How BizStuff Uses EDI*

BizStuff is a distributor of office supplies, their main source of revenue is selling to retailers.

BizStuff receives regular daily updates from all of its retailers, transmitted directly from the POS (Point of Sale) registers. An up-to-the-minute inventory balance for BizStuff’s retail stores and distribution warehouses is maintained. On a nightly basis, inventory consumption of each supplier’s products are transmitted directly to BizStuff’s suppliers (manufacturers).

The manufacturer reviews the inventory consumption and identifies an increase in demand in the West Coast region. Accordingly, the manufacturer adjusts its production schedules at a local plant to meet that demand. At the same time, the manufacturer electronically schedules transportation to pick up the shipments and notifies BizStuff of the expected shipping dates, quantities, and carriers.

For larger shipments, the manufacturer has agreed to ship directly to the retail outlet, rather than to BizStuff. As each shipment is loaded onto the carrier, the containers are scanned or otherwise automatically identified to verify the accuracy of the order. Advance Ship Notices (ASN 856 document) are then transmitted to BizStuff for each shipment, and an electronic invoice (820) is sent.

As BizStuff receives the advance ship notice (856), warehouse routing tickets for the material that is being shipped to BizStuff’s warehouse are prepared in advance. Some material will be identified as needed for immediate shipment, and in order to expedite movement of this material, shipping labels will already be prepared, and outbound shipments will be scheduled.

When the BizStuff receives the physical shipment, it is scanned and routed automatically. Material scheduled for shipment is cross-docked, and the rest is delivered to pre-assigned inventory locations. Inventory is automatically updated, and the receipt triggers a payment authorization, which is sent to Accounts Payable. When the authorization is matched with the electronic invoice, an automatic funds transfer is authorized to the manufacturer.

In the example above, BizStuff is both a customer and a supplier. So, on the outbound side of the process, moving material from the distribution center to the retail outlets, BizStuff can apply the same steps.

As BizStuff receives Point of Sale information, it will automatically schedule replenishment of the inventory consumed. Rather than shipping in “replenishment units” based on each store’s basic operation shelf stock quantity, BizStuff will replace exact quantities, adjusting them based on known inventory trends.

Advance Ship Notices (856 documents) will be sent to the retailers, and in the same manner that the vendors drop-shipped to the retailers, the distribution center can place orders for large customers that can be shipped directly to the customer (the retailer).

All of these steps are achievable and go a long way to defining the current environment of Electronic Commerce using EDI as an enabling technology.

This example has used a basic vendor/distributor/customer relationship. Another example from the food brokerage industry serves to highlight the changes this enabling technology has made possible, and the extent to which document trading partnerships have become true business partnerships:

A manufacturer receives a large order and their master production schedule to accommodate the large order. The production schedule updates (862 document) for key components are sent to the suppliers. The suppliers adjust their own production schedules and confirm shipping dates and quantities to support the manufacturer’s new production schedule. During the manufacturing process, product defect data is collected and transmitted to the supplier on a daily basis, allowing the supplier to keep its process within the required standards for free-to-stock certification of the material.

A customer in a retail outlet asks about an out-of-stock item. From the cash register, the clerk finds it in a store on the other side of town. Rather than ask the customer to travel to the other store, the clerk reserves the material, and schedules a delivery of the item that afternoon. Within minutes the clerk advises the customer that the item can be available at a specific time.

A customer calls a frozen food delivery service and orders eight items, to be delivered that afternoon. A delivery truck, already on it’s route can fill the order with items already on the truck. With a small hand-held unit, the driver calls up the order, and a printed invoice is generated. When the driver returns to the truck, the transaction is communicated to his office where a credit card transaction is sent.

These are just a few examples of how companies can add speed and efficiency to their businesses by entering into information partnerships with their customers and suppliers. And without it, it is difficult to imagine how they will achieve the levels of cost savings, quality, flexibility, and customer satisfaction necessary for survival today’s competitive market place.

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*BizStuff is not a real company, any resemblance to a real entity is coincidental. The above is a hypothetical example how a typical company might use electronic data interface.