In this article, we cover:
- What Does EDI Mean for Your Business?
- What to Consider in an EDI Solution
- Common pitfalls of EDI
- What Will Your O2C (Order-to-Cash) Cycle Look Like With EDI?
So your company recently landed a contract with a major supermarket in the UK? Congrats! However, there is one contingency. The supermarket chain—whether Sainsbury’s, Tesco, Waitrose, Iceland, etc.—is requiring your business to implement electronic data interchange (EDI).
So how does your business navigate selecting and implementing the best EDI solution for your specific needs in the food and beverage space?
Below, we cover some important items to keep in mind when sifting through the available options on the market, and we go through what a typical order-to-cash (O2C) cycle looks like between a supplier and a supermarket using EDIFACT/TRADACOMS standards.
EDI will help your business operate much more efficiently since the technology removes manual intervention and replaces it with automation. Your business will no longer rely on humans to manually handle the O2C cycle with supermarket customers, thus reducing errors and speeding up processing times. With EDI, companies rely on automated processing to handle all requests so they never miss a business commitment again.
Not only will your business operate more efficiently, but EDI can also help your business scale. This is because your business can process orders faster, thus ensuring all retailer SLAs are met.
Additionally, your company will be able to conduct business with larger supermarkets since they often require that their suppliers use EDI. Therefore, implementing EDI creates opportunities to work with larger and more supermarkets, while simultaneously processing the influx in orders.
What to Consider in an EDI Solution?
It can be overwhelming to compare EDI solutions and what to look for. To help guide your research, we list six factors to keep in mind when researching solutions.
The foundation of EDI is automation. Look for a solution that offers true, end-to-end automation, especially regarding the O2C cycle. This is because some EDI solutions only let suppliers automate certain aspects of a process. If you cannot automate an entire process, this defeats the purpose of EDI automation. This is because humans will still need to intervene, thus costing your business more money while being more susceptible to errors and supply chain delays.
Onboarding is one of the biggest pain points for EDI customers. According to our 2023 State of Ecosystem Integration Report, 44% of survey respondents said that onboarding a new trading partner takes on average between one week and one month, with 16% saying it takes longer than one month.
Each day one of your supermarket partners is not onboarded is another day your company misses out on earning revenue from potential orders. Look for a solution that offers quick onboarding and provides tools to expedite the process, such as accelerators, connectors, and boosters. These resources will help your team set up connections with supermarkets faster, allowing your business to start earning revenue.
Being able to look into your systems, processes, and transactions is vital when dealing with EDI for a multitude of reasons. First off, visibility allows your company to identify errors and pinpoint where they are coming from, so you can start addressing the issue immediately to avoid any disruptions.
Visibility also helps your company better understand its processes. This is helpful because your business can identify areas of improvement that can later be optimized. Lastly, visibility can be used to look into individual transactions. Your business can use this information as a source of record in case of any discrepancies with supermarkets and their orders or deliveries.
In today’s digital world, data is king. Your company needs an EDI solution that allows you to collect data in real time. Furthermore, the EDI solution needs to be able to integrate with a wide variety of systems and platforms (e.g. ERP and WMS) so you can integrate your entire digital ecosystem. By integrating your entire digital ecosystem, you can collect data in real time from each system and platform, which will then be accessible in one central location.
Furthermore, it removes the need for humans to manually toggle between platforms and pull data, which is time-consuming and error-prone. Lastly, real-time data collection allows your team to analyze the most relevant information in order to make more informed decisions, optimize processes, and more.
There is more to EDI than just the product. There is also the factor of managing the solution. It is in your company’s best interest to pick an EDI solution that also has flexible service options. Common service options include:
● Self-service: Your company is responsible for everything EDI-related, including deploying the technology, onboarding new supermarkets, fixing errors, monitoring performance, and installing software updates.
● Managed services: Your company delegates EDI and its associated responsibilities to an outside organization to handle, such as your EDI provider. This means that your company has little if any involvement with the technology and is hands-off.
● Blended services: A unique combination of self-service and managed services, where your business outsources some EDI responsibilities while also keeping some responsibilities in-house.
The reason having options is necessary is that your company’s needs will shift over time. For example, right now your business may just be getting started with EDI and the technology will not require too much oversight. However, as your business grows, your team may not have the bandwidth to oversee the growing EDI responsibilities. Thus, managed services may become a good option to lighten your team’s workload. Additionally, managed services are conducted by a team of experts that know the technology inside out, which is an invaluable resource.
Implementing EDI, especially for the first time, can be a daunting task as there are many moving parts. Oftentimes, companies find that once they select an EDI solution, they are left without any direction from their provider.
