More EDI Blog posts
Check out my blog posts at CovalentWorks EDI Blog
You will find weekly updates on EDI service topics of interest to small businesses.
Transaction basics are provided as well as updates on the latest in web based service delivered from the cloud. Upcoming topics include retailer vendor scorecards, chargebacks, and integration with 3PL, accounting, WMS, and custom systems. Later this year there will posts on drop shipping, small business trends and much more.
EDI System Components
An EDI system consists of all of the components necessary to exchange EDI transactions with trading partners who are EDI capable. The major components are EDI translation software, user or system interfaces, hardware, maps, EDI guides, a communication network and EDI experienced personnel. A company that wants to be EDI capable will have to either buy the components or outsource all of the EDI system
components to a third party.
EDI transactions are very compact and difficult to read and manipulate. EDI translation software provides the ability to translate EDI data into a file format that can be interfaced with a company’s in-house systems or translated into forms that can be used by users.
EDI translation software supports the development and maintenance of maps. Maps are required to manipulate each transaction type. Every transaction type with every partner will be formatted differently. The map translates the EDI transaction into a useable file format.
EDI guides are provided by EDI trading partners to communicate how each transaction type will be formatted. The EDI guides must be followed exactly in order to be EDI compliant with a particular EDI partner. The EDI guides are used to develop maps. Follow this link to see an example of an EDI guide
Hardware is required to run EDI translation software. The computer hardware must be sufficiently powerful and reliable to support exchange of EDI transactions 24 X 7 in compliance with trading partners’ transmission schedules.
A communication network is necessary to send and receive EDI transactions. A company can elect to either communicate EDI transactions using a direct AS/2 connection to a trading partner if the trading supports such a connection, or communicate with trading partners using a VAN. A VAN is a third party network provider that is a communications intermediary with other trading partners.
And perhaps most importantly, expertise is required to implement each of the EDI system components and maintain each of the specific maps for all of a company’s EDI trading partners.
eCommerce Best Practices Interview
Recently Scott Koegler of eCommerce Best Practices interviewed me about CovalentWorks EDI services. I had the opportunity to explain our focus and key initiatives for continuous improvement as well as the key challenges our clients are facing. We talked about how CovalentWorks helps our clients save time and grow their business. Scott was also interested in our approach to testing so we spent some of our time toward the end of the interview talking about the best practices we employ to make testing as fast and efficient as possible. Click here to read the complete interview eCommerce Best Practices interview
A brief EDI VAN History – Part II
As EDI use became more wide spread, each company followed EDI standards so that communication with their trading partners was facilitated. However, each company still had the flexibility to implement EDI transactions
that fit its business requirements. Large companies had the ability to dictate to their suppliers exactly how a particular EDI transaction should be formatted.
During the 1980's, EDI became even more popular and proliferated with companies who could afford to employ a VAN and who had the technical expertise to implement EDI transactions that integrated with their back office systems. The first EDI software companies provided assistance with translating EDI transactions into and out of the format used by in-house applications so that custom EDI applications did not have to be built from scratch. EDI continued to grow in popularity as an expanding number of companies saw the benefits for themselves and their trading partners. Mainframe or mini-computers were used to run EDI systems.
PC based EDI software began to emerge in the early 1990's as an alternative and at a lower price point, although EDI was still a significant investment. Competition among VANs had reduced the cost of EDI communication somewhat, but it was still expensive.
Emergence of the internet in the 1990's provided the first real competition for VANs. The obvious question was "why use a VAN for communication when the internet was free"? And innovative companies did start to do point-to-point communication over the internet. Standards emerged for this communication and the most popular became AS/2 communication
. Even though the transportation of the data was free, reliable and secure communication had to be maintained for each trading partner with whom EDI transactions were exchanged.
The demise of VANs was widely predicted because the internet was "free". However, in the late 1990's and the 2000's VANs reduced their pricing in order to stay competitive with the internet alternative. In fact, prices changed so much that it again became cheaper for many companies to outsource their point-to-point communication to a VAN rather than doing it themselves with AS/2. Many of their trading partners still used a VAN for the same reason. Some VANs began offering connections to trading partners that used AS/2 communication, while others resisted the trend. Today a competitive VAN offers their customers one point of communication regardless of their trading partners' communication preferences.
