Grocery retailers are expanding their EDI capabilities by tapping into the next generation of web-based technologies. At the same time, they are placing additional pressure on suppliers to comply with their increasing demands for more information at greater frequency. What issues do suppliers have to address in order to comply? How may they take advantage, themselves, of the next generation of EDI technology?
A shift is underway within the grocery sector relating to the way transactional
information is exchanged between retailers and suppliers. This is a change that will significantly impact the way suppliers do business with the big supermarket chains.
With such large numbers of transactions it is hardly surprising that grocery retail chains were early adopters of EDI technology, having used in-house systems supported by value added networks (VANs) to electronically exchange orders and invoices with key suppliers for the past 30 years. According to the ‘EDI Cost Savings Report’ published in September 2010 by the global standards organisation, GS1 UK, in conjunction with Cranfield School of Management, some 27 million orders are made in the UK grocery sector every year, with 84 per cent of orders by retailers and 87 per cent of invoices from suppliers transacted using electronic data interchange (EDI) technology. The report into the UK’s top 15 grocery retailers – covering 90 per cent of the sector – finds that the industry saves £650 million per year in costs by using EDI instead of manual, paper-based processes for its orders, invoices and despatch advices.
Although EDI is well established in the Grocery sector, GS1 UK’s report highlights that at present only 38 per cent of the orders made by UK grocery retailers use despatch advices, a situation which presents an opportunity for the sector to save a further £200 million a year through full EDI implementation. An increasing number of retailers seem to be recognising this opportunity and are now pushing for even greater supply chain efficiencies by demanding more information from suppliers, such as despatch notes/ Advanced Shipment Notifications (ASNs) and a more frequent exchange of this information.Next generation EDI facilitates collaboration
EDI technology has come a long way in the last 30 years and the large grocery chains are acutely aware of the increased visibility, operational agility and strategic advantage that come with the ‘next generation’ of EDI solutions. However, its potential can only be fully realised if suppliers too, share in the use of this ‘intelligent’ B2B technology to drive collaborative gains for both parties.
At this present time, several of the large supermarket chains are looking to move their electronic trading capabilities to outsourced service providers on a fully managed basis. Sainsbury’s are in the process of transferring 4000 of its suppliers onto a single B2B platform operated by Wesupply to significantly improve visibility into critical supply chain processes. The platform enables integration with supplier back-office systems, provides checking and validation of content against business rules of all messages exchanged between Sainsbury’s and suppliers and will generate alerts in the event of errors or delays. This additional visibility benefits both Sainsbury’s and its suppliers by streamlining the exchange of orders, shipping information and invoices in support of the delivery of product from supplier to distribution centre or store.
Other retailers in the sector are known to be evaluating an outsourced, fully managed approach to EDI. Given the scale of this sweeping change within the industry, it is highly likely that the majority of suppliers to the grocery sector will be mandated to
comply with the varying and expanding electronic trading requirements of the major supermarkets. This will place considerable pressure on those traditional suppliers with in-house EDI systems and IT support, to keep up.The challenge of complexity
Most of the traditional and long standing suppliers to the grocery chains are fully aware of the considerable benefits of using EDI. However, many manage the process in-house and are subsequently faced with a range of complexities, from selecting across the plethora of EDI VANs or web-based portals available, to the multiplicity of data formats that are commonly used – standards such as Tradacoms, EDIFACT, EANCOM, XML, along with all the proprietary formats.
Adding to the complexity, these formats vary by customer and change occurs with increasing regularity. Even if a given customer uses a well-established standard, such as Tradacoms or EANCOM, these may well be interpreted or implemented in slightly different ways. Further to this the rate at which VANs are acquired/retired, connectivity preferences changed, new document types introduced (ASNs, PODs), and even minor tweaks made to documents, such as adding a new mandatory field, all present challenges on an ongoing basis that makes maintaining links with customers a hardship. Then of course there are the costs of equipment, software, IT support and maintenance to consider – along with the costs of using a VAN.Managing capabilities and costs
Responding to the new trading mandates of grocery retailers and managing all of this variety and change can be expensive and time-consuming for suppliers, creating work for the IT function that can hardly be described as value-added activity. However, this need not be the case, and indeed, could be seen as an opportunity for suppliers to adopt this next generation of ‘intelligent’ B2B technology themselves.
