If any industry sector has embraced the adoption of EDI, it is the Retail sector. It has been at the forefront of using EDI to drive efficiency and creating lean organisations. For more than 30 years, the sector has been replacing paper-based processes with electronic documents. GS1’s survey of the UK grocery industry showed that 87% of organisations used EDI-based Purchase Orders and 84% used EDI-based invoices to save over £650 million every year.
Yet, the research also showed that 81% of companies still used some form of paper-based processes within their order, invoice and despatch advices. This shows that there is still a great deal of potential for EDI to deliver more to the retail industry. A fact that has not escaped the attention of many retail business managers who see EDI as pivotal to creating competitive value for their organisations.
Pioneered by the likes of Walmart and Proctor & Gamble in the 1980s, Vendor Managed Inventory (VMI) has become a driving force for the industry to cut costs while increasing customer service. It is the concept at the core of the grocery industry’s ‘quick response’ approach to product flow across the supply chain.
In VMI, the supplier makes the main inventory replenishment decisions for the consuming organisation. The result is that the supplier has much greater control of inventory leading to less wastage or over-supply and the replenishment cycle often moves from monthly to weekly or daily so increasing customer service. This, of course, is especially important for promotions where increased demand puts more strain on the supplier’s ability to re-stock.
Other key roles for EDI in Retail are in the streamlining of Direct Store Delivery (DSD) procedures and the drive towards Global Data Synchronisation. For this reason, Datamonitor suggested that VAN usage doubled in Retail between 2003 and 2005. This was driven by browser-to-portal (or Web EDI) and point-to-point technologies such as AS2.
Supply Chain Structure
The Retail supply chain has a unique structure because it is driven by product flow across the supply chain. The fast moving nature of sales, the accentuated importance of availability and the complexity of managing uncertain demand levels are further exacerbated by the perishable nature of many of the goods passing across the supply chain.
All supply chain inefficiencies are heightened as order delays or inaccuracies don’t just build delays into the supply chain – as with other industries – this directly affects the retailer’s ability to conduct business and offer a level of service to customers.
The retail industry was one of the first to automate its orders and invoices. More recently, the struggle has been for retailers to accommodate increased delivery frequencies and increased SKU counts offered by Direct Store Delivery (DSD) suppliers. Using EDI to automate the DSD process can relieve congestion at the retailer’s back door and reduce check in times.
Key to all this is the Advanced Shipping Notice (ASN). According to research from the Grocery Manufacturers of America, electronic ASNs slash receiving times by up to 60%. If just one quarter of deliveries use automated ASNs, a 250-store company can save 65,000 receiving hours each year. The ASN can ensure that every step of the supply chain is fully informed on the status of the goods and goods can be checked at a pallet level as if it was at an individual case level.
However, for this process to be successful, there needs to be effective Global Data Synchronisation (GDS) across the supply chain. Suppliers need to be able to maintain a fully aligned master file at an item level in order to facilitate the exchange of item information, authorisation, cost, price and promotion information. With GDS, retailers can readily identify discrepancies, unauthorised items that were delivered and differences between orders and deliveries.
The result is that retailers have better in-stock positions and problems and errors are rectified quickly – often early in the supply chain process such as the despatching distribution centre.
There are a number of key EDI document standards used within the Retail Industry:
Tradacoms was a very early EDI standard that was heavily adopted within the UK Retail industry. Initiated in 1982, the standard was effectively rendered obsolete in 1995 when it was superseded by EDIFACT EANCOM. No further development has taken place on the standard. Unfortunately, someone forgot to inform the Retail industry about this and the vast bulk of retail EDI traffic still uses Tradacoms.
- Voluntary Inter-industry Commerce Solutions (VICS) Association
The VICS association has worked to increase the efficiency and effectiveness of the retail supply chain. VICS pioneered the implementation of the ‘Quick Response’ (QR) standard to simplify the flow of product and information for retailers and suppliers. VICS EDI handles the maintenance of the VICS standards including its supply chain Collaborative, Planning, Forecasting and Replenishment (CPFR) standard.
A group of standards that address common standards in the supply chain that are very well-suited to the Retail industry. The vast majority of eCOM standards in use today are based on EDI. However a new generation of XML eCOM standards are emerging – although market adoption has been minimal.
There are a number of industry bodies that are helping to shape the deployment of EDI within the Retail sector:
The organisation tasked with managing global implementation of the UPC barcode, the organisations standards have expanded beyond the barcode to encompass other areas of the supply chain including EDI message definitions, Radio Frequency Identification (RFID) and product data synchronisation.
- Global Data synchronisation Network (GDSN)
GDSN allows the secure and continuous data synchronisation of product and location information. Retailers and suppliers connect to a selected data pool – managed by a GS1 member – which connects to the GS1 Global Registry. Suppliers transfer product data and location information to the data pool. Retailers subscribe to only the information they require.
- Global Standards Management Process (GSMP)
A forum where GS1 standards are defined and maintained by GS1 and its members – especially retail trade companies. GSMP defines requirements and best practise before establishing industry standards to support electronic commerce and data synchronisation.
- Global Commerce Initiative (GCI)
GCI is a global user group of manufacturers, retailers and service providers. It established the business rules for a globally standardised model: the Global Product Classification (GPC) model. The model improves the supply chain performance between manufacturers and retailers by the voluntary adoption of industry standards for product group identification.
- Association for Retail Technology Standards (ARTS)
ARTS is a standards body dedicated to the Retail industry. Whereas GS1 standards concentrate on B2B standards, ARTS focuses on application-to-application (A2A) standards, including the Retail Data Model, Unified Point of Service, IXRetail and IXRetail XML standards. UnifiedPOS addresses the need to exchange data between point-of-sale devices and back-end systems.