The use of the internet to provide business services has exploded recently and you can now buy almost anything online. While initially the domain of personal services, such as buying gifts or booking tickets, the business community has begun to realise such benefits and many companies now have some form of online service.

The joy of doing business and ordering online is the fact that the supplier is never closed. By its nature, such trading is a 24-hour operation, affording customers infinite flexibility in the ordering process.

Moreover, the internet offers a more immediate response than conventional methods of stock purchase. Often order confirmation is instantaneous, while many on-line suppliers also enable customers to track the status of their orders.

Yet the internet and electronic supply processing can also be used more creatively to provide a seamless interaction between supplier and customer. Extensible mark-up language (XML) documents and electronic data interchange (EDI) messages systems allow for a structured and integrated communication between customer and supplier trading systems.

Master data

However, the key to a successful trading relationship is the need, from the outset, to set up and maintain the supplier’s master data to ensure accurate conversion of delivery points, materials and prices.

The resulting sales order becomes a mirror image of the customer’s purchase order. This means subsequent documents sent electronically with reference to the customer’s original order will receive the correct order confirmation. Advance shipping notification of exact quantities to be delivered and when and, in addition, a revised invoice will be generated automatically. This means less paper work for the merchant and more effective stock management.

XML is designed to improve the functionality of the web by providing more flexible and adaptable information identification. It is called extensible because it is not a fixed format like HTML (a single, predefined mark-up language).

Instead, XML is actually a ‘meta language’ – a language for describing other languages – which lets the user design their own customised mark-up languages for limitless different types of documents.

Once documents have been converted to an XML format they can be sent point to point either via the internet, an extranet or file transfer protocol. There is therefore no need to subscribe to any value added network (VAN) and purchase specialist software to connect to the system, which opens the service up to a wider customer base.

A VAN is a private network provider hired by companies to facilitate EDI or provide other network services. Before the web, some firms used VANs to move data to other companies but now they find it more cost-efficient to use the internet, avoiding the minimum monthly fees and per-character charges found in typical VAN contracts.

EDI is the electronic exchange of business information between organisations in a structured format. It has the advantage over XML in that it uses long-established standards such as Tradacom and Edifact and only requires agreement between the two parties as to which elements of the message are going to be used. Connection and transmission over the VAN are therefore extremely reliable, with excellent audit facilities.

Extranet connectivity

Companies are now looking at developing ways to use the internet more intelligently and effectively to optimise benefits to both merchants, the customer, and themselves. For instance, Finnforest is developing its extranet to allow suppliers and merchants greater transparency of information.

Therefore, in the future, suppliers would only receive purchase orders electronically either via EDI or XML and suppliers will be able to access the extranet to either download or print the XML documents.

Although this is in the early stages of development, it is clear once companies can offer extranet connectivity to merchants, there will be no limit to the amount of information, such as inventory levels and forecasts, that can be made available.

There are a multitude of benefits to be offered both to suppliers and their customers through internet and electronic trading. Companies geared up to exploit these opportunities will see a revolution in the whole supply chain process.