Archive for the ‘EDI’ Category

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by Oliver Schmid  – IAOP :: International Association of Outsourcing Professionals Member


1.) What is outsourcing?

For years, outsourcing has been on the mind of many business people but what one associates with the term outsourcing, might be conceived as something completely different by somebody else. The only common ground is the understanding to give a task or process that used to be performed internally to a third-party service provider for fulfillment.

2.) Types of Outsourcing:

Outsourcing can be as mundane as giving support to somebody else and might be as complex as having business core processes being performed by somebody else.

Typical tasks and/or processes that are outsourced can be:

  • Partial or Total Outsourcing: Some functions or tasks will be outsourced partially while other will be outsourced in its entire. Partial or complete outsourcing can also be seen differently and depends of the viewpoint (Customer / Provider) of the parties involved. It also depends of the overall functionality of the to-be outsourced operations and can often not be determined clearly.
  • There is outsourcing of only operational functions vs. outsourcing of functions, tools and personnel.
  • Business Process Outsourcing (BPO): Interpretation of the meaning of BPO varies and depends again on the point of view. From a customer point, it could be giving away an in-itself-closed-business-process for which the provider carries complete responsibility. From a legal aspect, it is imperative to define all roles and responsibilities in a contractual from and every party involved need to understand their individual responsibilities and the consequences for non-compliance.

3.) Goals

The possible reasons for customers to look more closely at outsourcing to are equally diverse and complex as its possibilities and approaches.

Therefore, only some of the usual motivations for outsourcing will be referred to here:

  • Focusing on core business:
    • An organization wants to concentrate its resources on its core business, and therefore functions that are not part of its core business will be outsourced.
  • Cost savings and optimization:
    • An organization wants to reduce its cost of doing business through outsourcing by creating a flexible cost structure, which is directly related to the performance of its service provider.
  • Purchasing skills:
    • An organization wants to benefit from the increased competence of the provider who considers the to-be outsourced function as its core business. Often, an organization also wants to reduce its performance risk through contractual reassignment of performance risk to its service provider.
  • Flexibility:
    • The provider can often offer the customer more flexibility in the implementation of the delegated services than it would have been possible to a customer with its limited resources and scope for action.

4.) An outsourcing project is divided generally into:

  • the preparatory and planning phase, which includes the Baseline analysis, defining goals and determining the future procedures,
  • the initiation phase with the selection of the provider. and the contract negotiations,
  • the implementation phase with the transfer and the Setup of the facility (or Transition to Operate) and finally the actual
  • the start of the actual operation

Looking at the continuous “life” of an outsourcing initiative the following phases will follow:

  • Review and optimization of relationship and implemented processes
  • At contract expiration either the transfer of all functions to a new service provider or the return of the outsourced functions to the organization (insourcing)

5.) Preparation & Planning:

At the beginning of each outsourcing, a strategic analysis is performed to determine which services or which divisions will be outsourced as well as where the interfaces between the internal and external providers will be in the future.

Following this phase the outsourcing scope will be defined, which will include the functional spectrum. It should definitely be avoided not to make any clear commitments at the beginning, because the scope is the basis for all further tests, the structuring of the outsourcing and the subsequent tender.

The next step would be the internal analysis (assessment) of all areas that are part of the scope:

  • What personnel and which assets are involved?
  • What type of data is available?
  • Current Cost?
  • Which services are currently performed internally and which are already performed externally?
  • To which extend have processes and services already been documented?
  • What is the quality of the currently performed services?
  • Is delivery of services consistent with the according service performance documentation?
  • Are there any legal aspects that need to be considered; e.g. transfer of licenses?
  • Are there any industry-specific aspects to be considered (e.g. in the financial area)?

Oliver Schmid has extensive experience in offshore outsourcing to the Philippines, nearshore outsourcing to Canada and onshore outsourcing of matrix oriented call centers.  He is also versified in outsourcing of data center operations and data center monitoring and support. In addition Oliver Schmid participated in various 3PL and Supply Chain outsourcing initiatives.


Oliver Schmid, EzineArticles.com Basic PLUS Author


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The Structure of Outsourcing by Oliver Schmid is licensed under a Creative Commons Attribution-ShareAlike 3.0 Unported License.


