GXS launches e-commerce service for paying suppliers

million per year by using a new e-commerce settlement process that’s due to be announced today by Global eXchange Services Inc. (GXS).

GE Transportation Systems started using the service with its maintenance, repair and operations suppliers in January and has seen a 75 per cent reduction in the work needed for invoice reconciliation, said Ken Marshall, business leader for indirect sourcing at the Erie, Pa.-based division of GE.

On an annual basis, that should result in US$900,000 in savings for processing about 100,000 invoices covering a total of US$20 million in purchases from 4,000 suppliers, Marshall said. “They are clearly reducing our costs,” he said of GXS. “I can’t tell you the savings to our suppliers, but their reaction to the new system is, ‘Where can I sign up?’ ”

The GXS service will be made available to other companies immediately. It uses Gaithersburg, Md.-based GXS’s e-commerce trading hub and ePcard XML, an XML-based corporate purchasing card technology developed by GE Capital Financial Inc., another unit of GE.

Purchasing card tools, known as Pcards, haven’t gained wide popularity in e-commerce applications because many corporate users are worried about the potential security problems raised by purchasers giving credit account numbers to their suppliers, according to analysts.

“I hear over and over again that businesses are nervous about putting financial information out on the Web,” said Aaron McPherson, an analyst at IDC in Framingham, Mass.

But ePcard XML sidesteps the security worries by essentially giving suppliers a “pseudo-account number instead of the actual account number,” McPherson said.

A purchase order is associated electronically with a unique account number and is also packaged with information such as preset percentage limits for shipping and incidental costs as well as limits on when the purchase order expires, he said.

“I think it’s a really significant development in B2B payments,” McPherson said, referring to business-to-business transactions. “I haven’t heard of anybody else doing this.” He added that the GXS system also matches purchase orders with data about products or services from different suppliers, making it easier for workers to buy goods that qualify for pre-negotiated discounts.

GXS, a former GE unit that was spun off last month, said it will charge users of the settlement service a fee of US$1.75 to US$2.50 per transaction. Marshall said that’s much less than the US$15 to US$50 it costs to manually process a purchase order.