Supply Chain EDI 20 years young - still not widely adopted; a retail technology sector industry disgrace!

It is our intention to blow the Retail IT and Supply Chain EDI smoke screens away - ‘Get rid of paper’

Preparing for RFID and QR bar-codes….?

Don’t be snowed by the experts!

2009 is the time to finally eliminate expensive paper processes in the Australian and New Zealand Retail Sector Supply Chains!

1.      Basic EDI – the electronic transfer of retail orders, retail invoices and retail payments is simple.

2.      20%+ sales increases are common.

3.      1 full stock turn improvement is common.

4.      Double digit supply chain cost reductions are common.

5.      If your POS or ERP system is not EDI functional modify or change it.

This article is for all retailers, suppliers and importers irrespective of size wanting to decrease supply chain costs, reduce distribution costs and increase sales.

·         The article is also targeted towards POS and Retail Systems Vendors not engaged with EDI Supply Chain as core system competency.

It is the view of The RETAiL Alert Group that Australian Retail Sector Supply Chain reforms finally adopting decades proven EDI (Electronic Document Interchange) should be a priority infrastructure technology initiative for the Rudd government and Retail Sector Associations.

The cost savings and efficiency gains for the Australian retail sector Supply Chain in 2009 are massive.

In 1989 three interrelated pieces of Retail Technology emerged onto to Australian and New Zealand retail sector landscape.

• Bar-codes

• EDI (Electronic Data/Document Interchange)

• The Internet.

In 2009 all three pieces of retail technology have been woven into the fabric of the day to day running of Australian and New Zealand retailing however the uptake overall has been poor with the exception of standard bar-codes and email.

·         Australian and New Zealand retailers, suppliers and logistics providers are on the cusp of new age QR (Quick Response) and RFID (Radio Frequency Identification) bar-code introductions – our concern  many Australian and New Zealand retailers, suppliers and logistics providers have not absorbed or implemented first stage EDI basics.

This article attempts to define the gaps suggesting approaches to embed main structure EDI into legacy IT and supply chain systems easily.

·         There are massive retail sector cost savings to be made in 2009 by the simple adoption at all levels of simple, basic, uncomplicated Electronic Document Flow (EDI) between Australian retailers’ and their suppliers – everybody, retailers’ and suppliers of all sizes - bottom line winners.

This article talks to the retail supply chain and the disgraceful uptake of EDI (Electronic Data/Document Interchange) by the Australian and New Zealand retail sector, their suppliers and POS Vendors over the last 20 years.

It is our intention to blow the Retail IT and Supply Chain EDI smoke screens away – getting rid of paper.

As the Pat Gallagher (SALMAT) contribution says “The goal the buyer is wants to enjoy is to electronically purchase product to meet customer demand service levels, to achieve profitable stock turn levels and to meet cash flow performance that maximises sales, minimises costs and leaves enough loot for the back pocket so as to make the whole enterprise worthwhile’.

“For the seller the key thing is to get the purchase order rather than your competitor doing so, ship the goods required, and avoid errors in delivery, so that payment is not only received but is not delayed”.

Angela Hariohoedojo from LEADTEC has commented;

“It is fascinating to think that EDI is now 20 years young, particularly given the adoption level we have seen in Australia. 

Australia used to be ahead of the pack with scan packing / EANway (MGB etc) but seemed to have fallen behind in rolling out EDI beyond POs and ASNs and in embracing new technology such as RFID”. 

“That said, recent events such as the GFC seemed to have given companies a renewed focus on improving supply chain efficiency through EDI implementation – we see retailers rolling out new document types and engaging more of their supplier base to become EDI ready & I strongly believe that more companies can benefit from implementing EDI”.

“New technology (if it can still be called that, given that RFID has been around for a while now, though it has recently become more cost effective) such as RFID & QR (though I suspect QR will, at least initially, have a better take up in B2C space rather than B2B) are great triggers to change Australia’s EDI landscape further; and we continues to be excited at the opportunities both present”.

“However, given the slow adoption of EDI & the use of SSCC label, a middle ground approach would make sense, where both RFID and SSCC could be used for EPC (or serialised ASN), giving the market the benefit of being able to track shipments in the supply chain, without necessarily the initial outlay of replacing SSCC (& the corresponding systems) as logistic label”.

·         In 2009 there are major retailers’ and specialty chain retailers who complain about costs of doing business, poor sales, inaccurate stock reporting, high costs of stock-takes and high costs of processing invoices and claims – they only have themselves to blame by allowing Australian and New Zealand POS and retail systems vendors to ‘snow’ them when it comes to EDI communication with their suppliers, DC’s and stores.

·         The back office costs to retailers and suppliers not managing invoices, claims and payments via EDI are massive – just not acceptable in 2009.

·         Australian and New Zealand Retailers are on the cusp of the next supply chain revolution – RFID; the dragging of the feet on basic, proven EDI is now a blocker in allowing Australian and New Zealand retailers adopt RFID – those involved should hang their heads in shame.

·         The NBN (National Broadband Network) benefits will also be neutered if retail IT and Supply Chain sections fail to get their basic EDI document flows in order.

