Clicks Versus Bricks: Where does Supply Chain Stand?

In 2018, we’re no strangers to the concept of buying online. Countless sources have cited that the peak season ranging from Black Friday to Christmas of 2017, was record breaking for online sales. Amazon stole the show, leaving other large competitors in the dust. In Dotcom Distribution: Retailers Rake it in, Supply Chain Dish it Out  we discuss the vast adjustments that retailers had to make in order to please their customers and keep ‘business as usual’. Except, business was not as usual. It was better. The supply chain industry, from Third Party Logistics (3PLS), Electronic Data Interchange (EDI) providers to shipping, had to prepare for what was then to come. After an exciting year end and an analysis at what worked, where does that leave us? We all contribute to the battle of clicks versus bricks. Will online shopping continue to dominate the retail industry or will physical locations keep its slice of the pie? What kind of adjustments will be made in the supply industry? In a digital age and competitive market, there are many changing factors and we’ll now explore.

With the list of retail locations that are shutting down, the pressure is on for the traditional retail location to provide value to it’s customers. However, the online market also presents it’s own set of issues and limitations that customers feel when interacting with their digital devices. Customer service can be more satisfying for some shoppers in-person. Getting a prompt resolution for your issues can be lengthier over the phone or via online ticket. As the saying goes: “It’s all fun and games until…” you have to return a substandard product and aren’t getting the quality of service you expect Online consumers living in rural or remote areas face a distinct challenge with online shopping. Often, shipping is expensive and may take an extra length of time to be delivered, if shipping is even offered to their locations.

For this reason, avenues of purchasing and receiving goods are varied. It only makes sense. People want options tailored to their best interest. Being able to order online with in-store pickup, access to full inventory on all mediums, free returns and the best price guaranteed. Not to mention: If competitors are doing it, your favourite retailer has to as well. Piece of cake, right?

“More retailers with physical stores are investing in omnichannel , whether that’s where they’re putting items in their cart and completing the transaction, or simply doing research and planning,” Polk says. “We’re seeing more and more traditional retailers investing in techniques like buy or reserve online, pick up in store. Even if a customer is in-store, they’re offering the ability to place an order for something that’s out of stock or not the right color and having it shipped directly to the customer. Retailers are trying to break down and overcome any barriers that consumers have had.” –  Jennifer Polk. Gartner, Research Director.

Aside from the functionality of purchasing and immediate possession of goods, the traditional brick and mortar location also represents a consumer experience. Now, more than ever, merchandisers can be creative with their locations and provide an immersive shopping environment that emphasizes and strengthens their brand image. Successfully done, the store now becomes a focal point for the consumers experience.  This will now be passed on to friends, family and strangers by word of mouth or possibly through a multitude of available social media platforms. Having accomplished this, CEO of the Urban Land Institute, Patrick Phillips believes retail locations will bounce back within the next decade. Retail locations and online shops will work together for the good of the retailer, serving their prospective focuses. While this conclusion proposes a win-win scenario, retailers are not yet off the hook.

Some retailer’s supply chain structures are not setup to handle these kinds of demands. Implementation on the supply chain level is another beast. To begin, distribution centres need to be multiplied to keep up with next day shipping demands or would likely assume additional shipping costs for expedited orders. Alternativelysome retailers will occupy the role of both selling and fulfillment by using anything from back rooms to underperforming locations to ship from. Mid-sized retailers might opt for third party providers to handle this for them. These decisions are all made to cater to fast shipping at minimal cost.

On the other hand, inventory and SKU coordination need to be audited and organized in such a way that services a multi-channel retail structure, which would reduce out-of-stock items and excessive markdown. By allowing inventory to be visible in the company’s ERP Enterprise Resource Planning (ERP) system, across channels, it’s said up to 15% more products can be sold at regular price as opposed to being marked down. 

