The Fax of Electronic Commerce
(AS/400 Magazine, February 1998)

by Gary Langton

To successfully compete in today's global marketplace, companies are using several new electronic commerce (e-commerce) technologies to exchange business documents. One technology that leads the movement toward e-commerce is fax. With more than 25 million fax machines in the U.S. today, the ubiquitous fax remains a staple of business-to-business communication.

However, many companies are discovering that manual faxing cannot keep up with the flow of critical business data and can even cause a loss in productivity. The average time it takes to complete the process of manual faxing (walking to a printer or copier and waiting for materials) is 15 to 20 minutes. Fortunately, fax technology is evolving, especially for AS/400-based companies. Many of these companies have turned to automated fax products that replace traditional stand-alone machines by putting the power of faxing on users' PCs and terminals.

To gain an understanding of how automated fax technology works, take the example of one of the most popular applications for AS/400 faxing: the purchase order. This popularity stems from the AS/400's strength in the distribution and manufacturing industries, and from the just-in-time philosophy that pervades today's corporate climate. With AS/400 fax, the purchase order is never printed. Instead, the program that generates the spooled file for printing creates the spooled file for faxing. The exact methodology differs between vendors, but in any case the spooled file is never actually released to print. The fax software grabs the spooled file, breaks it into individual faxes, attaches cover sheets to each transmission, and automatically begins transmitting the purchase orders that evening, when phone rates are most economical. The end result is the buyer arrives to work the next morning knowing that his purchase orders are already at the vendor's order entry department and probably receiving top priority because they've circumvented the vendor's mailroom. This is in stark contrast to traditional mail, which can take anywhere from two days to two weeks to reach its destination, depending on the reliability of both the postal system and the vendor's mailroom.

AUTOMATED FAX EVOLUTION

Automated fax technology has evolved today to become an integral part of the changing office environment, especially with the explosion of the Internet and e-commerce. According to Forrester Research, Internet commerce will grow forty-fold, from $8 billion to $327 billion in goods and services traded between companies, by the year 2002. And according to the market research firm Volpe, Welty and Co., the number of companies that are engaged in interbusiness electronic commerce will increase from 135,000 today to 435,000 by the new millennium.

But what exactly does the term "e-commerce" mean? In the business-to-business side of e-commerce, the term is often confused with electronic data interchange (EDI). However, e-commerce is more than just EDI. Much more. It encompasses everything a business needs to do before, during, and after a transaction is conducted over an electronic network. EDI, on the other hand, is defined as the communication of business information between computers, using a standardized electronic form.

Automated fax, like EDI, plays a crucial role in e-commerce, particularly in intercompany transactions. This is because automated fax eliminates the key barriers to EDI implementation: security breaches and lack of resources. And while the idea of Internet e-mail seems utopian, business transactions traded over the Internet are susceptible to outside assault by hackers with a PC and Internet access. Many companies have elected to avoid the public network, instead opting to conduct EDI over value-added networks such as those offered by the IBM Global Network, GEIS, and Sterling Commerce. The security issue is perhaps best understood through a survey conducted by the Computer Security Institute and the FBI. As reported in Electronic Commerce World, nearly half of the 563 U.S. organizations surveyed reported that they had been attacked through the Internet. The same survey found that 75 percent of the businesses, government agencies, and universities questioned have lost money due to computer security breaches.

Financial resources are also something to be considered when implementing e-commerce. According to EDI industry expert Nahid Jilovec, depending on what type of system you and your trading partners use, the setup and ongoing costs of EDI vary enormously. If you already have the system in place, the ongoing costs range between $8,600 and $19,000 per trading partner. If, however, you are beginning with EDI, you would invest another $26,000 to $227,000 for the initial setup. The reason for the great disparity in the setup costs is due to the translation software. These costs depend on the hardware platform (which ranges between $600 and $55,000), and the interface software development, which can vary from $15,000 for a simple transaction to $50,000 for a more sophisticated one.

With these inherent costs, the challenge of convincing upper management to implement an EDI solution can be difficult. With automated fax, IS managers have a much easier job of cost - justifying the product, as a typical $10,000 fax software package pays for itself quickly and often in 90 days or less. These savings are realized by eliminating the postage and paper costs, as well as time spent by employees to manually print, copy, file, and stuff and mail envelopes with these transactions.

