Back in the Renaissance, Ted Watson and company might have been viewed as universal translators, bridging the gap between merchant traders speaking different languages.
This, however, is the age of the microprocessor, and Watson’s company is helping the computers of modern-day merchants talk to each other.
Watson’s company specializes in the growing area of electronic data interchange, or EDI, a system that is as essential to many of today’s merchants as sailing ships were to their predecessors centuries ago.
“In a nutshell, we facilitate businesses doing business with each other electronically, instead of doing it through paper,” said Watson, president of TSI International PC Division in Bannockburn. The company produces an electronic data interchange software package called Trading Partner.
“We provide for common business transactions to take place between computers,” Watson said. “Everything that you would normally see on paper and stuck in an envelope can now be exchanged electronically.”
For example, what TSI calls a “hub,” or major retailer such as Wal-Mart or Kmart, works with the software company, giving Watson and his crew information about the computer system that controls its inventory.
A “spoke”-a manufacturer that provides a product to the retailer-then buys the Trading Partner base software ($495) as well as a hub kit ($249 to $395) that allows the spoke to talk with the retailer. (A manufacturer must buy a kit for each hub with which it does business.)
After the software is installed in the spoke’s personal computer, the spoke is linked electronically with its hub. The spoke instantly and automatically can be alerted by an electronic purchase order when the hub needs more of a product, and can quickly fill the order.
“For example, Wal-Mart invented something called `continuous replenishment,’ ” Watson said. “At each of their 2,000 stores, at the point of sale, data is collected by scanners. Every day, they know exactly what was sold by item, by size, by store, by region, etc.
“Now they can distribute that data to their suppliers literally overnight. Which means Wal-Mart essentially has no inventory-they buy what they sell. And the general rule of thumb is that inventory costs you 27 percent of your value annually. The benefit is they can eliminate that inventory cost through EDI.”
“Because the Kmarts, Wal-Marts and Targets want to keep their inventory costs down, that gives us less lead time to deliver our products,” said Trading Partner user Ross Gosnell, who manages information systems for Selfix Inc., a South Side manufacturer of plastic housewares.
“Without an EDI system, there’s no way we could turn orders around in two or three days,” added Gosnell, who said his company checks its hubs three times a day. “As a result, Trading Partner is a critical piece of software for our business.”
Though the TSI software has a number of advantages, the most notable is efficiency, Watson said. “The idea is that with EDI, you’ve eliminated paper processing and delays,” he said. “It’s said that 70 percent of one computer’s input is another computer’s output.”
So, the company, a stranger to the EDI business four years ago, has worked its way to the top of the industry. It is thought to have the second-largest base of installed mainframe and PC data interchange software users, according to trade journal information. (Supply Tech is considered to have the largest base.)
“They are a company to watch in the industry,” said Torrey Byles, manager of the EDI program for Input, a California-based EDI consulting firm that also publishes a monthly industry newsletter.
“What differentiates TSI from the rest of the pack is that they were the first company with a Windows EDI package,” he said. “Plus, it’s a very easy program to use because of its simple graphic interface.”
Though about half of TSI’s 4,500 users are in the retail industry, the software’s applications can benefit “any company where voluminous data has to pass from point A to point B,” Watson said.
“The reach of your computer system now includes people you buy from, sell to, distribute through, file taxes to, pay phone bills to, etc.,” he added. “There are all these ways you can automate business-to-business applications.”
For example, growing markets for Trading Partner include the government and the transportation, grocery, insurance and health-care industries.
“Medicare is now requiring that all Blue Cross offices have to send and receive data electronically,” Watson said. “As a result, health-care EDI applications will soon dwarf retail.”
There are more potential applications, some of them unusual, Watson said. “For example, phone companies want to deliver electronic phone bills so that companies can download (them) to their computers and analyze the billings,” he said.
“And Hollywood wants to put PCs in every box office so they know point-of-sale information-theater box-office returns-via EDI. That way, if a film is a hit, they can push the ad budget.”
