EDI Compliance and SLA Standards: A Guide for Suppliers and Manufacturers Working with Major Retailers

For many manufacturers and suppliers, working with large, enterprise retailers is the ultimate goal. The benefits and opportunities that stem from these business relationships are enormous and bring a new level of success.

To get to this level and remain in good standing with large retailers, manufacturers and suppliers have to follow certain guidelines. One of the most crucial aspects is adhering to EDI requirements and strict service level agreements (SLAs) to avoid costly penalties and maintain strong, healthy partnerships.

In this blog, we cover:

• The Top Retailers of 2023
• Advantages of Working With Large Retailers
• B2B Requirements of Working with the Top Retailers
• The Importance of EDI for Suppliers and Manufacturers Working with Retailers
• Common EDI Documents and SLAs
• The Solution: Retail Relationship Manager

By understanding these factors, you can position your business for success in the competitive world of retail partnerships.

The Top Retailers of 2023

In order, the top retailers of 2023 by U.S. retail sales (billions) are: 

1. Walmart…$533.96
2. Amazon…$250.11
3. Costco…$175.39
4. Kroger…$149.61
5. Home Depot…$141.45
6. CVS…$113.92
7. Target…$105.84
8. Walgreens…$105.1
9. Lowes…$84.04
10. Albertsons…$77.86

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Advantages of Working With Large Retailers

Working with large retailers is typically a massive achievement for manufacturers, suppliers, and logistics companies. Doing so can open a slew of opportunities and benefits including: 

• Increased Market Reach: Top retailers have a vast customer base and widespread distribution networks, allowing manufacturers and suppliers to reach more consumers.
• Enhanced Brand Visibility: Partnering with well-known retailers can significantly boost a brand's visibility and recognition among consumers, retailers, investors, and the media. Improved Credibility: Association with reputable retailers can enhance a manufacturer or supplier's credibility and trustworthiness in the market.
• Stable Revenue Streams: Top retailers often have consistent and predictable demand, providing manufacturers and suppliers with a stable revenue stream.

Similarly, some opportunities of working with large retailers include: 

• Scale and Growth: Supplying top retailers can enable manufacturers and suppliers to scale their operations and achieve significant growth.
• Access to Valuable Data: Retailers often share valuable market insights and data with their suppliers, which can help inform product development and marketing strategies.
• Innovation Partnerships: Collaborating with top retailers can foster innovation and lead to the development of new products or services.
• Negotiating Power: Strong relationships with top retailers can give manufacturers and suppliers more negotiating power when dealing with other customers and partners.

6 B2B Requirements of Working with the Top Retailers

There are prerequisites to working with the largest and most successful retailers. Some common requirements include:

1. EDI Compliance

Retailers like Walmart, Target, and Amazon require suppliers to be EDI-compliant, meaning they must use Electronic Data Interchange to send and receive orders, invoices, shipping notifications, etc. Failure to comply can lead to chargebacks or delays in processing. We discuss EDI in more detail in the next section.

2. Adherence to Service Level Agreements (SLAs)

Retailers often set stringent SLAs that govern things like on-time deliveries, order accuracy, and inventory updates. Suppliers must consistently meet these requirements or face fines and penalties.

3. Vendor Scorecarding

Many large retailers maintain scorecards to track vendor performance across key metrics like order accuracy, delivery times, and fill rates. A low score can lead to reduced shelf space or even termination of the partnership.

4. Omnichannel Capabilities

As retailers expand into eCommerce, suppliers must be able to fulfill both in-store and online orders. This requires real-time inventory management (APIs can help with this) and the ability to drop-ship directly to customers.

5. Labeling and Packaging Standards

Retailers often have specific requirements for labeling and packaging, including the use of barcodes, GS1 labels, and other identification systems to ensure smooth processing through their distribution centers.

6. Sustainability and Ethical Sourcing

Many top retailers, like Costco and Target, have sustainability and ethical sourcing requirements that suppliers must meet. This can include certifications related to environmental standards or fair labor practices.

