Electronic Data Interchange (EDI) for the Logistics

Electronic Data Interchange (EDI) is the fastest, easiest, and most productive way to conduct business with the transportation, warehousing and logistics industry. Computer-to-computer communication eliminates the need to fax documents and provides a complete and comprehensive audit. Traditionally, in the Public Warehousing industry, their have been two functions provided:

• Product Storage and Replenishment
  
• Product Processing and Transfer
  

The process is very simple. The warehouse works as a "middle man" in the logistics process. A manufacturer produces product and ships the product to the public warehouse. The public warehouse stores the product until the manufacturer requests that they ship it to another company.

Public Warehouses have heavily invested in EDI systems to automate the information flow to support these basic functions. While these interfaces were excellent for transacting business with large customers, they usually failed to include the small and medium sized business customer, who could not make the investment necessary to take advantage of EDI. In addition, these interfaces limited their focus to the Replenishment and Transfer Cycle. The following are the processes which were not automated with the advent of EDI in the warehousing industry:

• Invoice Management (Invoices for warehousing services)
  
• Item Maintenance
  
• Merchandise Management
  

In addition, as public warehouses change their market niche from simply “product” processors to “information” processors, they are striving to use the electronic transfer of business information to provide additional services to their clients. For example, forward thinking public warehouses are looking to provide:

Sales Order Processing for their Clients

Presently, inventory is being managed by the retailer or by the manufacturer. The newest trend is to have public warehouses to manage the inventory for the manufacturer. The process would have:

• Retailers to send Product Activity Data to the warehouse.
  
• Warehouses utilizing the Retailers product activity data plus its own Vendor Managed Inventory software to suggest Purchase Orders to retailers.
  
• Retailers to approve the “suggested” Purchase Order (PO) and send the information back to the warehouse.
• The approved Purchase Order would be used by the warehouse to create a Warehouse Transfer (which may also create an Advanced Shipment Notification if required).
•  A copy of the Approved Purchase Order would be sent to the Manufacturer who will use this information to Invoice the Retailer.

Logistics Management for their Clients

Another trend in public warehousing is to have the warehouse manage the logistics process. An increasing popular portion of the logistics process being taken over by public warehouses is the handling of Merchandise Returns from Retailers. For example the process would have:

• Retailers to send Return Merchandise Requests to the Warehouse via EDI.
  
• Warehouses receive requests and to provide a Return Merchandise Authorization number to send back to the retailer authorizing the return.
  
• Retailers would send the goods back with a Debit Note attached to the warehouse and a copy of the Debit Note to the manufacturer.
  
• The warehouse would receive and inform the manufacturer of the receipt of the goods.
  
• Upon approval of the Return, the manufacturer would send a Credit Note to the Retailer and a document specifying to the warehouse how to dispose of the returned product.
  

The key to automating warehouse processes is to be able to have a solution that provides all parties the information that they need to do their job. This is where forward thinking public warehouses are looking to re-invest in EDI in solutions .

EDI in Warehousing and Logistics Processing

 

There are two major functions in the Warehousing Process:

• Receiving merchandise from the manufacturer to the warehouse.
  
• Transferring merchandise from the warehouse to the retailer.

The process is very simple; the public warehouse works as a "middle man" in the logistics process. The manufacturer produces product and ships the product to the public warehouse. The public warehouse stores the product until the manufacturer requests that they ship the product to another company (usually to a grocery retailer).

Increasingly, public warehouses are changing their market niche from being just warehouses of product, to being repositories of product and information on the movement of product. In this new role of the "information warehouse," the warehouses provide manufacturers with important information on product movement.

The following discussion is geared toward the traditional warehousing functions. This document will conclude with the ‘future trends’ in warehousing as public warehouses move to the "information warehouse" model.

