Helping Provide Competitive Advantage
The Retail Industry
Among the top challenges in the retail supply chain is reducing out-of-stocks. Think about it. When you don’t find the product you are looking for at your local store, you may visit a different retailer, purchase a different brand or not buy anything at all. None of these outcomes is desirable for retailers or the consumer products companies that supply them.
In recent years, retailers and their suppliers have begun new efforts to reduce out-of-stocks by sharing more data about inventory positions, demand forecasts and sales transactions. For example, by sharing point-of-sale transactions, suppliers can gain insights into exactly which SKUs are purchased in which stores on which days. Based upon the sales volume (and their recent shipment quantities) suppliers can identify which products need to be replenished before they go out of stock. Retailers who can experience fewer product availability issues than their competitors will not only engender more loyalty with customers, but will also increase revenues. In addition to reducing out-of-stocks, B2B integration technologies are used to accelerate new product launches, synchronize price changes and reduce supply chain costs.
The Manufacturing Industry
In the past two decades leading manufacturers in the aerospace, automotive, high tech and industrial sectors have outsourced an increasing number of their business operations to third parties. Contract manufacturers, freight forwarders, customs brokers and third-party logistics providers perform many of the supply chain functions that used to be managed in-house. In addition to outsourcing, these manufacturing companies have redesigned their supply chains using new techniques.
To reduce costs many manufacturing companies have entered into Vendor Managed Inventory (VMI) and consignment relationships with their suppliers. To accelerate the flow of materials and parts through the supply chain, manufacturers have adopted cross-docking and drop-ship models. To optimize working capital, self-billing and early payment models are becoming more popular. These new business models are viewed as offering competitive advantage. But the ability to perform any of these processes with scale depends upon B2B integration between business partners.
Without near real-time sharing of consumption data VMI models are not possible. Without electronic shipment tracking and receiving processes, self-billing cross-docking and drop-ship would not be possible. And without electronic invoicing early payment schemes would be relatively ineffective.
The Financial Services Industry
In fact, financial institutions that support a more flexible array of electronic payment approaches enjoy a competitive advantage in the sales process. And banks which can more quickly connect and onboard clients to their electronic payment processing systems will benefit from more revenue. The faster connections are achieved the sooner transactions begin to flow and deposits shift over.
It may be difficult to imagine at first, but B2B integration technologies are actually helping to save the planet. Here are the facts.
B2B technologies provide a critical foundation necessary to overcome some of the most challenging issues facing both the public sector and private sector today. GXS participates directly in some of these initiatives and indirectly in others. But this is not about us, it is about how B2B integration technologies are helping to make the world a better place.
Homeland Security in the US
Not a ship, truck, train or plane enters the US without the Department of Homeland Security screening an electronic manifest of the cargo and passengers. For example, the US has a program called the Importer Security Filing (ISF) that requires importers of goods to submit EDI documents (B2B technologies) to Customs and Border Patrol at least 24 hours prior to the loading of cargo onto a US-bound ocean vessel. With advanced access to information about the cargo contents, the country of origin and its final destination, US officials can better identify potential terrorist threats.
Reducing Carbon Footprint
Over 40 billion transactions are exchanged between businesses in the supply chain annually. Many of these transactions are communicated between business partners using paper-based transmission schemes such as fax or postal mail. By automating supply chain transactions significantly less paper would need to be manufactured, transported and disposed of.
If all of the 40 billion supply chain transactions were conducted using e-commerce, the environmental impact would be equivalent to 2.3 billion pounds of CO2, which is the equivalent of taking 206,672 cars off the road for a year or reducing gasoline consumption by 434 million gallons or 8.9 million barrels of oil.1
Health Care Reform in the US
Each year billions of dollars are wasted in the US health care system due to excessive administration costs. Experts estimate that 15% of every dollar spent on health care in the US is applied to administrative costs to facilitate paper-based claims and payment processes. Only 40% of transactions such as eligibility verification, referral authorization, claims submission and remittance advice are exchanged electronically between health care payers and providers. Increasing utilization of these B2B integration technologies from their current adoption rate of 40% to a more widespread of 90% would yield $6 billion in savings.
Since the start of the global economic recession in 2008, many small companies have struggled with cash flows. One of the leading causes of the cash flow concerns has been the extension of payment terms by large customers. Many large buying organizations have shifted from paying their bills in 30 or 45 days to 90 or 120 days. Banks offer various factoring and supply chain finance programs which can enable suppliers to get paid faster, sometimes in as few as 10 days. However, these processes are dependent upon the use of electronic invoicing technologies to accelerate the processing cycles. Unfortunately, fewer than 10% of all invoices in areas such as Europe are processed electronically today. Higher adoption rates of these B2B technologies could help to accelerate cash flows to small businesses, enabling them to be more competitive in the global economy.
1. Environmental impact estimates were made using the Environmental Paper Network Paper Calculator Version 3.2. For more information visit www.papercalculator.org.
Helping the Economy
Reducing Sovereign Debt in Europe
Approximately 16% of the European Union’s 1.5 billion Euro in GDP is spent annually on goods and services procured by the public sector. There is a significant opportunity to cut down on the paperwork that creates inefficiencies in the procure-to-pay cycle. Automation of supplier registration, order generation and invoice processing could reduce administrative costs by up to 25%.
Numerous efforts are underway at both a country and a regional level within the EU to promote the use of electronic commerce. Numerous countries have issued mandates requiring all public sector suppliers to submit invoices electronically. Additionally, there are efforts to harmonize the registration and tendering process for suppliers doing business with government entities in multiple countries.
Preventing Tax Evasion in Latin America
Latin America is widely recognized as one of the emerging markets with the fastest growth potential. But the region’s growth has been limited by its informal economy, in which many small and medium businesses violate employment laws, disregard regulations and avoid paying taxes. Countries such as Mexico, Brazil, Argentina and Chile have recently introduced new tax regulations that require the use of electronic invoicing (B2B technologies).
The new e-invoicing processes will allow customs and treasury officials to more quickly identify instances of tax fraud. For example, experts estimate that Brazil could grow 1.5% faster if it were able to reduce tax fraud and shift a greater percentage of its economy towards legitimate business practices.
Accelerating International Trade in Asia
Using B2B integration technologies such as EDI, countries such as Singapore and Hong Kong have been able to greatly improve the efficiency of their sea and air ports. As a result, these countries have been able to obtain more foreign direct investment from multi-national corporations.
When determining where to locate manufacturing plants, distribution centers and logistics hubs, large companies seek to avoid countries with excessive document requirements and burdensome customs procedures. Electronic submission of bills of lading, commercial invoices, customs declarations and packing lists eliminate the need for trading companies to stand in line at government offices to submit paperwork. In recent years a new set of emerging markets in Central Asia, the Middle East and Sub-Saharan Africa have adopted EDI-based international trade gateways to increase the competitiveness of their ports and become more attractive to international investors.