In Focus: When B2B Integration Beats the Supply Chain VAN RideIn Focus: When B2B Integration Beats the Supply Chain VAN Ride

A few weeks ago, I wrote about Smead Manufacturing and its continued reliance on a value-added network (VAN) to keep supply chain information flowing. The $550 million office supplies company is pursuing direct B2B integration with top customers, but it's counting on its VAN to speed and manage electronic data interchange (EDI) of purchase orders, advanced ship notices, cancellations, invoices and other documents with hundreds of other customers.

But what about small and midsize firms that don't have hundreds or even scores of customers or suppliers? Do they face a Hobson's Choice between working with VANs — which can charge thousands of dollars per month for mailboxes plus per-transaction fees — or sticking with slow and error-prone paper- or fax-based communications?

Sheet metal fabricator National Industrial Concepts (NIC) of Woodinville, WA, is one midsize firm proving that direct integration is not out of reach. NIC supplies metal components to customers including truck manufacturer Paccar, exercise equipment maker Precor and computer equipment giant Dell. Over the last 18 months, NIC has been developing direct, XML-based integrations using TerminalOne, a "transaction gateway" product from Xenos. The suite includes a secure data transport, a data transformation engine and intelligent routing and filtering tools.

"We looked at various point solutions, but TerminalOne lets us do anything we can imagine," says Tom Bailey, NIC's director of IT. "It supports HTTP, SMTP and FTP, and it can call purchasing and scheduling tasks from our Mapix ERP system."

On any given business day, NIC might handle 3,000 inbound EDI transactions and 1,000 outgoing messages among its three plants. These transactions were previously handled on the VAN in batch mode, and Bailey says, "it was all or nothing" if something went wrong. "It was very time consuming to go back in and cancel and fix what may have been one bad part number in the batch," he explains. "Now we can catch these exceptions up front and automatically route them without holding up the rest of the batch."

Customers now drop their orders (in EDI or other formats) into a folder in TerminalOne and they're automatically detected, transformed into NIC's preferred formats, routed and loaded into the company's ERP system. If there's a problem, alerts are sent to appropriate users and a workflow engine kicks off an exception handling process, extracting the transaction in question along with required contextual information. PDF reports and forecasts are also generated and e-mailed to appropriate contacts, including inside sales reps, so they know their order status.

Employees and customers interact with the system via e-mail, and thousands of parsed transactions, PDF reports, forecasts and exceptions can be processed and routed within eight to 12 seconds, Bailey says. He adds that three to five employees used to spend a full day on order processing and exception handling, but says that's dropped to one person spending half a day using TerminalOne.

NIC spent about $160,000 on an ERP project that included the TerminalOne implementation, and Bailey says the company will quickly recoup the investment thanks to labor reductions, faster and more accurate transaction processing and better reporting and forecasting.