Executive Briefings

Implementing Fully Integrated EDI for Supply Chain Efficiency

In today's world of web-based ordering, consumers expect the right products to be available all the time, delivered quickly, and for status updates to be provided at every stage of the process until the product is received. This places very high expectations on wholesalers, suppliers, distributors and retailers alike to ensure they are able to meet this demand, and they have little margin for errors and delays. The manual processes businesses have historically relied on make them vulnerable to the factors that contribute to these shortcomings and can negatively affect production, margins, reputation, scorecard performance and, ultimately, the bottom line. Because of this, supply chain executives are embracing real-time visibility and system collaboration.

Implementing Fully Integrated EDI for Supply Chain Efficiency

But as organizations embrace technology to eliminate human error and improve speed, they face new challenges – handling a high volume of data while ensuring that the data itself is accurate. When wholesalers and suppliers are juggling multiple systems, it can be difficult getting data from one system to another because each system has its own language. Getting them to speak the same dialect is challenging, yet essential for seamless information collaboration. This is where electronic data interchange (EDI) becomes the key to truly unlocking success for wholesalers, retailers, distributors and suppliers alike.

The original goal of EDI was to bridge systems, whether homegrown or external, so that they can communicate with one another without anything being lost in translation. EDI is automated, handles large volumes of data and can be implemented relatively easily as it encompasses industry standards for sharing information between trading partners. It’s essentially a universal translator for data exchange. Traditional EDI is a standard requirement for wholesalers doing business with retailers in order to automate order processing. But fully integrated EDI goes beyond the limiting use of EDI to streamline operations and communications throughout the entire supply chain, eliminating potential miscommunication between system data streams, ensuring accuracy, improving speed and enhancing business processes.

The Business Case for Integrated EDI

As consumer demand grows, wholesalers today face a number of business challenges – one of the biggest being chargebacks. For example, a footwear company shipping 2,000 cartons of sneakers to a big-box retailer risks facing a chargeback of $50 per carton if the shipment is late, or if the company fails to provide the retailer with an accurate advanced ship notice (ASN). This means that one small data miscommunication could cost the footwear company $100,000 – and that’s just for one shipment. Needless to say, this can negatively affect the company’s bottom line.

To mitigate this risk, wholesalers need accurate timing and automation within their warehouses. For retailers to properly receive products from the wholesalers, they should know from a systems standpoint that a shipment has been created before it arrives, including the number of cartons, their contents and the ID tags. Fully integrated EDI provides full data management, which would enable the wholesaler to communicate all this information directly to the shipping company and the retailer before the shipment is placed. This saves the company potential chargebacks, improves efficiency and makes the shipment process faster.

Fully integrated EDI also helps with inventory management. Big box retailers, for example, score wholesalers on how well they can fulfill orders, with the expectation of 85 to 90 percent accuracy. If a wholesaler’s inventory isn’t managed correctly and it is shipping only 70 to 80 percent of the orders placed, the big-box retailer will drop them. And there is a long line of other wholesalers waiting in the wings. Managing inventory starts from the point of manufacturing, which means incorporating EDI with factories is key.

As an example, say that a footwear wholesaler is based in the U.S. and employs factories in Asia to manufacture products. Through integrated EDI that wholesaler can track and manage the full production cycle. They will have access to data regarding what inventory is being produced within the factory, when it’s going to ship, when it will arrive in the U.S. and when it will get to the warehouse, so that it can be shipped to the retailer. By implementing integrated EDI and streamlining processes from concept to customer, the wholesaler can essentially do business hands free, while maintaining a high percentage of order fulfillment.

With this capability, the factory can also ship the product directly to the retailer – also known as “cross-docking.” This eliminates the need to warehouse any shipment. The inventory is tracked, managed and transferred without physically storing it. The wholesaler can relay the details of the shipment to the retailer, without ever seeing or touching the products. This enhancement meets consumer demand to get products faster, ultimately helping a company improve customer satisfaction.

