How to Meet EDI Compliance with Cloud ERP

Transcription

1 How to Meet EDI Compliance with Cloud ERP Lincoln: This is Trek Talk, the Cloud ERP podcast and today s topic is Advantages of an EDI Compliant Cloud ERP. With cloud ERP you can meet your goals for EDI compliance with your trading partners, this opens up important doors to increasing your sales and growing your business. We re going to be describing some solutions and providing some industry examples. Joel: I m Joel Stangeland, CEO of Trek Global. Lincoln: And I m Lincoln Wilcox representing Trek Cloud ERP for Distribution. Joel: Our team has been implementing ERP systems for nearly 20 years and we want to share some of the lessons we ve learned during that time. Lincoln, what is EDI and what does it do for a company? Lincoln: EDI stands for electronic data interchange and it s basically a communication protocol that allows systems to talk with each other. It s actually a 90s technology that was developed a long time ago, but it works and it s widely adopted. What it does is it allows communication between your organization and your suppliers and distributors. Implementing EDI allows you to gain simplified access to retailers and manufacturers and suppliers even third party logistics companies. Let s say you are dropping shipping or a logistics company is doing fulfillment for you, you can use EDI to communicate with them. Doing this automatically and in an electronic way allows you to reduce data entry errors, cut support costs, administration costs and it going to not only reduce those errors, but through streamlining the transaction processing you re going to gain efficiencies. Joel: Now, interesting Lincoln, you made reference to 90s technology, it s interesting I ve actually heard IT departments in billion dollar companies say, Yeah, EDI is old we don t need it. Why would in this day and age a company decide that they are now going to implement EDI? Lincoln: You re asking why would a company decide in to implement 90s technology (laughs), I don t think it s normally because they want to do it but just because it s fun; the bottomline is some partners require it. If you want to play in the big leagues and you want to start doing business with companies like Amazon and QVC you have to communicate your orders to them via EDI. They have certain communication protocols and think about it, if you re Amazon you re dealing with distributors all over the globe, businesses of all different shapes and sizes. If you had those people all sending you

2 invoices and order on their own paper not in a standardized format it would be an absolute nightmare; it would not be manageable, it would not be scalable. From their perspective, they have to give you a protocol and you have to follow their method in order to communicate with them and as a result you do business on a larger scale and because it s automated you can leverage that and really ]grow a lot more rapidly than you could otherwise if you were doing it manually. The scenario that we see often is you re a growing distribution company, you don t have EDI yet, you ve heard about it, maybe, and you don t really understand why you need it, but you re starting to get to that point where you want to do business with the big boys, you want to play in the big leagues and you know that participating in that game is going to help your business growth. You ve probably already thought about your internal processes and automated a lot of those and you re thinking, Alright, how can I increase efficiencies and how can I boost productivity, how can I decrease operational overhead? The next step there in that progression is to automate the entire process through trading partner integration, through EDI. You need your respective systems to communicate with each other. Most of the time this is not something that people just think, Oh, I want to go out and do EDI it s that their business requires it to grow. Joel: Yes, I think that s a very fair characterization of the situation. EDI is a real pain point to implementing organizations they for whatever reasons they struggle with stepping up to that implementation. I ve seen billion dollar a year companies that are struggling with being able to implement EDI and that s what brings it as a topic for our conversation today is that companies really need it and I think one of the things you mentioned is some partners actually require it and you explained a little bit why. Can you give us some examples, maybe, of partners that require EDI integration? Lincoln: I think I mentioned Amazon already, a couple of others are REI and QVC and even some department chains like Nordstrom and Dillard. Big companies who do business with a lot of different distributors, they have to have a standard process or it just doesn t scale. Joel: Yes, it makes sense then this is a real growth point for a lot of companies and maybe they ve done really well selling through their own website, maybe even local boutiques or local outlets, but now they ve established themselves, they have a contract opportunity to go on QVC and pitch this to the world or through a huge distribution format like a giant department store; they want to do that. They ve got say, Hey, if we want to grow our business to the next level, we re going to take this opportunity and that opportunity means they ve got to implement EDI. I think that s an excellent example and a very compelling reason why companies need to be stepping up to this issue. Can you talk to us about a real world example that somebody we ve worked with that s dealt with this situation? How to Meet EDI Compliance with Cloud ERP 2

