Consumer packaged goods (CPG) manufacturers face a double-edged sword when dealing with big box stores. Of course they want to grow their business and sell to the big-name retailers, yet owning and maintaining the necessary electronic data interchange (EDI) software to interface with these large and complex organizations can break the bank.
All transactions with retail customers must be mapped to the retailers' exact standards, and those standards are continually in flux. These intricate maps are at the heart of the retail supply chain, but without a way to adapt them in real time, manufacturers are bogged down with unnecessary costs, chargebacks and time delays. Beyond the steep EDI software and hardware costs, the technical expertise required to continually program, revise and maintain EDI maps is extremely expensive.
Moreover, retailers often change mapping rules with little or no notice to manufacturers. Even the slightest change to an EDI map has major ramifications. If a retailer isn't aware that goods are coming, for example, they may refuse shipments. With no warning of impending changes, manufacturers inevitably ship materials with mapping errors and incur huge costs when the materials are turned away or delayed at the shipping dock.
Short of a crystal ball, manufacturers have had no way to know when a map was about to change, and they have struggled to keep up with the vast number of mapping alterations. Thus, they've spent an inordinate amount of money on software, hardware and technical staff to support their in-house EDI infrastructure. Yet, regardless of how much money they've poured into these in-house EDI systems, this gave them no competitive advantage whatsoever.
Today, forward-thinking manufacturers are freeing themselves from the restrictive software EDI model by opting to outsource their EDI to a third party and using their pre-built maps already in use by other vendors.
What Held Manufacturers Back
Every manufacturer doing business with major retailers like Target or Wal-Mart are required to build and upgrade integration code — mappings — to allow their computers to share information with the retailer's computers in compliance with the retailer's business rules. Thus, there are hundreds or even thousands of manufacturers creating the same maps, each one paying its own in-house technical staff to essentially do the same work.
They are reinventing the wheel by undertaking the exact same mapping work to service the same retailers. This is most inefficient and despite the considerable cost and effort involved, these tasks do not give the manufacturers any advantage over one another. A new solution has emerged to replace this outdated approach.
Multi-tenant EDI Solutions
Until recently, manufacturers had no option but to follow a "single tenant solution," with each company individually undertaking a technical project. This is not an efficient approach for managing technical areas that are not core competencies within a business.
Alternatively, a multi-tenant (or software-as-a-service model) solution capitalizes on the work of many. It's much like what happened with payroll services. Years ago, most companies had their own hardware, software and specialized staff to keep up with ever-changing payroll regulations. Today, that no longer makes sense. Not only was it way too expensive to manage payroll in-house, these financial investments in in-house payroll capabilities gave the companies no competitive advantage.
Today payroll is typically outsourced to firms like ADP. The task of maintaining the necessary IT infrastructure and associated payroll knowledge is left in the hands of these payroll services. As with all multi-tenant solutions, the cost of the infrastructure and expertise associated with payroll processing is spread across many companies.
The multi-tenant approach is now available for EDI. Instead of investing the considerable time and financial resources for IT staff to build each mapping interface from scratch, manufacturers rely on trading partner integration centers, or TPICS. These centers go beyond delivering software functionality. They offer the technical expertise involved with managing an EDI system. This way, there is built-in support for all transactions, data formats and workflows.
This model of outsourced EDI can give manufacturers confidence in their connectivity, mapping and application integration. Trading partner integration centers handle the dirty work of diagnosing errors, network monitoring, software maintenance and data reconciliation. And they can maintain close relationships with key retailers so they are notified early of upcoming mapping changes. In addition, because these solutions are used by hundreds or thousands of other manufacturers, there is necessarily a higher level of reliability and lower cost of ownership.
The availability of outsourced EDI finally opens the door for manufacturers to have end-to-end retail supply chain visibility, including across partner sites at remote locations. Partners only need a Web interface to access the EDI data to perform their job. This opens the door for manufacturers to enter new markets, such as logistics, inventory management and importing/exporting, while maintaining rigorous standards of efficiency across these new functions. Manufacturers have also found this model appealing because they can migrate without interrupting existing systems. They merely engage with the trading partner integration center for the functions that are causing pain points within the supply chain.
