EDI in the Retail Industry

The retail sector has enjoyed the benefits of EDI for decades. Yet, many companies still use some form of paper-based processes within their order, invoice and dispatch 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 organizations.

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 organization. The result is that the supplier has much greater control of inventory, leading to less waste or over-supply and the replenishment cycle often moves from monthly to weekly or daily, increasing customer service. This, of course, is especially important for promotions where increased demand puts more strain on the supplier’s ability to restock.

Other key roles for EDI in retail are in the streamlining of direct store delivery (DSD) procedures and the drive towards global data synchronization (GDS). From Forrester’s research survey of more than 20 vendor companies, the results showed that 41% of organizations use an EDI message format, sending over 20 billion messages every year.

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 stock-keeping unit (SKU) counts offered by DSD suppliers. Using EDI to automate the DSD process can relieve congestion at the retailer’s back door and reduce check-in times.

The key to all of this is the advance ship 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 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, authorization, cost, and price and promotion information. With GDS, retailers can readily identify discrepancies, unauthorized 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 dispatching distribution center.

Document Standards

There are a number of key EDI document standards used within the retail industry:

• Tradacoms
  Tradacoms was a very early EDI standard that was heavily adopted within the 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 (now part of GS1 US)
  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 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.
• eCOM
  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.

Industry Associations

There are a number of industry bodies that are helping to shape the deployment of EDI within the retail sector:

• GS1
  The organization tasked with managing global implementation of the UPC barcode, the organization’s 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 synchronization.
• Global Data Synchronization Network (GDSN)
  GDSN allows the secure and continuous data synchronization 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 practices before establishing industry standards to support electronic commerce and data synchronization.
• Global Commerce Initiative (GCI)
  GCI is a global user group of manufacturers, retailers and service providers. It established the business rules for a globally standardized 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-office systems.