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Even the article ”

“Top 10 Risks of Offshore Outsourcing”

by ZDNET.COM is already 7 years old, it still contains valuable advice about offshore outsourcing. Many business are doing any of it and are wondering why their offshore outsourcing projects are failing or do not show the expected result or success.

Today while companies are struggling to reinvent themselves it is even more critical to have a structured outsourcing plan in place. A plan that everybody from the top down agrees upon and is able to follow. Not all organizations have the resources and/or skills and experience to do it right the first time around. In today’s economy it is critical that all aspects are considered and only a person with the respective experience can help to make an outsourcing task or project successful. Talk to somebody who has the experience and has this done already  multiple times successfully.


Oliver Schmid has extensive experience in offshore outsourcing to the Philippines, onshore outsourcing to Canada and domestic Outsourcing of matrix oriented call centers.  He is also versified in outsourcing of data center operations and data center monitoring and support. In addition Oliver Schmid participated in various 3PL and Supply Chain outsourcing initiatives.

Electronic Data Interchange or EDI has been becoming increasing popular since the early 90’s. Often pushed by large organizations, like retail chains, large warehousing and distribution providers, etc.,  with high transaction volumes in order to reduce cost. Cost that occurs through manual data entry labor, printing documents like orders, order confirmations, shipping documents, etc.

Unfortunately EDI has one big drawback. As mentioned, EDI is usually first implemented at larger organizations and then pushed down to their vendor. These larger organizations developed their own standard within the already existing ANSI X12 (mainly deployed US/Canada) or EDIFACT (mainly deployed in Europe and Asia). This standard is then passed on to their trading partners. These trading partners or vendors can be larger organizations that have the resources to maintain their own EDI department, but they can also be smaller organizations that do not have the resources available to have their own EDI department or people.

Now why would I need my own EDI people you may ask. The answer here to is: You have a number of customers of which only a handful may require from you to be EDI compliant. These are usually organizations that deal with a large number of vendors. The way it usually works is that these organizations dictate the trading standard, meaning they tell you what your transaction sets you trade with them has to look like. The most common transactions organizations usually start out to trade are purchase orders (ANSI X12 – 850 / EDIFACT – ORDERS)  and invoices (ANSI X12 – 810 / EDIFACT – INVOIC), since these documents lay the base for all other subsequent transactions and are the easiest to setup.

The problem now is, that you have only a small number of customers that do EDI, but usually every single one of them has a standard developed that fits their ERP Solution and they force you now to adhere to this standard even if it does not fit your system. Your organization needs somebody to develop maps that translates your customers standard into a file format that your system can understand and vice versa any document coming from your system will have to be translated/mapped into a file/transaction that can be read by your customers ERP Solutions.

This process is called “Certification”. It means that your organization needs to get certified by your trading partner as EDI-compliant. EDI compliant means that your trading partner certifies that you were able to import  the transactions (e.g. purchase orders) you received into your system in such a way that you were able to produce an order in your system and then fulfill the order and send back an invoice, which was correct in regards and relation to the original sent purchase order and  that it  could be read and imported into your trading partner’s system without any issue.

Developing these maps and perform testing and certification can be a fairly lengthy and expensive process if you have to do it on you own. The reasons here for are that you will have to invest into you own EDI Mapping Software Solution (Translator), have people who not only are familiar with your Translator but also understand the various EDI Transaction sets (orders, invoices, advanced ship notices, order confirmations, change orders, etc.).  Remember maps have to be developed for every single one of your trading partners and be tested.

You may think that should not be to difficult. Let us just take an order. An order that is  entered manually from a printed form has various information in various places. Take now these manual orders from all your trading partners and compare them side by side. Non of them looks the same. None of them has the same information in the same place on the purchase order form. One PO may require you to ship the product on a certain date. Another PO asks for the product to arrive at the customers location on a certain date. Others give you shipping windows, meaning a product can arrive as early as … but not later then … .

When these orders are now sent in a file the same happens. All the relevant information is in different places within the file.  A human eye can easily detect the various information that is required to process the form. A software unfortunately has to be programmed and told where the information is located within the file and then mapped/pointed into a new file format that fits your system.  This must be done for each trading partner and each single document type for each trading partner.

