Logistics and Transport Focus is the official member magazine of the Chartered Institute of Logistics and Transport.
Resetting supply chains in a landscape of electronic data interchange
The Covid crisis has exposed the acute fragility of many of the links that bring manufacturers, suppliers and retailers together for trade.
With innovation key to developing an efficient and adaptable supply chain, senior decision makers in production and operations management will now be keen to build greater resilience into trading processes to offset the risk of another outbreak or a separate black swan event.
Business are looking for competitive advantage
Over several decades, continual innovation in document management has prompted companies and organisations to increasingly favour electronic transactions over costly paper-based procedures.
EDI (electronic data interchange) and technology advances including paper-to-digital solutions have helped users gain competitive advantage over their peers through more cost-efficient management of orders, invoices, shipping notes and other essential records.
But as we emerge from Covid, those who cling on to antiquated or legacy EDI systems risk missing out on growth and efficiencies at a time when opportunities may be few and far between.
Paul Simpson, co-founder and joint managing director of automation specialists Transalis, counsels against reliance on what he describes as the ‘vested interests’ of legacy EDI software providers.
“Because EDI has been around for decades, it’s natural to have got used to a certain way of doing things recommended by your provider,” says Paul.
“But there will almost certainly be a need to review your current solution. In particular, EDI has been typically coupled with a value-added network (VAN) proposition that entails a data charge per transaction.
This can easily lead to excessive cost when dealing with multiple trading partners. Technology advances have removed the need to be paying VAN fees in respect of data transmission or middleware.
The chances are that your current EDI solution provider is doing nothing, or very little, to justify them. In a disruptive and ever more challenging trading environment, sticking with this kind of arrangement can leave you at a competitive disadvantage as rivals innovate in their capabilities. It’s simply an example of accepted practices, or vested interests, within EDI that are leading to a current lack of innovation.”
EDI has made a positive difference for AG Barr
A prime example of a company securing more value from EDI through leveraging ‘paper-to-digital’ automation is AG Barr, the soft drinks manufacturer famous for more than 100 years for the iconic, best-selling Irn-Bru.
Read the AG Barr EDI case study
Because of its wide product range and many routes to market, AG Barr’s customer service team are in continual contact with a complex mix of wholesalers, distributors and retailers.
Most of the trading network runs on automated processing but not every contact is so ‘user-friendly’. Despite EDI being omnipresent, some trading partners have insisted on keeping things manual.
As well as the avoidable time and cost involved in this, there is an inevitable risk of human error leading to mistakes that simply have to be rectified later on.
Utilising a cloud-based EDI platform can eliminate far more human errors
John Thompson, AG Barr’s Integrated Systems Manager, compared the error rates in documentation between partners using EDI and those who were not.
“I found there were far more human errors where the customer was relying on sending us PDFs and email attachments,” says John. “Rectifying errors typically entails issuing credit notes for returns and fulfilling mistaken orders. We confirmed that the proportion of credit notes issued to those not using EDI was much higher than for the rest of our customer base. To rectify a mistaken order, you have to take into account the lorry journeys there and back and the time involved in double-picking. It obviously adds cost.”
John encouraged AG Barr to implement paper-to-digital capture technology through a cloud-based EDI platform with no VAN costs attached. Now, everything is translated cost-effectively into EDI format and accessed through ODBC or ‘open database connectivity’, something AG Barr is used to in its production processes.
All the data processing involved has been automated and streamlined, enabling administrative resource to be reallocated to more valuable tasks.
In the months following implementation, savings of more than £200,000 were achieved in avoiding the need for credit notes, and there have been further benefits too.
“Being able to put orders automatically into the system is a big timesaver for all aspects of operational correspondence,” says John. “The platform has made life easier for our customer service team. It really has made a positive difference. We are seeing ROI by having people focused on more value-added activity. Customer ratings and feedback also show we have improved customer satisfaction levels.”
John’s colleague Julie Kelly, Business Process Analyst, says the benefits over manual processes are clear.
“You can be facing daily orders running to 80 or 90 lines from some customers. It can be difficult to keep on top of that with a manual system. You need to know the specific SKU you are ordering each time, otherwise there is potential for mistakes. The EDI system splits it all into data loads which is infinitely better than manual keying.”
Choosing the right EDI provider
Paul Simpson at Transalis agrees, adding:
“Technology is allowing everyone to do more with EDI – it’s time to move on from legacy systems and ensure EDI stays easy to manage even when trading volumes increase and you are managing multichannel supply chains and logistics operations.”
Reiterating his advice to avoid VAN costs, Paul says: “You should ask your EDI provider to confirm exactly what you are paying for. If it involves a VAN, it means you are paying a data charge per transaction to cover transmission or middleware costs. In other words, a charge for every individual message or document transmitted across your trading network or passed as traffic across your website. It is far better to move to a fixed-fee managed service, so you know where you stand on cost certainty at all times.
You should demand a clear pricing model reflecting exactly the level of help you need and with no hidden extras or upfront fees. Resetting the way trading relationships work following
Covid will not be easy but, when it comes to the technology for achieving cost-efficient document processes, help is available right now. The landscape of EDI has been transformed through greater digitisation.”
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Is your supply chain agile enough to cope with the unexpected?
If you want to find out if EDI is right for your company our team of experts is on hand to talk you through the various options. You can reach us on 0845 123 3476 or +44 1978 369 343 (for international callers), or email sales@transalis.com.