Receiving Merchandise from the Manufacturer at the Warehouse

A public warehouse receives product from a manufacturer and holds the product until the manufacturer specifies to ship the goods. The first step in this process is to maintain product in the warehouse. To do this, the manufacturer will send shipment notification to the warehouse to specify that an order is to arrive. In EDI, this stock transfer is either an EDI 943 (Warehouse Stock Transfer) or Advanced Shipment Notification (EDI 856) document. Once the product arrives at the warehouse, the warehouse will confirm the notification of product arrival to the manufacturer sending back an EDI 944 (Warehouse Stock Receipt) document. The information sent back and forth contains the following information:

• Manufacturer Information
  
• Shipment Identification and Dates
  
• Carrier Identification
  
• Item Identification (UPC, Vendor Number, Retailer SKU)
  
• Shipment quantity
  

The "automation" of this process is extremely important to warehouses, as an automated process for the receipt and notification of goods is an essential method for reducing costs. Prior to automation, paper based systems were expensive to maintain. In addition, delays in information greatly reduced processing efficiency. For example, if an order is received but the warehouse inventory systems are not updated quickly, the product can not be sold.

Transferring Merchandise from the Warehouse to the Retailer

The second function that a public warehouse must facilitate, is to receive requests from the manufacturer, to ship product to a retailer and to confirm the shipment of product to the manufacturer. This is accomplished in EDI by the manufacturer sending the warehouse an EDI 940 (Warehouse Shipping Order) and the warehouse confirming the shipment of the order by an EDI 945 (Warehouse Shipping Order Confirmation). In this cycle, the following information is passed:

• Manufacturer and Retailer Information
  
• Shipment Identification and instructions
  
• Financial Accounting information
  
• Carrier Identification
  
• Item Identification (UPC, Vendor Number, Retailer SKU)
  
• Shipment quantity
  

As with the stock transfer from the manufacturer to the warehouse, the automation of the shipment process has significantly reduced costs and improved the flow and speed of information.

 

Future Trends

As the public warehouse business becomes more competitive, many warehouses are trying to expand their traditional "product processing" business into the "information processing" business. The warehouses are looking at the following trends:

Sales Order processing:

Presently, inventory is being managed by the retailer or by the manufacturer. The newest trend is to have the warehouse managed inventory at a retailer site. The warehouse already has accurate information on product sales transfers to the retailer. If the retailer can send back accurate sales information (normally using an EDI 852 (Product Sales Activity Report) document, then the warehouse would have the ability to manage the inventory.

Logistics processing:

Warehouses are providing many functions to manufacturers including pricing, packaging, shipping merchandise in specific formats and advanced notification of orders to meet retailers' needs.

Transportation Management:

As warehouses are becoming more involved in supply chain management, the management of transportation is being looked upon as a natural extension to their business.

Promotional Announcement process:

As warehouses are much closer to product than the manufacturer, they have the ability to determine if product is becoming dated product (i.e., the expiry date on a carton of milk is close to being reached). In this scenario, warehouses have traditionally sent Inventory reports to the manufacturer notifying them that the product is reaching its "best before" date. The manufacturers are looking to move the management and selling of this product to the warehouses.

Order Process

 

The purpose of this section is to present and explain the retail order cycle application.  
There are four major functions in the Order Process:

•  Inventory Status (to determine what to order)
  
•  Purchase Order creation (by retailer or by vendor)
  
•  Purchase Order Acknowledgment (by vendor to retailer)
  
•  Invoice what product to order (by vendor to retailer)
  

Inventory Status

Inventory Status is essential for the ordering cycle. Without information on stocking levels, an effective inventory system is impossible to maintain. The items that must be maintained in an Inventory status system are:

•  Vendor Information
  
•  Item Identification (UPC, Vendor Number, Retailer SKU)
  
• Product Descriptions
  
• Inventory quantity on-hand
  
•  Inventory changes
  
•  Quantity on-order
  
• Quantity in-transit
  
•  "Special" needs (e.g. Christmas trees in December)
  

Prior to a Purchase Order being created, Inventory status is used to determine what merchandise should be ordered. This information can be derived in many ways. These methods include:

Electronic Sales Data to update "in-house" inventory systems.

This method has sales data captured at the store level either via the retail Point of Sale (POS) or capturing on a scheduled basis the quantity and item information using a hand held scanner. This information is pulled back to a head office inventory system. This system assists the central buying office in the creation of a Purchase Order.