Nordstrom is one such retailer that has enabled end-to-end visibility and inventory sharing across its online and retail networks. To make this integration happen, retailers will also need to restructure business processes and metrics, adopting uniform standards for shipping or for allocating credit for sales between online and in-store operations. But retailers should bear in mind that trying to arrive at the perfect answer can often take too much time up front. When Nordstrom rolled out its multichannel offering, it simply deferred decisions about incentives, instead focusing on meeting the customer’s needs now while worrying about allocating revenues later.” Nitin Chaturvedi, Mirko Martich, Brian Ruwadi, Nursen Ulker. “The Future of Retail Supply Chains.”

To get this process flowing, communication in each sector of the retailer’s supply chain would be of the utmost importance. With multiple avenues of processing an order and a limited timeframe, the retailers ERP system should be well organized and accompanied by a reliable EDI provider. Many company’s use an integrated platform to process purchase orders, advanced shipment notices and invoices, promptly and seamlessly to/from their ERP system. Small and mid-sized businesses without an ERP or EDI provider may opt for a Web-EDI solution or look to their 3PL to handle this. Either which way, to reduce errors, communication of this sort is usually highly recommended and often required by the retailer for smooth processing. 

In circling back to our topic, we believe like most things: there is room for everyone. The clicks versus bricks debate might become obsolete as the two avenues of retail merge to better serve the shopper. Where supply chain stands might be up for further debate as it’s processes will constantly move towards improvement and meeting high customer expectations.

Dotcom Distribution: Retailers Rake it in, Supply Chain Dish it Out

It’s a BIG year for the dotcom retail industry, not to mention the entire business surrounding dotcom distribution. December 2017 is giving the supply chain industry a run for their money. Tis’ the season to gift and more than ever people are choosing to purchase their items online. You no longer need to head to your local mall or department store. Why would you? You can shop freely online with many dotcoms offering international shipping, secure checkouts and accurate product descriptions. Although online shopping is nothing new, dotcoms of 2017 have managed to sway the masses and even the finickiest of shoppers. Cyber Monday 2017 spoke for itself.

Cyber Monday was reported to be the biggest online shopping day in U.S history at $6.6 billion in spending. “We’re seeing significantly higher growth in online spend this year,” Mickey Mericle, vice president of Adobe’s Marketing and Insights says about Cyber Monday. “Every day in November has been a billion-dollar day, and we’re predicting that we have more than twice the number of $2 billion shopping days this holiday season — that’s an incredible milestone.” Dotcoms are making a killing this season. However, the most fascinating aspect of this is arguably the question of: how will these retailers follow through?

Let’s start from the beginning. You get an email promotion from your favourite retailer, or Facebook and Instagram display a tempting sponsored ad, so naturally you click it. In the past, you might have wasted 20 minutes of your time browsing, before deciding to click out and get back to work. But companies are getting smart. They’re making it easier for us. No more endless scrolling to find the product we want. There’s direct linking to product pages, from apps mimicking Instagram. There are clear product descriptions, with detailed sizing charts for items like clothing, that we would never have tried buying online in the past. Autofill has been king of keeping people loyal to their impulse buy. And most notably, we’re not restricted to buying on our computers anymore. Almost half of online shopping for Cyber Monday was reportedly done on mobile, which would allow a customer to buy whenever they feel like it. All of this to say, the dotcom industry has wooed us into “Checking Out”.

Now, what happens after you receive your email order confirmation? Who are the people that honour Amazon or Walmart’s 10 business day shipping commitment to you. You would be surprised by the process taking place behind the scenes. One way of referring to this is the dotcom distribution. Amazon put together a great advert for this holiday season, showing a little bit of what your package goes through:

Once you submit your order, a purchase order is then processed by the retailer and is either sent to a 3rd party EDI (Electronic Data Interchange) provider or directly to the supplier/3PL. A purchase order communicates requested ship/delivery dates, your address and other details. This starts the chain of command and communicates electronically what the retailer has promised you, the shopper. Seldom is anyone picking up the phone to call another company over your order. Too many orders to process and therefor technology does it for us.

