ERP and B2B Integration Challenges

Today’s Challenges with Managing ERP/B2B Integration Mark Morley Industry Marketing Director Morley,

Introduction • Managing the integration of ERP and B2B systems is a complex process y p p • ERP and B2B projects are implemented across internal and p external users • Integrated ERP and B2B systems can g y help introduce significant operational efficiencies • ERP B2B integration provides improved visibility into cross enterprise business processes October 31, 2009 Slide 2 © Copyright 2009, GXS

Today’s ERP Systems Need to Support Global High Tech Operations g p Engineering R&D Regional Regional Marketing & Marketing & Finance Manufacturing Finance Global Engineering g g R&D Sales Manufacturing HQ Sales Manufacturing Engineering R&D Back Office Manufacturing Back Office Sales Sales Global companies must manage a network of manufacturing, sales, marketing, engineering and finance centres October 31, 2009 Slide 3 © Copyright 2009, GXS

Why do Companies Integrate their ERP and B2B Systems? • Companies integrate ERP and B2B systems for various reasons – Standardise business processes – Reduce time to integrate acquisitions – Provide a consistent customer experience – Improve supply chain efficiencies – Lower operational costs October 31, 2009 Slide 4 © Copyright 2009, GXS

The Need for ERP to B2B Integration • There are a number of key drivers for y integrating ERP and B2B systems – Significant amounts of ERP data is sourced from outside a company – Data quality compromises ERP value – Poor B2B integration limits visibility into b i i t business processes – High Availability in B2B is critical October 31, 2009 Slide 6 © Copyright 2009, GXS

ERP & B2B Integration Study Program Goals – Build awareness of the importance of B2B outsourcing with respect to the success of ERP related projects – Understand why B2B integration is so critical to the success of ERP projects – Find out why B2B outsourcing is such a compelling proposition for manufacturers Study Topics – ERP systems cannot function properly if B2B systems are down and no information can come in from external trading partners – ERP is handicapped if external data is of poor quality – ERP ROI is limited if ERP projects are delayed Jim Shepherd Dennis Gaughan October 31, 2009 Slide 7 © Copyright 2009, GXS

New AMR Research ERP/B2B Study Responses from High Tech Participants p g p • 90% of respondents said they had experienced delays with ERP projects due to B2B integration issues • 56% said they were consolidating multiple disparate B2B gateways on to a common integrated platform • 37% of respondents said B2B i t f d t id integration staff were ti t ff supporting ERP related projects • 30% of the data feeding ERP systems is sourced externally • 46% of respondents said they had lost B2B connectivity • 74% of respondents had a no ERP downtime policy • 79% of respondents have exceptions or problems on more “As management teams focus on the than 1% of inbound B2B transactions need for systems and processes to support an integrated global • 74% of respondents said they would be enforcing higher business, the importance of the relationship between ERP and B2B levels of data quality from their trading partners becomes critical” AMR Research 2009 Responses in red were the highest of the industry sectors surveyed October 31, 2009 Slide 8 © Copyright 2009, GXS

Profile of Survey Respondents Primary Business Level of Title Company Size 6% 9% 23% 18% 35% 27% 29% 29% 18% 13% 32% 34% 15% 12% Food & Beverage C‐Level Less than $1B High Tech Executive (SVP, VP, GM) E ti (SVP VP GM) $1B to less than $5B Snr. Director/Director/Snr. Manager $5B to less than $10B CPG Distribution and Brand Owners IT/IS Executive (CIO, CTO, CSO, etc) $10B to less than $20B Automotive OEMs/Suppliers IT/IS VP/Director $20B Plus October 31, 2009 Slide 9 © Copyright 2009, GXS

Profile of Survey Respondents Scope of Operations Other Regions Where They Have Operations p 10% 12% 25% 12% 22% 22% 19% 78% US Based Multinational Operation Western Europe China Division of a Company Based Outside the US India South America Operate in the US Only Other October 31, 2009 Slide 10 © Copyright 2009, GXS

Companies Undertake Many Different Types of ERP Related Projects yp j New Consolidations Installations Retire Legacy Merger & Mainframes Acquisitions q Rapid Company Shared Services Growth for Back Office Upgrades Extensions Vendor End of Supply Chain Life Support Planning Expanded Treasury or Bank Feature Set Relationship Management M t October 31, 2009 Slide 12 © Copyright 2009, GXS

