Trading partner advantage is big motivator behind B2B operations outsourcing
By Staff -- Manufacturing Business Technology, 4/1/2007 12:00:00 AM MDT
An apparent shift in the motivation behind B2B operations outsourcing is under way, moving from a tactical, cost-cutting focus to one of enhanced business value.
Why exactly do companies outsource their B2B operations? Cost, of course, is a primary driver, as it is for many business decisions. But several other justifications come into play when considering outsourcing B2B network management.
According to a recent survey by e-commerce and data-synchronization solutions supplier GXS—whereby the vendor polled its customer base—respondents cite improved customer service, enhanced B2B technology, and automated trading-partner processes as drivers for outsourced B2B network management.
Two-thirds of survey respondents are from companies with greater than $1 billion in annual revenue, while nearly 20 percent had less than $100 million in annual revenue.
The survey intended to answer three fundamental questions: 1) Why do companies outsource their B2B operations; 2) Once they have outsourced, how do they measure the ongoing value of their outsourced solutions; and 3) What is the ROI associated with B2B outsourcing.
“The perceived value of B2B outsourcing is the most significant finding from our survey,” says Ryan Kraudel, director of product marketing for GXS. “It's difficult for many midrange companies to keep up with the latest B2B technology because it's not a core competency for them. Plus, they want to improve customer-service levels by offering the latest data formats and protocols.”
GXS hopes to relieve companies from maintaining technology standards while keeping apprised of the many changes that occur due to constantly fluctuating customer requirements and other factors.
“Only a small fraction of trading partners is doing e-commerce with their manufacturers,” says Steve Keifer, VP of industry solutions for GXS. “Some do not have the resources or budget to start programs of their own. Every company follows different standards, protocols, and security, which are constantly changing, so it is difficult to manage.”
GXS' Trading Grid solutions—which include global messaging, B2B gateways, and other data synchronization tools—are used to translate, transform, and format different EDI protocols. “We help suppliers communicate electronically with their external partners,” says Keifer. “Many need to communicate on a daily basis about shipments, forecasts, payments, and other logistics concerns.”
San Francisco-based PG&E, a large utility company, has used GXS for nearly eight years. It recently expanded its contract to include managed services as a part of an enterprisewide business process change. When PG&E receives a file in native format from a customer, it sends the file to GXS, which then translates it into an EDI transaction for transfer to PG&E customers.
PG&E also has been using GXS in its accounts payable department, indicating that it did not want to purchase additional software for its e-commerce services.
“We were looking for a flexible system since we follow strict regulatory requirements,” says Victor Jimenez, PG&E lead architect, middleware. “We must be flexible enough to handle another 3,000 EDI transactions daily without investing in additional software or hardware. We need the infrastructure support to ramp up or down without the guarantee that the transactions will come.”
“Now we can be proactive,” says Jimenez. “GXS has a monitoring system that allows us to flag certain transactions with an alarm. Therefore, if a transaction fails or a rejection occurs, we receive an email notification about the error.”
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