You have choices regarding your value-added network (VAN). However, some companies mislead those new to EDI when it comes to VAN selection. Here's what you need to know.
VAN providers may be different from EDI providers
You are not required to use the value-added network of your current electronic data interchange (EDI) provider. However, you could work with an EDI provider who implies you must use their VAN. Unsuspecting customers take these words as truth and sign on, not realizing they have a choice. They are subject to their provider's costs and don't get the chance to shop around. If you come across this idea, please press your provider for clarification.
You don't need the same VAN as your partner
Abort the mission if a new trading partner says you have to be in the same value-added network! Indeed, you need a VAN to begin working with said partner. But you aren't required to be on their VAN. Any indication otherwise raises a red flag, in my opinion. Therefore, I would think twice before doing business with this company.
What to look for
Be wary if your EDI sales rep isn't upfront about your VAN options. It's misleading when the representative begins the conversation with VAN setup questions. Here are some conversation starters that raise a red flag.
- Can your ERP handle raw EDI?
- Do you need integration assistance?
- Which of our VAN options will work for you?
- Do you need Functional Acknowledgement (997) reporting?
- Are you interested in a validation service?
- What is your targeted completion date?
- Would you like connectivity testing for any trading partners?
If a sales rep begins with the assumption that you are using their VAN, turn the conversation to price.
How much is a value-added network?
Many VAN providers offer a range of services with customization options. Others offer hearty packages with all frills and no basic plan. Avoid VAN packages loaded with benefits if you don't need bells and whistles.
Value-added network costs: KC model
Frequently, VAN pricing is based on the number of kilo-characters transmitted each month. Providers calculate the monthly bill by adding the number of KCs in each purchase order, invoice, advanced ship notice, and all other EDI transactions and multiplying by the rate in your contract (typically 5¢ to 25¢ or more).
Value-added network costs: Trading partner model
BOLD VAN offers trader partner pricing. Each month, you pay a fixed price for active trading partners in your network. (The key is “active.”) We do not charge for the total number of trading partners you have set up in our EDI network.
Value-added network costs: Overage Fees
Oftentimes, pricing is based on a tiered structure. When you transmit more data than what is in your tier, the VAN charges overage fees. These fees can be very costly, especially during the holiday season when you are moving more products.
Understand your value-added network contract
Avoid getting stuck in a fixed contract. Ask the VAN provider important questions before signing.
- What is the duration of the contract?
- Does the contract auto-renew? If so, when?
- What steps are necessary to terminate the contract?
- What are the ramifications of early contract termination?
Some providers offer a brief period for making modifications to the contract. But, unfortunately, clients realize after it's too late that the door has closed for negotiations. It's unfortunate because those new to EDI and value-added networks simply don't know what they don't know.
More on Value-added Networks
This article explains what a VAN is and how you can benefit from it. Our blog post includes more considerations when shopping for a VAN.Also, switching EDI VAN providers isn't as difficult as it sounds.