Well, it's another year come and gone. In a couple of weeks most companies will close out their fiscal year end. It's been an interesting year to say the least. Uncertainty around global economies being the biggest concern. However there are signs of good things that have happened during 2011, one of those being the change in mentality for companies to take a deeper look into their processes and implement several cost saving or efficiency measures to work smarter. Below I've recapped my observations -
One of the largest changes in business is around E-commerce. Over the last couple of years, many retailers have expanded the options for ways that a consumer can purchase products, and that was through on-line or E-Commerce tools. Last year, E-commerce was mainly managed or fulfilled through a retailer's Distribution Center network. However they were limited to the product lines that were stored within the Distribution facilities. They learned that customers are looking a greater assortment of products, so with that, 2011 was the year of Direct to Consumer Deliveries. Several of the challenges of Direct Shipping were an introduction to Branding, knowing the suppliers' inventory levels, managing the increased number of products to offer, finding partners to manage the fulfillment of these smaller and numerous orders, and providing visibility/status of the orders to the consumer and/or the Customer Service departments. To support each of these here's what many of them implemented -
- To support a Branded Experience to the customer; Retailers asked their suppliers to provide a custom Packing Slip and Shipping label. This meant the supplier maintaining retailer logos, managing the varying retailer packing slip and shipping label formats which included returns policy or information.
- When retailers were shipping E-commerce orders out of their facilities they were aware of the inventory available and could manage the availability of products offered on their websites. However with shipments direct from the suppliers, they needed to have information from their partners on their Inventory Levels. To support that information, many retailers implemented the use of an 846 EDI transaction with their suppliers.
- To solve the issue of Product Assortment available to the customers, retailers again went to the suppliers for assistance. This meant asking for a more automated way to provide product information for their item masters or staged in their database for future orders/item setup. In addition to requesting new items within a data feed, they also needed additional information about those items that are specific to E-Commerce within those files. Attributes like consumer packaging dimensions, Hazardous Material information and an expansion of selling feature where now in play. All of these pieces where requested through the use of the 832 Price/Sales Catalog EDI transaction.
- One of the main things that Retailers looked at in 2011 was increased communication with their customers on the status of their orders. Retailers wanted to provide alerts to their customers on the status of the orders within the suppliers walls but also within the Carrier delivery process. With that, retailers requested that their suppliers provide the PO Acknowledgment - order status 855 EDI transaction and began receiving the 214 Shipment Status Message from the carriers (LTL and Small Package providers). Getting this information from these partners then allowed the retailers to send email alerts to their customers and also provide information on the status of a customer's order to the Retailers' Customer Service Department in preparation of receiving inquiries.
Another area of change in 2011 was around Transportation management. In the last 12 months, buying organizations have under gone a change to begin managing their freight expense through switching from prepaid to collect terms with the suppliers. This has not been an easy task, as switching terms meant re-negotiating contracts. But more importantly, adjustments to the PO prices of items that previously included freight.
Making this switch not only allowed the retailers to manage the cost of LTL and Truck Load Carrier shipments inbound, but also to take advantage of using their internal fleet for product pickup. With this switch came the need to have tools to manage when orders were available for pickup and also to manage building loads. Some partnered with 3PL's Logistic Service providers, others implemented their own TMS (Transportation Management System) or provided a portal for suppliers to interact with to provide shipment information. With this, there was a growth in the use of request for routing transactions like the 753 or 204/211 EDI Transactions and corresponding 754 and 990 transactions with the Carriers and the Retailers supplier base.
Lastly, in 2011, Cloud base trading or SaaS (Software as a Service) continued to be the "buzz" words of the year. More and more organizations were looking for automation with their trading partners. Many partnered with Service providers to assist those partners that had limited resources or capabilities to support electronic trading. For others, supporting the electronic trading themselves was becoming a burden so they've switched to providers of data exchange so they can concentrate on their core competence which is merchandising. Moving to a provider has allowed Retailers/ Grocer's to also expand on the EDI transactions that they support to position themselves to greater process improvements.
For the new year - 2012
So what does 2012 look like? I see continued general evolution of EDI and fulfillment processes. I see -
- Continued growth in E-Commerce with an evolution to expanding from DC fulfillment and Direct to Consumer shipments to In-Store pickup. Increased shipments directly to a consumer meant an increased risk of thief/loss so companies are working on managing loss prevention. I see retailers combating that risk by pushing deliveries to more being managed through In-Store pickup at the retail outlets/stores where applicable. This is being done already by many companies like Macy's, JC Penney and Wal-mart but I think that other retailers will implement this in 2012. The outcome being reduction of the risk of loss/thief but also as a way to move traffic back into the stores. In addition, I see small package carriers being asked by the E-Tailers to provide Proof of Delivery confirmations using the 214.
- I mentioned this last year and have been surprised that there was little expansion; but I'll predict that Financial transactions will be another change area. Most companies are exchanging Invoices electronically so this will continue. However I see growth with Nex/Dex partners, for those that utilize those systems with more partners in 2012. I also feel that we'll see more companies looking at automating the delivery of Remittance information. Retail, Grocery, Distributors and other buying organizations' accounting departments will start to look at ways to reduce or eliminate the need to manual payments for orders with their partners. In addition, the Suppliers will be looking at ways to automate applying these payments to their Accounts Receivable systems. Each of these will mean the addition of the 820 Remittance EDI transaction. There may be some further implementation of the movement of the funds electronically through the banking system, but I do see this being only the funds exchange and the Remittance Detail going through the traditional EDI mechanism and not through the banking data process.
- I think that in 2012 we'll see an increase in suppliers looking at more Factoring Organizations for funding their receivables. This means that automation will be a requirement for most of these organizations. Exchanging invoices and remittances electronically through the 810 or 880 and Remittance Advice through the 820 EDI transactions will be key.
- I see an expansion of Electronic trading in the International order process. This will mean new partners implementing EDI with North American Retailers will expand and thus the order process, statuses and shipment information will include 850, 860, 855 and 856 EDI Transactions. Toward the middle or end of 2012 I'd envision the automation of Commercial Invoices between a retailer's International suppliers/Factories and their Customs Clearing Partners/Brokers. This will likely mean the addition of an 810 Invoice to the International supplier to eliminate the manual entry of invoice data by these providers (Freight Forwarders etc) and quicker clearing of customs.
- Lastly in 2012, managing Pricing will become more important. In order for a retailer to be able to manage their landed cost which ultimately affects the price of their products to the consumer, I see Retailers and Grocers implementing some type of automation of price/cost updates with their partners. This will mean the implementation of either the 879/889 (Pricing/Promotion) EDI transactions for Grocery and/or the implementation of the 832 (Price/Sales Catalog) EDI transaction as a price change announcement for Retail.
Good luck as you close out 2011 and with your future Supply Chain initiatives for 2012. If you're interested in additional information about a topic please let me know.