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How Managed EDI Tools Offset Supply Chain Risk and Complexity
 

How Managed EDI Tools Offset Supply Chain Risk and Complexity

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    How Managed EDI Tools Offset Supply Chain Risk and Complexity How Managed EDI Tools Offset Supply Chain Risk and Complexity Document Transcript

    • How Managed EDI Tools OffsetSupply Chain Risk And Complexity A white paper from DiCentral
    • “If your supplier interaction is standardized and and information, etc.) between retailers and their suppliers.collaborative, you can expect a greater ROI on Until recently, the execution of EDI in any form was mostyour supply chain investments...” hampered by the technology infrastructure that facilitates it Recent economic conditions have dramatically changed – computers and networks weren’t fast enough, storage the global retail supplier landscape. Meanwhile, a demand- was too expensive, and software platforms were too pro- ing and price-conscious consumer base is growing accus- prietary. tomed to leveraging multiple mediums for shopping, and they’re expecting instant gratification for their efforts. Driven by economic trends and fulfill- ment demand, supply chain complexi- ty has increased by orders of magni- tude, creating a growing sense of urgency on the part of retail buyers and merchandisers to standardize and simplify their supplier interactions. This urgency is fueled by the promise of profit-saving efficiency and supply chain visibility gains that can result when retailers and their suppliers begin speaking the same language. The lack of integration between chan- nel-specific inventory and order man- agement systems also continues to confound retailers and exacerbate the complexities of their supply chains. In fact, the recent RSR Today, fast processors, seemingly unlimited bandwidth, (Retail Systems Research) report Omni-Channel and inexpensive storage make the concept of quickly mov- Fulfillment and the Future of Retail Supply Chain found ing large amounts of data infinitely more practical. Even that half of all retailers consider this lack of cross-channel more specifically, advances in the ability to interrogate the integration an organizational inhibitor to overcoming their data that’s contained in electronic communications has supply chain complexity challenges (see chart on this resulted in the acceptance and accommodation of more page). That said, advances in the technologies that enable forms of documents. This increased flexibility enables new- EDI (electronic data interchange) have breathed new life in found access to and sharing of information throughout the retailers’ interest in applying it as a platform for both con- supply chain. sistent and collaborative supplier interaction and seamless integration of back end systems. This paper will discuss Supply Chain Execution In A Multichannel World those advances, and explore how EDI can reduce the Perhaps no other development in retail history has been risks and the complexities associated with the modern so precursory of the need for supply chain collaboration retail supply chain. than multichannel retailing. The major retailers have set a precedent for cross-channel inventory alignment that effi- What Does Modern EDI Look Like? ciently fulfills consumer demand. As such, consumer EDI can generally be defined as the transfer of structured expectations have matured to the point that their interac- data, by common messaging standards, from one comput- tion with multichannel retailers of any size and in any seg- er system to another without manual intervention. The con- ment must result in complete satisfaction. Once upon a cept of EDI as a collaborative tool for the exchange of data time, an out of stock or a lag in delivery resulted only in between retailers and suppliers came on the scene in the frustration and perhaps a lost sale. Today, failure to have a early 1990s. The idea was, and still is, to standardize and product ready for fulfillment when and where the customer automate the exchange of common retail trade documen- wants it results in the loss of not only the sale, but the cus- tation (invoices, advanced ship notices, product attributes tomer as well. But many retailers remain challenged with
    • the implementation of technology that can facilitate The Benefits Of Standards-consumers’ fulfillment expectations. For those retail- Based Communicationers: Key to achieving the benefits of EDI is the establish- ment of a standard means of communication among Saving a sale at the store by ensuring merchandise as many of your supplier partners as possible. Manycan be drop-shipped to the customer’s home is a retailers struggle with the inefficient maintenance ofmanual exercise, and one that might work or might different communication standards, such as AS2 ornot, depending on the associate’s visibility into enter- FTP, from one supplier to the next. It will benefit retail-prise wide inventory and the supply chain. ers to work earnestly toward a single standard among their suppliers, and ana- Attempts to maintain accurate and up-to-date infor- lyzing your peer and “Source data – a single version of the truth sharedmation on the Web site, including real-time inventory competitor communities between retailers and their suppliers on aand product information, is an ongoing and labor- is a good place to start. common, managed services platform – eliminatesintensive process. the need for many point solutions.” This is also a good time to start standardizing Program disparity makes cross-channel inventory your supplier interaction. Recent economic conditionsvisibility consistently inaccurate. Disparate inventory have resulted in a shrinking supplier base, whichrepositories logged on disparate spreadsheets feeding means more retailers are sharing fewer suppliers. Ifdisparate channel operating units ensure insecure retailers impose disparate communication platformsdecision making, and set retailers up to disappoint on those suppliers, the suppliers and the retail com-customers. munity alike are burdened with diversity. Disparate hard-coded communications among different suppliersMultichannel retailers know that they must displace effectively force both parties to create something newmanual supply chain processes, not only to achieve – where a standard, network-based protocol alreadyefficiency but to improve data accuracy. Modern EDI exists. While proprietary protocols might be a practicalplatforms can help retailers offset those manual way to handle EDI with a handful of top suppliers,processes at the supplier level. Collaborating with managing thousands of communications across multi-your suppliers on a common