Interconnecting Business-to-Business

The need for supply chains to minimize inventory and reduce cycle times became important a decade ago as retailers like Wal-Mart began automating their supply chains. Using their speedy logistics to support their tremendous growth gave these retailers a distinct advantage.
In using EDI (electronic data interchange) to interconnect their systems with their vendor's systems, retailers have been able to improve response time and increase productivity. However there are areas where EDI falls short and this is where business-to-business (B2B) electronic commerce can bridge the gap.
EDI works by interconnecting systems using document-based coupling, which interchanges messages (files) that can be read by the retailers' and suppliers' legacy systems without actually interfacing their applications. Using EDI, a purchase order, an advance shipping notice, or an invoice can be turned into an unique message and transmitted between companies.
Where EDI falls down is in the very document-based messages that allowed for quick response prior to the rise of the Internet. These messages do not allow for interactive searches or collaboration, they are also less immediate than connecting online. Using the Internet allows retailers and their suppliers to connect efficiently in real time with a simple browser. In contrast with the immediate gratification of a browser and Internet connection, the speed of EDI transactions now seems somewhat slow. Considering that business messages have to be created, transmitted, received, and finally processed in order to go full cycle, EDI no longer corners the market on speed.
Unlike EDI, the technology of B2B ecommerce can combine product catalogs and support information, and then link directly into retailers' and suppliers' procurement and ERP systems. XML (extensible markup language), which is heavily used in B2B, can be integrated with existing EDI systems by providing forms that can be completed to generate EDI messages. XML can also reverse the process and take data received via EDI and translate it into a document that can be viewed on a standard Web browser.
Using XML, a vendor's catalog could be married into a retailer's merchandise database. Flipping the XML around, the buyers can order by SKU, style/color/size, or whatever other method they prefer, and have their purchase orders translated into the part number information needed by the vendor. The benefit in allowing users to work in the method that makes the most sense for them is a tremendous advantage to the new technology.
Web-based systems of all flavors will be able to be integrated with various B2B exchanges to allow retailers and their suppliers to vastly increase their productivity and reaction times. In addition to the other benefits of B2B discussed earlier in this series, the Internet will make real time collaborative planning, forecasting and replenishment (CPFR) a reality, creating more satisfied consumers and more profitable vendors and retailers.