If merchandise scanning is used, inventory levels will only be accurate for the day of the scan. All subsequent changes in inventory will not be reflected in the inventory system. If scans are done every two weeks, then a delay of two weeks is built into the system. If scans are performed more often, accuracy improves but the cost to capture the data is greater.

If POS data is used, the retailer will gain through a reduced effort to capture data and accuracy of data as it is captured daily. The problem with this system is that retail inventory systems can rarely track information at the lowest level of detail (UPC). In this scenario, the retail POS data must be rolled up to a class level. This makes the ordering at the color/size level (e.g. 16 1/2" x 35" white Arrow Brand shirt) impossible. Another problem in retailing is that using POS data will only be successful if other changes to inventory (such as theft, merchandise transfers, returns of sold merchandise, returns to vendors etc.) are entered in at the lowest level of detail. Even if information is kept at the lowest level of detail, it must be entered in on a timely basis. Traditionally, retailers using POS data will also perform a full scan of merchandise every three months to correct inventory accuracy.

In-store Determination of Quantities Required.

Store personnel check the shelves and communicate merchandise needs to the buyer (either centrally or in-store). This model is very common in distributive ordering/authority retail systems. The stores can determine inventory quantities quickly by looking at their inventory and they can also determine their additional product requirements based on their knowledge of local requirements. This model works only if there is a distributive ordering authority and there are a number of qualified individuals at the store to create an order. A consideration in this model is that purchases from a central buying office will cause overstock situations if purchases are not communicated to the stores (and vice versa on store orders communicated to the central buying office). As reductions in store personnel have become common in the retail industry, this model is becoming less and less used.

 

Vendor Managed/Assisted Inventory

Vendor to determine order quantities, either via EDI Sales Data or by the use of "merchandisers" to determine on-hand quantities. In this model, the vendor is in charge of maintaining the inventory. The vendor captures inventory information either manually, by the use of merchandisers, or electronically through an EDI Product Activity Data report. The vendor "orders" product for each store, using the inventory information.

In the manual method, vendors employ merchandisers, who go to the stores, re-merchandise the shelves, move any excess product from stock rooms on to the retail floor and determine what inventory is required for this site. The merchandiser will communicate these needs to the vendor's representative. The vendor's representative will then accumulate the store’s needs and create either a Purchase Order or call on the central buying office to create a Purchase Order. This method is very similar to the store-created inventory model. The difference is that the cost of the merchandiser is paid for by the vendor (the cost is indirectly charged to the retailer in the form of higher product cost).

In the electronic capturing of information, the retailer captures sales data at the POS. The data is then communicated to the vendor via EDI. The vendor inputs the POS data into a VMI (Vendor Managed Inventory) system. The VMI system will then calculate (based on order quantities and minimum stock levels) an order. The order may be sent to the retail buyer electronically via an EDI Purchase Order or may be reviewed with the retail buyer by the vendor's representative. This method has the same issues on inventory accuracy as the "in-house" electronic capture of Sales Order model.

Seasonal Purchasing

Seasonal Purchases occur when Buyers and Vendors determine the order quantities based on a purchase per season. This method is typical for seasonal product, such as swimwear, where the selling season is too short to re-order product. The buyers’ and vendors’ knowledge of the market and previous year's sales are used to determine orders. This can be a "best guess" process or it can utilize previous years’ sales information (captured at POS at the UPC level) received from the retailer to allow the vendor to suggest appropriate order quantities.

Seasonal Purchasing

Seasonal Purchases occur when Buyers and Vendors determine the order quantities based on a purchase per season. This method is typical for seasonal product, such as swimwear, where the selling season is too short to re-order product. The buyers’ and vendors’ knowledge of the market and previous year's sales are used to determine orders. This can be a "best guess" process or it can utilize previous years’ sales information (captured at POS at the UPC level) received from the retailer to allow the vendor to suggest appropriate order quantities.

