BENTONVILLE, Ark. -- Wal-Mart Stores, based here, plans to shortly mandate that all of its suppliers become equipped to exchange Web-based EDI (electronic data interchange) documents with the retailer over the next year.
Wal-Mart's plans were cited by several sources, including Peter Abell, research director, retail, AMR Research, Boston. Wal-Mart did not respond to requests for comment.
Wal-Mart recently announced that it has selected software to send and receive EDI documents over the Internet.
Observers said that Wal-Mart's mandate could serve to jump-start the use of Web-based EDI, also known as EDIINT (Electronic Data Interchange-Internet Integration), considered to be a faster and less costly way for trading partners to exchange business documents between their computers than the traditional EDI approach that uses VANs (value-added networks). EDIINT is also expected to drive EDI usage by smaller suppliers who have stayed away from VAN-based EDI and have tended to rely on fax, phone or e-mail.
"Once any supplier starts communicating by EDI [to Wal-Mart], it makes all the sense in the world for them to communicate to every other retailer if possible through the same methodology to reduce costs," said Abell. "And other retailers, knowing that a manufacturer is up on EDIINT, won't want to receive a fax -- they'll want something they can incorporate into their existing business streams because it reduces their costs. So there's now a likelihood of an explosion of transactions occurring by [EDI over the Internet]." Moreover, Abell said, Wal-Mart's endorsement of EDIINT means that the retail giant has checked out the reliability and security of the process, which would encourage others to use it. Wal-Mart is calling its EDIINT program the GEM (Global Enterprise Mailbox) Project.
Wal-Mart announced earlier this month that it had selected Commerce Suite Software, from iSoft, Dallas, in order to send trading documents like purchase orders and receive documents like invoices via EDIINT. ISoft is one of several companies whose software is standardized on the AS2 (Applicability Statement 2) protocol that governs the secure transmission of documents over the Web. A list of certified vendors can be found on www.drummondgroup.com. Wal-Mart's suppliers can use any of those vendors for EDIINT with the chain.
In a statement announcing its selection of iSoft, Wal-mart said, "By implementing AS2, Wal-Mart will provide domestic and international suppliers the ability to send and receive electronic data globally without the use of value-added networks. The expense savings found in EDIINT AS2 will assist Wal-Mart and its suppliers in lowering costs while continuing to provide everyday low prices for customers." In addition, the statement said, "Substantial improvement in transmission speed and enhanced security on transmitted business data [are] expected."
Sources said that Wal-Mart already has dozens of suppliers in production on EDIINT -- many of which had participated in tests of the system -- and that the chain expects all of its tens of thousands of suppliers to follow suit. Suppliers will send EDIINT transmissions through Wal-Mart's Retail Link extranet.
To facilitate their transition, Wal-Mart has arranged with iSoft to offer an AS2 client system to suppliers that would be linked only to Wal-Mart for a $300 annual support fee, said Christian Putnam, founder and chief executive officer of iSoft. For an additional $2,000, suppliers can be linked to one other trading partner; after that "volume pricing" applies, he said. ISoft's enterprise product affording universal connectivity starts at $50,000.
Abell noted that iSoft's pricing would "put downward pricing pressure on other AS2 vendors."
Wal-Mart had previously sent EDI transmissions via bisynchronous dial-up links to VANs. EDIINT will replace that method of delivery.
