The Forgotten message that costs industry Millions… Or is it Billions!

The Forgotten message that costs industry Millions… Or is it Billions!

Back in the 80’s, a number of major Retailers got together in the UK with the Article Number Association (ANA), as it was then. The ANA had recognised the need for a common platform for exchanging business documents electronically; they already had standards in place (TRADACOMS) for document exchange, normally done by tape in those days, and came up with a Tender Document for an Electronic Data Interchange (EDI) solution for Industry. This was based on what had successfully been implemented in Japan for the automotive industry to enable ‘Just In Time’ (JIT) methodology, and was very soon to be called ‘Quick Response’ for the retail industry. With the best available solution proposed, ICL, as it was in those days, won the bid for the business; and eventually the service, known as TRADANET, was born. Although TRADANET is synonymous with TRADACOMS, eventually other standards were catered for to allow for international and other trade sector requirements. Today there are many alternatives to TRADANET to exchange business documents electronically that provide the same result at lower costs.

Industry leaders such as Tesco in the Food industry, B&Q in DIY, M&S and Littlewoods in Clothing and others, led the charge, as the potential benefits were seen as enormous. It was clear that electronic trading had many benefits, such as hard cost savings by eradicating the need to re-key Invoices and enabling Orders to be placed, but for lower amounts, more frequently, leading to a massive reduction in the costs of stock holding, as safety stock could be minimised.

On top of that, by having a speedy Order Response methodology now in place, alternative Suppliers could be contacted in cases whereby the original Supplier could not fulfil an order completely; the hidden result being better customer service (as in the consumer!).  It is hard to put an actual value on this but it is high for all sorts of reasons. There were many other areas of benefit too, as invoices could easily be matched line by line, thus creating better trading relationships between Retailers and their Suppliers, with more time available to discuss positive business matters rather than large value invoice disputes (these were replaced by small invoice issues in many cases).

To make this happen the “majors” typically organised seminars where the suppliers were invited (instructed) to attend (one Commercial and one technical), whereby a director of the Retailer (Buying Director typically) would open the session by stating that….. “a strategic decision had been made by XYZ Retailer to adopt EDI IN ORDER TO PUSH COSTS OUT OF THE SUPPLY CHAIN”, and typically this message was given with an accompanying statement that it was to be a condition of trade, such was its importance!

To start the process, the invited Suppliers would need to adopt EDI, and the way it would happen would be explained for the benefit of the technicians that joined their commercial colleagues for the session. This was intended to be Phase One, because Phase Two (The forgotten message) was that the suppliers in turn had to do EDI with their own Supplier community and push them to do so, so that EDI goes right back to the raw material suppliers, like British Steel. Otherwise costs would only be pushed BACK and NOT OUT of the Supply Chain!

To date, this has hardly happened, with few exceptions like Black and Decker who quickly embraced the technology with their own Supply community. Retailers today still continue to do EDI with their Suppliers, but I am not aware of ANY that have been told by the Retailer in the last 20 years to get their own Suppliers on too! How on earth can a Supplier to a Retailer provide the highest possible level of service to the Retailer, if its own Suppliers are operating manually, with the inherent errors that occur? How can costs be pushed out when millions of Invoices are being keyed in Manually across the UK? How can the Retailers be so complacent too by ignoring this deficit in their Supply Chain?

A client of ours, who is a well-known Supplier to the Retail industry, recently confirmed that they had never been asked/pushed by any of the food retailers to do EDI with their own Suppliers, but are now looking to take it on board as he states “it’s really a no brainer!”. Another interesting and powerful quote, made by an ex Director of a well-known UK stationers who was a speaker at an EDI service launch in Brussels was “If you think EDI is just for the technical department to pick up and drive, you are making a big mistake…think again!”

If this article has rung alarm/opportunity bells with you, please contact me on tony.engleman@advancefirst.com. For interested parties, we can arrange an outline survey and cost benefit indication, or visit, at no charge, to discuss matters more fully.  If you are already doing EDI with your customers, that’s fine as this a separate process that goes the other way. We can facilitate this for you, independent of your current EDI system, and make you 100% EDI enabled with the suppliers through our simple Web solution, customised for you, as a first stage for them; although, clearly, their being Integrated will give you (and them) the most benefits. Our solutions are based on providing you with your own portal that your Suppliers will use.

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