ERP Deployment Responses from High Tech Participants p g p Q. Which of the following best describes your current ERP deployment? Q. Which of the following best describes what your ERP deployment will look like in 3 years? Today In 3 Years 2 to 4 regional 21% 44% systems Single global 28% 51% instance Multiple instances across business 15% 15% units and subsidiaries One global instance per line of instance per line of 13% 13% business N = 39 High Tech Respondents October 31, 2009 Slide 13 © Copyright 2009, GXS

Percent of B2B Staff Supporting ERP Related Projects j Q. On average, what percentage of your B2B integration staff is supporting initiatives or projects related to ERP? 0% 1% to 9% 10% to 20% 10% to 20% 5% 21% to 30% 43% 31% to 40% 14% 41% to 50% 24% Average % of High Tech B2B integration staff supporting ERP projects: Greater than 50% 14% 37% N = 39 High Tech Respondents October 31, 2009 Slide 14 © Copyright 2009, GXS

Externally Sourced ERP Data • ERP uses information from various external sources • Information can be sourced from customers, customers logistics providers and financial service institutions • Information derived from different global standards can be difficult to manage g • Integrating trading partners to remote manufacturing plants can gp be difficult October 31, 2009 Slide 16 © Copyright 2009, GXS

ERP Data Originates Outside the Enterprise Sales Manufacturing Supply Chain Financials Service Forecast Inbound Materials p Shipment Status Bank Statements p Repair Order Point of Sale Inventory Proof of Delivery Remittance Advice Work Order Status Sales Order Work In Progress Product Catalogs Trade Confirmations Warranty Claim Direct Ocean Commercial Distributors Di t ib t Suppliers Carriers Insurers Contract Freight Financial 3rd Party Customers Manufacturers Forwarders Institutions Logistics g October 31, 2009 Slide 17 © Copyright 2009, GXS

B2B Helps to Establish an ‘ERP Firewall’ Customers and Distributors Confirm Confirm Translate Consolidate Required Split Valid Customer Invoices Fields Orders ns Data Data Lo Financial Institution ogistics P Split b S lit by Units of Payment Measure Types Aggregate Account ERP Out of Sequence Providers Documents Balances B l Apps A Link Transform Invoice Carrier to Payment Codes Conforms to Confirm Check F Confirm Business Required within Valid Data Rules Fields Tolerances Direct & Indirect Material Suppliers October 31, 2009 Slide 18 © Copyright 2009, GXS

Data Feeding ERP Systems Responses from High Tech Participants p g p Q. What percent of the data feeding your ERP system is generated internally vs. externally? Q. What are you plans for technologies to support workforce management and procedures in the next 2 years? Data feeding ERP systems* External data feeding ERP system Supplier/ contract manufacturers 30% Generated internally 70% 3PLs 14% Generated externally 30% Other Customers/ 11% distributors 45% N = 39 High Tech Respondents October 31, 2009 Slide 19 © Copyright 2009, GXS

Data Quality Compromises ERP Value • Externally sourced data is rarely checked before it enters an ERP system • Once the information is within ERP, it will quickly spread across the enterprise • Inaccurate data can affect downstream business processes • Inaccurate data leads to incorrect electronic documents being created October 31, 2009 Slide 21 © Copyright 2009, GXS

External Transactions Requiring Exception Handling or Rework p g Q. What percentage of the transactions originating from external trading partners which are processed directly into your ERP system require exception handling or error processing? Less than 1% 21% Extensive Rework 79% of respondents said that more than 1% of 1‐2% 33% transactions needs reworking If a company processes 1 Million transactions per 3‐4% 26% year this represents 10,000 transactions that , will need reworking More than 5% 20% N = 121 Total Respondents October 31, 2009 Slide 22 © Copyright 2009, GXS

Policy Changes with Trading Partners Resulting From Changes to ERP g g Q. As a result of changes to your ERP system, which of the following changes is your company making to policies with trading partners? Enforcing higher levels of data quality from 74% trading partners Implementing new transaction types with 41% trading partners Measuring new KPIs and issuing penalties to 33% supplies for non‐compliance No changes to scope of B2B are planned for 8% current ERP projects Other Oh 1% % N = 39 High Tech Respondents October 31, 2009 Slide 23 © Copyright 2009, GXS