 

Purchase Order Creation

Typical information sent in the ordering cycle (Purchase Order/Invoicing):

•  Purchase Order (PO) identification information (PO Number, PO Date, Contract Number, Release Number)
  
• Currency Information (currency used, exchange rates etc.)
  
• Internal Reference Numbers
  
•  Free Form Notes
  
• FOB (Freight on Board) and Carrier information
  
• Special Allowances and Charges (either at the line item or entire order level).
  
• Terms of Sale
  
•  Delivery Dates
  
•  Back Order instructions
  
• Shipping and Remittance Name information
  
•  Line item identification (either structured (i.e. codified) or non-structured (free form descriptions)
  
• Sub-Line identification (i.e. assortments)
  
• Pricing and discount information for specific line items
  
• Delivery Instructions for the entire order (Name Segments) or for a specific line item (Store Destination Quantity).
  

The actual ordering process will be dependent on what inventory status system is utilized. A key is that the basic information from the Purchase Order is used in the rest of the retail order cycle.

The process of acknowledging a received Purchase Order may be done via electronic or manual means. If the acknowledgment is done electronically (via an EDI 855, Purchase Order Acknowledgment), the following sub-set of information is usually sent from the vendor to the retailer:

·       Purchase Order (PO) identification information (PO Number, PO Date, Contract Number, Release Number)

·       Internal Reference Numbers

·       Delivery Dates (either changes or confirmations)

·       Shipping and Remittance Name information

·       Line item identification (either structured (i.e. codified) or non-structured (free form descriptions)

·       Line Item acknowledgments  (changes, deletions, substitutions or confirmations).

·       Pricing Information

·       Sub-Line identification (i.e. assortments)

 

The electronic acknowledgment may be used to specify that there are:

·       Changes to the original Purchase Order at the line item level with the detailed changes sent in the         Acknowledgment.

·       No changes to the original Purchase Order at the line item level and the detailed line item information is sent as an Order Confirmation.

·       No changes to the original Purchase Order at the line item level and the detailed line item information is not  re-sent to the retailer.

·       Product Replenishment (the Purchase Order Change is actually a vendor-generated Purchase Order. A vendor-generated Purchase Order can also be sent as a Purchase Order to the retailer in some ordering models).

 

 

Purchase Order Creation

Typical information sent in the ordering cycle (Purchase Order/Invoicing):

·       Purchase Order (PO) identification information (PO Number, PO Date, Contract Number, Release Number)

·       Currency Information (currency used, exchange rates etc.)

·       Internal Reference Numbers

·       Free Form Notes

·       FOB (Freight on Board) and Carrier information

·       Special Allowances and Charges (either at the line item or entire order level).

·       Terms of Sale

·       Delivery Dates

·       Back Order instructions

·       Shipping and Remittance Name information

·       Line item identification (either structured (i.e. codified) or non-structured (free form descriptions)

·       Sub-Line identification (i.e. assortments)

·       Pricing and discount information for specific line items

·       Delivery Instructions for the entire order (Name Segments) or for a specific line item (Store Destination Quantity).

The actual ordering process will be dependent on what inventory status system is utilized. A key is that the basic information from the Purchase Order is used in the rest of the retail order cycle.

The process of acknowledging a received Purchase Order may be done via electronic or manual means. If the acknowledgment is done electronically (via an EDI 855, Purchase Order Acknowledgment), the following sub-set of information is usually sent from the vendor to the retailer:

·       Purchase Order (PO) identification information (PO Number, PO Date, Contract Number, Release Number)

·       Internal Reference Numbers

·       Delivery Dates (either changes or confirmations)

·       Shipping and Remittance Name information

·       Line item identification (either structured (i.e. codified) or non-structured (free form descriptions)

·       Line Item acknowledgments  (changes, deletions, substitutions or confirmations).

·       Pricing Information

·       Sub-Line identification (i.e. assortments)

 

The electronic acknowledgment may be used to specify that there are:

• Changes to the original Purchase Order at the line item level with the detailed changes sent in the         Acknowledgment.
  
