FIVE WAYS TO MODERNIZE AND GROW YOUR SUPPLY CHAIN TABLE OF CONTENTS

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1 FIVE WAYS TO MODERNIZE AND GROW YOUR SUPPLY CHAIN As the saying goes, no man is an island. The same principle applies to businesses as well. Today s growing businesses rely on partners more than ever from manufacturing to distribution, suppliers to customers, strong partner relationships are critical to smooth and efficient operations. Partners have also become an integral part of the ecosystem, whether it s a supplier who enables production or a logistics provider handling shipments. For businesses looking to expand while lessening growing pains, partners not only enable key business processes but also provide other services critical to operations such as banking, insurance, payroll and more. In such a unique Business-to-Business (B2B) ecosystem, it becomes important to focus on partnercentric processes and communications. As supply and demand chains have grown in past few decades, the need for better communications with partners has become critical to business growth and operational excellence. TABLE OF CONTENTS 2 Understanding B2B integration and its drivers 8 The key to supply chain transformation? A B2B gateway-based solution 9 In summary 10 Software AG can help 10 Take the next step JUNE 2018 WHITE PAPER

2 The mechanisms used by companies to exchange key business documents with partners such as Purchase Orders (POs), Advanced Ship Notices (ASNs) and invoices have also undergone changes to accommodate for growing volume. Exchanging documents electronically has gained momentum, and the majority of the companies now prefer to exchange documents electronically using a mix of formats ranging from Microsoft Excel and CSV formats to EDI and XML formats. In this white paper, we will discuss B2B drivers, then several mechanisms that can be used to automate B2B document exchanges. You ll see how a carefully thought-out B2B strategy can transform five key areas of your supply chain: Procurement Order management Logistics Returns Retail Understanding B2B integration and its drivers Companies have several options when it comes to exchanging documents with business partners. Manual methods like ing or faxing business documents are still prevalent for low-volume transactions but do not meet the performance and scalability needs of a modern digital enterprise. B2B integration refers to exchanging business documents electronically with your partners. The cost of generating, sending and processing an electronic document is a fraction of the cost if done manually. The larger the business, the larger the number of partners and the higher potential savings. For growing businesses, B2B integration can free up resources to be directed at core tasks and business development. From orders and invoices to bills of lading, from raw material purchases to store delivery, any transaction between two businesses is considered B2B whether with partners, vendors or customers. To manage those transactions digitally, many organizations have moved away from the manual (phone/fax/paper) approaches and implemented various B2B systems to ensure that the information exchanged is consistent, reliable, secure and near instantaneous. Although the business drivers for the adoption of B2B vary, reducing the cost of exchanging business documents and the adoption of electronic documents remain the top reasons driving the need for B2B integration. Transforming procurement Whether you re producing reports of category spend or comparing your procurement capabilities with those of your peers, a clear understanding of procurement operations and the internal and external integration processes will help you see the full picture including the direct and indirect costs involved in procurement. In many cases, efficient supplier integration and improved supplier collaboration can decrease costs and mitigate supply chain risk. Through the lens of procurement, B2B can transform the way you interact with your suppliers, streamline the processes and provide you with competitive advantage in several areas: Process automation B2B gateways support a wide range of B2B standards, offering the flexibility to onboard suppliers from any spectrum. Example: You are a manufacturer buying components from automotive, rubber and electronics suppliers. There is a good chance that your suppliers for these three categories use standards like EDI, AS2 and RosettaNet. If your systems are ready to support these standards, then you can start selling new product categories much faster. A comprehensive B2B strategy is key to achieving visibility so you know the facts about what you are buying, from where and from which suppliers. 2

