Think about how many times information from a single purchase order might be handled before merchandise reaches a retailer’s warehouse.
A buyer creates the order. Someone sends it to the manufacturer. The manufacturer enters it into its own system and sends back an acknowledgment. Later, shipping information arrives. Eventually, the retailer receives an invoice.
Depending on the systems involved, employees may be entering, checking, emailing, printing, and reentering much of the same information along the way. For a retailer working with dozens or hundreds of vendors, that activity adds up.
Electronic Data Interchange, usually called EDI, was developed to reduce this kind of repetitive work. It’s been around for decades, but it remains relevant because retailers and their suppliers still need a dependable way to exchange business information.
What is EDI?
EDI allows two businesses to exchange standardized electronic documents directly between their systems.
Instead of creating a purchase order, emailing a PDF, and having someone at the receiving company type the information into another application, EDI allows the systems to exchange the information in an agreed-upon format.
Common documents include purchase orders, purchase order acknowledgments, advance ship notices, and invoices. GS1 US, an organization that develops and maintains widely used supply-chain standards, describes EDI as a way for trading partners to exchange these business documents through standardized computer-to-computer communication.
The concept is straightforward. The implementation can be more involved because retailers and vendors may use different software, document requirements, and business procedures. That’s where EDI providers and integrations become important.
A purchase order is a good example
Imagine a furniture retailer placing an order with a manufacturer. Without EDI, the process might involve generating a purchase order, sending it by email, and waiting for the manufacturer to enter it into its system.
If a quantity or product number is entered incorrectly, someone has to identify and resolve the difference.
With an established EDI connection, the retailer’s system can generate the purchase order information for electronic transmission to the manufacturer. The manufacturer can process that information through its own EDI environment.
Depending on the trading relationship and documents supported, the manufacturer may then return an acknowledgment confirming the order or identifying changes.
This doesn’t mean every exception disappears. A manufacturer may still be unable to supply an item. Product information may not match. An order may require review.
But the routine exchange of information no longer has to depend entirely on people manually transferring data between systems. That frees employees to concentrate on exceptions that actually require attention.
Why acknowledgments matter
Sending a purchase order is only the beginning. Retailers also need to know whether the supplier received and accepted it.
An acknowledgment can help identify differences between what the retailer ordered and what the manufacturer expects to fulfill. That might involve an unavailable item, a quantity change, or another discrepancy.
Catching those differences earlier can prevent problems from surfacing when the retailer is expecting merchandise to arrive. This is especially important when the retailer has already made commitments to customers based on expected availability.
An acknowledgment isn’t a guarantee that every item will arrive on time. But it can provide useful information earlier in the process.
Shipping information can help retailers prepare
Another common EDI document is the advance ship notice, often called an ASN. An ASN provides information about merchandise being shipped.
Depending on the supplier and the information exchanged, it may include product identifiers, quantities, shipment details, and other information useful to the receiving operation.
For a warehouse team, knowing what’s expected before a truck arrives can make receiving more manageable. It also creates an opportunity to compare expected merchandise with what is physically received.
That’s particularly useful for retailers managing inventory across multiple locations or receiving large volumes of merchandise from manufacturers. The information still needs to be accurate, and employees still need to verify the actual shipment.
EDI doesn’t eliminate receiving procedures. It helps make information available before those procedures begin.
Invoices are another opportunity to reduce repetitive work
Once merchandise has shipped or been received, the supplier needs to bill the retailer. If invoices arrive by email or on paper, accounting employees may need to enter information that already exists elsewhere in the business.
EDI can provide an electronic method of receiving invoice data. When properly integrated with the retailer’s applications, that information may be available for comparison with purchase orders and receiving records.
Differences still need to be investigated. But routine information doesn’t necessarily have to be typed into the system again.
The value isn’t simply that the invoice arrives electronically. It’s that the information can become part of the retailer’s existing business process.
EDI doesn’t fix inaccurate information
This is an important point that sometimes gets overlooked. EDI can make the exchange of information faster and reduce manual entry. It cannot guarantee that the information being exchanged is correct.
If a retailer and manufacturer use different product identifiers, the systems need a reliable way to match them. If pricing or quantities are wrong, transmitting those details electronically doesn’t make them right.
And if an employee creates an incorrect purchase order, EDI may simply deliver that incorrect order more efficiently.
Retailers should pay attention to the quality of their product data, vendor records, and ordering procedures before and during an EDI implementation. They also need a process for handling rejected documents, mismatched information, and other exceptions.
The strongest EDI arrangements combine electronic communication with sound operating procedures.
Not every vendor works the same way
A furniture retailer may purchase from large manufacturers with established EDI programs and smaller suppliers that still rely on email or other methods.
Some vendors support a broad range of electronic documents. Others support only a few. Document formats, communication methods, and requirements can also vary.
That means a retailer should evaluate EDI based on its actual vendor relationships rather than assuming one connection will automatically cover every supplier.
Useful questions include:
- Which of our vendors currently support EDI?
- What documents can we exchange with each vendor?
- How will product numbers and other information be matched?
- What happens when a document is rejected or contains an error?
- Who will monitor exceptions and help resolve problems?
Those answers matter more than simply being told that a software product “supports EDI.”
The integration with retail software matters
EDI works best when the exchanged information connects to the retailer’s everyday applications.
For example, sending purchase orders electronically is useful. But if employees still have to manually reenter acknowledgments, shipping details, and invoices into separate systems, much of the potential benefit remains unrealized.
Retailers should understand which documents their software can generate, receive, and process—and what employees will still need to handle manually.
At eRetail Systems, we’ve been working on EDI connectivity between the eRetail Application Suite (eRAS) and TrueCommerce using Web Services.
TrueCommerce provides the EDI and trading-partner connectivity, while the integration is designed to connect that exchange of information with the retailer’s business applications.
As with any EDI implementation, the documents and workflows available depend on the integration and the participating trading partners.
Start with the work you want to eliminate
Retailers considering EDI don’t need to begin with a large technology project. A more practical starting point is to look at where employees are spending time.
Are buyers emailing purchase orders that suppliers must reenter? Is someone manually checking acknowledgments? Does the warehouse receive shipping information too late to use it? Is accounting entering invoices that could be exchanged electronically?
Identify the repetitive work first. Then determine which vendors and document types offer the greatest opportunity for improvement.
A retailer may find that starting with a smaller group of high-volume suppliers makes more sense than attempting to connect every vendor at once. The important thing is to understand the business process before deciding how to automate it.
Less paperwork is only part of the benefit
Reducing manual entry is a worthwhile goal. But the larger benefit of EDI is often better communication between retailers and the companies supplying their merchandise.
Purchase orders can move electronically. Acknowledgments can provide earlier information about changes. Shipping details can become available before merchandise arrives. Invoice information can reach accounting without unnecessary reentry.
None of that replaces the relationships between retailers and their vendors. It gives those relationships a more dependable way to exchange the information both businesses need.
For furniture, mattress, appliance, and consumer electronics retailers, that can mean fewer routine administrative tasks and more time spent handling the work that actually requires people’s attention.
Good technology doesn’t eliminate the need for experienced employees. It helps them spend less time moving information around and more time using it.
Learn more about eRAS and our TrueCommerce integration, or contact eRetail Systems to discuss your vendor connectivity needs.
Reference
GS1 US — Share Information Electronically: https://www.gs1us.org/upcs-barcodes-prefixes/how-to-use-your-upc-barcodes/share-information-electronically