3 Lincoln: Absolutely. I m thinking about one online retailer in particular and to give you an idea of their business they sell products online through their website through a number of different distributors and they had this kind of scenario come up where they got to a point where they wanted to start doing business with a company like QVC. At that point they had to make a decision, they had to think about how much it costs to implement EDI, is this something that s going to really expensive and not make sense financially for my business and you have to weight those options. In this case before they implemented EDI and started working with the bigger retailers, they actually did a lot of business to business shipping and this comes back to the difference between doing business with strictly other businesses or doing business with consumers. When they started working with a big company like QVC, they went from shipping a pallet of products at a time to now having to fulfill thousands of orders to individuals. Because when their products were sold through this channel, they were being drop shipped from their warehouse, so now instead of putting a bunch of products on a pallet, they had to ship out individual products to individuals. Taking that next step really highlighted the fact that they needed an automated way to get the orders into their system, to pick them, ship them, invoice the customer, and send out the shipping information to the end user. When you start hitting that scale and you start shipping out thousands of orders a day, there s no way you could do that manually, we have to make the decision between do I hire a whole bunch more people to work their knuckles off or do I implement EDI. Joel: There s something interesting that you said in there because at first glimpse you might think, If I m going to start working with QVC that s actually a B to B situation where it should get easier for me because I m working with one large customer. But I think you touched there in your discussion on the issue which is that if you work with QVC and they put you on TV and everybody calls in to their call center and places 10s of thousands of orders, QVC takes all those 10s of thousands of individual orders and drops them in your lap and says You ve got to take all of these items and send them out to all of these people and we re not going to touch it. Lincoln: And, Oh, by the way, you have to ship them within a certain period of time and if you don t we re going to stop doing business with you. Joel: Exactly, and yet you re going to take all of those orders and ship them to all the right places with the right correct specific QVC labeling that they require you to use, but you re going to pay the invoice for that to QVC in one payment. There s complexity there that really quickly amps out of your control unless you have an automated way to handle it and that s the role that EDI plays and that s why these big distributors require you to communicate that way. It s really the only way to rein in all that data and keep control of it. Now, Lincoln, do you have to have an ERP that can handle EDI natively or are there work arounds that you can use? How to Meet EDI Compliance with Cloud ERP 3

4 Lincoln: I thinking back to the online retailer example that I was talking about earlier, they already had an ERP in place and so when you re looking into EDI you do have a few different options. You can purchase an EDI functionality software from a vendor who can do all the EDI integrations to convert your sales orders and your invoices and all that to the right appropriate EDI format, help you transmit that to your retailers and your distributors. There are companies that can help you do that, the challenge is that EDI touches so many different parts of your business. We re talking about getting orders from consumers, we re talking about shipping them, packing them, sending out shipping information to the end users, invoicing QVC or whoever. These are all different touch points that are very deep into your ERP system, so if you go out and buy and EDI functionality from a third party you have to have that integrated with your ERP. It has to be integrated. You get an order in from QVC that has to automatically flow into your ERP and through your warehouse so somebody can pick it, pack it, and ship it out. That has to be integrated. If you don t have an integrated then there s no reason to have EDI, you re still doing manual labor, you re still doing manual work so it has to be integrated. Joel: So do I understand that you have two options; first of all, you can implement a third party manager for this and in that case you re probably building some kind of an integration with your legacy ERP or your legacy inventory management system so you re building this big add-on that s going to work between your system and the third party manager s system in order to keep this going. That sounds like it is not moving you in a forward direction, but just adding a room onto the house and probably ultimately in our experience I think becomes more expensive over the long run. The second thing I think I heard you say is that you can deal with this by adding staff and I think that may be the situation there is companies like QVC and Nordstrom they actually will provide you a portal so you don t have to communicate with them directly via EDI, but you can enter into their portal the information, you can download from their portal the information and re-key it into your system, but the situation you have there is you introduce a lot of extra labor, you ll probably hire more people to do it and you also introduce errors. So, this is a very expensive work arounds I think in both of these cases, whereas if you re dealing with a system that has a fully integrated EDI then you can bypass these other issues and really be actually moving your organization forward, streamlining your operations, making yourself very efficient in the movement of large quantities of goods. Lincoln: Yes, you know, the bottomline here is that we re advocating for organizations to use an ERP that has native integrated fully baked EDI functionality and capabilities out of the box. You need something that is built with EDI and ERP together, you really do. Otherwise like Joel was talking about having to build integration and we all know that the other word for custom integration is lots of cash. How to Meet EDI Compliance with Cloud ERP 4