3 Efficient B2B systems provide faster onboarding of suppliers, giving you greater control over your ompany s procurement activity. More importantly, best-of-breed B2B solutions allow suppliers to manage and maintain their own connectivity profiles and interfaces, ensuring that they are always accurate. If you have seasonal suppliers, for example, onboarding those temporary suppliers becomes much easier as the technical setups take much less time, helping you meet your procurement goals. If your business expands and you need to onboard suppliers for new geographies, it s possible that your systems do not support the EDI or other standards used by the new suppliers. B2B standards vary by geography, e.g., X12 in U.S. and UN/EDIFACT in Europe. Additionally the B2B protocols can be different. AS2 is very popular in the U.S. OFTP remains popular in Europe, while AS4 is gaining momentum. Same goes for banking and payments-related standards as well. Modifying procurement contracts and updating your B2B documents to reflect the new parts or SKUs that you are adding to your purchase orders can be a time-consuming and a cumbersome process. The complexity can be reduced by adopting a B2B solution that makes periodic changes to documents and maps easy for you. Improved order accuracy for supplier orders Order mistakes are very expensive and mean lost revenue and diminished production risk. Using automated mechanisms to generate a purchase order and transmitting it electronically to a supplier s systems reduces errors caused by manual processes. Automation increases the accuracy related to item description, price, shipping address and part number. It helps drive contractual compliance between you and your suppliers. With more efficient processes and fewer rejected orders and invoices, you will spend less time following up on order-related issues and improve your supplier satisfaction and the cost associated with resolving issues. AS2 is very popular in the U.S. OFTP remains popular in Europe, while AS4 is gaining momentum. Same goes for banking and payments-related standards as well. If you have a number of suppliers for the same part and use some business logic to pick a supplier, even that can be automated using a B2B solution. Another B2B solution best practice is to interoperate with Master Data Management (MDM) solutions for data cleanup and also with Business Process Management (BPM) suites to integrate supplierorder process in the higher-level business processes. Improved invoice processing Manual processing in invoices is time consuming and error-prone. It becomes even more expensive when you factor in the cost incurred on resolving errors that were caused by manual processes in the first place. Using a B2B solution, organizations can receive and process invoices electronically, reducing accounts payable costs while improving both the accuracy and speed of invoices being entered. The ability to process paper-based invoices quickly and accurately is an important factor for the success of a company. Automation of invoice processing provides a clear and tangible ROI and, as the volume of invoices grows, the organization benefits from even greater savings. Receiving an invoice from a supplier, validating it and entering it into the ERP system for processing can take hours just for one invoice. B2B reduces that effort to seconds and everything from receipt, validating and entering it into ERP can happen instantaneously. It s common for companies to report upwards of 50 percent reduction in effort involved in invoice processing after automation. 3

4 Transforming order management B2B solutions play a key role in automating several processes involved in the order-tocash cycle: Quote to order Order management and processing Inventory management Order fulfillment and shipment Billing and invoicing Quote to order Exchanging quotes with prospects electronically reduces the risks of delays and increases your chances of winning new business. It also reduces the errors involved in manual quotes and the cost associated with resolving the disputes later on. More importantly, it enables the ability to create a standardized approval process, which provides greater organizational control and visibility. Order management and processing From receiving orders to standardizing order processing, B2B solutions play a key role in automating electronic order exchanges, receiving advanced ship notices ASNs and payment-related exchanges with external partners. B2B transforms the whole process by reducing the time to process orders and also by improving the accuracy of information, which is critical for retail payments and other processes involved in order processing. Additional benefits of using a B2B solution for document exchanges for order processing is the security and privacy of the information, especially the information related to payments information, such as credit card numbers. Moreover, if you have order cancellations, automating the documents related to the order cancellation process enables timely cancellation before the order fulfillment happens. Inventory management Automation of document exchange using a B2B solution helps improve warehousing, transportation and material-handling processes for inventory management. Whether you maintain your own inventory or have a vendor (supplier or 3PL) managed inventory, a B2B solution can help you improve your processes in either scenario by automating the exchange of inventory-related information electronically which reduces the inaccuracies and delays involved in such processes if executed manually. Moving from self-managed inventory to Vendor-Managed Inventory (VMI) can be a painful and complex process. Three most commonly shared documents in VMI are: 1. Forecast 2. Schedule 3. Use (consumption) data All three documents can be shared electronically with the VMI partner using a B2B solution to increase accuracy and efficiency. 4

