EDI automates processes and enhances efficiency by creating seamless connections between retailers, suppliers, distributors, manufacturers, and others.
Exchange of information between trading partners (those who do business with each other) is at the heart of retail operational efficiency, and this is accomplished through Electronic Data Interchange (EDI) of transactional documents. In an era where speed and accuracy are essential, EDI replaces traditional paper-based and email communication with a faster, more accurate, and cost-effective solution.
Understanding EDI
A standardized digital format known as X12, is used by an overwhelming percentage of business-to-business transactions in the retail supply chain.
The companies that want to work together use different core business systems and have established data standards within their organization. They all speak slightly different “languages.”
EDI helps the companies communicate by translating the “languages” aka converting the data messages back and forth between the companies. This mitigates the need for companies to update their core business software. Companies also enjoy the benefits of automated data exchange. Automating data exchanges removes the risk of human error in manual data entry and improves the speed of communication between companies/partners.
Key EDI Documents in Retail
X12 standards identify the key business communications documents using a numerical reference system. Not all suppliers or retailers use all the document types shown below. As you begin working together, you must confirm which EDI documents your trading partner requires.
Retail businesses typically require the following:
850
Purchase Order (PO)
Initiated by the retailer, this message is sent to the supplier to request specific products or services. It includes critical details such as item codes, quantities, prices, desired delivery dates, and shipping instructions.
855
Purchase Order Acknowledgement (POA)
In response to the Purchase Order, the supplier sends a Purchase Order Acknowledgment to confirm the acceptance or rejection of the order, highlighting any discrepancies. This confirms that both parties understand and agree on order details.
856
Advance Shipping Notice (ASN)
When goods are ready to be shipped, the supplier sends Advanced Shipment Notice (ASN)to the retailer. This document provides confirmed information about the shipment, including item details, quantities shipped, back-orders, packaging, and shipping methods.
Retailers rely on ASNs to accurately anticipate incoming stock.
810
Invoice
The invoice is generated by the supplier as a request for payment for goods or services provided. It includes a breakdown of charges, quantities, prices, and payment terms.
820
Payment Remittance Advice
The retailer sends a Payment Remittance Advice to the supplier that communicates details about a payment that has been made. These details include invoice numbers, amounts, and payment dates. The Payment Remittance Advice streamlines payment reconciliation for both parties.
852
Product Activity Data
Retailers use this document to communicate product movement, including sales, stock levels, and promotions, to suppliers. This data allows suppliers to optimize production and distribution based on how their products are selling.
846
Inventory Inquiry/Advice
Retailers use this communication to request real-time inventory information from suppliers. Suppliers use it to communicate available inventory, and this may help prevent both excess inventory and stockouts.
Functional Acknowledgement
This serves as a receipt confirmation for EDI transactions, informing the sender that the transmitted documents were successfully received and processed.
Top Considerations for Retail EDI Communications:
- System Integration: If you set out to create a data message integration with your trading partner’s Enterprise Resource Planning (ERP), Warehouse Management System (WMS), Transportation Management System (TMS) or similar systems, a significant amount of planning is required. This starts with an assessment of what type of data file your system sends, and what your various partners require. Consider that there will be communications going both ways, and plan for that. Stay focused on the main goal of EDI and ERP integrations is to optimize your core business operations while complying with the EDI specifications of your business partners.
- Standardization: Adhering to EDI standards, such as X12 or EDIFACT, is crucial to ensure compatibility and smooth communication with trading partners. Standardized formats prevent confusion and errors caused by incompatible data structures.
- Data Security: Given the sensitive nature of the information exchanged, robust data security measures are essential. Implementing encryption, authentication, and secure communication protocols protects sensitive business data from unauthorized access or breaches.
- Scalability: As businesses grow, EDI requirements evolve and become more complex. You want to choose an EDI solution that can accommodate increasing transaction volumes and support the addition of new trading partners without causing disruptions. You will need to decide if you want to manage EDI operations yourself in-house or have someone else manage it for you, outside service provider manage the connections for you. Many companies utilize a value-added network (VAN)—a third-party service provider—that acts as a middleman, providing secure and reliable communication and data transfer. VAN providers may also help with data transformation to comply with data format specifics.
These companies find that outsourcing EDI compliance through a VAN allows them to grow their business without taking on the financial burden and strain it would take to implement new software, hardware and train their employees.
- Trading Partner Onboarding: Make sure the time it takes to onboard EDI trading partners will satisfy your desired timeline. This is an ongoing task each time you start working with a new supplier or retailer, so develop long-term processes for efficient onboarding. Experience is key to navigate the specifications and transfer protocols, complete the programming and test connections.
- Ongoing Support: First, make sure you plan for requests that come from trading partners to upgrade or make changes to either the EDI specification or file transfer protocol. These requests require adjustments to your integration solution. The more trading partners you integrate, the more frequently you will face these requests. Be sure to have a plan and staff ready to manage these changes.
Secondly, evaluate your requirements for uptime, access to live support and urgency for problem resolution. EDI will affect the very core of your business operations, so make sure you take a close look at the process for investigating and resolving disruptions to communications flow. Clarify who will be responsible for restoring interruptions and make sure you consider nights, weekends, and holiday coverage.
