B2B data integration is the automation of transactions between two or more computer systems. It allows for the standardized formatting of data among trading partners, suppliers and customers so that business processes can flow smoothly and accurately.
There are four main steps to every data integration flow: data extraction, documentation formatting, protocol specification and target application. The process ensures secure, accurate and timely transmission of critical trading information. Broadly, the benefits of B2B data integration are better visibility into operations, improved compliance with local and federal regulations and faster partner onboarding.
There are a wide variety of business-to-business integration solutions available to organizations looking to streamline their processes. In this blog post, we define B2B data integration, discuss the various types offered and tell you how the technology can benefit your business.
What is B2B Integration?
Business-to-business integration refers to the automation of peer and customer communications and transactions between at least two entities, with a fine-tuned ability to integrate crucial applications. By allowing entities to trade more efficiently and effectively with their suppliers, business partners and service vendors, data integration eases business processes with customers, too.
B2B integration gives you the technology infrastructure you need to digitize your data and direct it through your ecosystem.
Why is it necessary? Every entity, whether a business or other organization, has a unique approach to file and message exchange. So each uses its own amalgam of applications and systems that require various B2B protocols, security considerations, applications and more. B2B data integration enables these distinct technologies to communicate with each other and exchange important information nearly instantaneously.
By using B2B data integration, you lay the foundation for full control of your vital information exchanges.
What is a B2B Integration Platform?
So how does an organization reap the rewards of B2B data integration? Through a B2B integration platform, a solution that will help you integrate all your complex B2B and electronic data interchange processes from across your network in one portal.
The platform gathers data from various source applications, translates it into a standardized format and then transmits the created documentation to trading partners with the correct transport protocol. B2B integration solutions are available for either onsite use or implementation hosted through the cloud.
How does it work?
B2B integration starts by pulling information from internal source applications and moving it to target systems, or external applications. These can be intraorganizational or external (usually belonging to trading partners or customers) and could be cloud-based, onsite or a hybrid of the two.
Below are the four main steps in a standard integration.
Source-System Data Extraction
Once you’ve identified the trading partners, vendors, suppliers and/or customers with whom you want to integrate, you’ll need to extract data from source applications. This could mean pulling information from anything ranging from a purchase order to monthly sales figures. The manner in which the data is gathered depends on whether the application is a SaaS solution or is deployed on servers behind your firewall.
A comprehensive, up-to-date B2B integration platform should be capable of connecting the application through any allowable means so that it can ready the information for external transmission.
As mentioned earlier, different organizations use different documentation formats. The next step is to convert these various formats into standardized ones, such as EDI, XML and CSV, so the data can be integrated into a system of record.
Making matters more complex, many industries have their own formats, and even among these details can vary from location to location. International entities need support across a large swath of formats so that data can continue to flow efficiently.
Next, the parties transmitting data must agree on both a transportation medium and a messaging protocol (such as HTTP or FTP). The latter is akin to a channel used by two communicating parties on CB radio.
Usually the industry or trading partner will make this determination, but it is the nature of the payload that should ultimately decide how the message is sent. For example, is there sensitive information in the transmission? Do you need receipt confirmation? How large is the file–and how soon does it need to arrive?
While there are many advanced protocols available to hasten and ease file transfer, entities using B2B data integration supporting any protocol are the best positioned for success.
The final step comes when the data reaches its target system and gets converted so that it is readable and becomes part of the business process. The receiving application needs to be able to transform the data from the original, standardized format used for transmission back into a format understandable everywhere in the ecosystem. Many businesses have web portals to ease this process.
Types of B2B Data Integration
There are two main types of B2B data integration: data-level and people-level. While the above is primarily about data-level integration, the human role in B2B integration is also crucial.
Data-level integration refers to the process of migrating information from a paper to digital format. It involves automating document exchange between external ecosystem partners. For example, this might include all the transactions in a specific pick-up-request-to-invoice process. It is often helpful to think of EDI as the first generation of data-level B2B integration.
This level of integration calls for a sophisticated degree of automation. That’s because the electronic exchange and data-transformation processes require a connection with a secure protocol so the documents can be converted into a format that is readable by all trading partners.
People-level integration allows for effective collaboration and communication between people at various organizations along the supply chain. This enables individuals to conduct end-to-end business processes, such as partner onboarding and various customer-support situations.
People-level B2B data integration requires certain trading-partner management capabilities for the management of profiles and the capture and sharing of performance-related data.
People-level integration solutions that allow for transaction traceability, audit control and greater overall visibility facilitate better relationship management, which helps resolve disputes, chargebacks, missed service level agreements and other issues more quickly and more effectively.
B2B Integration Process
Below is a retail bill-to-cash scenario that illustrates the B2B integration process. In it, a large national retailer that wants to buy an item from a manufacturer creates an EDI data flow. Here’s what that looks like:
- In its purchasing system, the retailer prepares an order that gets pulled out and made into an EDI 850, a Purchase Order.
- The retailer then securely sends the 850 over the internet. It is received and processed by the manufacturer.
- The manufacturer sends back an EDI 997, a Functional Acknowledgement, or an EDI 855, a Purchase Order Acknowledgement, to confirm receipt.
- After it processes the order, the manufacturer sends an EDI 856, an Advance Shipping Notice, over the same secure connection to let the retailer know what is coming next.
- Once the retailer receives the EDI 856, it sends the 997 and integrates the 856 into the back end of its enterprise resource planning software. It then gets ready to receive the shipment it ordered.
- After the manufacturer sends the shipment, it sends an EDI 810, an Invoice, to the retailer. The retailer sends back an EDI 997, a Functional Acknowledgement.
- Next the retailer sends an EDI 820, or Payment Order, to the manufacturer confirming payment information. Finally, the manufacturer confirms receipt by sending an additional EDI 997 to the retailer.
How Companies Benefit from Improved B2B Data Integration Solutions
The need for B2B integration spans industries, verticals and business sizes. Once implemented, a sound B2B integration solution will give an organization increased visibility into operations, faster trading-partner onboarding processes and improved compliance with regulations.
There are also sector-specific perks, which we detail below.
Manufacturing: B2B integration allows for the exchange of customer and supplier information over secure file transfer protocol connections, secure communication with manufacturers’ banks and more.
Health Care: Here, B2B integration connects labs, hospitals, doctors’ offices and insurers, and lets health-care organizations automate time-consuming authorizations, claims, enrollments and more.
Logistics: Logistics businesses can use B2B integration to make certain deliveries are accurate and on-time. Another plus? Many integration solutions can integrate with warehouse management systems.
Financial Services: For finance, B2B integration’s ability to connect myriad brokerages and banks while providing the highest level of security and audit-trail capabilities is priceless.
Retail: By automating the conversion of documents in the X12 EDI standard to a format retailers’ ERP applications can handle, B2B integration reduces chargebacks and saves time and money.
Technology: A B2B integration solution does the bulk of the painstaking data work for cloud and SaaS businesses, which are required to integrate with many customers and handle huge volumes of data. With B2B integration, these organizations can maintain their uptime and meet all SLA targets.
B2B integration is no longer a luxury; in today’s competitive market, it’s a necessity. From retail to logistics to health care, every industry will benefit from implementing a high-quality data integration solution.