5 Order fulfillment and shipment Order fulfillment is the key to customer satisfaction and a well-implemented B2B solution can help transform every stage in the fulfillment and shipment process: Sending orders to warehouse/3pl/4pl Exchanging electronic orders eliminates delays in shipments, provides a greater time window for your customers to order from you and allows you to change a 3PL provider if the need arises. It also reduces your fulfillment costs by giving the 3PL the maximum amount of time to plan and staff appropriately. Carrier management Exchanging documents electronically with carriers improves accuracy and also helps carriers in passing along that information to their partners and port and customs authorities. It also gives you the agility to explore multiple shipping options and electronically receive quotes from multiple vendors if needed. Confirming shipment Confirming shipments, carrier name and other information, such as date and time of shipment and estimated arrival date and time, is critical for the business. Receiving and processing shipment status Receiving ASNs from shipper/ carrier and matching them to the orders to provide customers with shipment status improves customer satisfaction. Billing and invoicing Automating the billing process and exchanging invoices electronically can transform your receivables processes. From receiving the information from ERP to creating and transmitting invoices electronically, automating the process using a B2B solution can reduce the receivables cost and improve efficiency and partner satisfaction by: Improving the quality of invoices by reducing errors Adopting industry standards for generating invoices (X12 or EDIFACT) Submitting invoices electronically and receiving acknowledgements Receiving payment advices and matching them with invoices Digitalization and electronic exchange of invoices is also important from a compliance and risk perspective. Compliance with VAT or GST mandates becomes easier as now you can archive and store electronic invoices easily. Transforming logistics As business requirements and strategies have changed, the outsourced supply chain has become increasingly prevalent. 1. Communication between a company and carriers such, as road transport, rail, ship and air freight One B2B solution that provides broad EDI support can enable you to electronically exchange information, such as: Sending requests for pricing proposals based on your load Receiving proposals from multiple carriers Sending load tenders, bills of lading and manifest, etc. Electronically submitting data to customs/port authorities Exchange documents electronically to provide details such as confirmation, tracking number and status to your customers. 5

6 2. Communications between a company and 3PL or 4PL If you are outsourcing your logistics to a 3PL or a 4PL provider, automating the B2B data exchange becomes even more critical to realize the true value of outsourcing. Automate the key data exchanges related to following processes to exchange information electronically and transform your logistics: Using a B2B solution, organizations can receive and process invoices electronically, reducing accounts payable costs while improving both the accuracy and speed of invoices being entered. Sending goods advice to the 3PL and receiving the goods receipt notice from them Receiving confirmation related to pick, pack, ship and other status notification Changes to stock levels or orders Timely exchange with 3PL/4PL providers is critical so that the order cancellations and changes can be communicated in a timely manner to reflect changes before order fulfillment happens. B2B systems not only provide the agility needed by the processes but also reduce errors and cost. By prioritizing order changes and cancellations, and communicating them electronically, incorrect shipments can be avoided. You want to handle changes to orders changes before they get fulfilled. This improves order processing. Incorrect shipments can be avoided by managing and communicating order changes before fulfillment occurs. This results in not only the reduction of order fulfillment costs by reducing the amount of rework required but also reduces the quantity of products returned while increasing customer satisfaction. In some cases, order cancellations can be transmitted and processed at a faster speed compared to original orders so that they are cancelled before they are transmitted to 3PL for fulfillment. This gives your customers a larger window to update/cancel their order and reduces order errors. Transforming retail B2B can transform several key retail processes, from synchronizing a store s Point of Sale (POS) data with suppliers, to receiving products in warehouse to fixing replenishment issues in-store. By automating the demand chain, B2B provides an end-to-end integration between the retail stores and supplier systems. As customers shop at your retail stores, you need to restock the inventory and issue purchase orders to the suppliers. Using a B2B solution to integrate processes not only improves the Store-->ERP--> Supplier communication but also reduces errors when suppliers send you ship notices and the logistics providers deliver products to your store or warehouse. The fastest-moving SKUs require multiple restocks per day or costly stock-out situations develop. Combine this issue with a location that has a limited footprint and shelf space and the need to communicate product sales and availability in a short time frame becomes critical. To be able to restock in time, the stores need to have the stock in the warehouse and, for that, the supplier needs to deliver in time. With faster integration between the POS and the suppliers, B2B transforms the replenishment and restocking processes. If you are launching a new product in retail outlets, setting up new products in your systems can take long time. A B2B solution helps by reducing the setup time and enables you to sell more products or product lines faster in your stores. For an online retailer, B2B solutions connect suppliers and 3PLs to improve order processing and fulfillment. They also enable you to exchange your catalog and item information with other partners involved in your e-commerce operations. For retailers who are implementing ERP solutions to streamline their business, it becomes even more critical to use B2B solutions because automating document exchanges with suppliers gives you the performance and agility needed to realize the value of your ERP investment. 6

