in the sense that the ROI it promised was never recognized because no true “transformation” happened.