As the above examples demonstrate, more companies have come to see the advantages of expanding their current EDI capabilities by implementing fully integrated EDI. Let’s look at one more example to illustrate the business case. If there is a wholesaler that does business with a major retailer, from which it receives 850 orders at a time for a specific, customized product, traditional EDI-enabled orders to be automated, but everything else was completely manual. It was no surprise that this wholesaler received pressure from the retailer for more timely shipment notifications and order fulfillment.  The wholesaler even heard demands from its own employees for improved visibility into any delays as well as a better way of reconciling production issues.

By expanding the scope of its traditional EDI solution to include manufacturing and third-party warehousing, the wholesaler benefited from increased visibility, faster operations and reduced cost. Now, as soon as the cut-to-order 850 transactions are received from the retailer, the fully integrated EDI offering immediately and automatically creates production orders, which are then sent electronically to the factories. When the products are packed and shipped, the retailer and third-party logistics provider are automatically updated. With automation throughout the extended supply chain, the wholesaler meets the business demands of the retailer, while enhancing staff efficiency.

Making the right investment

With the clear benefits of fully integrated EDI companies may wonder how they can select a solution that’s right for them. Some things to look for include the scope of functionality of the software: Is the solution only specific to footwear or can it support a broad spectrum of apparel and consumer goods? What’s the vendors’ existing support capability and how many partners do they support? Do they have working examples of all the workflows discussed above? How long does it take to implement each workflow?

The best vendors are not only familiar with the company’s specific industry, but the industries that company may need to partner with as well. An expert provider that can scale will be able to handle partners as the company adds them.

Some vendors can offer EDI modules spanning the whole supply chain, including retail, manufacturing, payments, distribution, warehousing and product development. This versatility and modular design, if combined with a vendor’s support of high data volumes and types of business transactions, is a driver of operational efficiency and a smart investment for any company. Companies should also look for solutions that are designed to be plug and play, allowing the vendor to work with any partner without incurring additional development.

Wholesalers and suppliers in the consumer goods, apparel and footwear industries often have to deal with the repercussions of inaccurate, late or otherwise incomplete deliveries. But, with fully integrated EDI software, automation eliminates human error and data is united throughout the supply chain. With an accurate picture and streamlined data, supervisors and managers can ensure that shipments include the inventory needed, are prepared and delivered on time, and alert the retailer with proper notice and information. Ultimately, wholesalers and suppliers will see a return on investment by avoiding chargebacks, expanding business with scorecards that reflect an organized and efficient supply chain and satisfying the ever-increasing demands of the end customer.

Source: CGS

But as organizations embrace technology to eliminate human error and improve speed, they face new challenges – handling a high volume of data while ensuring that the data itself is accurate. When wholesalers and suppliers are juggling multiple systems, it can be difficult getting data from one system to another because each system has its own language. Getting them to speak the same dialect is challenging, yet essential for seamless information collaboration. This is where electronic data interchange (EDI) becomes the key to truly unlocking success for wholesalers, retailers, distributors and suppliers alike.

The original goal of EDI was to bridge systems, whether homegrown or external, so that they can communicate with one another without anything being lost in translation. EDI is automated, handles large volumes of data and can be implemented relatively easily as it encompasses industry standards for sharing information between trading partners. It’s essentially a universal translator for data exchange. Traditional EDI is a standard requirement for wholesalers doing business with retailers in order to automate order processing. But fully integrated EDI goes beyond the limiting use of EDI to streamline operations and communications throughout the entire supply chain, eliminating potential miscommunication between system data streams, ensuring accuracy, improving speed and enhancing business processes.

The Business Case for Integrated EDI

As consumer demand grows, wholesalers today face a number of business challenges – one of the biggest being chargebacks. For example, a footwear company shipping 2,000 cartons of sneakers to a big-box retailer risks facing a chargeback of $50 per carton if the shipment is late, or if the company fails to provide the retailer with an accurate advanced ship notice (ASN). This means that one small data miscommunication could cost the footwear company $100,000 – and that’s just for one shipment. Needless to say, this can negatively affect the company’s bottom line.

To mitigate this risk, wholesalers need accurate timing and automation within their warehouses. For retailers to properly receive products from the wholesalers, they should know from a systems standpoint that a shipment has been created before it arrives, including the number of cartons, their contents and the ID tags. Fully integrated EDI provides full data management, which would enable the wholesaler to communicate all this information directly to the shipping company and the retailer before the shipment is placed. This saves the company potential chargebacks, improves efficiency and makes the shipment process faster.