• No changes to the original Purchase Order at the line item level and the detailed line item information is sent as an Order Confirmation.
  
•  No changes to the original Purchase Order at the line item level and the detailed line item information is not  re-sent to the retailer.
  
• Product Replenishment (the Purchase Order Change is actually a vendor-generated Purchase Order. A vendor-generated Purchase Order can also be sent as a Purchase Order to the retailer in some ordering models).
  

Electronic acknowledgment of Purchase Orders is a very useful tool in the retail environment to supply the retailer with proper information whether the merchandise ordered will arrive on time, in the right quantities and at the right price. In more advanced electronic environments, there can be additional electronic information passed between retailers and vendors (Purchase Order Changes and Purchase Order Change Acknowledgments) to ensure that the Purchase Order is understood by both parties.  If the Purchase Order/PO Acknowledgment model is utilized, invoicing problems are greatly reduced. The problem with Electronic Acknowledgments is that many vendor and retail systems do not have a process to utilize this information. If this is the case, the Purchase Order is received via EDI and the Purchase Order Acknowledgment and Purchase Order change must be accomplished manually.

If acknowledgments are not manual, the vendor must review the Purchase Order when it is received and contact the buyer if there are problems with the order. The main danger is that the vendor does not contact the buyer or if there is a modification agreed to by the vendor and the retailer, will that modification get updated in the vendor’s and retailer’s systems. If it does not, there will be more problems on the Invoicing side.

Invoicing

Invoicing is simply the process by which the vendor gets paid for the goods delivered. Typically, the information sent in an Invoice is similar to the information passed in a Purchase Order. The Invoice additionally will send:

• Invoice Identification information
  
• Carrier Details
  
• Invoice Shipment Summary
  
• Invoice Monetary Amount
  

In retailing, the inbound Invoice may be used as a batch Invoice entry process where the Invoice will be moved into the Invoice application and then a retail Invoice clerk will manually check the Invoice against the original Purchase Order. The second use of the Invoice is to have the Invoice received and checked for differences against the original Purchase Order by the use of a program. The Invoice clerk would only be involved if there was a problem.

Typically, retailers who receive Invoices electronically will benefit from automating as many of the order processes as possible. The normal electronic process is to send Inventory Data via the EDI 852 Product Activity Data document. The Purchase Order is sent via an EDI 850 Purchase Order. The vendor acknowledges the Purchase Order by sending an EDI 855 Purchase Order Acknowledgment. Finally an EDI 810 Invoice is sent from the vendor to the retailer. Some of the other EDI documents that can be used in the order/replenishment cycle are:

• Price Sales Catalog (EDI 832) (vendor to retailer to specify changes to their Price Sales Catalog).
  
• Planning Schedule (EDI 830) (retailer to vendor to specify forecast future merchandise requirements).
  
•  Purchase Order Change (EDI 860) (retailer response to a PO Acknowledgment with a change).
  
•  Purchase Order Change Acknowledgment (EDI 865) (vendor response to a PO Change).
  
• Advanced Ship Notice (EDI 856) (from vendor to retailer to specify what is being delivered).
  
• Payment Order/Remittance Advice (EDI 820) (from retailer to bank and vendor to specify payment of an Invoice).
  

Logistics Process

 

The purpose of this section is to present and explain the application of the retail 
Logistics cycle.  There are three major functions in the Logistics Process:

• Receiving Advanced Shipment Notification from the vendor to the retailer
  
• Transfer of Merchandise within a retail organization
  
•  Return of Merchandise from a retail organization to the original vendor
  

Advanced Shipment Notification

Advanced Notification of a Shipment’s arrival has become the latest trend in retailing. The reason for the focus on advanced shipment notification is to reduce processing costs, time, and to improve knowledge of product delivery. If advanced shipment notification is provided by EDI, the shipment notification will report on:

• Vendor Information
  
• Shipment Identification
  
• Order Identification
  
• Packaging Identification (how the goods are packed, by store, by item, by pack, etc.)
  
