How EDI is used in the Retail Industry
Introduction to EDI in the retail industry
For over 40+ years the retail industry has been using EDI to replace its paper-based system and started exchanging documents like purchase orders, invoices, and ship notices with their suppliers/business partners using EDI. Retail businesses usually exchange high volumes of order data and EDI solutions can help in exchanging this large volume of data in a standardized format to improve operational efficiency and reduce the turnaround time to process orders. It also helps them to keep track of inventory management and provide more visibility into the supply chain and provide better customer support.
The retail industry uses EDI in 3 stages,
- Procurement
- Shipping
- Invoicing
1. Procurement
Procurement is the method of purchasing goods or services, typically for business purposes. During the procurement process, the retail industry uses EDI to exchange purchase orders (EDI 850) and purchase order acknowledgments (EDI 855). The buyer/retailer sends a purchase order to the supplier and the supplier then sends the purchase order acknowledgment back to the buyer/retailer.
2. Shipping
Logistics/shipping plays a big part in the retail supply chain. In this stage, the supplier sends the advance ship notice (EDI 856) to the buyer/retailer. The advance ship notice (ASN) provides the buyer with information like what is being sent in each package when it’ll be sent, by whom, and more. ASN plays a very important role can help retailers relieve stock congestion and reduce check-in times.
“According to the research from the Grocery Manufacturers of America, ASNs slash receiving times by up to 60% if just one part of deliveries uses automated ASNs, a 250-store company can save 65,000 receiving hours each year.”
The ASN can ensure that every step of the supply chain is fully informed of the status of the goods.
3. Invoicing
In the final stage, the supplier issues an EDI invoice (EDI 810) to request payments for products delivered. EDI 810 document consists of invoice details like invoice number, date, shipping details, payment terms, and item information like information including prices and quantities, discounts, and more. To this, the retailer will respond back with EDI remittance advice (EDI 820) and sends it to the supplier to confirm payment
Benefits of EDI in the Retail Industry
- Reduce transaction times
In contrast to the manual paper-based system, EDI messages can be exchanged in seconds, which leads to faster invoice processing and improved cash flows. By using EDI solutions buyers/retailers can receive EDI invoices directly into their accounting software so they can process them quickly and efficiently.
- Reduce costly errors, avoid delays, and saves costs
Manual processing is prone to Invoicing errors and can be costly leading to charge backs from retailers. Also, errors in documents can cause delays in shipments and goods receivable disrupting the supply chain. However, by using an effective EDI solution you can reduce all these costly errors, improve operational efficiency, and save thousands of dollars.
- Expand your fulfillment Models
Support eCommerce growth and create a seamless consumer experience across channels using standardized EDI transactions.
- Simply order management and improve warehouse efficiency
Get EDI order information from suppliers and gain visibility into whether suppliers can fulfill orders in full and on time. By receiving automated ASNs from suppliers you can move your inventory efficiently through your supply chain and plan better warehouse management, which in turn improves warehouse operational efficiency.
- Automation
With EDI you can automate your entire supply chain cycle. From procurement, shipping, and order management. On boarding your suppliers to EDI will enable a consistent order fulfillment process.
- Improve supplier efficiency
EDI can help retailers gain visibility into order management which means which suppliers are delivering orders on time, correctly, and quickly and which are not. With this type of data, retailers can make changes if certain suppliers just aren’t cutting it. This type of insight would take months to discover without an EDI system.
- Effective product management and bust trends
Gain visibility into product performance. EDI can help retailers help identify trending products i.e., which products are selling like hotcakes, and which are not. This will help retailers adjust inventory supplies accordingly.
- Increase sales with drop shipping
Drop shipping is a process of providing goods directly from manufacturers to retailers or customers. If a retailer provides an option to its customers to order products online via its eCommerce store, instead of storing the inventory in the retailer warehouse, with the help of EDI it can send the same order information to its supplier and ask the supplier to fulfill the order directly to its customer from their warehouse. In this way, retailers can save time and save storage space by not storing the inventory and processing orders faster for its customers. All this can happen with an effective EDI system.
Common EDI X12 Transaction Codes Used in Retail Industry
|
EDI X12 Transaction Number |
EDI Transaction Name / Document Type |
|
|
EDI 180 |
Return Merchandise Authorization and Notification |
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|
EDI 290 |
Cooperative Advertising Agreements |
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|
EDI 810 |
Invoice |
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|
EDI 816 |
Organizational Relationships |
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|
EDI 832 |
Price/Sales Catalog |
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|
EDI 846 |
Inventory Inquiry/Advice |
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|
EDI 850 |
Purchase Order |
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|
EDI 855 |
Purchase Order Acknowledgment |
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|
EDI 856 |
Ship Notice/Manifest |
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|
EDI 857 |
Shipment and Billing Notice |
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|
EDI 860 |
Purchase Order Change Request - Buyer Initiated |
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|
EDI 865 |
Purchase Order Change Acknowledgement/Request – Seller Initiated |
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|
EDI 869 |
Order Status Inquiry |
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|
EDI 870 |
Order Status Report |
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|
EDI 875 |
Grocery Product Purchase Order |
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|
EDI 876 |
Grocery Products Purchase Order Change |
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|
EDI 877 |
Manufacturer Coupon Family Code Structure |
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|
EDI 880 |
Grocery Products Invoice |
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|
EDI 881 |
Manufacturer Coupon Redemption Detail |
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|
EDI 885 |
Retail Account Characteristics |
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|
EDI 887 |
Coupon Notification |
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|
EDI 888 |
Item Maintenance |
Read More |
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