Roger Hardy, who in February sold web-only eyewear company Coastal Contacts for $385.7 million, will consolidate OnlineShoes.com and ShoeMe.ca.
The Internet may make connections easier, but software complexity still creates a role for VANs
The promise of electronic trading once seemed so simple. If all suppliers could hook up with all their customers electronically and trade purchase orders and invoices, the supply chain would be a much better place. No delays while paper moved from one place to another, or worse, failed to move. Orders at one’s fingertips and replenishment at the click of a computer key.
But electronic trading wasn’t that simple. Computer-to-computer talk wasn’t as easy as it seemed and installing, testing and running new computer systems wasn’t cheap-many smaller suppliers and retailers couldn’t make the investments needed to take advantage of electronic trading.
Enter VANs-value-added networks that hosted the trading software. Retailers and suppliers could link to each other through a VAN mostly via dial-up networks without investing in and maintaining the software. VANs were a large part of what made electronic data interchange work.
In spite of VANs’ success, though, many thought their days were numbered when the Internet became a commercially viable network. After all, they argued, now that all it took was a browser to connect to the customer, what role did VANs have any more?
A big one it turns out.
“Everyone’s been looking for a way to reduce the need for VANs,” says Tom York, president of York Worldwide Technologies Inc., a VAN. “Everyone thinks suppliers can send data directly to retailers. But VANs still provide important services.”
York Worldwide was started in 1992 with the mission of helping suppliers deal with the demands retailers were making for electronic trading. ANSI standards changed twice a year and the biggest retailers expected their suppliers to keep pace. “Vendors were having a nightmare of a time keeping up with the changes,” says York, whose background includes a stint as an IT manager with a retailer.
And even today, when the Internet provides a common interface, software development continues apace and the rate of change has not let up. “Our message to the suppliers is: ‘That’s not what you do best. Your expertise is in making candy or whatever, not developing and maintaining technology. It’s just like when you need legal services. You don’t hire a lawyer to be part of your staff. You can approach technology the same way,’” York says.
In addition to simply allowing retailers and suppliers to talk to each other, York provides other services. For instance, York automatically secures each transaction. York also provides an audit trail. Even with the new AS2 initiative that provides secure transactions and an audit trail, VANs will have a role, York says. “Vendors may be required to do AS2 and maintain a legacy VAN connection,” York says. “It makes vendors’ jobs harder. Now they have another technology they have to support.”
In addition, York provides other services that retailers and small suppliers would have a hard time implementing on their own. For one thing, York screens for duplicate invoices. “A company might have auditors who screen for duplicate invoices at the end of the year; we can stop them in the first place,” York says. In addition, York keeps track of the levels at which retailers earn volume discounts from vendors. “We have retailers who use us to make sure their purchase orders take advantage of all discounts,” York says. “They may issue a P.O. without realizing that if they upped it a little bit, they’d get a discount.”
York also links to accounting systems or enterprise reporting systems. “If you’re running an ERP or accounting system, it’s a real challenge to import and export data” into a trading system, York says. “We have a service called MULE that will transport to and from our system. Once it hits our network, it’s translated into whatever the trading partner needs.”
York’s typical customer does $50 million a year in sales, although customers range from $500,000 to $1 billion, and pays $300 a month for York’s services, with a range of $50 to $5,000 a month. The average customer trades about 200 documents a month.
The next big push for York is data synchronization through the Uniform Commercial Code’s UCCNet initiative. York is becoming a partner of UCCNet in that effort and plans to offer data synchronization services on a hosted basis. “Our goal is to give customers a single view of the b2b space through us,” he says.