The EDI documents are received by fulfillment and processed in their WMS. Small companies may be able to fulfill online orders using their own resources, along with a shipper such as Fedex or UPS. Larger retailers may rely on third party resources (3PLs). These 3PLS handle inventory, prepare orders and ship. Sounds like a basic structure, but infact is quite interesting to witness. CNBC discusses Dotcom Distribution, (conveniently) the name of a large distribution operation out of New Jersey, dealing with name brands. “Heading into the peak of the holiday shopping season, Dotcom runs operations 24/7 at its 400,000-square-foot warehouse in Edison. The building’s landlord, Prologis, has watched its stock climb more than 25 percent this year because of renewed warehouse demand…Upon entry, the warehouse spans aisles and aisles, with shelves reaching as high as the building’s 40-foot ceilings, each stacked with merchandise. Retailers are sectioned off throughout the floor, keeping inventory organized. There’s also a corner dedicated to handling returns. ” (Thomas, “As Cyber Monday sales surge, the race is on to deliver all those orders”).

It’s pretty impressive how extensive some of these operations are. The reality is, with the quantity of online purchases, businesses and the dotcom distribution chain must adapt. Once suppliers or 3PLs fill the order, a few steps take place. They send an ASN (Advance Shipment Notice) back to the retailer containing shipping and packing information , which is processed through the EDI provider. The supplier schedules a pickup appointment with  carrier’s like Fedex or UPS. An EDI transaction, known as an ‘856’, is also sent back to the retailer confirming the shipping and packing information. The carrier makes a stop at the supplier to pickup the product and drops it off at your front door – or close to it. Alternatively, it could be delivered to you by the 3PL. It’s reported that for the holiday season of 2017, an estimated 2 billion deliveries will take place by UPS, FedEx and the U.S Postal Service System.

Now you have an idea of what it takes for retailers to get little Tommy his remote toy before Christmas Day. The supply chain industry, especially within dotcom distribution, are constantly looking at ways to be efficient and ensure that their clients are happy. They also never want to let the customer down – even with a major surge in online shopping. In a holiday sense, it’s like a modern day Santa’s workshop.

EDI Dataflow From The 3PL Standpoint: Scenario One

There are many scenarios related to the 3PL, supplier, and trading partner’s EDI dataflow. In an effort to satisfy ship windows, ensure delivery of goods (and do so in a timely manner), from 3PL to the trading partner, careful considerations must be placed on full-cycle flow of each transaction. To provide more insight on how this data flow works, we’re going to present you a scenario in how it might function. Below, is a legend to help distinguish the purpose of each EDI transaction code.


3PL Shipping

850: retail purchase order
856: retail advanced shipment notice
940: Warehouse Shipping Order
945: Warehouse Shipping Advice
943: Warehouse Stock Transfer Shipping Advice
944: Warehouse Stock Transfer Receipt Advice
810: invoice (not discussed in the article)

 

To begin with, the trading partner creates a purchase order in their ERP and exports into a specified data format. Their EDI system translates to an 850. The 850 is sent to the supplier’s 3rd party EDI provider via VAN, SFTP, AS2, etc. The supplier’s 3rd party EDI provider translates the 850 to a specified data format and provides it to the supplier, which is imported into the supplier’s ERP. The 850 is also translated to a 940 and sent to the 3PL via VAN, SFTP, AS2, etc.

The 3PL EDI system translates this 940 to a specified data format and loads into their warehouse management system (wms). In their wms, a Warehouse Shipping Advice is created against this order. Also, a UCC-128/GS1 label is generated and placed on a shipping carton. Carrier info, consignee, consignor, warehouse, ship and delivery dates are examples of possible information contained on the shipping advice. This transaction is exported from the wms into a specified data format and is translated to a 945 by the 3PL’s EDI system. This 945 is communicated to the supplier’s 3rd party EDI provider.

The EDI provider then translates the 945 to an 856 and sends to the trading partner. Optionally, depending on the agreement, the supplier can create the ASNs in their ERP and upload to their 3rd party system. There it is translated to an 856 and sent to the trading partner, via VAN, SFTP, AS2, etc.

Keep in mind, the 856 must be received by the trading partner, before the shipment is received. This concludes the breakdown of of the first scenario related to EDI dataflow between 3PL, supplier and trading partner. Check back on our blog for two more possible scenarios.