The Importance of EDI for Suppliers and Manufacturers Working with Retailers

Electronic Data Interchange (EDI) is a crucial tool for suppliers and manufacturers working with top retailers. A cloud EDI solution digitizes, automates, and streamlines the exchange of essential business documents like purchase orders, invoices, and shipping notifications, allowing for fast, accurate, and paperless communication.

Retailers rely heavily on EDI to manage their supply chains efficiently, expecting suppliers to comply with their specific EDI formats and standards. Non-compliance can result in costly chargebacks, delays, or even a loss of business. By automating these transactions, EDI reduces manual errors and ensures timely updates across both parties.

Moreover, EDI facilitates real-time visibility into the order lifecycle, helping suppliers meet strict service level agreements (SLAs) and avoid penalties related to late deliveries or inaccurate order fulfillment. SLAs are formal contracts or commitments between businesses (such as a supplier and a retailer) that outline the expected performance standards and responsibilities each party must meet. SLAs typically specify key metrics like:

• Delivery Times: Ensuring products arrive by a certain date.
• Order Accuracy: Requiring the correct quantities and items to be shipped.
• Inventory Updates: Providing real-time visibility into stock levels.
• Response Times: Dictating how quickly a supplier or service provider must respond to inquiries or issues.

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And as retailers continue to expand into eCommerce and omnichannel operations, the ability to integrate EDI with other systems—such as inventory management and shipping—becomes even more vital for maintaining strong partnerships and driving operational efficiency.

Common EDI Documents and SLAs

Common EDI documents that suppliers and manufacturers have to send to retailers include order responses, advanced ship notices, and invoices. Each of these documents has its own SLAs that suppliers and manufacturers must abide by. 

Examples of SLAs for EDI Order Responses with Key Retailers

An EDI order response might include additional details beyond just confirming receipt of the purchase order, such as information about the order status, shipping details, tracking numbers, and any changes to the original order. Examples of the SLAs for order responses with popular retailers include:

Examples of SLAs for EDI Advanced Ship Notices with Key Retailers

An EDI 856 advanced ship notice describes the content of a shipment and is sent preceding a shipment arrival. It contains information like order information, product description, packaging types, carrier information, and more. Examples of the SLAs for an advanced ship notice with popular retailers include:

Examples of SLAs for EDI Invoices with Key Retailers

An EDI 810 invoice indicated the charges due between a seller and a buyer. It contains information like what the buyer needs to pay, acceptable methods of payment, and the details of the order. Examples of the SLAs for invoices with popular retailers include:

The Challenges of Meetings SLAs

Meeting these SLAs consistently can be a significant challenge for manufacturers and suppliers due to a variety of factors. Some of the more common challenges that manufacturers and suppliers encounter that cause them to violate SLAs include:  

• Inventory Management Errors: Inaccurate inventory levels, miscommunication about stock availability, or lack of real-time data can lead to late or incorrect shipments.
• Lack of Real-Time Visibility: Without real-time tracking and monitoring of orders, manufacturers may not catch potential SLA breaches until it’s too late to take corrective action.
• System Integration Issues: Failure to integrate internal systems (e.g., ERP, WMS) with retailer platforms or EDI solutions can lead to data misalignment and operational inefficiencies.
• Manual Processes: Relying on outdated, manual processes for order entry, inventory updates, or shipping can result in human error, missed deadlines, or inaccuracies.
• IT Failures or Outages: System crashes, network issues, or cybersecurity incidents can prevent the timely exchange of EDI documents or updates.
• Supply Chain Disruptions: Delays or issues with raw material suppliers, logistics providers, or other third-party vendors can affect the ability to meet delivery timelines.

These challenges illustrate why suppliers and manufacturers working with top retailers need proactive tools and systems in place to mitigate risks and ensure they consistently meet their obligations.

Deliver on Your Business Commitments: Retail Relationship Manager

An estimated 80% of revenue coursing through retail supply chains today is processed through EDI transactions. To keep companies accountable for delivering on their business commitments and maintain efficient supply chains, Service Level Agreements (SLAs) are enacted in many supplier-retailer relationships. However, just because SLAs and their violation repercussions (ex. expensive fines and negative vendor scorecards) are in-place, doesn’t mean they are a silver bullet. A range of factors can cause issues or disruptions that impede a supplier’s ability to deliver on business commitments.

