GXS: Cutting VAN Costs for an Automaker

Computerworld -

Global Exchange Services Inc. (GXS)

Category: E-commerce software/services

Location: Gaithersburg, Md.

Technology: Enterprise System

How it works: Enterprise System electronically connects businesses to their trading partners using electronic data interchange (EDI) technologies, allowing customers to convert incoming documents to different formats, such as an EDI document into an XML format or vice versa.

Customer sampling: Liz Claiborne Inc., J.C. Penney Co., Eastman Kodak Co.

Tip: When selecting a business-to-business technology, be sure that your selection can handle message arrival rates and sizes that are at least several multiples of your highest projected need, says Joe Dupree, global product manager at GXS. An e-commerce program can be successful beyond your wildest projections, and you need to know it will scale to all the load and trading partners that you'll run on it, he says. Run a proof-of-concept experiment to know that your selection can carry the weight, Dupree adds.

What's in store: GXS has successfully developed a combination of data format translation pieces and integration pieces, says Eric Austvold, an analyst at AMR Research Inc. in Boston. "The breadth of their offering has been very well received by customers to date," he says.

"I would see EAI [enterprise application integration], ETL [extract, transform and load software], EDI all coming together under one umbrella," says Austvold. "Today there isn't anyone who does all of that really well. But expect to see GXS, Informatica and Sterling Commerce making a play for this big time in the next 36 months."

User Profile

For years, manufacturers have relied on value-added networks (VAN) to help them buy parts and materials electronically from suppliers. Although the cost of a VAN is high, many companies choose to pay the price rather than risk the security and reliability problems of other types of Internet-based commerce.

One automotive manufacturer, however, was determined to drive down its VAN costs. In 1999, the carmaker, which requested anonymity, began using a self-contained EDI system from GXS.

The plan was to use GXS's Enterprise System to connect one of its manufacturing plants with all of its VANs and suppliers "while growing into a self-contained system," says the automaker's data communications analyst.

The carmaker has done that—and more. The company is using a mailbox system available through Enterprise System to interface with its suppliers via the Internet. It expects to save "hundreds of thousands of dollars" in avoided VAN costs, says the IT analyst.

Three months ago, the manufacturer moved two of its biggest suppliers to the Enterprise System, a move that's expected to help it save $60,000 to $70,000 in annual VAN costs. By year's end, the automaker hopes to shift its other three top suppliers to the system, which should net another $100,000 in VAN-avoidance cost savings.