 

Integration: Bringing EDI From Good To Great

Suppliers, distributors, manufacturers and 3PLs, are often required by their trading partners to use an EDI solution. This is done in an effort to standardize the flow of electronic documents between systems. EDI acts as a common language which allows the sender and receiver of documents like purchase orders and ASNs, to use the same formats, standards and communication methods. Seeing that both supplier and retailer are likely to have a unique setup and/or ERP system that reflect the company’s internal structure, the EDI process is basically stands as the middle man, making sure both parties are on the same page. This helps to ensure successful shipping and smooth delivery of products and goods.

What Exactly Are The Benefits of an EDI Solution?

The benefits of EDI can affect a wide scale of factors that should be taken into account in every business’s operations. Firstly, EDI improves accuracy, reduces manual data entry and the filing of paper work. This leads to a company having a greater outcome with it’s resources and time. Using a reliable system reduces process cycle time and lead times. It reduces cost, which is a driving factor of a business’s operations. By reducing postage and handling costs, form printing costs and inventory carrying costs, a company can save on each shipment. With all these factors, satisfied trading partners might directly and indirectly see an increase in orders and sales.

For all the reasons above, the EDI solution alone has worked for some time, since it’s filled the gap to smooth out the communication process. But now, the industry is now demanding more to increase efficiency as much as possible. Both parties want visibility, tracking, speed, transparency and no penalties in the process – AND they want ease of use.

The Advancements of EDI in 2017

Where does that leave EDI? Well, there are a few options the industry is looking to. One-stop-shop platforms and softwares have begun to surface in recent years with the industry’s demand. While these solutions are shiny and all encompassing, the cost of their service is at a premium. The platforms also tend to offer bells and whistles that many companies are not in need of. As far as cost efficiency, and annual profit, this may not be the ideal solution. Naturally, traditional EDI providers have also begun to step up to the plate, increasing their platforms’ integration abilities, through application programming interfaces (APIs).  With this  solution, a company doesn’t need to scrap their existing ERP system, and EDI acts as a plugin. The benefits include increased compliance, reasonable pricing and stronger customer service. A new wave of EDI integration is here and forecasted to be the foundation of supply chain data communication.

Looking for an EDI solution? Feel free to contact us . Our EDI Analysts will be happy to chat with you and answer all of your questions.

 

 

856 Series: The Four ASN Hierarchical Structures

 

ASN Hierarchical Structures

The 856 can be an involved EDI document, used to convey shipment, order, pack/pallet and item details. It can be a time-sensitive document and depending on the trading partner’s requirements, must be received before shipment. Hierarchical Levels are used to better define and represent physical shipment. The ASN Hierarchical Structures define the sequence or order in which hierarchical levels will appear within an 856. Here are the four variations to know:

Shipment-Order-Item (S-O-I)

This structure is used for a basic Ship Notice/Manifest and does not include any UCC-128 or GS1 label information.

Shipment – Order – Tare – Pack* – Item (S – O – T – P – I)

This structure is commonly referred to as “pick and pack” structure. It is used
when there is carton labeling (UCC-128 or GS1) and there are multiple products shipped together on a pallet or master container. This structure is used if it is required that labeling be order specific.

Keep in mind, if no Tare (pallet) info is required on the “pick and pack” structure, S-O-P-I is used. If no Pack (carton) info is required on the “pick and pack” structure, S-O-T-I is used. If both pallet and pack info is required on the “pick and pack” structure, S-O-T-P-I is used.

Shipment – Tare* – Order – Item (S – T – O – I)

This structure is used when there is UCC-128 or GS1 labeling and there is no requirement that the labeling be order specific. If there are multiple orders on a pallet or master container, there will be just one label per pallet or master container. There will not be a separate label per order.

Shipment – Order – Item – Tare* (S – O – I – T)

This structure is commonly referred to as the “standard carton” structure. This structure efficiently describes shipment of a single product on one or more pallets or master containers.

ASN Hierarchical Structures are one element of processing 856 EDI documents. Learn more about the Hierarchical Levels of an 856 and other information about ASNs in our EDI blog section.