Business Scenario-
You: Senior manager with a medium sized retail supplier. You just got back from a meeting where you had hoped to ask for a price increase from one of your larger customers. Instead what you got was your head handed to you on a plate and a long report of compliance violations including: concealed shortages, non-responsiveness to supply chain, late ASNs and so on.
Didn’t go quite the way you wanted, right?
How many colleagues do we know who regularly commandeer vast amounts of man hours (Contracted or borrowed IT resources, etc.) to “prove” you did it the way you should have to get long overdue invoices from retailer customers paid. Doing $7.5-$15 million in business with Walmart (For example) is a big deal, keeping that money in-house because you KNOW your processes work perfectly is equally a big deal. Many, many companies set up EDI systems (Internally or not), buy large ERP systems and take many other steps to insure they are “doing it the right way”. The problem is your processes and those of Walmart are never going to overlay perfectly. If you tweak and fine tune to accommodate Walmart it will throw off other customers – so what do you do?
Define the critical junctures in each process, measure them and continually work to improve. Easy to say. Everyone say measure and remediate, but what does that mean exactly and how do you do it? Managing the exceptions of your order to cash process with any customer should always be a hot topic. The “Perfect Order” is what we should all work towards. When you continually watch that report and micro manage out the problems which cause exceptions (Exceptions = charge backs or lost sales) then you are on a path to continual improvement.
Let’s say you have Walmart, Target and Kohl’s as clients. You have pretty good business with each, but your CFO is complaining most about the Walmart business – losing too much cash with this customer. So let’s work with Walmart. Your normal process with Walmart is to receive (from Walmart) the 850 (EDI PO), send an 856 (ASN) and an 810 (Invoice). You manage your EDI through Inovis VAN for Kohl’s, but Walmart and Target you use an AS2 connection with an in-house EDI translator (Bolt on ASN tool from someone) and maybe you are using MAS 90 or 200 (Sage).
A lot of people would immediately say that you shouldn’t be running MAS 90 with that much business ($15million + the other clients). The reality though is most retail suppliers run everything from QuickBooks to MS Dynamics (Great Plains) and there is a vast list of software companies and version/types between the two.
We have determined your process for Walmart is 850 (+997), 856 (+997), 810 (+997). Each 997 tells us and our trading partners the associated document was received and ‘usable’. Each of the other documents has specific business rules which must be adhered to. For example: on the 850 your customer orders 100 units of “X” at $8.50 each – you must ship 100 units. Ship any other quantity and you get a “Ding” on your score card. Conversely, if you bill $9.50 for each unit and ship only 97 units for a total of $950.00 (Short ship three items) and you get “Ding’ed” again. So each document has rules to follow. There are obviously many others, but these are basics. String them together be the documents and you have process which must be adhered to.
Over the last several years we have seen lots of media and market attention thrown on terms like: business intelligence, analytics, reporting, etc. Great stuff in many cases when you want to see what your sales are up to for a given product category or what you fuel expenses are. Someone on my linkedin.com group commented: “what is the point in measuring if nothing is done with the results? Analysis Paralysis is a dying trade........ we need more proactive, exception based reporting which highlights the exception rather than the norm. eg: if things are going well, then no report or dashboard. However, if things are going wrong then highlight and also provide alternative remedial actions. Now that would be useful.”
I totally agree. Give companies reports which show exceptions (Problems) within processes, the system should notify me when there is a problem. Use the EDI documents to form a process, then measure and monitor data in the EDI documents. Apply rules to identify specific instances where the process fails. For example:
1. 850 PO comes in on the June 18th with 100 units of “X” to ship by July 18th. (All of this information is translated and dropped into a database and business rules are applied.)
2. Give the user the ability to say: show all orders which haven’t shipped within “X” amount of days prior to the “Must ship by date” or “Cancel date”.
3. Provide said report.
Another example:
4. Same PO scenario as #1
5. ASN goes out (Data is translated and dropped into a database, rules are applied)
6. Give the use the ability to say: show me all any orders which have been short-shipped or had back ordered items.
7. Give the use the ability to say: compare items ordered on PO vs. items shipped vs. items invoiced. If discrepancies exist, correct before sending.
8. Invoice goes out <no errors or discrepancies> depending on your trading partner this can save you up to $50.00/carton, concealed shortages fines, or worse.
This is a great exception report to highlight potential problems in any vendors business. If we classify each of the exception types we can report on them weekly and address them to specific areas: low inventory, problem with EDI, packing issues, price conflict with client, etc. Remediation is great, but only when you have the tools to measure and identify the areas which need remediation.
Perfect order, Order-to-cash and many other report types can help you solve operational, sales and problems in other areas. A reporting system that tells you where your vulnerabilities are (Calls them out to you as they happen) and measures them for you is extremely valuable. When people talk about charge back remediation – fixing problems and putting a process in place to continually improve issues – this is a great thing for any company to have. The questions are:
1. What is the cost (Implementation/setup and ongoing maintenance going to be?
2. What does the system do at a high level to help you find the actual problems?
3. What other areas can a system like this address: Sales, transportation, or warehouse?
Because we want to try and answer these questions we would like to invite you to submit your views in this brief survey. Twelve simple questions to help us better determine what best of class solutions should be delivered to the market can be found here: http://survey.constantcontact.com/survey/a07e2y4agu2gav5b6o7/start
Why do we ask these questions? We ask them to better understand what decisions are at play. What are your considerations on cost/benefit and how/if you can get to a real ROI with this sort of solution (Assuming solution works, but cost of solution does not). Other areas must be considered as well. For example, most CIO/IT professionals don't feel they reach ROI <ever> with EDI. A good question to ask yourself is given a reporting solution driven from EDI you already pay for (Transactions, translation, etc.) would your EDI solution at that point be able to show a consistent return?
RetailEDI