• Item Identification (UPC, Vendor Number, Retailer SKU)
  
• Shipment quantity

The impact of Advanced Shipment Notification will depend on how close the vendor base is to the retailer (the farther away, the more important advanced notification is) and the type of distribution that will be attempted when the goods arrive at the retailer. In retailing, there are three types of merchandise distribution:

 

Central Stock

Central Stock distribution has merchandise shipped to a central warehouse and the stores will pull stock from the central warehouse. Refrigerators are a very common example of Central Stock Merchandise. A shipment of 1000 refrigerators is received at a central warehouse. Each individual store will only receive one in-stock refrigerator. The rest of the order will be kept in the central warehouse. As refrigerators are sold, the stores will send the warehouse a delivery notification, either electronically (in the form of a Warehouse Shipping Order) or manually (in the form of a copy of the customer’s sales order. The warehouse will then ship the product to the customer.

In this scenario, the electronic notification of merchandise arrival allows:

• Improved labor scheduling at the warehouse to handle the large influx of merchandise arriving at the warehouse.
• Improved notification of merchandise arrival to the inventory system. If the retailer’s inventory system has an "in-transit" feature, advanced shipment notification can be used to update the "in-transit" bucket for the merchandise. Again, this is very important when the source of the merchandise is far away from a retailer (e.g. a West Coast retailer whose vendor warehouses have been consolidated into fewer and fewer warehouses, located primarily in the East,  thereby increasing the transit time for merchandise arrivals).
• Reduction in time to reconcile merchandise receipts to Purchase Orders and Invoices. Typically, an Invoice cannot be paid until the goods are received, the Packing Slip is entered into the retailer’s receiving system, and the Invoice is received and reconciled to the original Purchase Order. The use of advanced notification of the arrival of the goods can allow receivings to be pre-entered into the retailer’s receiving system.

Direct to Store Deliveries (DSD)

Direct to Store Deliveries occur when an order will be placed for delivery to a specific store. The order may be placed at the store manually or electronically. Another option is to have a central buying office order the merchandise for each store. The DSD model is very common for retail organizations with distributed ordering authority or franchised stores. The keys to the use of advanced notification of a shipment's arrival in this scenario are:

• Improved labor scheduling for order processing. In a warehouse, there is usually a large pool of labor that can be used to process a large order that is received. In a retail store, rarely is there a dedicated labor pool that can be thrown at a large order. In addition, retail stores rarely have extra space to accommodate a large order for an extended period of time. In this scenario, the use of advanced shipment notification is very important for stores to be able to process large store receivings.
•  Improved notification of merchandise arrival for the stores. The stores can anticipate when merchandise will be available when advanced notification is given. Again, this is very important when the source of the merchandise is far away from a retailer (e.g. a West Coast retailer whose vendor warehouses have been consolidated into fewer and fewer warehouses, primarily located in the East, thereby increasing the transit time for merchandise arrivals).
• Reduction in time to reconcile merchandise receipts to Purchase Orders and to Invoices. Typically, an Invoice cannot be paid until the goods are received, the Packing Slip is entered into the retailer’s receiving system, and the Invoice is received and reconciled to the original Purchase Order. The use of advanced notification of the arrival of the goods can allow receivings to be pre-entered into the retailer’s receiving system, as opposed to waiting for a store to send in the receiving to a centralized receiving input office.

Cross-Dock

Cross-Dock is an initiative to push the processing of goods from the retailer back to the vendor. The approach is to have vendor’s pre-package goods so the merchandise does not require further processing by the retailer's warehouse. If done properly, the vendor will pre-package the merchandise in a 'floor-ready' state for each store. Each package will be marked for each store (usually using a UCC128 Carton Marking that contains a scanable barcode for the box and a human-readable destination address. The warehouse checks the packing slip to ensure that the number of packages matches the packages received and moves the boxed merchandise from the receiving dock to the shipping dock (hence the name cross dock). To accomplish this distribution system, the vendor must pre-price merchandise, pre-package it by store and the advanced ship notice is sent to the warehouse. Advanced Shipment notification (ASN) will:

