The truth behind the “competitive advantage” of value-added networks
“Value-added networks provide competitive advantage.”
On the surface, this statement seems to make sense of the eternal value-added network (VAN) claim that the advantage of their network is their network. While stated as fact, “the advantage of the network is the network” is only relatively true, depending on who you’re connecting with and whether the network is where you can find your trading partners (or at least some of them). What does that mean for the rest of your trading partners?
This argument for the VAN being a competitive advantage begins to unravel when you look more closely at trade among trading partners. You’ll arrive at the conclusion that a single network or VAN can’t possibly serve all of a company’s needs.
Begin at the end
The advantage of EDI technologies is connecting with your trading partners… and not just some of them. The ability to connect to most or all of them offers the greatest ROI.
However, the complexity of EDI and related technologies presents compatibility challenges. There are many EDI standards, formats, and transactions. There’s X12, UN/EDIFACT, and GS1 XML trade messages. There are also non-EDI formats like JSON, flat files, text files, and proprietary XML message formats. Let’s not forget about the myriad of communication methodologies such as AS2, MFTP, FTP, SFTP and APIs, or the number of transactions and variants.
Clearly, not everyone you need to connect with will be on the same network or VAN. That’s why a VAN must have an interconnect.
What’s an interconnect?
An interconnect is a tool that VANs use to communicate with other VANs. It aids in the exchange of EDI transaction documents belonging to individual clients. All VANs use interconnects to ensure delivery of transaction documents among the participants within various VANs. This begins to demonstrate the point of a VAN: connecting with more networks provides a bigger advantage.
Why haven’t I heard about interconnects before?
The real value of interconnects to VANs was that they help keep new VANs out of the market. Discussing interconnects dispels the notion that belonging to a VAN is an advantage. That’s why VANs don’t like to talk about them. If they did, they’d also have to talk about the characteristics of EDI, which reduces VAN confusion within the consumer.
The three-part harmony
For EDI to be effective, it needs three layers: transportation, transformation, and integration. In the marketplace, these layers are typically seen bundled together as what has come to be known as the “VAN solution”. However, they should be viewed as separate solutions that work together in harmony to produce the desired results.
A classic example of this harmony can be found in your pocket: your mobile phone. One company produces your device, another delivers your cellular service, and a third provides the local and long-distance lines that you connect to when speaking with someone on a landline.
The three essential components of EDI are:
The transportation layer allows partners to talk to one another. While VANs are dominant in this space, several successful methodologies like AS2, MFTP, FTP, SFTP and APIs also exist; most have been in use for over 20 years. In fact, your VAN may use FTP to connect to your VAN mailbox; I encourage you to ask your EDI representative.
The second component is the transformation layer. This is where the translation between EDI formats takes place. X12, UN/EDIFACT, GS1 XML trade messages, JSON, flat files, text files, or proprietary XML messages are transformed into a format that your ERP system can consume.
Lastly there’s the integration layer: the path into the enterprise system where the transformed message is consumed. It can be a connector (like ODBC or ODATA) or an API. The primary focus is a path for the order to take without manual intervention.
So more connections are better?
Yes! If belonging to a network is a strategic advantage, then access to multiple networks is even more of a strategic advantage. It’s actually not so much about the number of networks as it is about the availability of connections to your trading partner and choice of those connection methods. VANs typically involve monthly subscription costs and transaction fees (or kilo-character fees), whereas in most cases, methodologies like AS2, MFTP, FTP, SFTP, and APIs have no monthly costs directly associated with them.
Applicability Statement 2 (AS2) is a protocol used to transport data securely and reliably over the Internet. It provides document receipt and tracking without the need for a VAN or interconnect. In short, AS2 provides a direct connection with a trading partner.
AS2 makes use of the Internet as a payload-agnostic mechanism for delivery of EDI transaction documents, reducing potential points of failure. More importantly, it eliminates transaction-based charges that occur with the exchange of EDI transaction documents through a VAN connection.
PartnerLink and AS2
Visionet’s PartnerLink solution is different. PartnerLink isn’t a VAN; it’s a highly scalable, reliable, and configurable EDI and B2B interchange solution that integrates natively with Microsoft Dynamics 365 for Finance and Operations. It also supports integration with most other ERP systems. PartnerLink includes an AS2 solution and connects to all of the major VANs, making it the perfect tool for B2B communication with both EDI and non-EDI trading partners.
What about APIs?
PartnerLink also provides built-in support for API based eCommerce platforms like Shopify, Magento, and many others, allowing companies to shift seamlessly between EDI and API-based integrations. This makes PartnerLink a complete EDI, B2B, and API solution for frictionless partner communication.
…and nonstandard transactions?
PartnerLink enables communication with non-EDI organizations, too. It supports a wide range of EDI formats like X12, UN/EDIFACT, GS1 XML trade messages, non-EDI formats like XML and JSON, and custom formats to ensure reliable and secure communication with any trading partner organization.
What’s the lesson here?
“VANs provide competitive advantage” is only true when there’s no advantage found in access to multiple networks.
- EDI solutions should provide more than one communication channel for exchanging documents with trading partners, including VAN, AS2, SFTP, FTP, and MFT.
- EDI solutions should provide a transformation component – a mechanism for handling a range of EDI formats.
- EDI solutions should provide a clear integration path into your enterprise system that doesn’t require manual intervention or ongoing maintenance.