XML or EDI? Tracking the evolution of the two technologies is one of the biggest challenges facing the supply chain, particularly when XML (extensible markup language) standards are still evolving and EDI (electronic data interchange) remains deeply embedded in many legacy systems.
One company coping with the complex reality of this issue on a daily basis is global IT distribution outfit Ingram Micro, along with its value-add division, IM-Logistics, which recently added the distribution of brand new Windows XP boxes and marketing collateral to its résumé.
Glitzy launches aside, the Californian company faces a situation common to many companies dealing with supply-chain technologies: lowering the cost of operations and improving ROI (return on investment) on technology.
But company executives revealed in an interview with ARN that XML and the dream of Web services is not yet the solution to all its problems.
"Frankly, we're not hearing from our customers that they want to go XML," says Terry Tysseland, senior vice president of US operations at IM-Logistics.
The supply-chain engine driving the company's business model is a complex home-grown EDI-based system, internally known as IM First. On the product supply side, this proprietary system connects five North American distribution centres and a multitude of international operations. On the IT product and service delivery side, it uses the traditional distribution functions at parent Ingram Micro to interface with customers such as resellers and integrators.
Ingram has spent millions linking its EDI system with the back-end systems at almost every major IT vendor on the planet and has spread the expenses across the balance sheets of those vendors involved. As a result, the dream of a unified Web-based XML world is not going to come quickly. Tysseland says widespread use of XML will only happen when it can be used to conduct "industrial-strength" transactions.
Guy Abramo, Ingram Micro's chief strategy and information officer and executive vice president, says that EDI is the company's pervasive technology of choice "because it's the technology of choice for our business partners".
But XML connectivity does exist as an option via RosettaNet protocols as a viable alternative to customers that require it, he says. A case in point is Best Buy, where IM-Logistics uses XML to link into Best Buy's IT systems, receive online orders for Ingram to deliver to the customer, and feed back real-time sales and product shipment data.
"The issue we have, as with any technology, is standards," Abramo says. In addition, he says that from the integration perspective there's little difference between the two technologies because both XML and EDI customer-interface connections remain custom jobs. "No two companies have the same accounts payable system, for example," he says. "So the cost is fixed to some extent."
In an ideal world, the executives admit that standard APIs (application programming interfaces) available via the Web services model would dramatically improve integration time and reduce costs. "But until everyone is willing to build standards in all the applications, it's going to be a custom job no matter what you do," Tysseland says.
And right now, integrating its system with those of vendors according to specific requirements suits IM-Logistics just fine. The division's senior vice president and general manager, Michael Terrell, describes the division as Ingram Micro's supply-chain consulting arm. The existing EDI system offers the flexibility of offering procurement management; pick, pack and ship; real-time inventory levels; and product returns without too much hassle, he says.
And the value proposition is there for vendors looking to tighten their inventories. "Big manufacturers are trying to get out of the build-to-forecast model," Terrell says.
Talking corporate efficiencies, Ingram recently posted net sales in its third quarter of $US5.83 billion compared to $7.56 billion in the same quarter last year. Net income before special items, including re-organisation costs and write-offs, was just $5.4 million. Including special items, the company posted a net loss of $13.3 million, instead of the $38.9 million net income in the same quarter last year. On the upside, Ingram says gross margins are rising and it is leveraging tighter inventory and expense controls.
If IM-Logistics is going to help its parent improve the balance sheet in a tough economic climate, one solution would be reducing the time and cost taken to build and maintain Ingram's complex system as standards around Web services improve.
As it stands, the company needs 400 IT people to support Ingram Micro's operations. Some industry observers believe reducing IT staff through the integration efficiencies gained by Web services is a possibility, even if it's a distant reality.
According to recent research by analyst firm The Sageza Group, enterprises are signalling a clear trend toward adoption of XML-based Web services. Of 247 enterprises surveyed deploying Web services or XML, the company reports, 180 were already using EDI. But in two years time, only 90 still plan to use EDI, with most companies planning a complete conversion to XML in the future.
"We're in an early transitional stage," says Clay Ryder, The Sageza Group's vice president and chief operating officer. "XML is not going to cause an overall ripping out of EDI."
Ryder agrees with Ingram's comments that EDI remains a stable platform - to a point. "That's like saying the 1964 Dodge Dart is stable and the best car going forward for the future."
EDI means you must know absolutely
everything about your business partners, while XML offers flexibility, he says. But because of EDI's ability to leverage existing mainframes and legacy applications, Ryder says EDI will never be completely eliminated.
"I hate to admit it, but I'm resigned to that," Ingram's Abramo says. He believes customers will continue to drive the connectivity technology decisions, which means both EDI and XML will remain partners for a long time to come.
"One thing I'm not short of these days is work," he says.
What is XML?
By Beth Stackpole
You may have heard of HTML (hypertext markup language), one of the building blocks of Web sites that tells browsers how data should be laid out cosmetically on screen. Extensible markup language (XML) goes beyond that, telling systems how information should be rendered and, more importantly, specifying exactly what kind of information it is. It is through XML, for example, that a system can recognise a string of numbers and text as an invoice or a set of computer-aided design images as elements in a parts catalogue. With those built-in features, applications can share information more easily. And XML is considered highly extensible because developers can tailor the language to their unique data-interchange needs.
What can XML really do for my business?
XML is likely to become the standard for automating data exchange between business systems, whether between systems in one company or between suppliers and customers. Let's say a customer orders a digital camera from a Web site. If the site selling the camera is using XML as the behind-the-scenes communications mechanism, the order pings an inventory database to ensure the camera is in stock and hits a customer database to get shipping and billing information. XML can help tap into a third-party supplier's logistics system to arrange for delivery. XML could play a similar role for a customer relationship management application. A sales representative at a bank handling complaints about charges on a personal checking account would want to know if that same individual had commercial accounts with the bank to respond properly. XML helps put all the data in a similar format, allowing the different applications to share data without cumbersome conversions.
Does XML work only on the Web?
XML does have bearing beyond the Internet. While it describes both the content and structure of a piece of information, it performs these functions separately. That makes it easy to take content described in XML for display on screen and present it somewhere else, say for example, on a wireless device. XML could also play a role in creating links among legacy applications since it's likely to become a viable way of representing complex data like financials information or manufacturing data.
Is XML the panacea for data exchange woes?
No. By itself, XML is nothing more than an alphabet -- the basic building block for creating a data exchange platform. As support for XML builds, companies and industries will work together to create vertical and horizontal standards that will allow for this interchange. But that standards process is just beginning. And XML is complex beyond most people's reckoning. While anybody with a text editor and a few minutes can write a basic HTML document, putting your company's data in XML requires serious consideration by highly proficient people. For now, XML remains a work in progress.