• Reduce warehousing effort, as the warehouse clerk will not have to rip open boxes, price the merchandise and re-package the merchandise by store. It is estimated that the cost savings can be up to 30 cents per unit by the implementation of full vendor floor-ready merchandising using cross-dock distribution.
• Reduce processing time from 3 days per order to an average of 1/2 day per order. There must be a method to mark the merchandise boxes so that the warehouse clerk can move goods from the receiving dock to the ship dock.
• Improved notification of merchandise arrival to the inventory system. If the retailer’s inventory system has an "in-transit" feature, advanced shipment notification can be used to update the "in-transit" bucket for the merchandise.  This is very important when the source of the merchandise is far away from a retailer (e.g. a West Coast retailer whose vendor warehouses have been consolidated into fewer and fewer warehouses, primarily located in the East, thereby increasing the transit time for merchandise arrivals).

Typically, it is extremely difficult to implement the EDI Advanced Ship notice as:

• Vendors must be persuaded that they change their whole way of shipping goods to meet the retailer’s needs. The vendor might have to package by store, price the merchandise, and label the cartons all in the fashion that each retailer requires.
• The EDI Advanced Ship Notice has an extremely complex technical structure that makes implementation of it very difficult, unless a vendor commits a lot of money and effort to be able to implement it. 
• The retail industry has not decided upon "standard" Advanced Ship Notification systems. This leads to a situation where a vendor has to package and process product differently for different retailers.
• The majority of retail EDI coordinators do not understand the business processes required for implementing an EDI Advanced Ship Notice. With Invoices and Purchase Orders, there is a paper document on which retail EDI coordinators base their standards. The Advanced Ship Notice is a new business process. Unless the EDI coordinator can understand the ordering and logistics cycle for all merchandise, the implementation of the ASN is extremely difficult.

 

Transfer of Merchandise within a Retail Organization

The transfer of merchandise between stores is a very difficult process in a distributed retail environment. The reason is the lack of entry systems at stores. In a typical retail environment, the stores will move stock between stores using a Merchandise Transfer slip. The slip will specify:

·       Input Date

·       Originating Store and department

·       Destination Store and department

·       Quantity of Goods to be transferred

·       Cost price of the goods transferred

Three copies of the transfer will be created. One copy will be kept at the originating store, one with the merchandise to the destination store and one copy will be sent in a courier envelope to a central entry office. The entry office will receive the transfer slip and enter the transfer of merchandise into the inventory systems. The key issues are:

·       Merchandise transfers are rarely entered in at the UPC level. As the merchandise is not entered into the system at the lowest level of detail, inventory levels become out of date.

·       Inventory levels are incorrect until the merchandise transfer is entered.

·       If paper packing slips are lost, the transfer is never reflected into inventory.

The process to electrify the in-store merchandise transfer is a simple internal Product Transfer (EDI 849). This process would be very useful where distributive data entry is required and not available at present.

 

Return of Merchandise to Vendor

Returns of merchandise from a retailer to a vendor can occur for two reasons:

·       Faulty Merchandise.

·       Overstock positions on merchandise

 

Faulty Merchandise Returns

If merchandise is found to be faulty and must be returned to the vendor for credit, the process is simply to:

Contact the vendor to receive authorization to return the merchandise.  Upon receipt of the return merchandise authority (RMA) number, the store packages the goods (sometimes the vendor will instruct to destroy the product and not send it back), and writes up a debit note.  The store keeps one copy of the debit note, sends one with the product and sends one to a central entry office. The debit note will contain:

·       Retailer Identification

·       Vendor Identification

·       Original Purchase Order (if known)

·       Item Identification

·       Quantity returned

·       RMA Number

The central debit entry office of the retailer will enter in the debit into their accounts payable system.

Once the debit note is received at the vendor, they will credit the retailer for the merchandise. The merchandise credit will be reconciled against the store-created debit note and applied to the correct store and merchandise group.

This process is extremely time consuming and very difficult to maintain. Many retailers have centralized the transfer of goods into one area. This reduces key entry and increases auditability but centralization is very costly, as the goods must be shipped to a central site, and then re-shipped to the vendor.

