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e-Invoicing – Why you should integrate now
e-Invoicing facilities have been around for over a decade, so why do we still have so much paper in our supply chain transactions?
While large organisations were quick to grasp the low-hanging fruit by utilising EDI for Orders and Invoices with the largest volume suppliers, the perception at that time was that the cost and effort involved in eliminating paper from the other transactions was too high. So after an initial uptake in electronic integration (often just with Invoice documents), the degree of integration remained relatively static for many years.
However, over the last few years there have been significant advances in factors affecting successful integration. Organisations who have only implemented a limited amount of EDI, or who have avoided electronic integration altogether, should now look at this again.
The evolution of supply chain integration is non-linear, as there is a tipping point in integration effectiveness. When the number of our trading partners who can integrate reaches a critical mass, it suddenly becomes much more worth while for us to integrate as well. Over the last couple of years, the pace of electronic integration has started to become an avalanche, and over the next five years or so this will have a major impact on supply chains.
We explore below the reasons for this change and what is required to take advantage of the opportunities it presents.
ERP systems have better support for integration
It is not only the largest systems, for the largest organisations, that can now produce and utilise their business transaction documents in electronic form.
This area has suffered slow and uncertain progress over the last two decades, but there are distinct signs that new ERP solutions (and updated existing applications) are providing improved interface capabilities than were available before. Also, there are service companies which specialise in helping clients using particular ERP systems to overcome specific import or export difficulties.
Systems used by mid-range customers and suppliers nowadays generally have the necessary interfaces to send and receive electronic documents in an XML or CSV format, even if not in one of the old “EDI” standard formats. The fact that more systems can import and export data means that more document exchanges can be integrated.
The recent proliferation of standards, and increase in the number of non-standard document formats, are not without their own problems. But solutions to those problems are available.
Integration is of course not just about the format of documents – there is also the fact that they have to be exchanged between sender and receiver using a communications method that both parties can support. Fortunately, good solutions to these new challenges are now readily available – and at a lower cost than ever before.
Converting between formats is more affordable
One of the reasons it was cost-effective for large organisations to adopt EDI originally, was that the majority of their supply chain in any vertical sector would all use just a single common format. Because of the adoption of a particular standard EDI format within one vertical market, there was generally no requirement to convert between different formats. Format standards such as VDA, EDIFACT, Tradacoms were successful because organisations trading electronically in a particular sector used the relevant standard for the documents they wanted to exchange.
The simplicity of the early EDI days disappeared a long time ago, and modern trading networks are far more complex. Each new format or standard which has been introduced has allowed new local networks of integration, but it has also increased the complexity of integrations in the wider trading world. In turn, this has tended to hold back further integration growth. IT departments under pressure in an ever-more competitive business world simply don’t have the time or resources to convert between an ever-increasing number of different formats.
Out-sourcing the EDI service has been particularly helpful in addressing this problem. Because EDI service providers specialise in flexible format conversions, they enjoy considerable economies of scale. Because they convert data between any and all formats for many thousands of trading connections, they can invest in the best tools for the task, and they can afford to maintain a team of experts who are skilled in the specific tasks and tools needed..
A good EDI service provider nowadays does not dictate which format they will accept. It provides the flexibility to convert data between the various formats used by your trading partners, so that you get the highest possible degree of integration.
New communication methods are cheaper
We’ve all heard the claims that we pay more than we need to for our energy supplies, because we haven’t switched provider or deal. The same is true for electronic communications methods.
Sticking with a VAN connection to exchange documents may make sense if you have thousands of trading partners using a traditional EDI standard format, and the number of bytes of information exchanged is small – or if you have negotiated a very low rate. Otherwise, modern communications methods and protocols such as SFTP, AS2 and PEPPOL can be every bit as efficient and secure as VANs, and at a significantly lower cost.
The price for new users has generally come down significantly, year-on-year, even for the same communications method. The chances are that if you haven’t changed providers, or renegotiated your existing contracts, you will currently be paying significantly more for your established communications services than you need. And if you switch away from VAN to AS2, your traffic costs can potentially be slashed. For example, a prestigious UK manufacturer periodically sends price catalogues to its European distributors. This supplier has saved thousands of pounds a year on VAN charges just by sending the price catalogue by alternative electronic communications methods.
There are cost-effective alternatives to full end-to-end integration
Realistically, not all your supply chain will find it easy to get business documents electronically into or out of their computer system. This is no longer a complete obstacle to success, as there are good alternative solutions for these trading partners. The most appropriate solution for any particular trading partner will depend upon their specific problem. The critical thing for you is that you work with an EDI service provider that can offer appropriate solutions to every obstacle to integration that your trading partners might have, so that you are stuck with manual processes for as few of your trading partners as possible.
If your current EDI service provider only provides standard integrations, and is unable to help with non-standard requirements, you should not be afraid to switch. If they have only been providing standard integrations, transferring those is relatively easy, and then you can extend the scope.
Whatever has been holding you back, probably now has a solution
The bottom line is that it is no longer too difficult or too expensive to exchange data electronically with your trading partners, whatever your situation. See our Solutions to Common EDI Problems page to see solutions to the common obstacles holding back organisations from achieving e-Invoicing and general B2B integration.