Disruptive Technology Promises to Streamline Reverse Logistics Business Reporting

by Anthony Schell

Reverse Logistics Magazine, Edition 14

Imagine handling hundreds of suppliers' returns where the industry standardizes on a common platform of reporting terminology and a single format for processing returns and aggregating performance metrics. The days of dealing with hundreds of proprietary formats and manually consolidating these formats would be a distant memory.

The RLA standards committee is working on such a reality and the underlying technology (or single format) is called XBRL (eXtensible Business Reporting Language).

XBRL is a disruptive technology swelling up around the world. Its first use has been in external reporting and governmental data collection arenas.

Japan, China, Singapore, United States, Spain, United Kingdom, Belgium, Australia, and Netherlands are just a few countries that have assessed and are implementing the promised value of XBRL. Japan, China, Singapore, Spain, United Kingdom, and Belgium are requiring their publicly traded companies and/or small businesses to submit their business information in XBRL. Japan has a first-of-its-kind XBRL solution interfacing a new accounting system across 36 subsidiaries with 32 separate legacy accounting systems. The Australian and Dutch governments invested $208 Million and anticipate a reduction of 25% in processing costs, respectively.

Recently, the United States Securities and Exchange Commission (SEC) announced a unanimous decision for a proposed ruling, requiring XBRL for the largest public companies this 2008 year.

In general, these countries and their companies have realized that the information technology highway is no different then other historic advancements. Each advancement in history typically evolves into a standardization phase. The advancement of electricity standardized on voltage strength and wall-outlets for our homes. Cell phones went from analog to digital, and some countries standardized on one digital protocol. Standardization eliminates inefficiencies in technological advancements and ultimately provides benefits to its consumers at a more cost effective price point.

Business information and reporting technologies are not uniquely different from standardization requirements of prior historic advancements in the electric or cellular industries. Although there are a number of ways to standardize, XBRL promises to be the standard of choice for business information reporting. Currently, business information reporting is limited to text based or proprietary reporting from enterprise wide applications. These various protocol forms of business information reporting create inefficiencies in the marketplace for preparing and consuming information. The XBRL standard promises to separate the need for specific software applications from their proprietary formats through standardization. This enables any software application that generates and/or reads XBRL to drive significant efficiencies into the marketplace around business information reporting.

XBRL explained - Figure 1 has a simplified version of the type of business reporting industry has grown to appreciate. Note, the business report contains contextual information required to interpret the business data. In general, the consumer of this information requires the following contextual information: company name, report type, scale, time period, units, and line item descriptions. For example, 600 by itself is not enough information. If the optimal contextual information is added to the number, then the consumer understands the 2008 Unit Sales were 600 Million.

Machine-readable XBRL works this way, by "tagging" the data with the appropriate contextual information, see Figure 2.

Standard machine-readable data "tags" streamline the workflow of business information between the preparer and consumer, by removing the following inefficiencies: 1.) the consumer re-keying data and 2.) the preparer wrongly assuming the consumer's desired presentation format, which ultimately gets re-formatted by the consumer anyway. As a result, standardized "tagged" data rightly places the preparer in control of the contextual descriptions using standard tags while appropriately enabling the consumer to control the presentation, as in Figure 1 or another analysis presentation.

Anthony Schell he is a member of the Standards Committee. For more information on the committee, please contact the Committee Chair, Dr. Ron Tibben-Lembke at rtl@unr.edu. ValuLink is a strategic consulting & professional services firm with an XBRL offering. xbrl@valulink.biz, toll free at +1 (888) 412-LINK, or www.ValuLink.biz.