 

One application is to automate the process via EDI. The process is:

·       Stores using distributive key entry systems, enter in RMA requests to vendors.

·       Vendors receiving RMA's in various fashions send (using various input options) RMA #s to stores

·       Stores enter in Debit notes, which are transferred, to their head office and the vendor.

·       Vendor uses many methods to receive Debit Notes to update their system.

·       Central Head Office uses the store-created Debit Note to update Accounts Payable.

 

Overstock Positions on Merchandise

In retailing, there are occasions when retailers need to reduce stock levels in stores. Typically, the requirement is to reduce stock prior to stocktaking. To accomplish this, buyers will negotiate with their vendor representatives to have the vendor take back stock. The buyer will contact the stores and have them package the goods and send them back to the vendor.

One application is to automate the process via EDI. The process is:

·       Stores enter in Debit notes, which are transferred to their head office and the vendor.

·       Vendor uses many methods to receive Debit Notes to update their system.

·       Central Head Office uses the store-created Debit Note to update Accounts Payable.

 

Transportation Process

 

Transportation Cycle in EDI:

The typical cycle for Transportation is as follows:

A vendor sends a Motor Carrier Shipping Information document (EDI 204) to the cartage firm to specify that there is a shipment to be picked up. The cartage firm sends a Response Load Tender (EDI 990) to the vendor, specifying if they will pick up the shipment. When the shipment is picked up, the cartage firm may send back the status of the shipment to either the vendor or the ultimate receiver in the form of a Motor Carrier Shipment Status Message (EDI 214). The triggering of this document being sent can be pre-arranged (the parties will make an agreement of when the status is sent) or either the shipper or the ultimate receiver can request a status by sending a Motor Carrier Shipment Status Inquiry (EDI 213). Once the shipment is completed, the cartage firm sends the Motor Carrier Freight Details and Invoice (EDI 210) to the vendor to pay.

 

EDI 204 - Motor Carrier Shipping Information

EDI 204 is used to tender a shipment to a carrier and/or forward the shipment details to a carrier, consignee or third party. It provides the carrier (and/or third party) with a detailed Bill of Lading rating and scheduling information pertinent to the shipment.

Its basic use is to be an initial shipment tender between shipper and carrier. It can be used as a Load Tender (telling the carrier when to pick up the goods) or a Bill of Lading (specifying to the carrier what exactly is to be picked up.

The usual procedure is to send EDI 204 to the carrier. The carrier will respond with an EDI 990 (Response to Load Tender), which specifies that the carrier will pick up the goods.

 

EDI 990 - Response to Load Tender

This transaction is sent by the motor carrier in response to a shipper sending the carrier a Load Tender (EDI 204 - Motor Carrier Shipping Information document with the Load Tender option).

The document will contain the carrier’s acceptance, conditional acceptance or a decline, if they decline to accept the load tender. It can also contain the reason for the conditional acceptance or the decline of the load tender.

 

EDI 213 - Motor Carrier Shipment Status Inquiry

This transaction is used to request the status of a shipment from a motor carrier on a single shipment or a set of shipments.

It may be sent to the carrier by the shipper or the ultimate receiver of the goods. This document is an ad-hoc request for the status. If the carrier and the shipper and/or receiver have a set schedule for responses (in the form of an EDI 214 Motor Carrier Shipment Status Message), then this document is never sent.

 

 

 

 

EDI 214 - Motor Carrier Shipment Status Message

This transaction is used to pass information relating to the status of an assigned, loaded-en-route, or delivered shipment.

It is sent from the carrier to either the shipper or the ultimate receiver. It may be sent as a response to an EDI 213 (Motor Carrier Shipment Status Inquiry) or at regularly scheduled intervals. The carrier may also send it if there is a change in the shipment status (e.g. the truck is delayed in customs).

 

EDI 210 - Motor Carrier Freight Details and Invoice

This transaction can be used as an Invoice to request payment for services rendered or as details pertaining to freight shipment charges.

An Invoice will typically be sent for each shipment.