Taking the ‘Bitcoin’ Approach to Global EDI Standardisation
Bitcoin and EDI, is there really any form of comparison between one of the newest and one of the oldest technologies being used today? To start with Bitcoin is an attempt to get every consumer to use digital currency. For example a mobile phone would become your digital wallet, via a downloadable app, that could store Bitcoins and NFC based technology would be used to then pay for goods or services. Digital currency is not new however Bitcoin seems to have grabbed the fair share of the limelight in recent weeks for one reason or another.
Simply put, Bitcoin removes the complexity of making payments anywhere in the world, no longer worrying about exchange rates or even having physical money to buy goods etc. It is a decentralized, digital-only currency with no central monetary authority. Bitcoin uses a peer to peer computer network to maintain transactions and ‘creates’ Bitcoins through a process called mining. Users and their transactions are anonymous and there are no international exchange rates to worry about. Transactions are conducted through a Bitcoin wallet, put simply an app that users download and install on their computers of smart phones. Purchasers and sellers are identified only by their digital wallet address. Identical in a way I suppose to the information contained in an EDI message header which has information about trading partner related mail boxes.
I don’t want to spend too much time discussing Bitcoin other than to say that it is a great attempt to simplify, standardise and speedup the exchange of currency between a seller and a buyer. Yes it has its problems but it is helping to remove the barriers that have always existed due to global exchange rates etc. Banks have started issuing debit cards with NFC payment capabilities and smartphone manufacturers are starting to embed NFC chips into their phones. So the infrastructure to support digital currencies is starting to emerge.
Many companies are undertaking international expansion projects and they are desperately trying to remove the complexity of trading electronically in any country worldwide. I thought it would be worthwhile highlighting three initiatives that are being undertaken in the automotive industry to simplify today to standardise and speed up the global shipment of parts between suppliers and vehicle manufacturers.
Global Messaging Standard
The German automotive industry is currently seeing exponential sales growth in the emerging markets such as China and for years the VDA message set has been the standard that all German automotive companies have used to exchange EDI messages. However many German companies found that the traditional VDA message set was too restrictive and the limited number of fields that the VDA messages contained was actually hindering the exchange of B2B transactions with trading partners in other regions of the world. To get around this problem the industry has decided to make a fundamental shift towards using a Global Message set based on EDIFACT. I will stress that this is not a new message set but is merely a recommendation of how to implement the standard EDIFACT message set to support global trade.
The aim of this initiative is to provide the European automotive industry with a core set of messages to allow them to work with trading partners anywhere in the world. VW, BMW, Bosch and Hella are the joint driving force behind developing these implementation recommendations and the complete message set is expected to be finished next year. One of the first messages to be made available under this initiative was VDA4938, a global recommendation on how to implement the GLOBAL INVOIC standard. Given the number of cross border shipments that take place each year, simplifying the e-Invoicing process is a great example of how a standardised approach can significantly help to reduce complexity across the automotive supply chain.
Global Communications Standard
AS2 was one of the first internet based communication protocols to be adopted by businesses, primarily in the retail sector. The internet provides a global platform to allow companies to virtually connect to their trading partners anywhere in the world. Many companies have developed their own web based portals and web service environments over the years and the internet has provided the flexibility to exchange information anywhere in the world. However in the automotive sector, internet based communications have seen slow adoption because of the lack of security associated with internet based transactions.
To overcome this issue the Odette organisation released, OFTP2, an update to their long serving OFTP communications protocol that is widely used across the European automotive industry. OFTP2 has many benefits over other communication standards in that it is web based, offers three levels of security to both the transactions being exchanged and the transmission tunnel and it offers check point restart to allow large multi-gigabyte files to be exchanged with ease. The successful roll out of this particular protocol has led to a global initiative by the Joint Automotive Industry Forum (AIAG in North America, Odette in Europe and JAMA in Japan)to see if a similar communications protocol can be developed for use anywhere in the world, across the internet. OTFTP2 would be more than suitable to become the global communications standard of choice. Further information on OFTP2 can be found HERE.
Global Transport Label Standard
Delivering parts to vehicle manufacturers around the world means that today’s automotive suppliers often have to follow widely differing container labelling requirements, depending on the location of their customer’s operations. The length of today’s automotive supply chains led to an initiative to develop a global standard that would allow one label to be applied to a shipment irrespective of which country the shipment was passing through. The Global Transport Label (GTL) was the very first product of the collaboration that was established between Odette, AIAG and JAMA to produce global standards and recommendations.
Now that parts procurement has become a worldwide operation, global standardisation is not only desirable, but essential and vehicle manufacturers are responding to the challenge. Transport labels are a vital part of the supply chain management and build-to-order processes. The standardisation of transport labels is therefore warmly welcomed by suppliers and logistics operations have been significantly improved by the standardisation activities of each region.
By introducing a single global labelling standard, such as the GTL, all parties in the supply chain can enjoy substantial benefits by communicating in a common language, cutting shipping errors, delays and losses. More importantly the GTL helps to reduce the vast number of different labels in the global supply chain. Recent studies show that unnecessary variations in this basic business process, multiplied by the millions of parts transported every day, can cost millions of Euros in added supply chain costs every year. This new label template has been developed from experiences with existing label standards, the Odette Transport Label, the AIAG’s B-10 Trading Partners Labels Implementation Guideline and the input from JAMA and JAPIA.
These are just three examples where the need to work globally is driving B2B standardisation and if the barriers can be removed it will reduce the complexity of working with global trading partners and help to increase adoption of B2B across the end to end supply chain. Needless to say GXS supports all of these initiatives today and I will discuss these in more detail in an upcoming webinar related to international expansion. More details on this will be made available in the very near future.
So in closing, the one common theme between Bitcoin and the three global EDI standardisation efforts discussed above is to remove the complexity of doing business on a global basis. I guess the bigger question is whether one day suppliers will be paid by Bitcoins? or will manufacturers offer supply chain finance through Bitcoins?, we are certainly at the early stages of this payment technology and nothing can be discounted at the moment, watch this space!