EDI in the High Tech Industry
EDI has been in use across the high tech industry for many years. The high tech value chain has become very complex with many high tech companies relying on external partners to help design and manufacture their products.
Due to the nature of the high tech industry there has been a desire to try and exchange business transactions electronically, more so than in many other industry sectors. It is very consumer driven, which has meant that high tech supply chains have had to become flexible to changing consumer demands. There has also been an increasing demand for introducing Vendor Managed Inventory systems to ensure that retailers have the correct levels of inventory to support for example new product launches or seasonal fluctuations in consumer demand. For this reason inventory visibility across retail networks and multi model logistics networks is important for both the high tech companies and their business partner community.
As with companies in the automotive industry, many high tech companies have globalized their operations to take advantage of low-cost suppliers in many of the emerging markets around the world. This has meant that the high tech manufacturing companies have had to ensure that they can trade electronically with suppliers in any country around the world, even those with limited ICT related skills. The provision of simple-to-use, quick-to-deploy, and easy-to-maintain EDI tools is very important for high tech companies.
Supply Chain Structure
The high tech industry has the most complex supply chain structure of any industry sector. Whereas the automotive industry has a tiered and fairly logical structure, the high tech industry is very matrix structured by comparison. The industry relies on the use of many outsourced design consultancy and contract manufacturers, known as Electronics Manufacturing Service companies. To give you an idea of how prevalent contract manufacturing has become within the high tech industry, Cisco, one of the world’s leading providers of networking based solutions, does not manufacture any of their own equipment. All of Cisco’s products are manufactured by outside contractors. So you could say that Cisco has become a ‘branded integrator’, responsible for the design and marketing of their products, but the actual manufacture of their goods is handled by external EMS providers. This model is common across many high tech companies now including Apple, one of the world’s leading high tech consumer brands.
In order to try and explain how the high tech supply chain is structured, the following diagram illustrates the key players across both the supply and demand chain. On the supply side there are the fabless semiconductor manufacturers, these companies will typically design the semiconductor chips but will then outsource the manufacturing of the chips to a specialist chip manufacturer such as Global Foundries who in turn will source their materials from the raw material providers. Once the chips or other electronic components are manufactured they will be distributed to a number of strategically located distribution hubs so that they can ship the components to the EMS or contract manufacturers as and when required. Meanwhile, on the demand side of the chain, the OEMs, such as Dell, HP and Cisco, work in partnership with a number of contract manufacturers, such as Celestica, Flextronics and Jabil. These contract manufacturers will be responsible for either designing the entire product, to which the OEM would simply apply their logo or they will build a number of sub-systems that make up the final product. It is not unusual for an OEM to work with many different contract manufacturers in order to manufacture one product.
Once these products are manufactured they are shipped via specialist high tech distributors such as Avnet and Arrow to the OEM’s storage and distribution facilities before finally being forwarded to retailers or resellers. The diagram below illustrates both inventory and information flows across the high tech value chain.
Being able to exchange business documents across a relatively complex and fast moving supply and demand chain is important to the smooth running of these high tech operations. Due to the number of contract manufacturers, design partners, logistics partners and retailers, etc., that are involved across this value chain, (across geographically dispersed plants and offices), means that it is important to work with an EDI or B2B vendor that can support a complex and global value chain such as this.
Document Standards Used
In addition to the more common standards such as ANSI X12 and EDIFACT the high tech industry has had some success with trying to develop an industry standard based around XML. At the height of the dotcom boom in the early 2000s a number of new XML standards were developed to meet the needs of companies working across the high tech industry. RosettaNet is a popular XML standard in use today. However, it tends to be used in parallel with the more established EDI document standards such as ANSI X12 and EDIFACT. RosettaNet has developed XML standards to cover the procure-to-pay and order-to-cash process spectrum. Partner Interface Processes (PIPS) are the XML-based documents that form the basis of the RosettaNet standard. RosettaNet is a subsidiary of GS1 US.
Another standard that has been successfully deployed across the high tech is the Open Applications Group Integration Specification (OAGIS). Developed by the Open Applications Group, OAGIS is an effort to provide a canonical business language for information integration. It uses XML as the common way of defining business messages and for identifying business processes that allow businesses and business applications to communicate with each other. OAGIS is one of the most complete set of XML business messages currently available, but it also accommodates the additional requirements of specific industries by partnering with various vertical industry groups.
Over the past few years the high tech industry has been served by a number of industry associations. EDIFICE is the leading high tech industry association globally and they have been supporting the development of B2B standards and working practices for nearly thirty years. This particular association runs plenary sessions each year, in different locations around the world, and each of the member companies has an opportunity to sponsor a plenary session.
The convergence of the automotive and high tech supply chains has led to the signing of a memorandum of understanding between the automotive industry’s Odette organization and EDIFICE. It is hoped that this partnership will help to develop new B2B standards across both industries.
In North America, one of the most active industry associations serving the high tech industry has been the Computer Technology Industry Association, COMPTIA.