The benefits of Electronic Data Interchange (EDI) have long been recognised by retailers, who have simplified their processes and increased efficiency by digitalising their supply chain documents. Currently, shops in the DIY sector are rapidly integrating EDI into their processes.
Despite the obvious advantages provided by EDI, including the automatic processing of orders and invoices with hundreds of lines (with different goods and their attributes), this solution is not yet so widely used in manufacturing, distribution, car and other vehicle dealerships. Therefore, in this article we examine the reasons why the sector with the greatest potential to benefit has little use of EDI.
A more complicated process
The process of supplying goods is quite simple in retail: an order is sent, the goods are delivered, and the store receives them. Orders are done regularly, at equal intervals (daily or weekly, etc.). The assortment of goods is agreed and known in advance. Delivery is usually carried out on the agreed date and does not exceed a week. The entire order is fulfilled in one shipment.
However, in the production and distribution sectors, things are a bit more complicated. We order not consumer goods, but materials, components, spare parts that are intended for production, resale or service needs. Orders are placed in advance based on planned production, sales or service needs. The customer usually wants to know when and what kind of goods will be delivered, or whether the entire quantity will be received. In the absence of a sufficient quantity of goods, the alternatives are required. Changes to the order can also be made, and even multiple times.
All this information must be documented and transmitted, and the procedure for changes must be provided. The order of goods can be delivered not once, but several times. Arrived goods must be linked to orders and tracked in the system to see if they have been fully fulfilled. The invoice for the goods can also be received later by consolidating multiple shipments. All this creates many technical challenges. For example, not every supplier can transmit the order number on the invoice or the delivery time for each item separately, and the implementation of additional fields in the ERP system can be very expensive.
More complex data management
In retail, few product attributes are used - code, barcode, quantity, unit, package, etc., but in production and distribution, lot number, date of manufacture, country of origin, weight, dimensions and other specific information also contribute. A document can contain several lines with the same product, but for example with different batch numbers. In addition, goods are sometimes made to special order, and their code may not be known to the recipient of the document and may not be recognised by his system. Not all suppliers can fill in all the required fields in the documents, and scenarios need to be foreseen, what will be done in this case.
Old standards and proprietary systems
Most of the production and distribution sectors cooperate with large foreign suppliers who have been using EDI for several decades with outdated document formats, channels and protocols (Edifact, AS2, X.400). This means that data transfer is technically more complex than using modern formats (eg XML) and channels (eg SFTP).
Some suppliers prefer that customers order goods through their online stores. However, buyers usually have dozens of suppliers and connecting to different portals no longer seems attractive. It takes more time than placing orders in your ERP system.
Complicated supplier engagement
For the reasons listed above, suppliers are often unwilling or unable to make an EDI connection - it is either technically too complicated, expensive, or they believe that their procurement portals meet the needs.
A large buyer in the retail trade easily convinces his supplier to use EDI (the clause about EDI is included in the supply contract), because he can choose goods from several suppliers. Unfortunately, the situation with the aforementioned sectors is somewhat different. Most of the time, their suppliers are large foreign companies, and there is not much choice of alternative suppliers. Meanwhile, suppliers are not always willing to change or improve their systems for one particular customer.
In retail, an alternative to an integrated EDI solution is to use an EDI portal, but convincing a large supplier to do so is practically impossible.
Despite all the listed challenges, solutions can always be found. Some suppliers have their own EDI operators and there is an opportunity to negotiate with them. Other alternatives include sending files via email and converting or digitalising documents.
Unifiedpost Group has accumulated considerable experience in this field, offers non-standard solutions and will be happy to share this information in a free webinar, which will be held on November 8, 2023 at 11:00 AM.
If you are a buyer of goods in this sector, with many partners abroad and in Lithuania, and you want to reduce the costs of the supply process - we look forward to your participation!
