Tweet me!The global economic conditions continue to waffle from bad to not-so-bad; retailers have been exceptionally hard hit, as our customers are more worried about keeping their jobs and their homes instead of keeping in the current trend or style of fashion. These self-imposed limits on spending have shaken the retail industry to its very foundation – with the closure of many old and well established retail chains over the past few years, and the consolidation of other retailers into one.
In order for a retailer to remain solid and solvent after all the dust has settled, it becomes important to keep track of all of our various business relationships we have with our suppliers and vendors. It becomes important for us to maintain visibility into our supply chain and come up with ways to make our supply chain even more viable.
Oh… Supply Chain. That’s one of those buzz words that’s been sailing around the retail world for a while. The world is full of buzz words and catch phrases; nifty little bits of language that are supposed to make you think. But what, exactly, is a supply chain? What’s behind that buzz word?
Everybody has a supply chain. It’s simply the way you get merchandise into your warehouse and onto your shelves and – hopefully – into the happy hands of your customers. If you’re not a very EDI-capable retailer, then your supply chain is made up of a lot of bits of paper; faxes and phone calls to your suppliers, ordering whatever it is you sell and provide to the consumer.
Now, I’m going to make a couple of assumptions here. If you’re on this site and reading this article, chances are good that (1) you ARE a retailer or are involved with one and that (2) you are EDI capable. I mean, why visit RetailEDI.com if these are not relevant and true?
One of the biggest hurdles you may find in your Supply Chain is keeping your vendors compliant. There are a lot of levels to compliance that need to be considered. For example, just the fact that you and the vendor are Trading Partners and are exchanging information – well, that’s a level of compliance. It’s one of the most basic levels of compliance within the concepts of EDI.
But there are other levels of compliance that need to be thought about and considered. And if those levels of information and compliance are not clear or understood to your vendor community – those Trading Partners of yours – then the rest of your compliance efforts may just be for naught.
“What does he mean by that?” you may well be asking yourself. Well, I surely will let you know.
Let’s take the point of view of a good sized retailer (gee, big shock there!). Now, if you’re a retailer, you tend to track your products by the one piece of data that matters to you – your SKU. That SKU (stock keeping unit) will probably be the most important identifier for you and the way you do business. Whether you sell apparel, footwear, home furnishings, pet supplies, automotive accessories, or a little bit of a lot of things, that SKU is the way you track your items. Chances are good that the SKU number is going to be included on each and every document you trade via EDI – whether it’s just the PO and the ASN or you include the Invoice, the PO Change or any one of so many other documents, it’s there.
Now, to your trading partners – your suppliers – that SKU doesn’t matter much. No, instead, if you’re a vendor – a Nike or a Reebok or a Levis or a Corning, you’re going to focus on a number that’s more important to you – like the UPC or your own style number. That’s the number that is important to the supplier. As that supplier, your customer’s SKU isn’t that important. In fact, it’s only as important as the customer makes it. You may not understand the importance behind that SKU.
Let’s take a look at a product as an example. We’ll say you’re Bob of Bob’s Big Bandana Company. All you do – all you care about – is making bandanas. You’ve got hundreds of colors and dozens of patterns and styles. And each and every pattern has its own style number and then each color within that style will be identified by a unique UPC. But now, over at Walt’s Western Wear, they sell those bandanas by style, but not by color. In other words, all colors of your style 123-A, with all of their UPCs, are sold by one single SKU – 12345 – and listed as “assorted” for color.
So, you can see that only the SKU is important to Walt. All of your UPCs for the bandanas may be associated with that SKU, but it’s by SKU that Walt is tracking sales and ordering replacements. That’s why Walt is requiring that SKU on the ASN documents and the Invoices you send for each order Walt makes.
Here’s another big one in the world of retail; well in the world of retail warehousing, to be more precise. Over at Bob’s, you can pack 144 bandanas into a single shipping carton. You may even be sophisticated enough in your own product management system to have a UPC for a carton of 144 bandanas, packaged in groups of 12 of the 12 colors you sell. So when Walt orders that “carton level” UPC, he knows he’s going to get 12 of each of the 12 colors; which Walt sells all as the same SKU.
There’s a Rodeo coming to town and Walt is going to have a booth there, selling bandanas; he needs a big order. Walt generates a PO for you for 14,400 units – and Walt is basing this on 144 units per carton, and Walt knows that the 100 cartons you send will fit nicely in the back of the truck so they can take them to the Rodeo and sell, sell, sell.
But now wait… There’s something new on the horizon. The company that supplies your shipping cartons has revised those cartons and now they can only hold 120 bandanas – 2 dozen less. Not too big a deal, you may think. But now, instead of the 100 cartons of 144 units that Walt was expecting, you’re going to ship Walt 120 cartons of 120 each. And those 120 cartons will no longer fit in the truck.
Both of these examples of Vendor Compliance issues can truly impact the supply chain and mess it all up.
