Today’s EDI Service Bureau
First let’s look at what service bureaus do. Service bureaus almost by definition take your problems or challenges unto themselves (or at least parts of them). If you have human or technical process which needs to be accomplished by your company whether its payroll, payables or technical requirements for a replenishment program – chances are good you can find a service bureau to handle it for you. In context, within the Retail vertical, the service bureau will most commonly handle several related areas such as:
- EDI connectivity, testing and processing with your retailer clients via EDI (Even none EDI clients).
- They often print all of your UCC-128 (GS1-128) labels and ship them to your warehouse.
- Very often they will manage the printing of your price tickets, tags
- Bill of lading, TMS interactions, Catalog/item management, VMI, etc.
In the last two weeks or so I have spoken to numerous companies about the “service bureau” question and most readers I think would be surprised to know many of North America’s largest companies (CPG, Manufacturing, etc.) run everything from simple replenishment to VMI (Vendor Managed Inventory) through a service bureau. Many of those are multi-billion dollar companies in business for over 100 years. No, I didn’t get permission to name, names so I won’t be dropping any here.
Many people in the industry who have been around a while will remember the service bureau at QRS. When QRS was broken up and sold off, ICC (Now Easylink, http://www.easylink.com/) purchased the service bureau. At the time they purchased it the concern with service bureaus was – you guessed it: Charge backs. While early service bureauss did have their fair share of charge backs over the years this has changed and they have improved. I had a chance to question them in detail on this – why and what are the changes to reduce/remove so many of the previous charge back issues? The answer: “…, all customers’ requests for specific EDI transactions are logged into our workflow system and can only be checked out by a single operator. In addition, the system insures that logical order processing steps are handled in the appropriate sequence (creation of UCC-128 labels, then ASN creation, then Invoice creation). We’ve also added several business rules to the platform that do logic checking for common chargeback errors (ship date is past PO cancel date, quantity checks against original order, etc.). The actual explanation was much longer and much more detailed – but not unique in that each service bureau I spoke with has quite a bit to say about checks and safeguards to prevent charge backs. The President of ACT Data (http://www.actdata.com/), Paul Meyer says: “At ACT, we take our client’s EDI personally. Our customers receive instantaneous personal support and are accustomed to flawless execution. On a daily basis, ACT creates and verifies thousands upon thousands of documents on behalf of our clients. All of our clients, large and small, count on our EDI expertise to get the job done with services designed to help increase a company’s revenue and lower their technical burden.” Talk to people who use service bureaus and they will more than likely tell you that one of the best value propositions is service – a high degree of hand holding and education is often available to service bureau clients. That is important when you are new to EDI, have a complex replenishment program you are responsible for – or any time for that matter.
Let’s take a look at why they may be seeing a higher recent client acquisition than some other methods. Stores.org and other sources point out, many retailers (Esp. higher end) have contracted in many cases up to 25% with respect to PO’s issued. As order volumes from retailers have dropped over the last 10-12 months, the cost of implementing and/or maintaining an EDI client has not, as a result client acquisitions are actually increasing at service bureaus. For many retail suppliers the service bureau has become an easy way to save money processing orders for many of their slower retail clients. The general feeling is with the downturn in the economy, many suppliers have closed hosted accounts with high overheads (Minimum fees) and moved slow clients back to service bureau models. Suppliers in many cases have decided service bureau is more cost-effective when receiving only a handful of purchase orders for the month. Not too surprising is it? Technology used by service bureaus is typically very mature meaning not a lot of R&D, development or other capital expenses are associated with it.
What does it all mean? There are hundreds of companies for retail suppliers to choose from when placing their EDI in safe hands, regardless of whether it is a SaaS (Software as a service), service bureau model, in-house application or other sorts. The market tells us [Service bureau] is viable for many. With close to 85,000 companies supplying the retail industry in North America – a noticeable amount – as much as 15% still resides to one degree or another with service bureaus. My take on all of it: clearly there is something right going on at service bureaus. Personal preference for direct integration (Through the cloud or otherwise) is not really the point as some service bureaus will manage some aspects of that for you as well. The key is finding out if they are right for your business and that comes from homework.
Some of the service bureaus we spoke to in writing this article:
• ACT Data Services, Inc.
• Easylink Services International
• IBM Global Business Services
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