·         There are even some Australian and New Zealand retailers that have gone performance backwards by not forcing EDI into Buyers ‘standard’ buying and replenishment processes – the result lost sales and higher stock levels.

Even if you look under the bonnet of the major Australian and New Zealand retailers you will find appalling gaps in the so called ‘seamless’ information flow from order, to supplier, to DC / 3PL / to store and back through the replenishment process – buffer DC basics stocks are not acceptable and are way over the top.

The loss of sales and associated costs run into the millions.

The % of orders and transactions without the basics of an Order linked to an ASN (Advance Shipping Notice) in 2009 floors us.

Woolworths at least is trying with its Transitioning to Electronic Invoice (EDI) initiative - with COLES, COLES in fact has announced MIG for their eInvoice and Target is implementing RCTI and others hopefully in lockstep – good but should have happened years ago.

As Pat Gallagher says further in his article “Guess what the average transaction costs[1] both sides? Ah come on take a guess, it isn’t a State secret. Global and local studies show that the shared costs for all of this invoice reconciliation electronically is between $2 and $5 a transaction”.

“And, drum roll, to cost to undertake this totally or partially with the use of paper? The average is $70. Best practice, for paper processing as an oxymoron, is $20 (Wal-mart) and the worst goes from the State agencies, in the $100s, to Federal agencies in the many of $100s.”

“Wait there is more. By far and away the most expensive component of this loop is the paper invoice. Why? Well, first off the ratio of inbound paper invoices is as high as 90% of all purchase orders, regardless of whether the POs are electronic or manual. Fifty percent of all workflow costs and the reasons for all payment hassles, aggravation and delays are almost all down to one simple problem: missing invoices.  In Australia we estimate that there are 2 billion paper invoices put in stamped envelopes very year. Not all of them it seems get processed much faster than they did one hundred years ago”.

“Disgracefully really (in 2009)”.

Pat Gallagher says and we tend to agree, “The bellwether of commonsense in 2009 is e-invoicing….”

Basic EDI was introduced in 1989, not 1999 and some retail IT and Supply Chain Managers still don’t get it – or could it be they want to drip feed the process to maintain control over their positions and incomes.

·         Any retailer that does not have over 95% of Orders, ASN’s, Supplier Invoice Payments flowing through seamless EDI Document process should look long and hard at who within their Supply Chain or IT Department is the impediment – in our view in 2009 they should not have a job.

Time and again it has been proven that seamless EDI  electronically transmitted retail documents can deliver double digit sales increases, a one stock turn improvement and a double digit reduction in supply chain accounting administration costs.

The RETAiL Alert Group is aware of those retailers’ who are being hoodwinked by their IT and Supply Chain ‘gurus’ – they are in our cross hairs.

·         It is our intention to ‘out’ those retailer IT and Supply Chain Teams and their supporting IT Vendors who are in need of an IT and Supply Chain team clean-out; be warned.

As already said, any retailer that does not have over 95% of Orders, ASN’s, Supplier Payments flowing through seamless EDI Document process should look long and hard at who within their Supply Chain or IT Department is the impediment – in our view in 2009 they should not have a job.

Those POS, ERP and Retail System Vendors who are still resisting embedding basic EDI into their ‘standard’ solution offer – again you are on watch.

Run an EDI competence ‘health’ checklist test on your business.

·         Be ruthless on your IT and Supply Chain Teams if you are not getting 90%+ competency rates.

·         If you are not maximising Cross Dock orders, have a DC / Warehouse / Third Party Distribution EDI capable or Stock Scan Packed before despatch - make the necessary changes.

Your options on how to communicate in the most cost effective manner are varied – ask us for advice.

·         Don’t be ‘snowed’ by the experts……….!

·         Basic EDI – the electronic transfer of retail orders, retail invoices and retail payments is simple.

·         20%+ sales increases are common.

·         1 full stock turn improvement is common.

·         Double digit supply chain cost reductions are common.

·         If your POS or ERP system is not EDI functional modify or change it.

We repeat, it is our intention to ‘out’ those Australian and New Zealand retailer IT and Supply Chain Teams who are in need of an IT and Supply Chain team clean-out; be warned.- shareholders are watching internal IT and Supply Chain costs blow out with no return or beneficial affect on the business.

It is our intention to blow the Retail IT and Supply Chain EDI smoke screens away preparing the Australian and New Zealand retail sector supply chain community to embed RFID and QR bar-codes into legacy systems in 2010.

2009 IS the time to finally eliminate expensive paper processes in the Australian and New Zealand Retail Sector Supply Chains enjoying substantial sales increases and cost reductions!

For a professional evaluation of your EDI supply chain email Supply Chain EDI evaluation.

Next week we intend to put the blow-torch in Australian and New Zealand Website uptake and standards.

Tony Standley

Principal
The RETAiL Alert Group (Australia)
Mobile +61 (0)41 924 0497
e-mail info@adsass.com.au
Fax +61 (0)2 9987 0633
Website http://www.retailalert.com.au
 
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