On top of this, there are various communication methods in which organizations want to send and receive their transactions. Some utilize a Value Added Network or VAN. A VAN is more or less an electronic mailbox in which transactions are stored until they are picked up by the respective party. Then others want to trade directly with you using AS2 (S-HTTP) or AS3 (Secure FTP (S-FTP)). Some want to send you the transaction in its native ANSI X12 or EDIFACT Form. Others will be using their own file format or  XML. The variations are almost endless.

For an organization that deals only with a small number of trading partners it may be to expensive now to invest and acquire a translator and have their own resources to develop and maintain transaction sets and on top of it monitor the daily transaction volume.

This is when outsourcing makes sense. Outsourcing providers come in various flavors. There are the ones that require you to invest in your own mapping solution and they then develop the maps. You invest in hardware, software and monitoring resources. Then there are the ones that provide you with the whole service; meaning  they not only have the software and the resources to develop the translation maps, but they also monitor the transaction and are your first line contact for all your trading partners EDI issues and deal as intermediary between you and your trading partner for any questions or issues that may arise.

If you have a large number of trading partners and a high traffic volume it may make sense for you to invest in your own EDI resources (hardware, software, staff, knowledge, etc.)

Often organizations feel overwhelmed with the task evaluating what is the best solution for them and finding the right software and or outsourced EDI Service Partner.

Here is where you may want to talk to me. With more than 15 years of EDI experience, I have dealt or worked  with many different possible solutions. Whether it is doing everything inhouse, partially outsourcing EDI or completely outsource the whole solution, I have spend many hours and days, evaluating various EDI Translators. I have talked to and dealt with various solution partners.

I not only now what to look out for and what questions to ask, but I also have the experience to evaluate with you what may be the right EDI Solution for you, this includes providing a cost/benefit analysis for your business.

Feel free to contact me for a free 1 hour consultation by calling me at 770-776-6182 or sending me an email to oliver.schmid@4954itc.com.

Oliver Schmid, EzineArticles.com Basic PLUS Author


by Oliver Schmid / 4954 IT Consulting, LLC

Nearshoring (also known as “nearshore outsourcing” and “nearshoring”) means sourcing service activities to a foreign, lower-wage country that is relatively close in distance. (Source Wikipedia)

outsourcing2

Outsourcing means that you are sourcing experts in their fields.
Now, you made the decision to outsource certain business processes. The question now remains, do you want to go offshore, (which is usually from a straight financial aspect the cheapest solution), stay onshore (usually the most expensive solution) or outsource to a near-shore service provider (usually more expensive than off-shore but less expensive than onshore outsourcing).
The question you may want to ask yourself: “But how good is an expert that has all the technical expertise but does not understand your business needs and requirements, due to cultural misinterpretation or due to language barriers. What benefit does it have, if you have the hardest time to contact the people you work with due to differences in time zones.”

This is what may happen when you outsource to offshore service providers.

Please, don’t get me wrong, I have nothing against offshore outsourcing, where it makes sense. Not all outsourcing projects lend themselves for offshore outsourcing. I have worked in the past on various offshore outsourcing projects. Some were 100% successful but some we had to change midway and bring some of the outsourced BPO (Business Process Operation) either back inhouse or to a onshore or near-shore outsourcing partner.

Near-shore outsourcing makes sense in outsourcing projects that require frequent personal interaction, like hands-on product training and/or education about product and company processes. Another area that lends itself as a perfect candidate for nearshore outsourcing is software and application development and here especially if it is an add-on development to an existing solution that is critical to the overall business process.

More and more countries close to the US, like Argentina, Mexico and Peru have companies that concentrate t deliver near-shore outsourcing solutions in the areas of software and other technical IT areas. These countries have the advantage of being close to the US in regards to time zone and travel distances. People and organizations understand the US business culture better than countries in Asia or Eastern Europe.

If you are exploring outsourcing opportunities at this time or any time in the future please contact me and I will together with you evaluate your requirements. I will not develop and propose a solution based on my experience alone, but I will work with you to come up with a solution that fits all your needs, makes financial sense and delivers, while guaranteeing sustainability of the solution for the future.

