| Marlow Recommends... |
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| Written by Marlow Atticus | |||||
| Monday, 08 February 2010 | |||||
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With the number of Retailers, Distributors and suppliers I work with it amazes to me that with the tough economic times we are experiencing, companies still do not know the cost of doing business. The use of EDI can not be utilized to its fullist potential within an organization without having some understanding of the expense of each process/step within a supply chain. Let’s take a look at the 3 common EDI transactions; The Purchase Order, Advance Ship Notice and the Invoice. Purchase Order Many companies will argue with me that the value of the PO data is hardly worth the cost of transmitting the EDI transaction; I beg to differ – Retailer Value – Getting exactly what you ordered. One of the biggest values of transmitting a PO electronically is knowing that the supplier is likely not re-entering the data into their Order Processing System. Granted there are service providers that support EDI services that are a “Rip and Read” process, however in looking at the functionality of many of them, these are ways to import data if the suppliers has concerns with human error. Providing the supplier with their UPC/GTIN per Style, Color and Size is the root to the success of any supply chain regardless of EDI or not. However, providing the information electronically means that there will likely be fewer delays in getting the data into the supplier systems. Getting what you ordered on time. Data entry still being a concern means that automating the PO load process particularly around the requested Ship or Delivery dates for a Retailer is critical to the Retailer. Lead times are built into the Inventory Management systems, so making sure there are no errors in dates entered and confirmation back means no outs. Audit Trail of transmission. Knowing that data has been received, adds to the comfort level of the buying organization, and EDI provides this audit trail. Remember however, that the receipt of a file is not proof that data was passed to the supplier's systems, and it is your trading partners' responsibility to monitor the stages that data goes through, and that there has been a successful hand-off. Perhaps consider adding an 855 – PO Acknowledge as another level of confirmation, and the visibility of being able to receive what was ordered and when it’s needed. First in line for hot products. Automating the sending of PO’s to the suppliers may improve your odds of getting your allocation of the hottest products. Suppliers tend to treat their more technically advanced suppliers better then those for whom they need to handle paper or faxes. Supplier Value – Automating the entering of PO data. As mentioned above with the value to the buying organization, automating the loading of PO data into a supplier's system without human intervention is extremely important. Re-keying information into a system is prone to data entry errors. Fullfillment accuracy. “Garbage in, Garbage Out”, the quality of the information provided within an order does affect the value of getting the correct product ordered. Item number accuracy will affect whether a PO loads into the supplier's order system. Just as important is the correctness of the number that is being sent. There is nothing worse than sending a valid number to your supplier, but addressing a different product than you thought you were ordering. Perhaps consider the 832, product catalog feeds or GDSN processes to assist with this. Fullfillment timeliness. The quicker the order is loaded to the supplier's system, the quicker the order can be filled and shipped. Automate the process. Advance Ship Notice – Retailer Value – Fullfillment Accuracy. Whether the Retailer integrates the ship notice into their WMS systems or not, many have learned that adding the ASN into the mix of EDI data, does improve the accuracy of the shipment. This is primarily due to the double checking that is done when the suppliers are scanning while packing goods. Scanning a UPC barcode, for example, when creating the Ship Notice data has been known to find that the wrong supplier product was picked. Shipment Scorecarding. Vendor Scorecarding is becoming more and more evident with Retailers/Distributors and their trading partners. Having suppliers that they can count on day in and day out equals success. Many retailers have struggled in the past with being able to gather receiving data from systems to populate into a vendor scorecarding system however new systems have been built to do so using the receipt of EDI ASN data. Automated receiving. Integrating the Ship Notice data adds the highest value to a supply chain process. With many, unloading and inventory put-away is cut dramatically with the addition of EDI data, to the point that large shipments without this information can cripple the receiving process. You sould also be aware that many companies are using the advanced data for post-distributing the products to improve the “flow-through” of goods from Receiving to Shipping. Shipment Visibility. Knowing what is coming and when, continues to be a value-add to the retailers/distributors; from knowing what resources and equipment is needed for unloading a trailer to knowing the orders, products and quantities is of value for the buyer. Supplier Value – Fullfillment Accuracy. Even though creating an ASN may be more work for the suppliers than they would like, many will agree that the double checking of the order fullfillment step is starting to payoff. Shipments that are incorrect, simply add to delays in receiving, invoice payment, future replenishment orders, and also affect customer satisfaction. What’s that worth to you? Shipment Scorecarding. As mentioned above, suppliers should be aware that their customers are indeed starting to keep score. Buying organizations need to “weed out” the weak performers, and are doing so by scorecarding the qualitity of shipments. What’s your score with your customer? Do you even know? Invoice – Retailer Value – Reduction of data entry. With more complex Accounts Payable systems come more data entry of manually sent invoices. While many of the older systems were PO summary level entries, the newer applications now need Item level data for validating against orders and reciepts. Sending invoices electronically may not eliminate all invoicing discrepancies, but it will allow the AP staff to spend their time with strictly the 30% of the invoices with issues verses entering 100% of the invoices. 3 way matching Automation. With some systems the only way for an invoice to get paid, requires information going through an automated step of matching to the PO and to receipts, and receiving invoices electronically is the only way that this process can be done. Supplier Value – Audit Trail. Like the PO for the Buying organization, the receipt of invoices by the customer is of concern to many suppliers, EDI does provide that audit trail. In addition, knowing that the data is being integrated and validated upon receipt of invoices gives the suppliers additional confort that they will get paid more timely, especially when there is no data entry by the customer staff into the AP system. There are many websites available today where a company can play around with the ROI on moving to an EDI program or enhancing that program. Some of these sites may exagerate the vaue proposition, so keep in mind that your organization should do its own internal cost assessment on the hard and soft dollar savings of automating a process. For those of you that have not done this assessment, lets use some very simply and conservative math and play around with some number. I have to believe that a retailer or a supplier can see at least $1 of savings by electronically trading a PO and an invoice. With that said, in our example lets use the scenario where a retailer's top suppliers receive 60,000 PO’s per year. Assume that they back order half of these orders so there are 90,000 invoices traded; at $1 each, that’s a saving of $140,000. For a retailer that is receiving an ASN and automated receipts. let’s assume that for each PO, you save as little as $10/PO (very conservative number) if my math is correct, that’s $600,000. Sure does not take long to see the ROI with simpe numbers like these. All of the above said I would strongly suggest taking the time to conduct your own assessment of the value of automating your supply chain. Start small and then grow your program as you see fit. | |||||
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