Fluctuations in supply chain processes can be as unpredictable as the weather. Certain changes to supply chain processes originate “out of thin air” due to newly introduced geo-political policies, for example, while others may come as a result of a retailer, distributor or other buying organization investing in a new ERP (enterprise resource planning) software or introducing new trading documents to drive efficiency. In any case, even the subtlest adjustment can send an effect wave throughout the supply chain.
Evolving Vendor Compliance Rules in Today's Retail Reality
Two years ago, retail giant Target introduced new business rules to its trading community in an effort to keep up the evolving demands of today’s consumers. Some of the new rules included:
- Single-day arrival date for shipments to Target’s warehouses
- No “grace period” for late shipments (Was: 2 to 12 days)
- Fine for late shipments: 5% of order cost (Was: 1 to 3%)
These changes enabled Target to speed up the supply chain to stay competitive, and keep products stocked on its shelves and reduce missed sales opportunities, but could not have been achieved without cooperation from its supplier community.
Some retailer-imposed supply chain process changes are not as dramatic, such the case with Neiman Marcus five years ago. The high-end retailer recognized the need for an integrated supply chain for all three of their different buying groups to streamline shopping for their customer in an omni channel environment. A case study published by GS1, Neiman Marcus – distinctive retailer creates branded shopping experience with supplier enablement solution, outlines how Neiman Marcus maintained 95% supplier compliance of their 2700 vendors using GS1 standards and EDI
How to Enable a Scalable EDI Compliance Process
So, how can buying organizations introduce new technological efficiencies to their supply chain integration processes without disrupting the currents of automation already in place with their supplier communities? And how can the supplier community maintain business rule and EDI compliance while adjusting to these changes?
These changes will continue to occur controlled or uncontrolled, but always constant. As a retailer or a supplier, it is about weathering the storm and giving your company the best odds to do this. The key goals are:
- Communication to stay compliant
- Not have orders get stuck in a queue
- Keep the consumers happy
Communication between back-office systems is key. For Neiman Marcus, EDI enabled transactions allowed them to communicate effectively with an integrated system. First, they started by utilizing DiCentral to test their vendor community. Testing is a general rule to verify a trading partner can comply with the document specifications or the retailer’s rule book. Trading documents go back and forth to enable automation and these documents have to be verified in order to move the process along. Any vendor who is submitting the invoice electronically will need to ensure these documents are formatted and communicated correctly, so there will not be any issues.
Exception Management and Business Rules Automation
Peter Edlund, Chief Solutions Evangelist at DiCentral, gave this example during an interview,
“Highly automated systems deal with exceptions rather than rules, if you are processing 1000 invoices a day and have a 10% error rate, 100 invoices have to be followed up on manually with a phone call or email. Testing these electronic invoices with each supplier before moving them into production will decrease the impact on actual production systems and the staff that monitor those systems.”
While comprehensive testing verifies the effectiveness of the EDI syntax, many buying organizations and distribution companies will also compel their supplier communities to comply with additional business rules for document sequencing and timing.
The ultimate solution will provide testing and utilize business rule management as part of a comprehensive compliance program. This will allow trading partners on both the buy and sell side to prevent supply chain exceptions on an ongoing basis, well after the initial testing phase.
For example, a retailer may mandate that a supplier send an ASN before the invoice. If, for whatever reason, the invoice was sent before the ASN, the exception management tool can be deployed to catch the document and quarantine it before it is issued to the retailer. At this point, the supplier is immediately alerted of the and is given recommended actions steps, where management can decide to discard, hold or release the invoice.
Exception management and business rule solutions provide additional insight with near real-time visibility across every trading partner relationship, ensuring business rule compliance and preventing rule violations before they occur.
Combining these solutions with your ERP or back-office systems will decrease manual efforts, labor and time exhausted on your incorrect invoices.
Learn more in DiCentral’s Webinar: "Winds of Change: Ensuring Supply Chain Compliance when Change is Constant".