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In the SAP Insider article entitled, “Is Your Organization Still Focused Only on Labor Costs?” Bernhard Fischer and Steve Sprague discussed how to optimize financial supply chains with electronic data exchanges among other points. They point out that one of the key challenges for organizations is negotiating electronic exchange documents and formats with their suppliers and buyers. Why is this a key issue? Let’s discuss:

There is a phrase, “combinatorial explosion” that is relevant here. It refers to the massive chaos that can result if you try to support too many different custom electronic file formats and integration maps in EDI/B2B. You ideally want to receive one standard electronic invoice from all suppliers, and you want to send one standardized electronic invoice to all buyers. This keeps it all simple, efficient and manageable. However, in the real world, you may need to support hundreds of different supply side and buy side electronic invoice formats. This causes huge problems, expenses and impacts your ability to support and grow B2B/EDI connections over time. This reduces you ability to optimize your AP processes and efficiently invoice your customers.

I have seen many cases where companies simply could not afford to continue growing their EDI/B2B because of the “combinatorial explosion” of supporting thousands of custom integration and EDI maps. How can this be avoided? You can be your supplier’s biggest customer and demand (i.e. negotiate) to use your standard electronic invoice, and then you can negotiate with your customers and explain how you can give them the best pricing if they agree to accept your electronic invoice format. But again the real world abruptly awakens us from our fantasy.

The point is – it is very important for companies to try to standardize, consolidate and simplify their business processes, services, IT systems, ERPs, EDI systems and supported EDI formats. Many business managers don’t realize that agreeing to the use of a suppliers, or a customer’s custom EDI formats can lead to complete chaos over time that can negatively impact growth, efficiencies and profits.

SAP’s Business Network Transformation strategy is designed to fix these problems and to standardize and simplify B2B/EDI.

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