High Availability in B2B is Critical • Ensuring that B2B information is available 24/7 is crucial to the operation of an ERP environment • B2B platforms ensure that externally p y sourced information can be used by internal business applications • Lack of B2B information could lead to production line stoppages • Business critical decisions need to be made in real time to allow operations to run smoothly October 31, 2009 Slide 25 © Copyright 2009, GXS

Loss of B2B Connectivity Responses from High Tech Participants p g p Q. Has your company every experienced a loss of B2B connectivity that has impacted your manufacturing operations? Q. How important/effective is your company’s contingency p p y p y g y plan for mitigating risk of losing B2B connectivity to g g g y manufacturing operations? Loss of B2B connectivity Importance/Effectiveness of Contingency Plan Yes Importance 67% 46% No Gap = 23% ! 54% Effectiveness 44% N = 39 High Tech Respondents October 31, 2009 Slide 26 © Copyright 2009, GXS

Policy for no Scheduled ERP Downtime Q. Does your company currently have a policy for no scheduled ERP downtime for the end of quarter sales periods? I d t Industry 18% 23% 26% 38% Yes 74% No 82% Yes 77% 74% No 63% 26% Auto (n=28) CPG (n=32) High Tech (n=39) Food & Beverage (n=32) N = 39 High Tech Respondents October 31, 2009 Slide 27 © Copyright 2009, GXS

Program Management • Integrating ERP and B2B requires constant monitoring to ensure that any problems are resolved efficiently y • Changes made to an ERP system may need to be incorporated into y p the B2B platform as well, or vice versa • Must ensure that the ERP/B2B integration platforms is tested and deployed correctly October 31, 2009 Slide 29 © Copyright 2009, GXS

Testing Approach on ERP Projects with B2B Integration g Q. During the course of your ERP projects that included significant B2B integration, which of the following best describes the testing approach performed with internal participants and external trading partners? Internal Participants External Trading Partners Basic testing of most most 36% obvious, common 35% tasks Robust testing of common and 48% 35% obscure, less‐ used functions Testing efforts were terminated prematurely to 17% 29% meet externally imposed go‐live deadlines N = 121 Total Respondents October 31, 2009 Slide 30 © Copyright 2009, GXS

Changes to B2B Integration Strategy as a Result of Changes to ERP System g y Q. As a result of changes to your ERP system, which of the following changes has your company also made to your B2B integration strategy? y g gy Consolidating multiple, disparate B2B gateways 56% onto a common platform Standardizing B2B technology enterprise wide on a 38% single vendor Changing the primary vendor used for B2B 21% integration Oursourcing B2B integration to a third party Oursourcing B2B integration to a third party 5% organization Significant Differences None 11% 29% of Automotive companies said 29% of Automotive companies said outsourcing B2B integration to a 3rd party N = 39 High Tech Respondents October 31, 2009 Slide 31 © Copyright 2009, GXS

Severity of Delays in ERP Projects Caused by B2B Integration Issues y g Q. Which of the following best describes the issues you may have encountered with B2B integration which caused a delay to ERP projects currently underway or previously performed? Major issues were encountered which caused 23% significant delays Minor issues were encountered which caused small delays 67% Minor issues were encountered, but caused no 8% delays Delays in both B2B planning and integration D l i b th B2B l i di t ti can potentially cost companies in excess of $45K a day or $1Million per month….. No issues were encountered 3% N = 121 Total Respondents October 31, 2009 Slide 32 © Copyright 2009, GXS

AMR Research Study Conclusions • Most of the companies in the survey base have major ERP projects planned or in progress • B2B Integration is frequently the cause of expensive delays in ERP implementation projects i l t ti j t • ERP projects often drive new B2B initiatives and significant changes in strategies and vendor preference • B2B components receive less rigorous testing than internal ERP functions and during project delays B2B integration testing is frequently cut short to facilitate go-live dates • ERP consolidation/upgrade projects create disruption and consolidation opportunities for B2B October 31, 2009 Slide 34 © Copyright 2009, GXS

How can B2B Outsourcing Keep ERP Projects on Schedule? j • Ensure projects remain on time and under budget with scalable d b d t ith l bl resourcing and best practices • Achieve faster ROI from new modules and transaction types with rapid on- boarding of trading partners • Less risk of connectivity loss impacting manufacturing operations with high availability architecture • Improved data quality for 1/3 of externally originated information via ERP firewall October 31, 2009 Slide 35 © Copyright 2009, GXS

ERP and B2B Integration Challenges

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