Fully integrated EDI also helps with inventory management. Big box retailers, for example, score wholesalers on how well they can fulfill orders, with the expectation of 85 to 90 percent accuracy. If a wholesaler’s inventory isn’t managed correctly and it is shipping only 70 to 80 percent of the orders placed, the big-box retailer will drop them. And there is a long line of other wholesalers waiting in the wings. Managing inventory starts from the point of manufacturing, which means incorporating EDI with factories is key.

As an example, say that a footwear wholesaler is based in the U.S. and employs factories in Asia to manufacture products. Through integrated EDI that wholesaler can track and manage the full production cycle. They will have access to data regarding what inventory is being produced within the factory, when it’s going to ship, when it will arrive in the U.S. and when it will get to the warehouse, so that it can be shipped to the retailer. By implementing integrated EDI and streamlining processes from concept to customer, the wholesaler can essentially do business hands free, while maintaining a high percentage of order fulfillment.

With this capability, the factory can also ship the product directly to the retailer – also known as “cross-docking.” This eliminates the need to warehouse any shipment. The inventory is tracked, managed and transferred without physically storing it. The wholesaler can relay the details of the shipment to the retailer, without ever seeing or touching the products. This enhancement meets consumer demand to get products faster, ultimately helping a company improve customer satisfaction.

As the above examples demonstrate, more companies have come to see the advantages of expanding their current EDI capabilities by implementing fully integrated EDI. Let’s look at one more example to illustrate the business case. If there is a wholesaler that does business with a major retailer, from which it receives 850 orders at a time for a specific, customized product, traditional EDI-enabled orders to be automated, but everything else was completely manual. It was no surprise that this wholesaler received pressure from the retailer for more timely shipment notifications and order fulfillment.  The wholesaler even heard demands from its own employees for improved visibility into any delays as well as a better way of reconciling production issues.

By expanding the scope of its traditional EDI solution to include manufacturing and third-party warehousing, the wholesaler benefited from increased visibility, faster operations and reduced cost. Now, as soon as the cut-to-order 850 transactions are received from the retailer, the fully integrated EDI offering immediately and automatically creates production orders, which are then sent electronically to the factories. When the products are packed and shipped, the retailer and third-party logistics provider are automatically updated. With automation throughout the extended supply chain, the wholesaler meets the business demands of the retailer, while enhancing staff efficiency.

Making the right investment

With the clear benefits of fully integrated EDI companies may wonder how they can select a solution that’s right for them. Some things to look for include the scope of functionality of the software: Is the solution only specific to footwear or can it support a broad spectrum of apparel and consumer goods? What’s the vendors’ existing support capability and how many partners do they support? Do they have working examples of all the workflows discussed above? How long does it take to implement each workflow?

The best vendors are not only familiar with the company’s specific industry, but the industries that company may need to partner with as well. An expert provider that can scale will be able to handle partners as the company adds them.

Some vendors can offer EDI modules spanning the whole supply chain, including retail, manufacturing, payments, distribution, warehousing and product development. This versatility and modular design, if combined with a vendor’s support of high data volumes and types of business transactions, is a driver of operational efficiency and a smart investment for any company. Companies should also look for solutions that are designed to be plug and play, allowing the vendor to work with any partner without incurring additional development.

Wholesalers and suppliers in the consumer goods, apparel and footwear industries often have to deal with the repercussions of inaccurate, late or otherwise incomplete deliveries. But, with fully integrated EDI software, automation eliminates human error and data is united throughout the supply chain. With an accurate picture and streamlined data, supervisors and managers can ensure that shipments include the inventory needed, are prepared and delivered on time, and alert the retailer with proper notice and information. Ultimately, wholesalers and suppliers will see a return on investment by avoiding chargebacks, expanding business with scorecards that reflect an organized and efficient supply chain and satisfying the ever-increasing demands of the end customer.

Source: CGS

Implementing Fully Integrated EDI for Supply Chain Efficiency