Food retail expert Steve Rees draws on his experience of working with clients throughout the food industry supply chain, including Sainsbury's, Berry Gardens and Produce World, and discusses how organisations can reap the rewards of a fully managed approach to outsourcing EDI.
EDI is an essential ingredient of any food industry supply chain's operations, whether you're a producer, manufacturer, wholesaler or retailer. It facilitates the sending and receiving of important trading documents and messages between buyers and their suppliers, creating clear and instant visibility of all transactional activities while eliminating paperwork, removing keying and reducing the time between demand generation and sales order creation.
The cost of purchasing and maintaining all of the necessary components required to successfully undertake EDI is notoriously high. The effort is also equally difficult, exacerbated by the frequent changes in requirements, standards and systems thrown at the supplier community.
This is currently making outsourcing an increasingly popular choice, especially in an industry such as food production, which consists of a huge variety of suppliers and manufacturers working within budgetary constraints.
While the commercial advantages of outsourced EDI are increasingly recognised, the number of different levels of outsourcing means that companies must take care to select the most appropriate option for their business.
Many variants of EDI outsourcing simply consist of adopting hosted hardware and software to transmit messages between an organisation and the businesses it's trading with. This can be seen as the critical area in markets such as food manufacturing, where the high volume of orders means messaging costs can be significant.
However, outsourcing just the hardware and software elements of EDI means that critical processes such as message translation and supplier and customer on-boarding still form significant overheads. These need to be handled in-house or through a third party, requiring additional cost or resource. As a result of this, the total expenditure on this type of outsourcing can quickly build up; prospective purchasers need to be sure they understand all internal and external costs in order to make a sound judgement on whether this is the most effective route to take.
The limitations of outsourcing only hardware and software become even more apparent when compared to a fully managed service approach, where the whole process is contracted out to a third party rather than just the transmission of messages.
Improving visibility and accuracy
Fully managed EDI can save organisations time and money and provides a range of additional benefits, including business intelligence and improved visibility and accuracy, which can be harnessed to boost performance across the supply chain.
Fully managed EDI also removes the onus on suppliers to comply with a broad range of customer mandated industry standards and message formats.
Choosing a provider that's fully compliant with all standards and formats ensures that a business can accommodate new EDI directives and onboard new customers without a large additional financial outlay. This is now achieved through a single connection to the fully managed EDI provider that carries out these tasks on the client's behalf.
A fully managed approach allows costs to be kept under control as the connection and service is paid for through a fixed annual fee. High capital expenditure on hardware and software licences is no longer necessary to get the process up and running, meaning the business can forecast its EDI costs more effectively.
With the majority of major supermarkets and retailers now demanding that EDI is in place but covering a range of standards and mandates, it allows any business in the food supply chain to adopt a flexible solution and still focus on their core business.
A lot of the work that goes into a managed service goes on behind the scenes, ensuring all clients get optimum EDI performance. For example, if a particular customer changes their requirements regarding the format of an invoice or purchase order, the change can often be made just once and applied for all suppliers of that customer.
Individual real-time message management also eliminates errors, to ensure that messages reach the required destination and invalid documents are flagged and dealt with before they get sent. This significantly accelerates communication and reduces potential wastage.
Supply chain performance is also enhanced through the increased business intelligence provided by managed EDI. Partners are able to share and access information in real time, integrating it into existing ERP systems. This allows for more accurate forecasting, as point-of-sale information can be distributed back through the supply chain allowing organisations to get a far more accurate picture of future demand, critical for many companies operating in the food industry where goods are often extremely perishable.
Individual suppliers can also be monitored to make sure that deliveries are on time and match what has been promised in order acknowledgements and Advanced Shipping Notices (ASNs). As this information is available to buyers and suppliers, managed EDI limits the opportunity for disputes as it clearly shows where problems have arisen, allowing organisations to cooperate with each other more readily in order to solve issues.
It's surprising how many food companies continue to work under the constraints of limited and outdated platforms, either on-premise or through basic outsourced solutions.
A fully managed approach turns EDI into much more than just a secure way of transmitting trading messages and also helps control this necessary cost. Fully managed EDI services can give companies an edge in the fast moving and competitive food industry, where slick supply is paramount.
Steve Rees is the food retail expert at Wesupply, the UK Electronic Data Interchange (EDI) service provider.
- Britvic to close factories
- Frusions from Rocks Drinks
- Geoff Collins on Clasado's range of prebiotic products