To avoid this scenario, you can research if an EDI vendor is a good partner by checking out customer reviews of their platform and services on websites such as G2 and Capterra. This will give you a better understanding of what working with the potential solution provider would look like should you move forward with them. Better yet, you can sort through reviews and find ones that are posted by other food and beverage manufacturers to get an even more accurate understanding.
Overall, your business should be searching for a provider that will help you through the EDI implementation process, as well as answer any questions or concerns that arise along the way and after.
Common Pitfalls of EDI
Implementing legacy EDI technology often becomes a big issue for companies. Businesses, especially ones that are implementing EDI for the first time, are attracted to the lower cost of legacy EDI. However, the cost can quickly swell with legacy technology as its higher system downtime prevents orders from being processed. System downtime often results in missed SLAs and supply chain disruptions, leading to costly fees from supermarkets and negative vendor scorecard reviews. So while the upfront cost of legacy EDI technology is lower and more attractive, it is also far inferior to newer solutions on the market, hindering a business’s success.
On the other hand, modern EDI has major advancements and features that provide companies with:
» More control over processes
» Increased visibility
» Improved efficiency
» Greater system uptime
» Wider protocol support
» Real-time data
Doing Too Much In-House
Sometimes companies implementing EDI for the first time find themselves in over their heads. While it is definitely feasible for companies to handle the implementation and responsibilities of EDI, occasionally companies will simply not have the resources (bandwidth, skill, knowledge, etc.) to properly manage it. Then, instead of outsourcing EDI management, they continue to keep it in-house which further exacerbates issues.
To combat this, companies should regularly assess their internal expertise and resources to make sure they are sufficiently managing their EDI processes. If concerns or questions do arise, it may be a good idea for them to contact managed service providers for assistance, or to simply learn how they could help their businesses.
Some EDI solutions are not as complete as others, meaning they do not have the same breadth of features and functionalities. These piecemeal solutions may be cheaper initially, but eventually, companies discover that in order to gain particular capabilities, they need to add additional solutions into the mix. Not only does this add to the total cost of ownership, but it also adds to the complexity by having to manage multiple solutions. Lastly, EDI becomes more susceptible to errors due to the intricate nature of EDI and having more solutions involved.
What Will Your O2C (Order-to-Cash) Cycle Look Like With EDI?
Imagine Sainsbury’s wants to place an order with your business. The EDI O2C cycle may look something like the following:
The supermarket (buyer) will send your business (supplier) an ORDERS, which is a purchase order. This document informs the supplier which products the supermarket wants to purchase. It contains information such as product SKUs, the requested quantity, the agreed-upon price, and the requested shipping date.
2. ORDRSP–Order Response
In response to the ORDERS, the supplier sends an ORDRSP to the supermarket. This message acknowledges the purchase order and communicates any of the following:
• Confirms the supplier can provide all items in the purchase order
• Suggests alterations to one or more of the requests in the purchase order
• Highlights parts of the purchase order that cannot be fulfilled
3. DESADV–Advanced Shipping Notice
After sending the ORDRSP, the supplier follows up with the supermarket using a DESADV, informing them of shipping information. Many grocers require that the DESADV is sent within a certain time frame before the shipment arrives at their store or distribution centre. This transaction includes information such as shipping date/delivery date, shipping location details, shipment tracking details, and product quantity.
4. RECADV–Good Receipt Advice
Once the order is delivered, the supermarket sends the supplier a RECADV. A RECADV is used to report the physical receipt of goods. Here, the supermarket can outline any discrepancies from their order, including product and quantity.
Once the shipment is delivered, the supplier sends the supermarket an INVOIC to request payment for the order. Contains information such as the amount due, payment terms, and an itemized list of the products and services provided.
The beauty of EDI is that all five of the steps above are automated. There is no human interference necessary, meaning fewer delays and errors, therefore shortening the entire O2C cycle. However, it is important to note that EDI best practices recommend having a team member routinely assess and review orders to ensure accuracy and avoid hiccups. Overall, implementing EDI will streamline your O2C cycle while simultaneously opening more business opportunities for your business as it expands.
When looking for an EDI solution for your food and beverage manufacturing business, it is important to understand common EDI transactions you will have with your UK supermarket partners. Moreso, it is helpful to know what to look for in a solution so you can focus your time researching viable solutions that will bring your business the greatest success. Be sure to use this blog to aid your research when comparing different EDI solutions and as a guide when it comes time to make a decision.
If you have questions about what was covered in this blog, EDI, or Cleo’s products and services, contact us at email@example.com. Or explore some of our educational resources.