7 B2B integration automates the interfaces involved in multi-channel retail. Transforming returns (reverse logistics) Every industry offers its customers the ability to return the purchase for a full or a partial refund. In some industries like clothing, the percentage of items returned can be as high as 30 percent of the total sales volume. According to industry estimates, reverse logistics can eat away 30 to 35 percent of the potential profit. The cost of processing a return is two to three times the cost of processing a shipment. Asset recovery for the returned items back into your stock is the best thing possible for your bottom line. Industry research firms have estimated that 70 to 90 percent of every dollar generated through asset recovery goes straight to the bottom line. Staples saved millions of dollars by automating the processing of next-day delivery orders, connecting order management, warehousing and delivery systems electronically. Learn more in the success story. You may also have contracts with suppliers and in some instances you may be able to send the returned (defective) stock back for a refund. B2B solutions can automate every step in the process and improve the efficiency of your returns, from Return Merchandise Authorization (RMA) generation and processing returns to recovering assets. With B2B, businesses can: Exchange documents electronically with carriers/3pl/4pl providers to confirm returns related information Process returns and send RMA Track and monitor shipment Confirm returns and issue credits Companies may use a variety of vendors to process returns. In addition to using a carrier for reverse logistics, they may also have a vendor who checks the condition of returned items and then repairs/re-sells them. Exchanging documents electronically using a B2B solution with each vendor involved in the returns process provides a number of benefits: Items being returned can be processed faster improving customer satisfaction Items can be tracked and monitored as they flow through the process Suppliers can be notified accurately about returns Asset recovery involving re-conditioning, repair and re-selling of returned items can be efficiently processed 7

8 The key to supply chain transformation? A B2B gateway-based solution B2B software has helped organizations reduce the cost of doing business: Automating transactions between customers, suppliers, partners and marketplaces Reducing costly overhead Improving transaction reliability Increasing the efficiency of B2B processes With real-time dashboards, sophisticated reporting tools and customizable built-in rules, B2B systems are making a significant impact on today s business. However, there are numerous B2B solutions available of varying scope and price, based on the needs and transaction types of each individual organization. Many businesses choose to manage several B2B systems to meet the needs of the other organizations they work with. Unfortunately, as a business grows, it doesn t take long for this approach to become unwieldy. And the larger the organization, the more systems in play and the greater complexity in maintaining them. B2B automation reduces the replenishment cycle times and also reduces the time it takes to set up a new product or a product line. Decreased efficiency, ongoing maintenance and/or upgrades of multiple systems, security breaches, lack of integration and scrambling to meet varied requirements can cost organizations millions, every day. But what makes these supposedly similar systems so different from one another? Most B2B implementations fall into one of three main categories: software, Value-Added Networks (VAN) or managed services. With a software approach, companies leverage different types of applications to exchange and translate files, as well as other B2B functions: FTP(S) servers that enable exchange of files between business entities Translators to assist with multiple system compatibility Security software to help encrypt and decrypt data Legacy VANs are carry-overs from the ISDN era and provide data exchange over internet protocols, typically charging variable fees based on usage. With managed services, companies outsource the B2B system or portions of it to a third party, which hosts the product and provides implementation services. Not every system communicates information the same way, creating challenges when moving data from one partner to another. When multiplied out across an organization with a dozen, a hundred or a thousand partners, the opportunity for errors and inefficiencies increases exponentially. A B2B gateway specifically addresses this issue. It s a digital conduit and translation solution that integrates data from back-end systems in order to enable information exchange across trading partners. Designed to facilitate the consolidation of multiple B2B systems, an ideal B2B gateway is: Purpose-built Based on a trusted architecture and created specifically to manage multiple protocols, partners and data types Comprehensive The system should enable organizations to re-take control of many disparate B2B systems Transparent Offers a single view of business across all system and information silos both inside and outside the enterprise 8