product information ple suppliers is cumbersome and inefficient.toolset ensures accurate product information from thesource, and allows multichannel retailers to populate Digitization of supplier communications alone createstheir sales mediums with that information in a format significant savings. The exchange of digital docu-that’s efficiently uploaded and easily consumed. ments reduces the cost of each interaction to pennies,Outsourcing EDI to an experienced managed services compared to the industry standard ten- to twenty-dol-provider is a proven path to the immediate achieve- lar-per-document cost of handling paper. The cost ofment of EDI benefits. handling 100,000 purchase orders per year adds up quickly, and it multiplies exponentially with the creationA significant advantage of using EDI to enable inven- of POS reports, ship notices, and so on. However, thetory visibility and agility is the nature of the data itself. return on electronic communication scales throughoutSource data – a single version of the truth shared on the enterprise; when accounting, for instance, cana common platform between retailers and their suppli- examine POS reports and ship notices efficiently anders – eliminates the need for many point solutions. by exception in a standardized digital environment,For example, is implementation of a proprietary drop- the cost of doing business is reduced significantly.ship solution to accommodate the aforementionedtrend in consumer fulfillment necessary? Some retail- For its part, DiCentral subscribes to the standards anders simply enable this through EDI, eliminating sys- benchmarks developed by VICS (the Voluntarytems redundancy, avoiding placing another burden on Interindustry Commerce Solutions Association).their suppliers, and executing functions such as this Applying these standards in a Web-based EDI plat-through integration with their fulfillment systems for form enables retailers to standardize communicationspennies per transaction. compliance with suppliers.
    • Achieving Supplier Community Compliance dor community, led by companies like DiCentral, is posi- For merchants, the far-and-away most effective approach tioned well to hasten that education and bring standards- to onboarding suppliers to a standards-based EDI platform based communication platforms to both sides of the supply is education. For some large retailers, a heavy-handed chain. With a standardized trading platform in place, it’s approach to “force” suppliers to collaborate was once an become significantly easier and less expensive for retailers effective option. But the aforementioned “rationalization” of and suppliers to exchange information. the supplier base – that recent reduction in the volume of suppliers to retail and the number of suppliers retailers are Conclusion choosing to do business with – has changed the To achieve the benefits of EDI, retailers must get their sup- game. Maintaining negotiations, compliance, and pliers involved in the process, and the benefits increase supply chains with a large supplier base is expen- with economies of scale; the more of your supplier interac- sive, and the economic turn in 2008 caused many tion that’s standardized and collaborative, the greater the retailers to pull back on inventory and minimize ROI on your supply chain investments. Retailers that han- their trading partners, resulting in the downsizing or dle a large volume of sales for specific suppliers have suc- demise of many overseas manufacturers and sup- cessfully leveraged that volume as a means of onboarding pliers. This phenomenon fueled collaboration those suppliers. But even retailers with smaller sales vol- strategies, which are easier to execute with fewer umes have influenced suppliers to engage in collaborative suppliers. trading processes by effectively communicating the supply- side benefits of the efficiency and scalability gained with Management of a leaner supplier base, coupled with EDI. Regardless of the size or scope of their businesses, a reduction in the leverage that large retailers had to retailers that engage a managed services provider for EDI “force” proprietary processes on their suppliers, has creat- both eliminate complexity from the process and get critical ed opportunities for small-to-midsize retailers in particular. help bridging the retailer/supplier gap. There are a number Consider a sporting goods manufacturer, for instance, who of resources available at www.dicentral.com that illustrate is significantly challenged if its five major retailers require the EDI business case for suppliers. You can also consult five different hanger configurations. These multiple and with a DiCentral representative to discuss your next steps varied configurations add cost and complexity to the sup- toward reduced supplier risk and supply chain simplicity. plier’s operations, which impacts the cost of merchandise. For more information, visit But for many suppliers, proprietary configurations are con- www.dicentral.com or call 1 877 TRUE EDI. sidered a cost of doing business – a cost that’s ultimately passed on to retailers and consumers. Of course, when there was more competition in the market, suppliers who About DiCentral balked at proprietary process demands were easily With collaborative supplier/merchant solutions from dropped by large retailers, who could simply choose to buy DiCentral, EDI goes far beyond compliance. from another source. But as supplier options became DiCentral pioneered multi-tenant SaaS (Software- fewer, the balance of power shifted to those manufacturers as-a-Service) as the preferred EDI platform for buy- that remained, accelerating the adoption of common stan- ers, suppliers, and logistics partners to seamlessly dards by retailers. exchange data without costly investments in soft- ware or hardware. Personalized support ensures As those retailers standardized their configuration require- that first-time users achieve EDI compliance quickly ments, the aforementioned burden on suppliers was and economically; enterprise clients enjoy the bene- eased. Thus, smaller retailers are wise to piggyback on the fit of expert consultation regarding integration of collaborative standards being developed and deployed SaaS EDI solutions with their ERP or accounting among their larger counterparts and the supplier communi- systems. ty. Recognizing the trend, retailer/supplier education has Visit www.dicentral.com for more information. become a central tenet of organizations like the VCF (Vendor Compliance Federation). VCF and VICS stan- dards help retailers of all stripes and sizes scale their sup- ply chain practices by aggregating a community of thou- sands of standards-based suppliers. The EDI solution ven-© 2011 DiCentral