Automated fax continues to be an important part of the e-commerce explosion, not only because of its low price tag, but because it eliminates any security concerns and is simple to implement, given the newer Òno programmingÓ solutions in the market today.

Because automated fax products use the old reliable public switched telephone network (PSTN), no fax can be altered or read during transmission, resulting in 100-percent integrity of the received information. Automated fax also provides proof of delivery. Because fax uses the PSTN and tightly defined end-to-end control, documents donÕt become lost in the mail or in the network, where an electronic document passes from network node to network node before reaching its final destination.

The ease of integration is also an added benefit of automated fax. Unlike EDI solutions, which often require some amount of programming to map applications data with EDI transaction sets, some automated fax systems require no programming, and can be up and running within an hour.

EDI AND AUTOMATED FAX: PARTNERS FOR AN INTEGRATED SOLUTION

Of course, EDI is an excellent solution for some organizations. Forrester Research reports that 10,000 U.S. companies are currently using EDI. But it is really only one part of a total e-commerce solution. Compared with the 25 million fax machines that are installed in U.S. companies, the number of companies using EDI is small, but this is precisely why both automated fax and EDI, when used together, form an effective e-commerce solution for many companies.

If you're like most companies, you do 80 percent of your dollar volume of business with 20 percent of your total customers and vendors. These larger customers and vendors are great candidates for the electronic exchange of business documents that EDI encompasses, because of the dollar volume of transactions executed. But what about the other 80 percent of your customers and vendors that represent only 20 percent of your business, typically in relatively small dollar amounts or in number of transactions? Many of these companies are finding that a total e-commerce solution of combining EDI and automated fax fits the bill.

Some experts have suggested that e-mail could supersede automated fax for delivery of key business documents. But security is not the only issue when dealing with transmission of documents across a public network. Clearly, e-mail is not a better solution than EDI, because EDI transfers data in a form that can be interpreted by the receiver regardless of the computer system on which he receives the data. E-mail only competes for e-commerce transactions now handled by automated fax. But incompatibility among different mail systems, particularly when handing attachments such as business documents, can make production-level business-to-business transactions via Internet e-mail both impractical and unreliable.

The power of fax comes not only from its use of the secure PSTN, but from the fact that what appears on the receiver's side is an exact replication of what was generated on the sender side. The simplicity of automated fax makes it a compelling e-commerce solution. Unlike Internet e-mail, which uses a store-and-forward scheme for getting documents to their final destination, fax simply replicates an image and receives absolute end-to-end confirmation that each page of the document was properly received. There is no technological monkey wrench in the middle of the transmission.

GLOBAL COMMERCE

Nowhere is the need greater for ensuring secure, private transmissions than with official documents, especially when dealing with international trade and its many regulations. Global commerce is a force that is driving companies today. Businesses are looking to reap the benefits of burgeoning foreign economies by developing new com-petitive solutions to better manage their operations. Ausimont USA, a New Jersey-based developer of chemical supplies, is already taking advantage of global commerce with its automated fax system and the added security benefits and global reach that it provides.

With raw supplies arriving daily from the company's manufacturing division in Milan, Italy, the company has a vested interest in ensuring that its key business documents are readily available to its network of brokers, located in various ports in the New York/New Jersey area. At the offices in Milan, vital bills of lading are transmitted electronically to Ausimont's headquarters in New Jersey, where they are then immediately rerouted to the company's brokers waiting at the ports of U.S. Customs clearance.

Ausimont's automated fax system allowed the company to handle these complex transactions with ease. Using preexisting leased data line, the raw bill of lading information is now received electronically, and then merged with an official importer form. The form is then faxed using an automated fax system to waiting brokers. Ausimont realized a $50,000 savings in late port fees because the process requires no operator inter-vention. Now Ausimont uses the automated fax system to distribute the bill of lading information to a dis-tribution list of involved brokers who receive the information from the U.S. headquarters, completely eliminating inaccurate information previously generated in Milan and manually sent via fax across expensive international phone lines.

Not only have Ausimont's overseas offices realized savings, but it has improved employee production and enhanced security. With automated fax, the company is now able to maintain scrupulous records of all fax transmissions and receptions, giving authorized personnel access to the information they need, while preventing unauthorized individuals from accessing confidential forms.