Not All EDI Outsourcing Is the Same
Nearly all EDI outsourcers can handle the basics such as purchase orders (POs), simple advanced shipping notices (ASNs) and invoices. However, tasks such as processing complex ASNs with multiple ship-to addresses and managing logistics, dock scheduling and vendor-managed inventory are trickier. Each market niche has unique standards. For example, hard goods retailers measure shipments in fixed length, width and height; grocery chains have variable package sizes; and lumber manufacturers measure materials in board feet. In addition, many hubs require custom documentation to satisfy specific requirements. It's important that the EDI outsourcer have the specialized knowledge to handle these custom data elements.
Another consideration is peripheral technology. These systems often play a vital role in producing labels, price tickets and hang tags. For manufacturers concerned about these functions, it's important to have peripheral technology that works in synch with the EDI service. Likewise, the EDI service should have the ability to produce all the bar code labels that retail customers require and provide the necessary materials (shipping address, packing slip, return forms, carrier labels and gift cards) for drop shippers. Some EDI outsourcers also offer the ability to produce price tickets to affix to goods prior to shipment.
File formats are another important consideration. Although most organizations still send and receive data via EDI, the world is slowly migrating to XML and flat files. Chances are, most manufacturers now have — or soon will have — partners that will need transactions converted to a format other than EDI. Thus, support for additional file formats may be an important consideration for choosing a future-proof solution.
Many manufacturers are leveraging the experience outsourcers have not just in building and testing EDI maps but often in working alongside retailers on these adjustments. This type of alliance helps outsourcers gain early notice of impending mapping changes.
Multi-tenant EDI Solutions at Work
A large manufacturer recently integrated its enterprise resource planning (ERP) system with an outsourced EDI solution to automate the sending and receiving of EDI documents. In working with Kmart, the manufacturer was required to produce an ASN and GS1-128 label. The company outsourced its warehousing and shipping to a third party that did not have its own EDI infrastructure. Thus, although the manufacturer was able to complete the ASN themselves, they had to courier labels to their 3PL. This created time delays. The manufacturer's new outsourced EDI solution enabled them to give the 3PL secure access to their EDI account via WebForms. The 3PL now renders and prints labels at their facility, reducing errors and speeding up the shipping process.
Another global manufacturer shared an analogous experience. The company required high-priced programmer-level staff to maintain its internal EDI infrastructure. At first, they attempted to offload this work to consultants, yet they found they were always at the mercy of the consultants' schedule. Moreover, as the company added more partners, its EDI costs skyrocketed. The firm repeatedly outspent its EDI budget. One executive reported that EDI management had been "like a huge science project."
The company sought a reliable vendor to outsource their ongoing EDI infrastructure to, freeing them to focus on their key business operations. They found an outsourced file integration service was ideal for handling the company's growing EDI demands while keeping costs low and monthly fees predictable. They now have an experienced partner to assist with new EDI projects and developments, and to keep abreast of changes, system upgrades, mandates and map maintenance. They're now well equipped to support a growing number of retail customers without the constant demands of supporting their own EDI infrastructure. This multi-tenant architecture ensures the firm can connect to their trading partners using the same fully tested maps being used by hundreds of other manufacturers.
Conclusion
Manufacturers constantly have the rug pulled out from under them whenever retailers make changes to their EDI maps. These last-minute changes cost manufacturers dearly in returned inventory, charge backs and resulting loss of negotiating power. The rate of change and sheer cost involved with managing EDI maps has become cost-prohibitive. Today there is no reason for manufacturers to bleed internal resources to keep up with this task when there are experts on hand to take on role at a fraction of the cost and with greater reliability and support. Happily, the emergence of trading partner integration centers frees manufacturers of this thankless job.
