Introduction
Today, most, if not all, larger wholesalers, particularly those in the food and food-related industries, have adopted Electronic Data Interchange (EDI) as the de facto method of trading with their Suppliers.
This has brought enormous differential advantages over their medium-sized counterparts who were either not aware of the importance of EDI or for whatever reasons simply chose to ignore the essential role it plays in managing external business relationships. Those who ventured into the technology did so on a limited basis, predominantly with a few Customers who shouted the loudest to invest in EDI as a term of business.
With everything that has been said or is generally known about the numerous benefits of EDI, it’s a wonder why medium and smaller-sized wholesalers persist in ignoring the obvious importance and advantages of having closer integrated links with their supply chain partners. This in effect has allowed the major players to monopolise the industry by increasing their dominance and buying power.
Whilst by no means an exhaustive list, the main reasons for this dominance are:
- Their business operations are more efficient and more profitable by reducing costs and risks.
- They operate with reduced stock holdings by adopting more efficient Just-In-Time procurement processes.
- They gain significant efficiencies and accuracy by automating manual process and removing human intervention.
- They remove re-keying of data which increases accuracy and eliminates errors which can lead to order failure and, consequently, the cost of funding reverse logistics when things do go wrong.
- They are better able to provide the highest possible service to Customers, meet stringent SLA (Service Level Agreements) and DIFOT/OTIF performance expectations (On-Time In Full). This is an extremely important measurement of delivery performance within a supply chain and something customers track and keep a keen eye on. It is usually expressed as a percentage and measures whether the supply chain was able to deliver the expected product in the quantity ordered by the customer at the right place and time expected by the customer.
If the above concerns or resonates with you, I urge you to read on!
The Early Days of EDI
Arguably, the Japanese motor manufacturers were the early pioneers of real Electronic Data Interchange (EDI) for Just In Time (JIT) enablement with component suppliers. It was first developed and perfected in the early 1970’s by Taiichi Ohno of the Toyota manufacturing corporation as a means of meeting consumer demands with minimum delays. Due to its success and contribution to process efficiency, it quickly became a widespread management philosophy adopted by other Japanese manufacturing organisations.
UK Retailers and FMCG Adoption
The results of this “electronic trading revolution” were plain to see although it took a while longer for it to become mainstream in the UK when the large food retailers also embraced it by making it a mandatory term of business between themselves and their supply chain partners. The DIY and clothing retail industries quickly followed suit and has, to a certain extent, become the de facto method by which supply chain partners communicate and exchange business transactional data.
The main Suppliers soon realised the benefits to be gained from having close integrated links with their customers and they became as enthusiastic as the Retailers to engage in it. EDI had revolutionised their businesses by streamlining processes, delivering real, tangible benefits and fostered closer relationships with their customers. Prior to that, they managed their businesses as best they could with all the inefficiencies EDI was devised to eradicate; typically, reliance on manual processes and human touch points, poor customer service, increased costs, errors and risk.
So enough of the history lesson. What of the situation today for Wholesalers!
Wholesalers
Thirty five years on since its widespread adoption, EDI has become the de facto way organisations conduct trade across the supply chain. Whilst it could be argued the take on has been relatively slow, particularly downstream from the Suppliers back to their own, second tier Suppliers, many of the major Wholesalers have embraced it wholeheartedly with their own Suppliers. Whilst the initial catalyst came from the Food retailers, EDI is now entrenched in all industry sectors from consumer goods and manufacturing to the logistics industry or, indeed, for any organisation engaged in the supply chain, and the need to do so has never been more critical as more and more trade moves online and marketplaces have become truly global.
The benefits to be gained from EDI (as noted above) are exactly the same for any company operating in the global supply chain. So again, it remains a mystery why all wholesalers have not embraced it wholeheartedly in the same way as the Retailers did.
In the early days, wholesalers had a much easier job to convince their Suppliers to use EDI, as many of them were already doing it as a result of the Retailers making it a term of business and were more than happy to exploit it further to maximise initial investment. Naturally, smaller Suppliers had to be pushed a bit harder by the Retailers who incentivised them to bring them into line. Some resisted on the basis their volume of business did not justify the cost of investment. Apart from the tangible and intangible benefits all suppliers gain from investing in EDI, regardless of size, the smaller ones derived an extra advantage in becoming a business that were “easy to do business with” and in fact found that without it, they could risk being delisted as a supplier or losing hitherto long standing customers!
As the more tactical low-cost options for engaging in EDI became more available, the arguments against doing it became less justifiable. It is truly baffling why there are still companies today who do not put EDI at the top of their agenda, who still resist it or fail to realise how critical it has become to remaining competitive in the global marketplace.
The same applies for any remaining wholesalers who haven’t yet taken the leap of faith. They cannot possibly be as profitable or as competitive as they could be and may well fall a long way behind their competitors who have had more foresight, particularly in these uncertain times. For the reasons mentioned above, adopting EDI today is less costly and less complex than the early days. This is particularly true with a managed service partner in place like AdvanceFirst who have over 350 man-years of practical experience in building EDI networks for companies, large and small, across multiple market sectors. Given most suppliers are now connected by one means or another, EDI deployments are relatively easy to get off the ground – that is with the right expertise and know-how it must be said.
If you are a wholesaler, you need ask yourself the question: if your competitors can run their business with less admin costs, lower stockholdings, provide better customer service and be able to provide product at a lower cost if they chose to, why would Customers choose to do business with you?
