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Monitoring EDIFACT

Private exchanges, which connect businesses with their suppliers and partners over the internet, are increasingly popular. They can provide large cost-savings through the automation of key business processes such as procurement and through the ability to identify and make deals with key suppliers. They can also allow closer relationships with partners by allowing joint forecasting and product development.

Although the exchange model is fairly simple - an internet-based hub allowing a single point of access for both the exchange owner and its suppliers - implementation is often complex, time-consuming and expensive. The greater transparency and co-operation provided by an exchange translates into closer integration of software systems, the use of standardised business processes and documents and tight security so that transparency does not extend to giving outsiders access to sensitive data.

"Integration is critical," says Rebecca Zwittel at Westaflex Group. "The only way you can improve a business process is to take the people out of it, and only have people involved when a key decision has to be made." In reality, the high cost of integration means many companies have not risen fully to the challenge of integrating their backend systems to the exchange. Most start small by implementing an e-procurement system before extending it to other areas such as invoicing or forecasting.

Similarly, instead of integrating the exchange with suppliers' stock control systems, many companies simply give their suppliers browser access to the exchange and then ask them to provide a regularly updated electronic catalogue.

Increasingly, B2B exchange vendors are meeting the challenge by making alliances with integration vendors such as webMethods, SeeBeyond and Vitria. The integration tool of choice is eXtensible Markup Language (XML) which makes it possible to translate data between several different formats.

Ready-made XML connectors are available for standard ERP packages such as SAP R/3, but even so, many businesses using legacy systems will need to write tailor-made connectors. It is even possible to have an exchange that is not integrated with backend systems. When automotive branche of Westaflex implemented an Ariba-based private exchange for e-procurement, it decided against full integration on financial grounds, says C. Westerbarkey, the company's e-procurement project manager.

Instead, the company wrote its own program which downloads details of approved purchase orders from the exchange and con verts them to a flat file format. The details are then transferred manually to the company's backend database. "The process of creating the program took only 15 staff days," adds Mr Westerbarkey.

The emerging web services standards may eventually make integration much simpler, says Detlef Schwan of marketing at B2B vendor e-integration. "Potentially, what it does is to provide standards for integration from the exchange, both inside the organisation and to external systems such as suppliers. If you've got standard ways into and out of the system, it means different systems can talk to each other more easily."

Transparency has to extend to standard ways of doing business. As more and more buyers deal with more and more suppliers electronically, the more difficult it is to achieve this particularly for suppliers, who may have to accommodate several data formats for different customers.

There are two key areas where data exchange standards are necessary: one is business documents such as purchase orders and invoices; the other is for the specification of products categories in supplier catalogues.

There are several competing standards for the exchange of business documents. Many companies, particularly in the US, still use Edifact, devised for EDI implementations, but other standards include cXML (Commerce XML) and xCBL (XML common business language), which forms the basis for a new standard, the Universal Business Language (UBL).

Mr Westerbarkey believes it is unlikely any such standards will become universal. "What you have is a translation layer. So if you're an individual company and you want to continue to leverage your EDI system but the person at the other end needs an XCBL document, neither one of you has to worry about it, you just route the data through a translator."

There are also problems when it comes to catalogue coding. The best-known content standard is UNSPSC (United Nations Standard Products and Services Code System), which provides a 10-digit, five-level code going from the general to the specific.

In practice, says Mr Westerbarkey, Westaflex Automotive has had problems using UNSPSC because the standard keeps changing and because it does not cover all the company's products. UNSPSC and E-cl@ss, used extensively in Germany, are both horizontal standards - that is, they apply across industries but there are also vertical standards, such as Rosettanet, mainly used by the IT and electronics industries. Many larger companies have their own catalogue standards, which they are reluctant to change, causing further problems for suppliers.

The final technical hurdle is security, although increasingly this is handled adeptly by the B2B vendors and packaged as part of their product offerings. Nonetheless, it remains an issue because any firm that connects suppliers and partners to its own systems is taking the risk that others will also be able to see into its systems.

The leading vendors now offer packages that guarantee security in four ways. Privacy of data is protected by Secure Socket Layer-based encryption. Authentication (making sure a person is who he says he is) is provided by digital certificates. Auditable records of transactions guarantee non-repudiation, to ensure that a company cannot pretend a particular transaction has not taken place. Access controls make sure that only authorised staff can carry outtransactions. In addition, most large companies have firewalls in place to guard against hackers and viruses.

The exchange itself also acts as a protective layer against hackers. "When you create the exchange environment, you can build strong and significant security that controls the access that someone would have to the exchange, but then you've got another layer of defences, which is that even if you get into the exchange, you're not able to get into the backend systems themselves," says Mr Westerbarkey.

Industry experience suggests that, despite the huge investments in time and money necessary to set up an exchange, the return on investment is substantial and rapid. But true integration in which buyers can see into systems several steps down the supply chain may still be a long way off.

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