InformationWeek 500: Emerson Transaction Hub: A Bright Idea That's Paying Off In Efficiency, Savings

PLUMBING
Here's how the system works: A business unit initiates a transaction, say a purchase order, through its ERP system. The order is sent to the transaction hub, which translates the message into OAGIS XML. The exception is the handful of units that have adopted XML, saving a translation step.

Three of Emerson's five logistics providers use EDI, which means the hub translates the message from XML to EDI before sending it on. Providers and suppliers then coordinate shipping, and the providers communicate shipment status to the Emerson division through the hub.

The hub is processing about 10,000 transactions per day. Once all business units are on board, Emerson expects to see that number jump to 100,000 transactions. The company also plans to encourage major suppliers to connect to the hub, though at present only a small number use the service. The goal is for all information to flow through it, Hermes says.

However, the company also realizes that a majority of its suppliers can't support XML or EDI. So Emerson plans to build a Web portal that suppliers can access using an Internet connection and a Web browser. These portal-based transactions will pass through the hub to be transformed to OAGIS XML before being sent on to the appropriate Emerson division.

THE PAYOFF
Hassell estimates that Emerson invested about $500,000 in the hub and has recovered those costs several times over. Putting 10 suppliers in the same shipping container cuts costs by 35%, Hermes say. The company has saved millions in transport costs alone by consolidating shipping. Also, with information such as purchase orders and shipping notices in a common format, Emerson has more visibility into its supply chain, increasing inventory control efficiency by ensuring that materials aren't over- or understocked.

Finally, whereas Emerson used to appear to be 70 smaller businesses to its suppliers, it now looks like one big customer. Suppliers can streamline their business processes through the transaction hub while Emerson gains better leverage to negotiate prices and contracts.

Given these benefits, Hassell and his team are confident they'll beat the August deadline. In fact, they expect to have all 70 divisions on board by year's end.