RETAILERS PUSH MANUFACTURER SUPPLIERS TOWARD EDI
BUT MANUFACTURERS MUST RE-KEY DATA FOR INTERNAL USE
Byline: MAUREEN CONDON
BOSTON — EDI software providers contend it is only a matter of time before retailers will refuse to do business with manufacturers who do not use EDI (Electronic Data Interchange) systems for taking orders and sending retailers invoices and Advanced Ship Notices (ASNs).
“J.C. Penney Co. and other major retailers are looking to place orders and log in boxes at the loading dock electronically,” explained Pablo Nieto, president of New York-based software provider Garpac Corp. “They want to just scan in the bar code on the merchandise and get it down to the store location and department level ready to sell.”
“EDI is a big push right now for the apparel industry because the major retailers have all made a decision to be paperless and take advantage of the technology that’s been available,” added Gary Gaffney, national sales representative, Infor-mation Associates Inc., an EDI software provider in Portland, Ore.
“More than 50% of the industry is doing some EDI — if we are talking about retailers above the mom & pop level,” Nieto said. “If you are doing business with any of the major stores, you have to have EDI. And with consolidations, you don’t have many choices,” he added.
The Dillard’s, Sears, Wal-Marts and major distributors are using EDI, Gaffney agreed.
Alan Diamond, president of Apparel Data Systems, New York, said, “We have customers that have decided that, as opposed to looking at EDI and bar coding as an onerous task that retailers are imposing, they are embracing EDI. And our customers that have been giving retailers what they want are increasing their business with the retailers. If a retailer can get the same jeans from 10 different suppliers, and you are giving them what they want in terms of EDI and bar coding, then they are going to buy from you,” Diamond said.
“Instead of manufacturers saying this is what we are producing, the retail industry is now dictating what the manufacturers will do and the consumer is dictating to the retailers what they want. It’s a big change,” said Gaffney.
“The biggest thing EDI does for manufacturers in a volume envi-ronment is increase cash flow and customer efficiency by providing shipments more timely and more accurately because your pricing and data entry will be stronger,” Gaffney said.
“The manufacturers don’t want to waste time filling out purchase orders by hand. This is what technology is all about, making it simple, less costly and speeding up the process,” Jay Hakami, vice-president, products and services, of Computer Generated Solutions, in New York, said.
“EDI is the way commerce is going to occur and eventually it will lower cost and get quicker response. You are not piling up paper, and it is less expensive than doing transactions manually. It gives retailers utility to order more, and allows the manufacturer to have less cost,” Nieto said.
Two of the biggest challenges, however, facing apparel manu-facturers in implementing EDI are customizing the EDI interface for every retail trading partner and then integrating the entire EDI function with the rest of the manufacturer’s business systems.
“Some of our manufacturing customers have 30 to 50 retailers that they do business with, and they are doing EDI and bar coding that are customized for each retailer,” Diamond said.
“Right now, J.C. Penney, Kmart and others do EDI differently. There are different data streams and methods. Hopefully sooner, rather than later, there will be standards. Everyone is trying to go to the VICS standards, but it’s far from being there yet,” Hakami said.
“EDI, from its infancy, has been difficult to implement because there are no standards,” Marty Osborn, vice-president of sales for Byte Systems, said.
Nieto added, “The reality was there never was a good agreement on what standards EDI should take, so the large stores developed their own systems and required vendors to comply.”
“What we are now doing is getting into using EDI mappers,” Osborn said. He explained that mappers allow manufacturers to import data from individual retailers whose formats may all be different and convert that data into a single format that can be readily used within the manufacturer’s business systems.
Osborn predicts that the use of mappers, which were first introduced to the market a year ago, will cut in half the EDI cost of adding individual trading partners for the manufacturers.
“EDI by itself is no answer,” Osborn said. “It only benefits the manufacturer when you can integrate it with the rest of the manufacturer’s business systems.”
Diamond said, “A lot of manu-facturers are taking the Band-Aid approach — using PCs and doing their own labels, but they don’t have the software to integrate EDI into their business systems.”
So, the data has to be re-keyed for inventory control, accounts payable, warehousing, sales administration, etc.
Diamond said, “If you’re a small manufacturer doing $1 million or $2 million in business, it is expensive to do business on EDI. So you get off-the-shelf EDI software and you don’t integrate it with your regular business systems.”
“Every company has to make a cost-benefit analysis,” Gaffney explained. “You’d be surprised at the number of companies in the industry doing EDI with large retailers, but not integrating it with their own internal management systems and so having to re-key the data internally,” Gaffney said.
“The expectation that the manufacturing customer has of EDI does not match reality. Part of what makes the process fast is having the EDI be integrated with your order-management system,” Nieto explained. The software manufacturers agree most apparel manufacturers are surprised by the cost and complexities of implementing EDI.
“In the EDI business, it difficult to gain good customer satisfaction. You become a lightning rod for problems you have no control over. When the manufacturer is being yelled at by the retailer, the manufacturer turns around and yells at us, and we tell the manufacturer that it was the retailer that changed his system that is causing the difficulty,” Nieto said, noting, “Retailers are constantly playing with their EDIs.
“You are constantly having to educate. There’s a belief that EDI is simple and when you present it in its complexities, there is a reluctance to accept it. The upfront cost to the manufacturer is what is difficult too, and it also costs for updates.”
“One of the biggest complaints of the manufacturers’ side about EDI is that retailers are not paying any faster, and in fact are sometimes paying slower,” Nieto added.
“Software providers get put in a bind. If we present EDI with all its warts, we’d never sell it,” Nieto said.
Despite the complexities of implementing EDI, all of the EDI software companies say they are growing.
“Even though the economy is lackluster, our business has grown over the last couple of years. We’ve experienced 100 percent growth,” Diamond said.
“There’s a nice market there for software companies to get in and integrate EDI with manufacturers’ internal management systems,” Gaffney said. “As we approach the year 2000, everybody will be using EDI because of the benefits. I think the price will come down on it, just as computers came down.”
“I think EDI will continue to grow. EDI is the way of the future because companies will communicate globally,” Hakami said.