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EDI: Connecting Today's Global Supply Chain Partners
Forward-thinking suppliers are breaking free of a constraint that has long held them back from the promise of the fully automated supply chain
The globalization of consumer packaged goods (CPG) businesses makes relying on in-house electronic data interchange (EDI) systems impractical. Suppliers are outsourcing most functions to third-party logistics providers (3PLs), sourcing companies, expeditors and freight forwarders who require immediate access to EDI data to manufacture and ship items correctly to their retail customers. However, reaching these partners via EDI has proved to be too cumbersome and expensive for most.
Until recently, companies needing to implement EDI had few options other than installing and managing their own in-house systems. This included conventional EDI software packages like Sterling's GenTran or B2B integration software packages from WebMethods or Tibco. These software packages were resource-intensive and had no cost-effective way of being shared with global business partners.
With many remote factories not sustaining 24x7 Internet access, let alone able to maintain their own EDI software, sharing EDI data with their trading partners was impractical. In comparison to industrialized nations, many are still in the dark ages when it comes to technology and the resources now available to help streamline trading partner communications.
Today, however, CPG manufacturers are breaking free from the in-house EDI model, empowering business partners and optimizing processes across the retail supply chain.
EDI Challenges of International Sourcing
During the 1980s and 1990s, suppliers invested in in-house EDI systems. To operate and maintain EDI systems necessitated an investment in computer hardware, specialized EDI software and communications networks, such as value-added networks (VANs) and FTP technology. This also required considerable expertise and attention to detail, both during the initial setup and routine, day-to-day processing. Maintaining these systems was always a costly undertaking. This problem has become exacerbated in recent years.
The rate of change and globalization of markets today means that EDI systems are continually in flux. As suppliers outsource the production and delivery of products, they must have a way to exchange order and supply chain information seamlessly, both with the growing number of business partners and with their retail customers. For example, retailers often demand visibility into production and shipment statuses, which require information from the supplier's ERP systems such as SAP, Oracle or JD Edwards, and/or their shipping and packing systems to produce advance ship notices (ASNs).
However, extending EDI into low-tech remote factories in Asia and other regions has been cost-prohibitive with traditional EDI models, since these facilities haven't had the finances to purchase these systems or the staff to maintain them. Thus, they have relied on fax and e-mail for communications with the supplier. Not only did this archaic approach introduce tremendous inefficiencies, it prevented necessary visibility into that segment of the supply chain.
In addition, information within these EDI transactions needs to be filtered before being shared with business partners, such as carriers, 3PLs, consolidators and global sourcing companies that are performing tasks on the supplier's behalf — a costly and often impossible task to automate.
A Kink in the Supply Chain
Eighty percent or more of a supplier's fulfillment operations are outsourced to selected third parties. Yet until recently, the shipping and order information from EDI transactions was difficult to forward to global business partners who need this information to perform their fulfillment task. Instead, information from these EDI transactions was often printed, marked up to remove sensitive information and faxed to these entities. With this task came the cost, delays and errors typical of manual processes.
For example, the process of generating advance shipping notices (ASNs) was like a game of telephone; the factory had to call the sourcing agent to convey information about items ready for shipment, and the sourcing agent would then fax or e-mail the CPG manufacturer with this information so that the manufacturer could then send an ASN to their retail customer. Every step along the way brought delays and inaccuracies.
Likewise, factories didn't have access to the data to print the barcode labels necessary for shipping. Instead, sourcing agents printed labels and mailed them to the factory. This task couldn't be performed until the factory finished making the product — causing further delays. The ability to perform these tasks closer to where the task occurs eliminates days from the cycle.
Until recently, companies needing to implement EDI had few options other than installing and managing their own in-house systems. This included conventional EDI software packages like Sterling's GenTran or B2B integration software packages from WebMethods or Tibco. These software packages were resource-intensive and had no cost-effective way of being shared with global business partners.
With many remote factories not sustaining 24x7 Internet access, let alone able to maintain their own EDI software, sharing EDI data with their trading partners was impractical. In comparison to industrialized nations, many are still in the dark ages when it comes to technology and the resources now available to help streamline trading partner communications.
Today, however, CPG manufacturers are breaking free from the in-house EDI model, empowering business partners and optimizing processes across the retail supply chain.
EDI Challenges of International Sourcing
During the 1980s and 1990s, suppliers invested in in-house EDI systems. To operate and maintain EDI systems necessitated an investment in computer hardware, specialized EDI software and communications networks, such as value-added networks (VANs) and FTP technology. This also required considerable expertise and attention to detail, both during the initial setup and routine, day-to-day processing. Maintaining these systems was always a costly undertaking. This problem has become exacerbated in recent years.
The rate of change and globalization of markets today means that EDI systems are continually in flux. As suppliers outsource the production and delivery of products, they must have a way to exchange order and supply chain information seamlessly, both with the growing number of business partners and with their retail customers. For example, retailers often demand visibility into production and shipment statuses, which require information from the supplier's ERP systems such as SAP, Oracle or JD Edwards, and/or their shipping and packing systems to produce advance ship notices (ASNs).
However, extending EDI into low-tech remote factories in Asia and other regions has been cost-prohibitive with traditional EDI models, since these facilities haven't had the finances to purchase these systems or the staff to maintain them. Thus, they have relied on fax and e-mail for communications with the supplier. Not only did this archaic approach introduce tremendous inefficiencies, it prevented necessary visibility into that segment of the supply chain.
In addition, information within these EDI transactions needs to be filtered before being shared with business partners, such as carriers, 3PLs, consolidators and global sourcing companies that are performing tasks on the supplier's behalf — a costly and often impossible task to automate.
A Kink in the Supply Chain
Eighty percent or more of a supplier's fulfillment operations are outsourced to selected third parties. Yet until recently, the shipping and order information from EDI transactions was difficult to forward to global business partners who need this information to perform their fulfillment task. Instead, information from these EDI transactions was often printed, marked up to remove sensitive information and faxed to these entities. With this task came the cost, delays and errors typical of manual processes.
For example, the process of generating advance shipping notices (ASNs) was like a game of telephone; the factory had to call the sourcing agent to convey information about items ready for shipment, and the sourcing agent would then fax or e-mail the CPG manufacturer with this information so that the manufacturer could then send an ASN to their retail customer. Every step along the way brought delays and inaccuracies.
Likewise, factories didn't have access to the data to print the barcode labels necessary for shipping. Instead, sourcing agents printed labels and mailed them to the factory. This task couldn't be performed until the factory finished making the product — causing further delays. The ability to perform these tasks closer to where the task occurs eliminates days from the cycle.
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