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.
This is a tale of two very different companies one quite large and one, well, not so large and how they traversed the electronic divide that frequently separates big businesses from small suppliers. All they needed was a little help in bridging the communications gap.
Big Business, Big EDI Challenge
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. In fact, because the company is continuously seeking out new and innovative products to put through its television and online channels, HSN faces the ongoing challenge of bringing small, often young suppliers into its network. "There's quite a substantial turnover in vendors," affirms Tim Weber, director of e-business for the Home Shopping Network, "so it's a weekly effort to bring on new vendors to HSN."
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. HSN uses this model when the products involved are, for example, perishable or very large or stock-keeping unit (SKU) intensive. Whatever the product, the drop-ship model requires a high degree of communication with the suppliers, including sending the orders to the vendor, receiving a confirmation of shipment back from the supplier and also receiving notification of any returns sent back to the supplier.
Weber says that HSN decided early on that, in the interests of efficiency, it would handle all transactions with its drop-ship supply base via 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, in a lot of cases, 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 big/not-so-big spectrum is David's Cookies, based in Fairfield, N.J., about 15 miles west of New York City. David's Cookies is typical of the kinds of smaller enterprises that HSN is looking to tap. 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.