Less than 50% of all interactions between business partners are performed electronically. While data flows at the speed of light between computers within the four walls of a corporation, the information flowing between the firewalls of business partners often moves at a snail’s pace. When data reaches the edge of the enterprise, it stops and waits for a person to convert the data from digital into analog format. Information shared between business partners is often exchanged via mail, fax phone or email. In some cases, the process is semi-automated with people keying data into a website.
On the other side, the recipient must convert the data back from analog to digital format, which usually involves rekeying the information into the company’s own applications. The inefficiencies resulting from this lack of automation create a tremendous drag on productivity throughout the world. In fact, many people have referred to the commercial activities that occur between companies—business-to-business (B2B)—as the most inefficient part of the global economy.
Over the past 20 years hundreds of technology vendors have tried to break down the barriers to B2B electronic commerce with innovative and disruptive technologies. During the dot-com era, venture capitalists invested billions in startups focused on B2B integration and e-commerce. The investments have come not just from Silicon Valley, but from big corporations as well. In the past 20 years, over 60% of the Fortune 50 has made direct investments in companies that provide B2B e-commerce technologies. But most of these investments have failed to meet expectations.
Consider the following statistics:
Retail—The UK retail industry has one of the most technologically advanced supply chains in the world with widespread use of B2B integration. The EDI standards introduced in the 1970s have gained adoption by all the major retail chains. A recent GS1 UK study found that 87% of purchase orders and 84% of electronic invoices are exchanged via EDI today. But a lot of work remains to be done. Only 38% of shipments have an electronic ship notice associated with them.
Automotive—The European automotive industry is also very advanced in its adoption of B2B integration technologies for the supply chain. However, only 40% of auto suppliers receive delivery instructions and delivery forecasts via EDI technologies that were introduced in the 1970s. And even fewer—less than 30%—receive purchase orders and invoices electronically. The remaining data exchange is conducted using semi-automated (analog) methods such as web portals, email and faxes.
Financial Services—The US securities industry has been a pioneer in adopting B2B integration standards such as FIX and SWIFT for trading of stocks in the past few decades. However, most of the trading of bonds, hedge funds and derivatives is not fully automated. Faxes, emails and phone calls are used to exchange information between investment managers, broker/dealers, custodians and depositories.
Service Sector—In 2001, the European Union passed its first directive authorising the use of electronic invoicing. The EU requires strict controls on the invoices used as the basis for VAT collections. However, over 10 years later less than 10% of the invoices exchanged throughout Europe are electronic. While retailers and manufacturers in the supply chain have achieved relatively high levels of adoption the uptake amongst public sector and service sector organisations remains very low.
But what is that makes B2B integration so hard? There are lots of reasons, both technical and business-oriented in nature.Pages: 1 2 3