Aug. 1, 2006

In today's competitive B2B economy, testing EDI (electronic data interchange) transactions makes more sense than ever. Overall, the consensus is that EDI transactions must be closely verified to ensure viability, integrity and accuracy. What you may not agree is what the costs are and how they should ultimitely be paid.

For the most part, opinions are split along a line that falls along a specific company's position in the supply chain. Also, a lot has much to do with the size of your organization.

Most of us agree the purpose of testing is to assure that necessary information about B2B and EDI transactions are communicated in an expected manner and format. Motivations are similar in that both customers and suppliers want to take advantage of the efficiencies provided by the EDI process that minimize manual intervention and allow orders to be processed in the most automated manner possible.

The converse of this, and the possible result of poor or no testing is the increase in costs that result from transactions that don't flow properly and require manual intervention.

The cost of managing bad transactions can be significant for both suppliers and customers, but customers usually have higher transaction levels. In addition, customer organizations have more consistent formatting requirements, partly because they are the organizations generating the purchase orders and mandating their suppliers to comply with their requirements. Suppliers have the burden of dealing with multiple customers and the resulting variety of document requirements.

Given that the customer organizations have seemingly better control over the data that comes to them from their suppliers, it would seem logical that these companies would do everything they could in order to reduce the errors and data mistakes in documents they receive. Even so, customer companies have other methods of reducing their costs of dealing with bad transactions. They can simply impose fines on their suppliers for every transaction that requires intervention. These fines act as motivating factors to suppliers.

Lisa Steinbuck, EDI Specialist with Perfetti Van Melle USA Inc. says, "ASN fees are very frustrating to us. For example, Toys-R-Us charges up to $250 for missing ASN information, and because we are shipping smaller quantities in each shipment, the fines are often more than our profit for those shipments." The reduced shipment sizes themselves are a byproduct of the efficiencies electronic order processing has delivered, making it possible for companies to order only those quantities needed to support just-in-time (JIT) supply.

Whether $250 per transaction is realistic or outrageous is the subject for a different debate. Certainly, part of the fee goes toward paying the technical staff for their time to resolve the problem and process the document (even though the document may simply be rejected). Any residual from the fine could be considered punitive and an incentive for the vendor to resolve the problem. In effect, these fines amount to after-the-fact testing fees.

Brooke Ameling with Tippmann Pneumatics admits, "I am never happy about paying $300 to $700 in testing fees, but once I get over it, most of the testing I've done has been easy and worth while. But it does depend on what company does the testing, and what method has been chosen for the test." Ameling refers to two different kinds of testing she has had experience with. One kind of testing is an emulation of actual transactions, using the same data that would be used in an actual order, while the other is unrelated to the actual business transaction and seems to be more of a test of the EDI professional's skill in manipulating data.

Ameling explains, "I've had two very different experiences recently with two kinds of testing, and we paid about the same fees for both. I'm not sure whether it is the customer or the EDI provider that determines what kind of testing to do, but we feel much more confident after testing with real data."

Ameling is participating in KMart's "Extreme Item Makeover" project, working with Inovis, KMart's chosen service provider. "I don't know that what we did really qualifies as a test of anything in particular," says Ameling. The test consisted of a text document with a series of meaningless fill characters where actual product data would normally appear. "I had to download the file, manually replace the filler data with my real data, format the file to be acceptable to our EDI system, and eventually process it. Then I had to perform the reverse operation before uploading the file to Inovis."

The cutover was originally scheduled for August 1, 2006 but Ameling was informed that date has been pushed to sometime in September. Though she has passed the testing phase, she says, "I'm sure there will be additional issues that will need to be addressed when we go live with the new format."

In contrast to that experience, Ameling worked through a mandated implementation with Cabellas. "The tests were complex and demanding, but because the EDI documents included our specific data we were able to work through them all in less than a day," says Ameling. "We worked with SPS Commerce who helped us through the testing and gave us results of our test runs within minutes so we could retry right away."

From the perspective of the customer, fees are simply a part of getting the job done. According to Todd Wermerson, VP of MIS for Northern Tool and Equipment, onboarding their vendors using internal resources simply wasn't working. "In 2003 we had very few vendors using EDI with us. We started testing vendors using actual data, and got an EDI service provider to handle all the customer contact and testing for us." The company now has 86% of its vendors onboard, up from 15% in 2003.

"Paying for the testing service is always a concern," says Wermerson, "but we don't have a choice. As a company we can't manage 1,000 vendors with the associated testing. And we think there are benefits to both companies in getting EDI implemented quickly and efficiently."

Jesse Sphaaf, EDI coordinator with Northern Tool says, "Having an outside company handle our testing and certification means consistency. Every vendor gets tested the same way and we are sure their transactions will work." When a vendor is ready for testing, Sphaaf generates a set of purchase orders using that vendor's specific product data. "That starts the process," says Sphaaf. "We use the same information then for the ASNs and invoices."

Wermerson adds, "We get almost no complaints about paying for testing. Those questions we do get are about whether the charge is legitimate. When we explain that we believe the charges are reasonable for the service, we get very little resistance from our vendors. The fees are independently assessed by our EDI vendor (SPS Commerce), and we are not involved in establishing, nor receive any portion of the fees.

EDI testing will continue because it is a necessary part of implementing and maintaining electronic commerce. Those organizations that understand the need and the purpose of testing are likely to be the ones that drive their trading partners to adopt rational strategies for transaction validation... or testing.

Source: Line 56