Together with you I will find the right partner for you and will work with you through the process all the way from intiation to completion. I will be your partner  and your consultant at al times, representing your needs, requirements and demands. I have implemented offshore and nearshore as well as onshore outsourcing solutions in the areas of customer service (call center on demand support), software development, IT Infrastructure hosting and Logistics and Supply Chain outsourcing to 3PL and 4PL providers.

A provider we agree on will have the  expertise of advanced technologies has alloweto provide innovative, customized, groundbreaking, sustainable Nearshore software solutions and providing your business with an outstanding value and a competitive edge.

I work with service providers in the areas of IT Consulting that have an uncommon combination of experience, know-how and leadership, which allows me offer consulting services on the application of information technologies to achieve substantial improvements aligned with your business objectives. Whether it is in the areas of

  • Internet,
  • Technology Architecture,
  • Business Intelligence,
  • Network Security,
  • or custom Software Solutions Development.

The providers I chose with you can perform

  • Risk Analysis,
  • Vulnerability Analysis
  • and develop security policies suitable to your organization.

They advice and development procedures that guarantee for your systems:

  • Integrity,
  • Confidentiality,
  • Availability
  • and Irrefutability (Non-Rejection).

For a free one hour phone consultation please contact me at +1-770-776-6182 or send me an email to oliver.schmid@4954itc.com

by Oliver Schmid / 4954 IT Consulting, LLC

Outsourcing EDI  is increasingly being chosen by companies of all sizes who engage  in EDI.   Suppliers are put under pressure from their customers to adopt EDI, but find that they are investing resources and money into, which may for the organizationa non-value-adding activity, while negatively impacting  the core business.  Even companies who come willingly to EDI are often put off by the extra resources and technical expertise it demands.

There are EDI Standards that have to be learned like ANSIX12, EDIFACT or XML and knowledge has to be maintained, since structure of these EDI standards changes all the time, as well as customers often change their internal standards and usually is your responsibility to stay up-to-date on these changes.  In addition EDI translation maps for your various trading partners (TP) need to be developed and maintained.

Learning and maintaining those standards, developing and maintaining TP maps on an ongoing bases,  plus the acquisition of an internal EDI Solution (Translator, Hardware) can be expensive.  To setup an in-house EDI System you need:

  • EDI Translation Software – The low end packages are a few thousand dollars and they go up from there. And usually you get what you pay for.
  • EDI VAN Services – A few hundred dollars to set up and monthly charges based on volume. And volume may go up quick, since a trading partner not only sends you an order (ANSIX12 – 850), but wants in return a “Functional Acknowledgement (ANSIX12 – 997). These are already two transactions for one order. The next thing a TP usually will require from you to be send is an EDI Invoice (ANSIX12 – 810) and you will in return receive a Functional Acknowledgement back. And already we are at four transactions just for one order. Transactions that may follow down the road are Advanced Ship Notices  (ANSIX12 – 856) (which are by the way one of the most difficult transactions to setup and to satisfy), Change Order Request (ANSIX12 – 860), etc.. And anytime you are not able to trade these documents in a timely and for your customer satisfactory condition you will get hit  with a Charge-back, which someday will be a complete Blog Subject of its own.
  • EDI Integration with your Business Software (Your ERP Solution or accounting package)  and this can be expensive. Even most EDI Packages today claim to seamlessly integrate with the major back-end systems, some customization is usually required and depend on your needs and your customers requirements.
  • EDI Technical Staff – You will need at least one technical person to set up the EDI Translation Software and integrate with your back-end system. This person will not only need to understand the technical challenges your business has on top of all the EDI requirements from your trading partners and of course the systems and software involved.
  • EDI Coordinator – At least one person, which will oversee the day to day operations of your EDI system to insure all your documents are flowing in and out of your systems  correctly and in a timely manner. This person is usually also the direct contact for your trading partners in case anything goes wrong on your end or your trading partners end and coordinates the resolution.

Summary: There will be some significant upfront cost and investments, as well as some ongoing investments in staff and operations to maintain an In-house EDI System.  This does not mean that you should outsource your EDI Operations at all cost, but you definitely should perform a detailed cost benefit analysis to see what makes most sense to you.

email: oliver.schmid@4954itc.com

Phone: +1-770-776-6182

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