Electronic data interchange is set to play a substantially expanded role in the industry's quest to automate data flow and cut costs.
To date, most wholesalers, manufacturers and retailers have used EDI primarily for transmitting purchase orders or sending and receiving invoices.
But that should all be starting to change. The next step in company-to-company communications will be the exchange of a much wider range of information, such as advanced shipping notices, promotional programs, price changes and other key variables.
The vehicle for transmitting much of this information between the separate links in the distribution pipeline will be UCS II, the expanded version of the Uniform Communication Standard. UCS II has been involved in test programs for some time but is now expected to be rolled out and used on a much broader basis.
The importance of EDI in general, and
UCS II in particular, in the industry's drive to enhance efficiency was cited by numerous executives interviewed by SN.
Fleming Cos., for one, is seeking to use EDI for a wider range of applications in the future, said Rick Rowan, manager of EDI communications for the Oklahoma City-based wholesaler.
Expanding the use of EDI and UCS II in the areas of invoicing, price changes, promotional announcements and item maintenance, and making existing communications more timely and accurate, is a strategic priority for Fleming in the year ahead, Rowan said.
"Focusing on those UCS II transactions will help synchronize and align our data bases to the point where, when a purchase order is created, [communicating partners will] have the same expectation about the number of pounds to be delivered, the price and what promotions will be applied," he said. Fleming is now using EDI for purchase orders at 31 of its 34 distribution centers, and for receiving invoices from suppliers at 21 locations. At these distribution centers, about 80% of dollar purchases in grocery, frozen foods and dairy are through EDI purchase order, and about 60% of the dollar total of invoices arrive over EDI, Rowan said.
Fleming's UCS II transactions, on the other hand, are in place for price changes at seven distribution centers, and for promotional announcements at five. An item-maintenance pilot should be completed this year, he added.
The 100% mark, though, for full implementation of EDI and the integration of UCS II systems is still far off. One key reason is that many smaller manufacturers and brokers will not be EDI-ready anytime soon, he said.
But the industry excitement about the enormous benefits envisioned under the broad ECR umbrella also has stolen some attention away from important programs such as implementing UCS II.
"Unfortunately, ECR has stolen part of the spotlight that a few years ago was shining on UCS II," Rowan says. "Manufacturers, and to some degree, wholesalers and retailers devoted their energies and resources to other EDI facets and slowed down the move to develop UCS II."
Save Mart Supermarkets, for its part, is focusing on applying EDI technology in particular to enhance its direct-store-delivery program. "DSD is really where our push has been. DSD items account for 28% of our business. A lot of major brands are involved -- and a lot of promotional activity," said Ed Martin, director of information systems for the Modesto, Calif.-based chain.
For Save Mart, UCS II is a major key. "We're interested in UCS II to help us manage data in the future," Martin says. He hopes to implement UCS II transaction sets this year.
Save Mart's current DSD system, using handheld computers and direct exchange/UCS, tracks deliveries only. For price changes and deals, DSD suppliers notify Save Mart headquarters, where the retailer's staff keys in the information. Then, stores must be notified to change shelf prices to reflect the new cost. But keypunchers sometimes make mistakes, which are extremely time consuming to find and correct, Martin said. "The quality of information is so critical -- getting it right the first time."
In addition, deal notifications sometimes come "at the last minute" or in the form of "photocopied pages [of price lists] and other scraps of paper. There's not a lot of consistency," he said. Goods may arrive at stores before the lowered cost is reflected in the shelf price. "We miss the advantage of the sale price, and by the time it's reflected, the price has gone back up," Martin said.
But if vendors transmit the deals and price changes, the responsibility shifts. "We want to make vendors responsible for having the correct cost" in our system, he said.
Martin estimates Save Mart could save hundreds of hours a week by eliminating keypunching -- 24 to 32 hours a week at headquarters and another four hours at each of the company's 94 stores. At store level alone, that's nearly 400 hours a week. In addition, buyers would save time. Today, buyers and vendors map out deals from scratch. Martin says if deals were registered into the retailer's system prior to the buyer meeting, the buyer could simply agree to the terms and print out a contract on the spot. Any changes in cost, terms or off-invoice could be entered as needed and reflected without confusion or dispute. What Save Mart hopes to accomplish with UCS II is part of what the industry hopes to accomplish with ECR. "That's the ECR environment -- sharing data efficiently and reducing costs down the line," he said. At 19-store G&R Felpausch Co., Hastings, Mich., most computer communication is from headquarters to stores and back, or involves direct deposit of accounts-payable payments and employee paychecks. But Mike Hubert, Felpausch's management information systems director, said he is anxious to launch his company into the world of company-to-company EDI. Felpausch is testing DEX/UCS transmissions with Frito-Lay at one store, and is pursuing ECR through its wholesaler, Spartan Stores, Grand Rapids, Mich. Like other independents, Hubert expects the wholesaler to act as agent for the retailer. "I don't want to get involved in protocols and that type of thing. I am a nontechnical user. But ECR is where we're headed."
"We see the day when all DSD communication will pass through Spartan. We are also exploring other things, including labor scheduling and scale management. It all comes back to ECR and how to make all the information flow." For its part, Spartan hopes to gather and analyze retailer scan data to work toward category management and computer-assisted ordering, said Bill May Jr., Spartan's MIS vice president.
"We want to build an efficient order with the right product at the right time, and let the consumer tell us what products to order and when to order them, rather than the vendor forcing products through the system," May said.
Spartan's model stores will do prototype testing as capabilities are developed. Currently, the wholesaler communicates "a good majority" of nonperishables purchase orders through EDI. Invoices should be implemented in the foreseeable future, he said. May also is looking forward to the use of EDI for advance-ship notices, which will help with labor scheduling, cross-docking and scheduling receiving doors for incoming trucks. Spartan, he said, is now analyzing potential savings, benefits and return on investment. As each EDI piece is implemented, return on investment will be measured to ensure that Spartan and its 323 members, representing 500 stores, are getting an appropriate return. Will the effort be worthwhile? "Absolutely. The efficiencies, wringing excess costs and paperwork out of the system [will make it worthwhile], and we will pass the savings to our retail customers. Ultimately, the beneficiary will be the consumer at store level," May said.
John Dickson, chairman and chief executive officer of Roundy's, Pewaukee, Wis., and co-chairman of the joint industry ECR task force for wholesalers and independents, though, stressed that EDI remains a particularly complex project for many of those types of companies.
"We've got to interface with a lot of various front-end systems, and the independent retailer may change those systems," Dickson said. Yet independents must stay technically abreast to compete with chains and other classes of trade, and wholesalers must help them do that, he stressed. Roundy's retailer customers "are enthusiastic about EDI," and sometimes even more willing to share data with EDI partners than their chain counterparts are, he said.
"After all, most innovation comes from independents. I think they are more willing to share data, and there's no question that stores -- whether chains or independents -- the depots that supply them and manufacturers must work in unison" to achieve the benefits of EDI, Dickson said.
In a test under way between Roundy's and one independent, retailer front-end data is transmitted to Roundy's for automatic reordering based on movement. In addition, Dickson says, "we are looking forward to getting into more tests with [joint industry ECR task force] members. We'll be having wholesalers and, in some cases, independent retailers setting up test programs with manufacturers."
