This is a great discussion! For small and medium-sized companies, being able to keep up with the technology being used by the large companies is always a challenge.

One may look at it several ways. For some businesses, it could very simply be a barrier to entry to begin with. For others, it may be a limiting factor to growth. Either way, most decision-makers accept that if there is a certain market a company intends to reach, there are some mandatory accommodations that much be made. It certainly does not mean that a smaller business is not capable of "running with the big dogs", but it is certainly an important factor contributing to that company's ability to be a true competitor in the field and must be considered in the budgeting.

Fortunately, open code software and the ability to write conversion software make it a more attainable goal for a smaller business than it once may have been. Through shear product life cycle, if the large businesses accept this as the norm, it will eventually become attainable to the masses and become the standard to play the game; somewhat similar to the evolution of bar coding I imagine.

Perhaps the upswing in supply chain SaaS indicates that more companies are actually willing to cooperate to get their apps off premises networks. It will be interesting to see some future information on company size compared to progress in this area.

I agree with you, Mary. When I had mentioned this point about compliance, I had mid-sized companies in my mind who had a number of vendors and was not so influential. I speak from my experience as a consultant for such a company. As for the vendors, it may not just be having a common document format. Linking with your customer's supply chain may mean that you have to redefine your business processes and in some cases bring about structural changes in the organization as well. Unless its a giant like Walmart which gives you business worth millions of dollars, many companies may not be interested in complying with these changes.

Your example is great, tnieusma. But what if a company not as influential as Walmart wants to adopt an all-SaaS supply chain? It may not be an optimal choice unless there is a guarantee that partners and vendors would go along.

This is a valid question concerning cooperation. As a former project manager for a major OTC Pharmaceutical Vendor, I can validate Scott's assertion regarding Wal-Mart. 

Some year's back, Wal-mart created a "test market" for using the RFID (Radio Frequency ID) tagging for supply chain purposes in warehouses. They demanded that their top suppliers join in the effort to the tune of millions of dollars and subsequent changes to each vendors manufacturing and supply chain processes. I remember the strategy meeting well. It was brief. What was the conclusion? "What Wal-mart wants, Wal-mart gets". We were on board.

Wal-mart hold the power over many of their vendors due to the percentage of sales they represent. Most vendors sell more to Wal-mart than many other customers combined. That is a crucial part of Wal-marts strategy. Therefore, whether RFID, EDI, or some other new technology, they will always be able to pull their vendors along. It stands to reason that anything Wal-mart adopts will eventually be adopted by the other retailers and become commonplace. Vendors are well aware of this reality and will therefore bite the proverbial bullet and join in the effort.

One of the advantages of EDI is that is a standardized format. That means the actual system at either end (or at multiple ends) is irrelevant as long as it has the ability to generate and accept the proper files, and to translate between trading partners. So there is no need for all trading partners to be using the same system.

As for forcing your vendors to use your system, the most obvious example of this (and there are many) is Walmart's initial mandate a few years ago. The company only generates orders via EDI, so if a vendor wants to supply its products to Walmart, if MUST be able to accept EDI transactions. Walmart, has no particular interest in what software, whether it be SaaS based or locally installed, its suppliers use as long as they are able to handle the required EDI documents.

That said, there is another point to 'forcing vendors' to use a specific application that has nothing to do with the ability to read and write the proper formats. For an explanation of this, read this article. It is a controversy that has ben around for a while.

I agree with the fact that the future is cloud and 'premises-based software', as Scott calls them, would no longer be considered effective or efficient. However, to have an integrated supply chain with EDI between your vendors and your company, you need to ensure that the vendors are also using the same system and have business processes designed in a way that can integrate with your supply chain through the cloud systems.

My questions are:

1. How would you enforce your vendors to customize their business processes and operations to use an EDI system to integrate with your supply chain?

2. If you have been dealing with a vendor for several years, would you terminate the business with them just because they cannot change their operations to integrate with your system?