Maytag Corp., based in Cleveland, Tenn., is another example of a company using e-commerce technology. The company's top 40 vendors communicate planning schedules via EDI, but the remaining 300 plus vendors use automated fax. Judy Rogers, senior programmer/analyst at Maytag, says that because of the complexity and cost of setting up a vendor to communicate using EDI, the technology is an impractical solution for many vendors. Rogers claims that the setup work involved in sending schedules via EDI is staggering. The review of 50-page EDI standards documents is often enough to scare away many IS departments with limited staff. This is precisely where automated fax finishes the e-commerce puzzle. Implemented in less than a day, Maytag's automated fax system was up and running so quickly that the company also automated the faxing of 2,500 weekly vendor request forms, eliminating postage fees and the manual process of stuffing envelopes.

Another benefit of Maytag's auto-mated fax system was its prepro-grammed screens for faxing on-the-fly from AS/400 or PC terminals. Before implementing their automated fax system, when vendor request forms arrived by mail to their overseas destination, the information was sometimes obsolete due to the lag in international mail time. Automated fax and EDI guarantee that the documents are on the vendors' desks by the next morning, while the information is still timely and accurate.

BIC Corp. of Milford, Conn., a manufacturer and distributor of stationery products, lighters, and shavers, is another company realizing the benefits of EDI and automated fax as part of its e-commerce solution. Automated fax fit BIC's needs of integrating fax and EDI seamlessly into one order entry application that met the needs of its customers. According to Keith Anderson, BIC's manager of administrative systems, automated fax has slashed phone costs. With their automated fax system, the confirmations and invoices are automatically sent overnight, when phone rates are more economical. BIC feels that EDI is a great solution for its large customers, while automated fax fills in all of the gaps for smaller customers.

Automated fax also improved BIC's bottom line by assisting their accounts receivable department in collections of overdue accounts. Rather than spend time and resources to print, copy, and mail hundreds of invoices, BIC now uses automated fax to send invoices immediately upon shipment of its orders. This in turn diminishes the lag time between invoice receipt and payment from these customers.

In addition to using automated fax as part of e-commerce, each of the above companies also uses its automated fax packages for sending ad hoc faxes from either client PCs or attached workstations and receiving faxes for electronic distribution to the desktop. Companies are finding automated fax to be the most efficient method for distributing information that cannot be preprogrammed. Certainly the Internet is a big part of network omputing, but the same reasons that make e-commerce via Internet e-mail impractical often make Internet e-mail for ad hoc communications between businesses impractical as well.

CONCLUSION

The popular appeal of fax itself can best be explained by the notion that it is, like a telephone, simple to use. Technocrats need not apply. Faxing is here to stay and on-the-fly faxing made easy by automated fax products are giving new life to a tried and true technology that is pervasive in everyday life.

What items are e-commerce-enabled companies faxing on the fly? Typical business documents, such as purchase orders, invoices, and order acknowledgments are, of course, programmed for automatic faxing, so what's left? Plenty. Spreadsheets and letters from popular PC packages come quickly to mind. But don't forget about the not-so-obvious items originating on the AS/400. Typical examples are sales or inventory reports here certain pages need to be sent under a time-critical deadline. How many end users can manipulate the format of an extra-wide spooled file, attach it to an e-mail, and have it result in a document that can be easily viewed by the recipient? Most automated fax products handle the format changes by automatically reducing and rotating the documents, and will even allow selecting specific pages, saving time for the busy executive or executive assistant.

Both EDI and automated fax share many of the same e-commerce parallels. Both techniques are aimed at improving the exchange of information between trading partners, suppliers, and customers by eliminating the boundaries that restrict how they interact and do business with each other.

Keep in mind the primary benefit of e-commerce is the considerable reduction in transaction costs by improving the speed and efficiency of filling orders or completing transactions. Automated fax will decrease a company's operating costs, bearing a return on investment that is easy to justify. In addition, automated fax is a superior means of information distribution, and has grown to be the only technology that solves the true dilemmas facing businesses today, by empowering end users with the ability to fax documents directly from their terminals.

Automated fax users and recipients can count on 100-percent secure transactions of authentic, private ocuments that make repudiation by a vendor or customer nearly impossible. Until another technology can do the same, automated fax will continue to lead the e-commerce evolution.