Before computers, business-to-business information was transmitted manually.
“A salesman would call on a business, there would be a discussion with a buyer, and if the salesman did his job well, a purchase order was typed up to his company and sent through the mail,” Watson said. “Days later, the order-entry department would get the order, code it, keypunch it into a system where it would begin to be processed. It was a cumbersome process.”
When large retailers and manufacturers became computerized about a decade ago, they realized the efficiency of electronic ordering. The problem was that there were numerous differences in data exchange standards.
“If you’re a human and you get a purchase order from Wal-Mart and one from Sears, they may be different looking, but, as a human, you don’t have any problem dealing with those differences,” Watson said. “Computers can’t discern the differences in forms and data. As a result, suppliers would need a different system or different programs to process that order electronically from every one of their buyers.”
In essence, the data interchange software acts as a translator, allowing computers to communicate in the same language, he said.
So, Trading Partner also has become a marketing tool for users, he said. “Even if you’re a small manufacturer, once you’ve got that EDI pipeline into a major retailer, you’re an efficient partner from (the retailer’s) perspective.
“Once you’re in the program, people are going to buy from you all day long and you don’t need a salesman. If you do well, you may wind up supplying to 2,000 stores. You can be a million-dollar company today and a $300 million company in a couple of years.”
“It’s definitely a requirement to do business with the big guys today,” Selfix’s Gosnell said.
“In this day and age, if you don’t do EDI with large accounts, you’re not going to be in business,” said Trading Partner user Joe Bernard, director of data processing for Mundelein-based Decorel Inc., which makes picture frames for retail sale.
Trading Partner’s roots date to 1984, when the core of the program was created by Deerfield-based Foretell, Watson said. The firm did work with companies such as Sears, Roebuck and Co. and explored the now-antiquated teleprinter business. (The teleprinter was a clumsy predecessor to the fax machine.)
About three years ago, Wilton, Conn.-based TSI International, which had specialized in on-line data-entry in the 1970s and 1980s, decided to go into the EDI business, Watson said. “With the way technology was going, EDI looked to be a very good field to be in. I recommended we acquire Foretell because it was the only Windows-based product on the market.”
After the aquisition, TSI moved the company to Bannockburn and began tweaking the product, Watson said.
“The product was powerful, but we wanted to polish it and make it more friendly for the average user, which is why we came up with idea of custom kits. Previously, you needed a consultant or programmer to implement the program. Now you can open the box and go to work.”
TSI officials also cut the price and shrink-wrapped the software to make it look more like an off-the-shelf PC product. They renamed it Trading Partner, which Watson felt better represented the users than ESP (Electronic Sales Processor) II, its previous name.
TSI markets the software by working through the 100 or so hubs it has signed on. “We ask the hubs what are the names of the suppliers that you would like to have this product,” Watson said.
Though Watson declined to release sales information on the privately owned company, he said TSI has tripled its number of users in three years. “We’ve grown significantly. Our office is about twice the size, as far as the number of people here.”
The company is trying to build on the success of Trading Partner with the recent release of a companion program called Mercator ($2,500), which maps EDI data.
Mercator allows a spoke to use the EDI information in other computer applications, such as merging purchase-order information into a spreadsheet program or word processor. The program is named for the famous 16th Century cartographer.
“Its value is that it replaces a custom program that a company would have to create,” Watson said.
“It’s a first in the industry. The key to the program is that it is very high-powered, but it’s easy to use,” said Input’s Byles.
With only a small percentage of businesses into electronic data interchange, Watson sees great growth potential for TSI. He believes that most companies that deal with data will need a data interchange program.
“There are about 40,000 companies in the U.S. today doing EDI in some form, and it’s estimated that more than 6 million businesses will be involved with EDI by the end of the decade,” he said.
“I believe many businesses are realizing that EDI is part of this pursuit of efficiency and the general compression of time in the business world. The general consensus is that people will need to do EDI in the future the way they need the fax today.”
