Analysis: VANs, Visibility and the Changing Supply Chain

Supply chain process automation and document interchange have been a work in progress for more than 20 years. Until recently, electronic data interchange (EDI) and proprietary, fee-based value-added networks (VANs) handled all the heavy lifting, supporting high-volume exchanges of purchase orders, acknowledgements, advanced ship notices, cancellations and invoices. With the advent of XML, and with the more recent drive toward services-oriented architecture (SOA), many have been predicting the demise of the VANs and a move to direct B2B integration.

Although direct integration is clearly on the upswing, today's practices are betwixt and between, with a diversity of approaches and technologies required to serve legacy needs and future directions.

"People have been saying that VANs and EDI are dead for years, but it's just not true," says Ken Vollmer, principle analyst with Forrester Research. "Most companies don't want to in-source communications capability. They're experimenting and handling maybe 10 percent of their trading partners with direct integration, but they're leaving the rest to VANs, or what I now call 'B2B service providers.'"

Office supplies manufacturer Smead is a case in point. The company has relied on EDI and VAN services from Sterling Commerce for years, but it's now moving toward direct B2B integration with larger customers. "We converted one of our largest customers, Corporate Express, over to XML about a year ago, and in the last two months we've had Office Depot and United Stationers tell us they want to get off the VAN," says Todd Schroeder, systems development manager for SCM, interface systems and Web services at the Hastings, Minn., company.

Smead is using Sterling's Gentran Integration Suite (GIS) to build the integrations, and Schroeder says the company will likely move its largest customers to the direct approach. Still, the majority of customers remain on the VAN, he says.

That fits the pattern described by Vollmer, who says that despite the hyperbole, there is a cost to direct B2B integration. "You have to have at least two people to manage all those connections," he explains. "The B2B service providers—regardless of the pipe, Internet protocols or proprietary networks—get paid to manage the links. Most companies are finding that's it's not worth their while to move their entire trading partner community to Internet-based direct communication because you can only handle so many direct connections."

Gartner's new term for VANs is "integration service providers," and it says companies such as Sterling Commerce, GXS and Inovis are evolving to offer a blend of software, services and hosting. Sterling fits that mold—and is placed among the leaders in Gartner's Quadrant—having introduced the GIS as well as a "Multi-Enterprise Services Architecture" designed to support a mix of direct integration, integration application hosting and network services.

As part of its effort to offer more than the basic mailman functions of the conventional VAN, Sterling last week introduced a Visibility Manager service designed to bring greater document and process visibility to the 16,000 companies using its network. The service's Web-accessible interface gives supply chain managers and non-EDI specialists reporting on individual transactions as well as broader processes and compliance with service-level agreements and contractual terms.

"This will quickly tell you whether your key purchase orders or advanced ship notices went to your partners on time or not before somebody has to come banging on your door," Vollmer says.

Once Visibility Manager is proven as a hosted service, Sterling plans to bring the same functionality to the GIS product used for direct integration—something Schroeder is looking forward to. "That will give us some of the auditability we're struggling to build on our own in the direct integration environment," he says. "Right now, we have 80 to 90 percent of the functionality we were used to on the VAN, but the downfall is that you don't have the same visibility on orders when they get stuck in the chain."