The risks associated with multiple VAN providers
Some companies trade and interact through direct EDI very successfully, also known as point-to-point, without ever going near a VAN (Value Added Network) provider. Others find themselves with multiple service providers, without good reason. Can either of these approaches really be appropriate and sustainable? However, some businesses naturally choose a single VAN provider, below we outline some of the issues that contribute to this decision:
Suggested reading: Different types of EDI compared
Longer time to resolution
With a setup of multiple VAN providers, you will have duplicates of a lot of functions. To name a few:
- Support desks/contacts/phone numbers
- Web portals
- Service/SLA reviews
With all these duplicated functions comes complexity and more for your internal resource to manage. If you are faced with an issue, say with an order document, it will take you longer to identify where the issue originated, due to the added complexity in your set up. Your internal resource will need to log into each web portal (using different user interfaces) for each VAN provider and see if they can find the issue.
If not, they will need to ring round, or create tickets with each VAN providers support team. After this, they will need to chase and keep on top of each ticket until the origin of the issue is discovered. Once this has been found, a resolution can be worked on. Why not just work with one VAN provider? It can get your issues resolved much quicker!
Having multiple VAN providers means needing support for each, and this is clearly a duplication of a cost which could be much smaller if wrapped up with one provider. Furthermore, it is not just the upfront cost from the providers but the cost of wasted time in terms of your internal resource. Take, for example, reporting. Rather than being able to set up a report or dashboard to report from within a web portal, there are several dashboards or reports to work from. But the business needs to see the full overview of trading documents and stats. This takes your internal resource time to merge into one overarching report.
Why pay two or three sets of fees for very similar services? We rarely, nowadays, have multiple mobile phone accounts to access services or apps, why not take this kind of thinking into the world of business. Firms should be thinking of gaining economies of scale on pricing:
• Lowering internal costs because there are fewer contracts to monitor and manage.
• Having just one contact point if a problem arises (and not having the confusion of which vendor may be the cause of the problem).
• Redirecting staff to more gainful activities.
• Having a larger amount of traffic going through one VAN gives you more leverage.
Suggested reading: To find out what other costs you could be facing read our article – The impact of failed EDI on supply chain
Using multiple VAN providers increases your third-party risk. Not only are you opening the risk to those directly serving you, but those who also serve your providers. This increases your risk dramatically. In addition, it is adding complexity to the overall engine that runs your business. This increases the time it takes to get things done, squandering your efficiency.
Ultimately businesses outsource to transfer the ownership onto experts in certain fields. While this has its benefits, it is good to understand how your provider operates. How many third parties do they work with? At the end of the day, you have given the control to someone else, however, do you know if they are the ones who have full authority across their whole offering?
To reduce your third-party risk, you will need to ‘vet’ your potential VAN provider to ensure they are in control. Here are some questions to consider asking:
- Is the VAN they are offering you their own? If not, whose?
- Is the support they offer run by them? If not, who?
- What is their company structure, in terms of; have they acquired any other businesses recently? Or in the past? If so, how do they work together? (This can mean clunky processes or gaps, which means things can get missed, lost, or take longer to sort.)