Here’s a real-life example I came across just the other day. We’re ordering some products that come packaged as “one each” per carton. Now the supplier’s manufacturer switched shipping companies – and with that comes smaller cargo containers. Instead of holding 760 units in each container – for a PO of 1520 units total, the smaller containers can only hold 720 units each. Now we’ll need to go back and revise 5 existing POs to a smaller quantity of 1440 instead of the 1520 we’d originally ordered. And all of this is because of a relatively simple change.
Maintaining these levels of compliance can be very important as the world continues to spin and people continue to buy things – surf boards, sewing machines, sprigs of spearmint – those levels of compliance and vendor communications will be important
One of the ways that many of us can get a grasp on Vendor Compliance is through the testing that we do with our vendor community. We can do it all in-house or use one of the 3rd party testing providers. Most of the major EDI networks or VANs will probably have some kind of testing program you can use to have your vendor test – with a Pass or Fail grade – on your document specs.
I was having a discussion recently with some other EDI folks about the validity of testing; rather, the validity of using 3rd party testing companies. Some charge exceptionally high testing fees – usually paid for by the vendor in the retail world – and the testing that they provide may only be able to check the data for the concepts of form and maybe syntax; rarely can these tests provide detailed compliance on the content of the documents being tested. For that, you may require an in-house testing program with test data based upon live documents – your PO, their ASN, their Invoice, etc. – and that may require some pretty sophisticated testing processes.
In the realm of vendor compliance, there’s another buzz word that’s often mentioned – SCORE CARDING. Score Cards are a way that you, as a retailer, can keep track of what vendor is following whichever EDI rule or requirement you’ve set in place. It’s basically a way for you to give a grade – A, B, C, D, F – to your vendors for following those EDI guidelines you’ve put into place. If a vendor is not doing well in a particular area, you and the supplier can work to resolve that issue.
Some of the translation applications out there can help with that scoring – in that the document can be accepted or rejected, based upon certain errors. Most of these will be related again to syntax and form, not content. You can see that the document contains a 10-digit number for your PO, but it generally cannot check on the validity of that number – 1234567890 vs. 1234567891 – it takes human eyes and reporting to get that for you.
There are, however, some networks and 3rd party providers that may be able to help in the concept of Score Carding. I’m a customer of Inovis and I know that they offer a service solution called AI – Actionable Intelligence. Through the interface, you choose certain pieces of data that you deem as important – such as the PO number – and verify that you get all the documents you need in return for the PO you’ve sent out; you can keep track that you receive an ASN (or many) and an Invoice (if required) via EDI for each of the EDI POs you’ve sent out.
Some of these systems can even be sophisticated enough to give you more information. Let’s say that your vendor ships from 4 distribution centers around the country. From three of the DCs, you get regular processing of documents and the appropriate return documents. But from the other, you get ASNs on a sporadic basis. And maybe from one of the other DCs, you don’t always get the correct and required information in the ASN, but at least you’re getting the ASN.
These are other problems you can be having with your vendor compliance levels. And all are very important to your business functions or you wouldn’t be pursuing them. Speaking of pursuing them – what do you do if your vendor or supplier is not meeting your expectations; they’re not providing you the data that you need? Well, there are a few schools of thought on that.
Part of what you do – and how well your vendors comply – is based upon how good of a relationship you have with your vendors and your trading community. There’s a reason that those entities that you trade documents and data back and forth are called Trading Partners; you and they enter into a Trading Partner Relationship.
There are a couple of very important words up there in that statement. Partner is one; relationship is the other.
When you set up your EDI communications with your supplier and vendors, you’re creating a partnership in which both parties are providing something – something valuable. And we’re not talking about goods and money, either. You’re both providing (or should be providing!) data that the other partner needs or wants.
Your supplier base would often like to receive your orders in the simplest and easiest way possible. By doing it “the EDI way”, you’re also giving them the data in the most correct way possible, as well. With EDI trading, generally the orders are sent from you and are directly entered into the supplier’s systems without a person to do the data entry. This can easily eliminate errors – sometimes very costly errors – due to data entry issues. Once your EDI system is set up and in place and the testing has been completed, the process is very simple and easy; it’s not much more difficult than sending an e-mail.
But let’s not stray too far from those two important words up there… Just like in your own personal life outside of work and EDI, you’ve got partners and relationships all over the place… Are you married? Or do you have a romantic “significant other”…? Well, those are just two examples of partners…. And then think about all of the people you know and talk to and call and e-mail and deal with on an daily basis – the mail carrier, your doctor, your kids, your neighbors, your parents, the mechanic, the … well, you get the idea, right? All of these people are relationships that you work with all the time.
And these personal relationships all work because of communication. How well you and the other person get along can be directly tied to how well you communicate with each other… For example, how well your doctor can fix what ails you is dependent upon what you tell him or her about how you’re feeling. And then, with their knowledge, training, and experience, they can provide you with what you need to get better.
EDI works the same way… Your trading partner relationships can work just the same way as your relationship with your doctor. You give them information – a PO – and they give you products and information – the ASN and the Invoice – and you get to receive the product and proceed with using the product. Then, when you run out of product, you order more.
EDI isn’t that difficult to grasp, if you can think outside the box. But one of the biggest and most important pieces that you can consider and work with is your vendor compliance and trading partner relationships. They’re key to making it all work.
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