Keeping the Cookies Coming

When large companies want to do business with small suppliers using electronic data interchange, sometimes they have to find a bridge to cross the communications gap.

[From Supply & Demand Chain Executive, April/May 2004] St. Petersburg, Fla.-based Home Shopping Network (HSN) is certainly large by most of the measures that count: close to $2 billion in sales for 2002, a customer base of 5 million and a customer relations staff that processes more than 70 million calls a year. In short, big business.

Like many large companies, HSN has a supply base that includes a variety of smaller enterprises. The challenge of integrating a new supplier is compounded when HSN elects to work with the vendor under a drop-ship model, whereby instead of stocking a manufacturer's products in its own warehouse facilities and handling fulfillment on its own, the shopping network takes customers' orders but has the manufacturer or distributor send out the product directly to consumers.

Tim Weber, director of e-business for the Home Shopping Network, says that HSN decided early on that, in the interests of efficiency, it would handle all transactions with its drop-ship supply base via electronic data interchange (EDI). Trouble was, linking electronically with each new supplier using EDI required a weeks-long process of establishing and testing electronic connections, far too long a lead time for a company that differentiates itself by being first to market with new-fangled merchandise. "When new products come along, we have to be able to bring them to market very quickly, sometimes with only a couple weeks notice," says Weber. "We found that with the speed with which we need to bring these products to market, if the vendor wasn't already EDI capable, it was just too long of a process to get them up and tested on EDI."

The Little Guy's Perspective

On the other side of the spectrum is David's Cookies, based in Fairfield, N.J. The company, which employs about 100 people, is a purveyor of cookies, brownies, crumb cake and ruggalach, among other gourmet specialties. David's is growing, to be sure, but it is still a relatively small enterprise. In fact, until about three years ago, the company operated solely through a "business-to-business" line, selling preformed frozen cookie dough to food services that resold the dough to restaurants and cafeterias. David's began venturing into retail only when it created its DavidsCookies.com Web site a few years back to sell ready-baked and packaged goods directly to consumers.

When the Home Shopping Network approached David's about two-and-a-half years ago to begin selling the cookiemaker's goods through HSN's online site and television programs, the smaller company still did not have EDI capability, and implementing a full-blown EDI connection with HSN would have been cost prohibitive for the baker, according to Oliver Tress, who heads up the retail sales operation at David's Cookies.
But that was only half the challenge for David's Cookies because, while the company had sufficient employees to handle order entry and processing for the couple dozen orders that would be coming in daily via the HSN.com Web site, the baker did not have the staff that would have been necessary to handle the thousands of orders that could be expected to roll in on days when HSN featured the cookies on one of its television shows.

Have Your Cookies and Eat Them, Too

By this time, however, HSN had found a way to have its cookies and eat them too, so to speak, by linking with its non-EDI-capable suppliers through third-party EDI service providers. The providers could receive EDI messages from the shopping network and provide the information therein to the suppliers in whatever format worked for the smaller companies, and vice versa, taking communications from the suppliers and translating them into EDI for transmission back to HSN.