Cleaning up the Paper Trail

In working to reduce the 40,000 paper invoices it receives from its supply base every month, Owens Corning has learned that the three most important elements of automating data exchange with suppliers are process, process and process.


Narrowing the List of Targeted Suppliers

The first step in this process, of course, was deciding with whom the company should transact via EDI, beyond those suppliers already using electronic data interchange. After reviewing transaction histories for its supply base, the company used two criteria to narrow down the list of suppliers with which it wanted to connect via EDI. First, Owens Corning identified the top suppliers based on the number of transactions that the company did with each supplier. To make sure that moving to EDI would make sense with each of these suppliers, Owens Corning also verified that the transactions were regular in nature and represented an ongoing relationship with the company. Then they checked that each of the targeted suppliers represented at least $50,000 in business annually with Owen Corning, based on the theory that it would not be cost-effective for smaller suppliers falling under that dollar threshold to do EDI with the company. The result of this process was an initial list of several hundred suppliers that the company would target, representing a variety of services and indirect and direct materials.

Now that Owens Corning had narrowed down the list of suppliers with which it wanted to connect via EDI, the next challenge, naturally enough, was figuring out exactly how to set up that connection. The crux of this challenge, of course, was that not all the company's targeted suppliers were set up to do EDI, and given a cost of as much as $75,000 to $150,000 to establish electronic data interchange capabilities, any number of the suppliers, particularly the smaller vendors, were likely to balk at having to make the necessary investment just to do EDI with Owens Corning.

Fortunately, several solution providers have stepped forward in recent years to offer B2B connectivity services that let large corporations exchange EDI messages with their non-EDI-enabled suppliers through transaction networks and translation services. Owens Corning looked at several of these providers, including Global eXchange Services, Edict Systems and EC Outlook, before settling on Advanced Data Exchange (ADX), an outsourced EDI and XML translation service based in Newark, Calif. According to Hawkins, the choice fell to ADX because the provider had experience with, and was able to handle, the full range of documents that Owens Corning wanted to exchange with its suppliers.

The Cell-phone Plan

Founded some six years ago and currently boasting more than 300 of the Fortune 1000 among its customers, ADX operates a network that links large enterprises with their suppliers to exchange documents. The large enterprises can send, for instance, a purchase order intended for a supplier in EDI to ADX, which translates the document into a format, say, XML or a flat file, that the supplier is capable of receiving. ADX then either sends the file directly into the supplier's back-end systems or allows the supplier to receive and respond to the document using a Web browser interface based on an e-mail paradigm. The supplier responds back to the large enterprise through the network, too, for instance, "flipping" a PO into an invoice or PO acknowledgement that gets sent back, via ADX, directly into the customer's back-end systems. The solution provider offers tools for integrating with suppliers' accounting applications — which, for a small or midsize enterprise (SME), could be something like a Great Plains or QuickBooks package — that helps eliminate re-keying of information on the supplier's end.

ADX typically charges a transaction fee to the enterprise's suppliers. The fees usually get rolled into a cell phone-like plan, whereby the supplier signs up for a subscription that includes a certain number of transactions per month, plus a per-transaction fee for any transactions over the limit. A "starter plan" could run $69 per month for 25 transactions, plus $3 per transaction over that limit. Overall, the provider's prices cover the spectrum from $4 to $0.35 per transaction, depending on number of partners connected with and number of transactions. Andy Duncan, CEO of ADX, says that the plan fee covers the entire cost of doing business with the solution provider, and ADX charges no additional fees for software, connecting to additional trading partners or support fees.

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