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ADVANCING BY DEGREES

Use of electronic data interchange for advance ship notices, direct-store-delivery and electronic funds transfer is on the rise -- a sign that many grocery retailers and wholesalers are leapfrogging beyond basic transactions, such as purchase orders and invoices.Sources told SN that electronic data interchange transactions such as these are crucial to continued savings at all levels of the supply

Use of electronic data interchange for advance ship notices, direct-store-delivery and electronic funds transfer is on the rise -- a sign that many grocery retailers and wholesalers are leapfrogging beyond basic transactions, such as purchase orders and invoices.

Sources told SN that electronic data interchange transactions such as these are crucial to continued savings at all levels of the supply chain, including cutting paperwork, processing time and inventory levels in the distribution center.

A comparison of statistics from the Third Annual Technology State of the Industry Survey conducted by SN provides a glimpse into the growth occurring within EDI, particularly for advance ship notices. The number of chains using EDI for ASN increased to 23.5% in 1996, up from 14.3% in the prior year, according to the survey.

With wholesalers and independents, the growth is even more dramatic. In 1995, only 5.3% of wholesalers and independents said they were using EDI for ASN; in 1996 that figure jumped to 35.6%.

Hannaford Bros., Scarborough, Maine, is preparing to receive its first ASN via EDI from one major vendor in dry grocery.

"We're testing with our first vendor, so it's very early on [in the process]," said Bill Homa, chief information officer at Hannaford. "The ASN will simplify our receiving process. It will notify us when product is going to be arriving, so we can schedule it and match the shipment against the purchase order before its arrival. The plan is to bring up as many vendors as are able to send us this ASN information. Ideally, we'd like all of them to do it."

Hy-Vee Food Stores, West Des Moines, Iowa, has been receiving ASNs via EDI in grocery for about a year. Ron Waldbillig, assistant vice president of management information systems, said EFT via EDI has been in place longer and has more widespread use than ASNs.

Hy-Vee pays more than 50% of its invoices electronically in the grocery category, which eliminates the cost of cutting and mailing checks.

Seaway Food Town, Maumee, Ohio, has just begun a project to pay suppliers via an EDI transaction set with the goal of having its first trading partner in dry grocery on-line this month.

Dianne Northington, business systems adviser, explained that the retailer has just completed the installation of a new accounts-payable package from which it will retrieve data and route them to its EDI system. From there the information will be sent to the value-added network and to its bank to initiate the funds transfer.

She added that suppliers are encouraging its use of this EDI transaction set by offering discounts.

"We've had one of our suppliers [say] if we have certain transaction sets going on and we meet other criteria as far as volume, the vendor would give us a per-case discount," Northington said. "In one case it was 70 cents per case, which we estimated at $8,000 in savings."

Hannaford is also gearing up for electronic payments via EDI beginning late in the second quarter of this year with vendors who generate a number of invoices or separate payments that can be consolidated.

Schnuck Markets, St. Louis, is exploring electronic payments for use in the future. But for now, it is seeing benefits from EDI partnerships with 175 vendors, mostly in frozens and dry grocery, and its recent utilization of transaction sets in direct-store-delivery, said Robert Drury, vice president of management information systems.

Drury said Schnuck is working on an EDI transaction set for direct-store-delivery that addresses the problem of truck drivers who do not want to use computers at the store level when they make a delivery.

He explained Schnuck is using an EDI transaction set for network exchange, or NEX, with two local Anheuser-Busch distributors. Using NEX, a representative from the beer company, for example, goes to the store to determine the next order. The anticipated delivery information is then sent directly to the store prior to the delivery. As a result, drivers are not involved with the computer at all.

By comparison, a driver using direct exchange, or DEX, would have a handheld computer from which he would download the information right into the in-store computer when he makes the delivery.

Following this, the driver goes through a check-in process. Any discrepancies are noted and the driver plugs his computer back into the in-store computer and the store issues the driver's computer an "895 transaction," completing the process. No 895-transaction set is used with NEX, Drury said.

Drury said one motivation behind using EDI for direct-store-delivery information is to reduce costs and errors that stem from manually handling DSD invoices.

"We get in excess of 5,000 shipments from warehouse deliveries a month, so you'd expect we would have the same amount invoices a month -- but we don't," Drury said, noting Schnuck has one warehouse for frozens, general merchandise and grocery and perishables in St. Louis.

"We have over 100,000 invoices a month and the difference is the DSD invoices. That's where the real burden is. So we're trying to reduce the load on the paperwork by automating that as much as possible."

He added that Schnuck has more work to do in this area, particularly with companies who do not use DEX. NEX is the next way to go to solve the problem, Drury said.

Hy-Vee is testing with one grocery vendor a direct-store-delivery summary information EDI transaction set, which is essentially a summary of a vendors' invoices sent directly to the retailer's headquarters.

Aware of all the activity in the industry surrounding various transaction sets in EDI, other retailers plan to get involved in it as well.

Gil Russell, chief information officer at Fiesta Mart, Houston, said the retailer has earmarked funds in next year's budget, which begins in June, to pursue EDI. While he was unable to identify specific transactions the retailer would pursue, he did note the store will begin implementation in the dry-grocery area first.

At URM Stores, Spokane, Wash., a member-owned wholesaler that serves 160 stores, Berit McAllister, EDI coordinator/E3 project manager, said accounts-payable software will be updated so that it can automatically compare the invoice with the product received.

The wholesaler currently uses EDI for purchase orders on half of its volume, including grocery, frozens, deli, meat, general merchandise and health and beauty care, and it hopes to be at 80% in the next few months.