Electronic Service Offers Small Companies Access to World of Big Business
Data interchange over the Internet links players previously left out of the game.
One of the world’s largest automobile manufacturers has a goal—to operate in a paperless environment with its suppliers by the year 2000. A web-based tool, which also speeds response times to customers’ requests, is bringing the company closer to that objective.
With the help of a personal computer, modem, Internet access and a web browser, traditional electronic data interchange (EDI) has been transformed into a more cost-efficient way to do business. Little or no additional hardware is needed to allow most small businesses to tap into the innovative system, trim business costs and improve turnaround on product delivery.
The enthusiasm of large companies is encouraging suppliers to sign on to this new Internet trade network. The network, which features low barriers to entry, is being used by major corporations to automate their interactions with suppliers.
Developed by GE Information Services, Rockville, Maryland, it all begins at the GE Information Services (GEIS) trading center, an Internet site that links business associates together in a number of trading communities. Through what GEIS calls TradeWeb, subscribers to the EDI network exchange business documents that include on-line purchase orders, purchase order acknowledgements and invoices.
A user signs on at the trading center to initiate the service and becomes part of a trading community. Responsible for defining its own business relationships, a firm registers to be added to an on-line directory that lists trading partners who use the service. Generic EDI ANSI X12 standard forms are available, or a business can create company-specific forms that are customized to match its own operations. Communicating through an EDI mailbox, an enterprise conducts transactions using the electronic forms in an inbox/outbox paradigm.
Subscribers have the option of being part of a closed community with access restricted to only approved business partners. The site can be used seven days a week and allows businesses to speed response times when ordering products.
Jeff Anderson, global product manager for GEIS, describes TradeWeb as a “hub-spoke model.” The large companies are the hub of the business activities and encourage the small companies, known as spokes, to become part of the trading center. Success comes when the hub encourages many of its smaller suppliers to join the program and submit their forms electronically. “It’s a three-way partnership between what GE is offering, the hub and then all their spokes,” Anderson says.
For DaimlerChrysler Corporation, the product is connecting more than 3,000 partners, making it one of TradeWeb’s largest users. The company employs the system to trade electronically with many production and nonproduction suppliers. It uses between 15 and 20 different standardized forms. Company representatives describe the EDI service as a robust business-to-business commerce tool that handles the behind-the-scenes data crucial to a firm’s daily operations.
GEIS offers different levels of service to its TradeWeb customers. Each level is based on usage. One program allows the subscriber to pay as the service is used. Sending electronic documents through the service under this plan costs $6 per document. Anderson explains that this plan is designed for clients that send an average of four documents per month.
GEIS representatives say the service is truly global. Trading partners from five continents are included in the web directory, and the service can be accessed in the local language of the specific client, allowing participants to view contracts and other standardized forms in their own language. Anderson points out that this feature benefits small companies in nations where English is not the native language. These companies are no longer locked out of trading circles because of a language barrier.
Another international feature of the TradeWeb service is the system’s ability to calculate transactions in the local currency of a trading business. GEIS plans to improve the international service to European Union nations by adding a euro currency conversion to TradeWeb’s capacity.
Business currently is being conducted with partners around the world through TradeWeb’s two main hubs, DaimlerChrysler and Ericsson. Specifically, DaimlerChrysler, headquartered in Stuttgart, Germany, and Auburn Hills, Michigan, is working with companies in the United States, Latin America and Europe. Stockholm, Sweden-based Ericsson maintains relationships with European and many Asian companies, including businesses in Japan and Malaysia. “Because the web has no boundaries, it’s a natural,” GEIS officials say.
In the past, Anderson admits, EDI was limited mostly to large companies that had the resources to buy expensive equipment to support an electronic trading environment. “The cost savings from EDI is gaining more momentum,” he acknowledges. With an on-line, web-based capability, smaller businesses increasingly are able to capitalize on EDI’s benefits. “It’s evolving so that not only the larger companies exchange with the larger companies, but it’s [being used] more down the line,” GEIS representatives offer.
Anderson believes EDI trading communities that encompass smaller businesses will continue to grow. The impetus for this growth has been the advent of widespread usage of the Internet, open systems architecture and the decrease of disparate systems. EDI has evolved with technology, and the decreasing costs of software and hardware have allowed the whole industry to move forward, Anderson explains.
GEIS measures businesses by ranking them in three tiers. The top two tiers—mainly the largest companies—have generally been able to participate in traditional EDI. Anderson states that, historically, these two tiers have only been able to trade electronic forms with 40 percent of their partners. The third tier comprises the remaining 60 percent that still complete purchasing functions manually. Anderson believes TradeWeb will change this and notes GEIS’ efforts to develop products and services to increase this last tier’s usage of EDI. “Certainly, the web has allowed us to have access to the last tier customer,” he says.
Company officials maintain that TradeWeb, in automating the laborious manual transactions, decreases the chance of error. The service is expected to make trading easier, faster and more cost effective. For small companies, decreasing the time between billing and payment is a tremendous benefit, Anderson points out.
In addition, TradeWeb designers are working to address security issues. User authorization and secure sockets layer technology are among the service’s security features. All connections to the system are conducted via a commercial firewall. They are logged, and access to the system is audited.
Although the system is not yet year 2000 compliant, the company is working to eliminate any problems by the end of this year.