5 Joel: Very fair. Would you say that this is a fair summary? Some advantages of an EDI compliant cloud ERP are that EDI allows your ERP to automatically exchange information with your business partner s systems and it eliminates manual re-entry and reduces human error? Lincoln: Absolutely, I mean that s really the gist of it. In addition, you also have to take into account the data is more timely and accurate. As soon as that order is placed on line or over the phone it s in your warehouse. Its accurate and it s fast, so like you said it reduces the chance of errors especially with no re-entry. So, less opportunity to fat finger the file or fat finger the order. You re also going to obviously lower the labor costs because you have fewer manual processes, and you re going to get faster delivery because that electronic data is transferred directly into the system, you don t have to wait for paper order to be reviewed or entered and your response time goes up dramatically, really. When you think in terms of big retailers like QVC they absolutely expect and sometimes require you to be fast and accurate. You have to be on point if you want to do business these days. Joel: Anybody who has dealt with them knows those service level agreements are accompanied with stiff fines. So, if you send them the wrong data, you get hit with a fine, if you miss the service level agreement on delivery to a customer you get hit with a fine and those can really stack up quickly. Not only is it important for maintaining that relationship with that very large customer, but it also is going to contribute to happiness on the side of the customer if you re moving these things through quickly. Lincoln: Right, so grow your business, leverage EDI to automate these processes; you have happier customers, you can accept way more orders, can sell more product; everything is great. Joel: So, it s clear that even though it sounds like an old technology EDI can be really valuable to company growth. Lincoln: Yes, absolutely and in some cases it is necessary. Joel: Let me tell you a story about one company we worked with and we were working with them when they were maybe only about a 200 million dollar company all the way up through about 750 million. It was an interesting situation that they faced because in the course of that growth they wanted to implement EDI. Obviously, they realized that it was an important way for them to grow out their channels, give them more exposure, give them more efficient opportunity to sell out through some popular channels and so rather than selecting an EDI solution that was part of their ERP system, they opted out to a third party implementer and they spent about 19 months implementing EDI without going live at the end of it. I think it s just an illustration that even in this modern day and age the How to Meet EDI Compliance with Cloud ERP 5

6 implementation of EDI can be really challenging. You are miles ahead of the game if you have the opportunity to select an ERP system that can on board handle that EDI for you. Lincoln: So today we talked about advantage of an EDI compliant cloud ERP. We talked about the advantages of and the necessity to have EDI fully integrated with your ERP system and of course, the benefits of taking that step. If you d like to learn more about how we do it here at Trek Global or if you would like to listen to any of our other podcasts, please check out trekglobal.com/podcasts or you can always contact us directly; send an to info@trek global.com. Joel: I m Joel Stangeland, CEO of Trek Global Lincoln: And I m Lincoln Wilcox representing Trek Cloud ERP for Distribution. Joel: Thanks for checking us out. Lincoln: Thank you. How to Meet EDI Compliance with Cloud ERP 6