About the Author: Jim Frome is strategy officer and executive vice president of SPS Commerce. You can reach Jim Frome and learn more about outsourced EDI by contacting SPS Commerce at www.spscommerce.com.
All transactions with retail customers must be mapped to the retailers' exact standards, and those standards are continually in flux. These intricate maps are at the heart of the retail supply chain, but without a way to adapt them in real time, manufacturers are bogged down with unnecessary costs, chargebacks and time delays. Beyond the steep EDI software and hardware costs, the technical expertise required to continually program, revise and maintain EDI maps is extremely expensive.
Moreover, retailers often change mapping rules with little or no notice to manufacturers. Even the slightest change to an EDI map has major ramifications. If a retailer isn't aware that goods are coming, for example, they may refuse shipments. With no warning of impending changes, manufacturers inevitably ship materials with mapping errors and incur huge costs when the materials are turned away or delayed at the shipping dock.
Short of a crystal ball, manufacturers have had no way to know when a map was about to change, and they have struggled to keep up with the vast number of mapping alterations. Thus, they've spent an inordinate amount of money on software, hardware and technical staff to support their in-house EDI infrastructure. Yet, regardless of how much money they've poured into these in-house EDI systems, this gave them no competitive advantage whatsoever.
Today, forward-thinking manufacturers are freeing themselves from the restrictive software EDI model by opting to outsource their EDI to a third party and using their pre-built maps already in use by other vendors.
What Held Manufacturers Back
Every manufacturer doing business with major retailers like Target or Wal-Mart are required to build and upgrade integration code — mappings — to allow their computers to share information with the retailer's computers in compliance with the retailer's business rules. Thus, there are hundreds or even thousands of manufacturers creating the same maps, each one paying its own in-house technical staff to essentially do the same work.
They are reinventing the wheel by undertaking the exact same mapping work to service the same retailers. This is most inefficient and despite the considerable cost and effort involved, these tasks do not give the manufacturers any advantage over one another. A new solution has emerged to replace this outdated approach.
Multi-tenant EDI Solutions
Until recently, manufacturers had no option but to follow a "single tenant solution," with each company individually undertaking a technical project. This is not an efficient approach for managing technical areas that are not core competencies within a business.
Alternatively, a multi-tenant (or software-as-a-service model) solution capitalizes on the work of many. It's much like what happened with payroll services. Years ago, most companies had their own hardware, software and specialized staff to keep up with ever-changing payroll regulations. Today, that no longer makes sense. Not only was it way too expensive to manage payroll in-house, these financial investments in in-house payroll capabilities gave the companies no competitive advantage.
Today payroll is typically outsourced to firms like ADP. The task of maintaining the necessary IT infrastructure and associated payroll knowledge is left in the hands of these payroll services. As with all multi-tenant solutions, the cost of the infrastructure and expertise associated with payroll processing is spread across many companies.
The multi-tenant approach is now available for EDI. Instead of investing the considerable time and financial resources for IT staff to build each mapping interface from scratch, manufacturers rely on trading partner integration centers, or TPICS. These centers go beyond delivering software functionality. They offer the technical expertise involved with managing an EDI system. This way, there is built-in support for all transactions, data formats and workflows.
This model of outsourced EDI can give manufacturers confidence in their connectivity, mapping and application integration. Trading partner integration centers handle the dirty work of diagnosing errors, network monitoring, software maintenance and data reconciliation. And they can maintain close relationships with key retailers so they are notified early of upcoming mapping changes. In addition, because these solutions are used by hundreds or thousands of other manufacturers, there is necessarily a higher level of reliability and lower cost of ownership.
The availability of outsourced EDI finally opens the door for manufacturers to have end-to-end retail supply chain visibility, including across partner sites at remote locations. Partners only need a Web interface to access the EDI data to perform their job. This opens the door for manufacturers to enter new markets, such as logistics, inventory management and importing/exporting, while maintaining rigorous standards of efficiency across these new functions. Manufacturers have also found this model appealing because they can migrate without interrupting existing systems. They merely engage with the trading partner integration center for the functions that are causing pain points within the supply chain.
