I was on my way back from the VCF conference this week.  My planning could have been better since I spent all that time on my way to Chicago and had to turn around and get back to New Jersey for the conference.

The man sitting next to me on the plane from NJ told me this story... another example of un-openness in our little world.

Special Cecil Supplement

I was on my way back from the VCF conference this week.  My planning could have been better since I spent all that time on my way to Chicago and had to turn around and get back to New Jersey for the conference.

The man sitting next to me on the plane from NJ told me this story... another example of un-openness in our little world.

Who's in charge here?

Let's say that you're a supplier doing business with a dozen or so customers, and being a progressive company, you're making the most of your digital presence by transacting business using EDI.  You're long past your first experiences with EDI, and while you don't have enough traffic to justify a full time staff, you have enough collective knowledge to be able to put together well formed transactions.

An opportunity comes along to do business with a potentially large account.  You've finished negotiating pricing, discounts, delivery, and the rest of the parts of the deal that let both you and your customer make money.  To your joy,  you find that your new customer is doing business through EDI.

A few days later a call comes in from your new customer's EDI provider, whom you're happy to talk with, until...  "Yes," the EDI company's rep says, "the first thing we will need is a check from you for $900 so that we can test your transactions against your customer's requirements."  As you hold the phone away from your ear and stare at it to see if some digital glitch has somehow transformed the incoming words, you also struggle to contain both a laugh and a grumble.  Why would you need to pay such a tremendous amount for a few minutes testing?  Especially when you already know your transactions will be fine.

With all the composure you can muster you calmly explain, "I don't think we need to pay you to test our transactions.  We've been doing this for quite a while and while we don't think we're perfect, I doubt that we would be too far off the mark.  How about if we just send our transactions in without testing?"

Certain that you've got past that little annoyance you listen for his acquiescence, but instead hear, "You can certainly send in your transactions untested sir, but each one will incur a $100 penalty fee."  As you start to boil again you ask, "And who will assess this fee?"  "Your customer will charge the fee against your payments," the salesperson calmly explains.

So, now your new customer has seemingly found a new profit center that throws a very different light on your relationship.  The salesman continues cheerily, "We do understand that the testing fees and the penalties can be burdensome.  There is a possibility that you can avoid them altogether.  Since we are the authorized service provider for your customer, we can do the transaction testing for you at no charge, and that will also avoid the transaction penalty."

Sitting back down in your chair you say, "Why didn't you say that from the start?"  The rep smoothly slides in with, "All you need to do is to let us become your service provider. You can switch from which ever company you're using now, and we'll be happy to handle all your EDI traffic." 

Tell me it ain't so!

Does that sound far-fetched?  Though I'm sure my cabin companion embellished his story, suppliers of Northern Tool have been getting calls like this from SPS Commerce with similar content.

I talked with Northern Tools (NT) manager Todd Wermerson who explained that any fees being charged were the responsibility of their service provider, SPS Commerce (SPS). 

When I spoke with Jim Frome, SPS Commerce's Chief Strategy Officer, he explained that the testing fees were indeed paid to his company, but went on to explain that these fees included much more than testing.  "The first thing we do is to build a testing environment so that transactions can be tested without affecting NT's live system.  Then we create a set of transactions using NT's actual product information." Those things sound a lot like expenses that should be picked up by NT.

Frome explained further, "We do a lot of training and hand-holding in order to get companies up and running. Many suppliers have problems with ASNs, packing slips, etc. and we help with mapping."

When I asked about vendors that were already competent, or already had a service provider, and didn't need the help, Frome said, "Those vendors' calls fall into an escallation bucket, and we work out special arrangements with the retailer.  Some vendors chose to switch service providers and become customers of SPS Commerce. "In that case, the testing fees would be waived, but they would still pay our setup charges."

Frome also said that any penalty fees that might be charged were not part of SPS Commerce's fee structure.

Let's get it straight

I don't have any problem with service providers charging for services.  That's what they are in business to do.  In that context, if SPS Commerce needs to train a vendor, the company should charge a reasonable amount for its time.  But that's not the same as testing fees.

Testing fees put a bad taste in the mouth of first-time EDI adopters, and simply anger experienced companies.

The point is...if a company is going to outsource its EDI department, it should choose and pay a company that can operate the most reliable and cost efficient system for the entire supply chain.  It should not put in place a company to collect money from suppliers for the privilege of doing business with it.  The entire point of getting suppliers on-line electronically is to enable you to be more competitive and effective in servicing your clients.  Adding costs by charging testing fees for making an on-line connection is counterproductive. 

Rather than wasting your supplier's time and money with EDI testing fees.  Why don't you just charge-back your supplier $1,000 off the next invoice for the privilege of doing business with you?  This way the supplier will respect you for being honest and won't be further insulted by wasting their time.

The message

I found this quote from a recent press release from SPS Commerce that sums up the relationship. 

"We are pleased to welcome Northern and its suppliers into our community,” said Archie Black, chief executive officer of SPS Commerce. “With a proven program to test or EDI-enable suppliers of any size, SPS Commerce aims to make EDI enablement as simple, cost-effective and hands-free as possible for the vendor and the retailer alike."

What do you think?

Cheers,
Cecil

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