Outsourcing to a B2B service provider overcomes the technical constraints to extending EDI capability across the whole customer portfolio and off-loads the responsibility for compliance to the service provider.
However challenging the task of compliance and increasing customer demands is for suppliers with experience of EDI, for suppliers unfamiliar with EDI the prospect is far more daunting. With the fast expansion of supermarket product portfolios into non-food items there are a large number of suppliers that do not yet use EDI and are therefore not aware of EDI’s vast array of advantages. According to the GS1 UK report, 81 per cent of companies are still using manual, paper-based processes.
Many such suppliers will fear that the complexity of grappling with the various protocols and technologies used by their key customers may present large costs, particularly in fulfilling the differing needs of each retailer. These, often small, suppliers have never used EDI technology and have relied on the often labour intensive and error prone process of faxing documents to customers and re-keying orders into their ERP systems, something that is becoming increasingly complicated and expensive.The advantages to outsourcing EDI
Suppliers, large or small, regardless of their technological capabilities, are not only able to easily comply with their customers’ electronic trading requirements, but are now in a position to take full advantage of ‘intelligent’ web based B2B trading technology to accrue all the benefits that come with supply chain visibility. Suppliers can now trade seamlessly with their customers and therefore speed up the order-tocash cycle, through an outsourced, fully managed solution delivered on a Software as a Service (SaaS) basis.
In the case of Wesupply’s OneTime EDI solution, to be compliant suppliersneed only to make a single connection to the Wesupply network. This may be a direct link into the supplier’s ERP system or, with smaller suppliers, a simple web browser interface.
To take full advantage of this new ‘intelligent’ B2B technology a supplier can develop its own electronic trading hub through which it can trade with all its customers, irrespective of the numerous protocols and technologies used across the industry. The ‘intelligence’ of the technology within the hub attunes the format of each message carried to the individual systems requirement of each customer. Suppliers who have their own hub are in full control of their supply chain as they set the rules by which electronic trading takes place, so that predefined fields can be set to ensure that requirements, such as minimum order quantities, prices and delivery times are as contracted. An ‘alert’ can be sent if any parameter is outside of compliance, which helps rectify any problems quickly and prevents shortfalls in supply that may lead to customer disappointment. Importantly, automated invoicing and validation against orders speeds up payment.Establishing links
Wesupply has been working within the retail sector for a significant number of years, establishing hubs for some of the largest and most recognisable retailers and suppliers such as: Sainsbury’s, Fine Lady Bakeries, Diageo, Vitacress, Capespan, Lyons Seafood, G & J Greenall, Radnor Hills Mineral Water, and Grohe. Over four thousand companies will soon join Wesupply’s grocery sector community, as part of the Sainsbury’s replatforming project. The addition of such a large number of suppliers will establish links that help speed the time it takes to onboard trading partners and bring a new hub on-stream.
Suppliers to the grocery retail sector have the opportunity to use B2B EDI technology to their advantage, bringing IT and administrative costs down and pushing supply chain performance up across all their customers. Grocery retailers have recognised the benefits of outsourcing their EDI capabilities, perhaps their suppliers should be thinking along the same lines.
David Grosvenor is chief executive of Wesupply. Wesupply provides a fully managed and outsourced electronic business-to-business integration service, using a unique approach that maximises supply chain collaboration between independent organisations. This approach has consistently helped its customers secure tangible operational cost savings along with improved customer service, since the business was founded in 1999.
For further information visit: www.wesupply.com