One solution to these issues? Cleo’s new offering, Retail Relationship Manager. 

What Is Retail Relationship Manager?

Cleo’s Retail Relationship Manager is an early warning system designed to strengthen supplier-retail relationships. This solution leverages supply chain data to provide suppliers, shippers, carriers, and other B2B supply chain players with in-depth visibility and control over important trading partner commitments, such as on-time inventory updates, billing, and order acknowledgments.

Retail Relationship Manager captures and evaluates real-time situational data, looks for anomalies, surfaces risk signals, and then delivers contextualized information via alerts that organizations can use to take immediate corrective action–before problems occur. 

Furthermore, Retail Relationship Manager is built on top of the Cleo Integration Cloud (CIC) platform, which provides companies with an expansive list of EDI, API, and integration capabilities. 

Benefits of Retail Relationship Manager?

Suppliers that harness Retail Relationship Manager gain the following benefits: 

• Early warning detection (proactive alerts) for at-risk missed obligations and SLAs to avoid violation fees 
• A centralized location to manage business commitments and view real-time data from all integrated trading partners
• Scorecarding against individual trading partners using historical and predictive analytics so you can quantify and assess your performance
• Benchmarking against industry standards—compare your performance against other Cleo customers that do business with the same trading partners, so you know how you stack up
• Measuring expected volume flows from trading partners to gain insights into revenue patterns or relationship risk
• Shorten days sales outstanding (DSO) metrics through timely invoicing
• Boost revenue through seamless order capture and on-time order delivery

Sample Retail Relationship Manager Use Case

A longtime Cleo customer, we’ll refer to as FreshFoodz, is one of the leading food distributors in North America. Its retail partners include most large grocery chains in the United States. As a user of Cleo’s Retail Relationship Manager, one of FreshFoodz’s focus areas is proactively maintaining predictable order volume—not just to protect the revenue those orders represent but to optimize internal operational efficiency every day. 

In this case, FreshFoodz is using Cleo’s Retail Relationship Manager to detect issues outside their own control. For example, if any of FreshFoodz’s revenue channels has a dip in orders, it could signify an issue with their customer. Thanks to Cleo, FreshFoodz is now able to detect this shortfall before it impacts warehousing operations by proactively engaging their customer, and ensuring their warehouse team has time to pick, pack, and ship these vital customer orders.   

While FreshFoodz benefits from the assurance of revenue and optimal operational lead time, FreshFoodz’s customers all benefit from Cleo’s Retail Relationships Manager because FreshFoodz was able to ensure their orders were not delayed – reducing the risk of empty grocery shelves and fostering a better business relationship.  

For example, FreshFoodz’s didn’t receive a typical weekly order from one of their major retailers. Retail Relationship Manager picks up on this and sends the FreshFoodz’s an alert early the next day that pushes their teams into action. By sensing this business anomaly, FreshFoodz can flag this to their grocery customer and initiate conversations to make sure their order still arrives on time and they will have the products they need for their shelves.   

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In today’s competitive retail landscape, manufacturers and suppliers must not only meet the high expectations of large retailers but also proactively manage the complex requirements that come with these partnerships. From EDI compliance to stringent SLAs, adhering to these guidelines is essential for avoiding penalties and fostering long-lasting, lucrative relationships with top retailers like Walmart, Amazon, and Target. The ability to stay on top of order accuracy, inventory management, and timely document exchanges can be a game-changer in maintaining vendor scorecards and securing future business opportunities.

Cleo’s Retail Relationship Manager offers a powerful solution for overcoming the common challenges of working with large retailers. By providing real-time visibility, early-warning alerts, and predictive analytics, this tool empowers manufacturers and suppliers to mitigate risks, improve performance, and strengthen retailer relationships. In a world where every missed SLA can lead to fines or damage credibility, having a proactive system in place ensures you remain compliant and capable of delivering on your business commitments, driving revenue growth, operational efficiency, and more business opportunities.

If you have questions about what was covered in this blog or Cleo's products and services, contact us at sales@cleo.com, +1.815.282.7695, or by completing our brief form fill. And be sure to explore some of our educational resources through our content hub.