Supply chain management: more accurate information is essential

Everywhere you look, the global supply chain is a mess, and shortages of everything from fuel to food and toys are driving up prices.

Although it’s easy to point the finger at the pandemic, it deserves only partial blame. The Allied Market Research article, “Supply Chain Management Market,” reports that only 6% of companies report having full supply chain visibility, while 69% of companies do not. This 6% indicated that they believe information from their Tier 1, 2 and 3 suppliers is essential to their visibility.

Customers are increasingly asking for more information and penalizing their suppliers for not being able to provide it. Customers evaluate their suppliers and determine which are a “preferred supplier”. If the supplier cannot provide delivery information in advance, the customer may seek an alternate supplier. They will order less from non-compliant suppliers or eliminate them altogether.

Assessing your current environment to help address some of the efficiencies exhibited by COVID is the first place to start. This step can be inexpensive and provide more product information throughout the supply chain: Electronic Data Interchange (EDI). Yes, this old technology that everyone uses but, unfortunately, does not exploit its full potential. Failure to manage the backlog of your customers’ requests can result in fines and/or fees, loss of preferred supplier status, and loss of revenue.

Most of your larger customers not only require you to send their orders electronically, but also require the corresponding documents to be sent and received. This means that many, if not all, of the corresponding order documents must be implemented with all of your customers. You need to know what documents your clients need and make sure you plan to implement them all.

There are many ways to approach the onboarding process. This includes:

  • Approaching the Big Bang
  • Step-by-step approach
  • Outsource to an EDI provider

Whichever approach you decide to take to onboard your customers and/or suppliers, you need to bring together a team from all departments. Too many companies think that because EDI is a technology, IT has to drive the project. For this reason, many companies fail to implement more documents to take full advantage of EDI. Although IT plays a major role in the project, every department must be involved. Depending on the document(s) implemented, different business departments must make business decisions. For example, if you are implementing purchase order acknowledgment, how does your company handle acknowledgment? Do you recognize only what you have in stock, indicate out of stock, back orders or substitute with another product? IT cannot make these decisions; they can only code how exceptions will be handled.

Once you have formed a project team, the next important step is to survey your business partners. If you are implementing more documents with your customers, you may already have a backlog of requests from them. You will also need to find out what their testing requirements are, what their timeline is for being able to test, and whether they have hired a third party to manage their testing processes.

If you are implementing new or additional documents with your vendors, create your specifications for each of the documents you are going to implement. This will save you time during the implementation process. Your suppliers will send you your required fields and know which fields they will receive from you.

When implementing new documents with clients, the phased approach is usually the best choice. Your customers may have different testing requirements, other projects on their schedule, or other reasons that may delay the implementation of new documents. Developing a schedule based on the timelines of all your clients will help you facilitate a successful project.

If you are implementing documents with your suppliers, the phased approach or the Big Bang approach can be used. However, both have their pros and cons. The Big Bang approach means that you implement all new documents with all your suppliers at the same time. This approach requires a lot more testing to make sure everything goes well when the project “goes live”. Thorough end-to-end testing with all your vendors is recommended so there are no surprises when it runs in production for the first time. The Big Bang approach also means that all of your suppliers must be on the same schedule as your project. The phased approach allows you to transition your suppliers into production over time. This allows you to resolve all issues with fewer vendors rather than dealing with issues with all of your vendors. Plus, it gives your suppliers flexibility in when they can be ready.

You can choose to outsource the project to a third party. Many EDI managed service providers have trading partner implementation programs. They will manage the process from start to finish. They will interview your trading partners, create document specifications, establish test schedules, perform the tests and validate that the trading partner can send and receive all documents. This approach takes much of the burden off your resources and can help complete the project faster than if you did everything in-house.

Setting up an EDI project with your customers and suppliers will give you more visibility into your supply chain to plan and facilitate your business relationships.

Karen Puchalsky is the Founder and President of Innovate E Commerce.

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