9 Any business that conducts high volumes of transactions with partners, vendors, shippers or suppliers especially those with varied B2B systems can benefit from a B2B gateway. In terms of efficiency, the greatest benefit would be to those organizations that manage procurement, order management, logistics, returns or retail. The benefits of a B2B gateway are measurable and significant, because a wellimplemented system offers: Smooth automation of processes and operations Reduced costs The scalability and flexibility to grow and change as business does Increased accuracy and consistency across transactional data Unmatched, relevant reporting and information that can be turned into meaningful insight for business planning and development In summary From the automotive and manufacturing industries to electronics or retail, the impact of an efficient, well-implemented B2B gateway can be significant to a growing business. Whether improving relationships, streamlining operations or increasing visibility. B2B s transformative effects on procurement, order management, logistics, returns and retail cannot be overstated. Based on the examples cited, these effects on the supply chain include: Improved efficiency Increased accuracy through automation Improved customer satisfaction Better insight into processes Positive ROI in short time frame If you decide that a consolidated B2B solution that includes gateway capabilities is your next move, choose a vendor with experience, expertise and a proven track record. As with any system purchase, the combination of skills and knowledge will ensure that you get the most out of your investment. 9

10 Software AG can help A flexible B2B solution from Software AG provides an automated way for exchanging critical business documents, such as purchase orders, ship notices, invoices, payments and more. With Software AG, you can use a single B2B gateway for all your transactions with suppliers, distributors, customers and other trading partners of any size. All documents flow through the same B2B gateway without worry of file size, format, reliability or security concerns. Plus, you gain visibility of the entire B2B processes, endto-end. Designed with growing businesses in mind, Software AG s B2B solution helps our customers in automating several key supply-chain-related processes, reducing the cost of doing business and improving scalability and accuracy in all five key supply chain processes. For more than 45 years, Software AG has been inventing new and better ways to help organizations achieve business results faster. We can transform your company so business and IT are aligned around common, achievable business goals like smarter transactions with your business partners. Take the next step To learn more talk to your local Software AG representative and visit 10

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12 ABOUT SOFTWARE AG Software AG (Frankfurt TecDAX: SOW) helps companies with their digital transformation. With Software AG s Digital Business Platform, companies can better interact with their customers and bring them on new digital journeys, promote unique value propositions, and create new business opportunities. In the Internet of Things (IoT) market, Software AG enables enterprises to integrate, connect and manage IoT components as well as analyze data and predict future events based on Artificial Intelligence (AI). The Digital Business Platform is built on decades of uncompromising software development, IT experience and technological leadership. Software AG has more than 4,500 employees, is active in 70 countries and had revenues of 872 million in To learn more, visit Software AG. All rights reserved. Software AG and all Software AG products are either trademarks or registered trademarks of Software AG. Other product and company names mentioned herein may be the trademarks of their respective owners. SAG_Five_ways_to_modernized_and_grow_your_Supply_Chain_12PG_WP_Jun18