Not All EDI Outsourcing Is the Same
Nearly all EDI outsourcers can handle the basics such as purchase orders (POs), simple advanced shipping notices (ASNs) and invoices. However, tasks such as processing complex ASNs with multiple ship-to addresses and managing logistics, dock scheduling and vendor-managed inventory are trickier. Each market niche has unique standards. For example, hard goods retailers measure shipments in fixed length, width and height; grocery chains have variable package sizes; and lumber manufacturers measure materials in board feet. In addition, many hubs require custom documentation to satisfy specific requirements. It's important that the EDI outsourcer have the specialized knowledge to handle these custom data elements.
Another consideration is peripheral technology. These systems often play a vital role in producing labels, price tickets and hang tags. For manufacturers concerned about these functions, it's important to have peripheral technology that works in synch with the EDI service. Likewise, the EDI service should have the ability to produce all the bar code labels that retail customers require and provide the necessary materials (shipping address, packing slip, return forms, carrier labels and gift cards) for drop shippers. Some EDI outsourcers also offer the ability to produce price tickets to affix to goods prior to shipment.
File formats are another important consideration. Although most organizations still send and receive data via EDI, the world is slowly migrating to XML and flat files. Chances are, most manufacturers now have — or soon will have — partners that will need transactions converted to a format other than EDI. Thus, support for additional file formats may be an important consideration for choosing a future-proof solution.
Many manufacturers are leveraging the experience outsourcers have not just in building and testing EDI maps but often in working alongside retailers on these adjustments. This type of alliance helps outsourcers gain early notice of impending mapping changes.
Multi-tenant EDI Solutions at Work
A large manufacturer recently integrated its enterprise resource planning (ERP) system with an outsourced EDI solution to automate the sending and receiving of EDI documents. In working with Kmart, the manufacturer was required to produce an ASN and GS1-128 label. The company outsourced its warehousing and shipping to a third party that did not have its own EDI infrastructure. Thus, although the manufacturer was able to complete the ASN themselves, they had to courier labels to their 3PL. This created time delays. The manufacturer's new outsourced EDI solution enabled them to give the 3PL secure access to their EDI account via WebForms. The 3PL now renders and prints labels at their facility, reducing errors and speeding up the shipping process.
Another global manufacturer shared an analogous experience. The company required high-priced programmer-level staff to maintain its internal EDI infrastructure. At first, they attempted to offload this work to consultants, yet they found they were always at the mercy of the consultants' schedule. Moreover, as the company added more partners, its EDI costs skyrocketed. The firm repeatedly outspent its EDI budget. One executive reported that EDI management had been "like a huge science project."
The company sought a reliable vendor to outsource their ongoing EDI infrastructure to, freeing them to focus on their key business operations. They found an outsourced file integration service was ideal for handling the company's growing EDI demands while keeping costs low and monthly fees predictable. They now have an experienced partner to assist with new EDI projects and developments, and to keep abreast of changes, system upgrades, mandates and map maintenance. They're now well equipped to support a growing number of retail customers without the constant demands of supporting their own EDI infrastructure. This multi-tenant architecture ensures the firm can connect to their trading partners using the same fully tested maps being used by hundreds of other manufacturers.
Conclusion
Manufacturers constantly have the rug pulled out from under them whenever retailers make changes to their EDI maps. These last-minute changes cost manufacturers dearly in returned inventory, charge backs and resulting loss of negotiating power. The rate of change and sheer cost involved with managing EDI maps has become cost-prohibitive. Today there is no reason for manufacturers to bleed internal resources to keep up with this task when there are experts on hand to take on role at a fraction of the cost and with greater reliability and support. Happily, the emergence of trading partner integration centers frees manufacturers of this thankless job.
About the Author: Jim Frome is strategy officer and executive vice president of SPS Commerce. You can reach Jim Frome and learn more about outsourced EDI by contacting SPS Commerce at www.spscommerce.com.