A Brief EDI VAN History - Part I
Today, a company that is new to EDI or a company that wants to reduce their expenses can arrange for cost effective service with an EDI VAN
that will provide EDI communication with their trading partners regardless of whether the trading partner wants to use AS/2 communication or wants to use their own VAN. However, this has not always been the case.
EDI started in the 1960’s when a relatively few companies wanted to exchange data electronically in order to become more efficient. The focus of EDI since its inception has been on the replacement of paper-based business documents with carefully defined machine-processable electronic forms. In the 1960’s, companies had no choice at that point in time except to transmit their data directly with each other using point-to-point connections. However, they soon realized that maintaining point-to-point connections with a growing number of trading partners, all of whom had different computing platforms, was an expensive proposition.
In the early 1970’s, companies in several industries banded together to develop the first set of EDI standards
and they decided that a for-profit company would be the best avenue for administering the communication among them. The first EDI value added network company, or VAN, then came into existence. The value added network provided one point of connection for each company and then managed the communication with other companies. Now a company could outsource the secure flow of EDI transactions to many other companies while maintaining just one point of communication. EDI had become much easier and less expensive.
EDI standards became more formalized throughout the 1970's, additional EDI VAN companies were formed and those VAN companies developed interconnections among themselves so that it did not matter which VAN a particular company chose. EDI communication with other companies was now possible regardless of which particular EDI VAN any one company used and EDI started to flourish.
Federated EDI requirements
There are extensive and sometimes complicated requirements for Federated
EDI. Federated mandates EDI compliance for suppliers to all of its stores including Macy's, Bloomindales, Famous-Barr, Foley's, Hecht's, Kaufmann's, L.S. Ayers, Marshall Fields, Meier & Frank, Robinsons-May, Strawbridges, and The Jones Store.
Federated grew considerably with the acquisition of Marshall Fields from Target in May of 2004 and then went on to become the largest operator of department stores in the U.S. during August of 2005 when the acquisition of the May stores was completed. Federated is now moving all May Store suppliers to the Federated EDI standards. Federated has a sophisticated supply chain and EDI transactions are an important link between them and their suppliers.
Federated EDI requirements include the 810 Invoice, 820 Remittance Advice, 846 Inventory Inquiry/Advice, 850 Purchase Order, 852 Product Activity Data, 856 Advanced Ship Notice and 997 Functional Acknowledge. If EDI seems too complicated and expensive, you can have CovalentWorks take care of all the headaches associated with Federated EDI
Federated has three kinds of Advance Ship Notice EDI transactions. The Standard Carton Pack specifies shipment, tare, order, pack and item. The Pick and Pack specifies shipment, order, pack and item. The Drop Ship Advance Ship Notice is simpler because it describes a shipment that goes directly to a consumer rather than to a distribution center or specific store. Most suppliers to www.macys.com
must support the Drop Ship Advance Ship Notice and special packing slips forms.Macys EDI
requirements and Bloomingdales EDI
requirements all fall under the Federated EDI standards umbrella and are the same.
Office Products EDI requirements
Led by the largest retailer of office products, Office Depot, EDI is a requirement for virtually every supplier in the office products supply chain.
Other major retailers such as Staples, and Office Max require EDI capability. So do wholesale companies like S. P. Richards and United Stationers; buying groups like Independent Stationers and Tri Mega; as well as manufactures including Ampad.
Retailer Office Depot mandates that their suppliers exchange EDIpurchase orders, advance ship notices and invoices with them. Learn more about Office Depot EDI requirements at Office Depot
and about an easy-to-use EDI solution at Office Depot EDI
Wholesale company S. P. Richards’ EDI requirements include the same three transaction types for their suppliers. However, smaller volume suppliers may get an exemption and not have send advance ship notices. More about S. P. Richards EDI can be found at S. P. Richards EDI
Manufactures have also been adopting EDI. Ampad, for example, sends their suppliers EDI purchase orders and requires EDI advance ship notices be sent to them. They pay on receipt though and suppliers do not have to send EDI invoices.
Transmission of EDI transactions is done via VAN (Value Added Network) with all of the companies discussed so far. Some, such as Office Depot and Staples also offer suppliers the option of communication via AS/2, which is a secure communication method over the internet.
Of course other retailers with efficient supply chains such as discount retailers Wal-Mart, Target, and CostCo, grocery stores Albertsons, Kroger, Meijer, Publix, and Shaws; and drugstores CVS and Walgreens all require their office products vendors to be EDI compliant. I will discuss these stores' EDI requirements in future blog posts.