What is EDI?
As a ecommerce business owner, you may decide to sell through the big box chains. These larger retailers have specific requirements surrounding how data is exchanged. It’s important for you to understand their needs in order to do business with these companies. Electronic Data Interchange, commonly referred to as EDI, is a standardized format for communicating electronic business documents which is commonly used by retailers. Business documents refer to information that is essential for the exchange of goods.
What are the Common business documents for an EDI transaction?
- Warehouse Stock Transfer
- Purchase Order and Acknowledgement
- Advance Shipping Notice (ASN)
Because requirements can vary from retailer to retailer, and can present a unique set of challenges, understanding how EDI works can help you recognize their specific needs and how you might be able to help.
COMMON RETAIL TERMINOLOGY
Before diving deeper into working with retailers, it’s helpful to understand some basic terminology.
Trading partners are the parties who are exchanging EDI documents. Below are the typical trading partners involved in a transaction.
The owner of the product. This is typically the company whose brand name is on the finished product.
The business who makes products for the merchant from raw materials.
Receives products from the merchant, stores inventory, and ships to the customer.
The retail store who sells the product to the final consumer.
An EDI Integrator is a third-party business who converts data for EDI compliance and facilitates communication between trading partners.
Business documents include the information exchanged between trading partners. Each business document has an EDI transaction code associated with it, which is a part of EDI standards. In the event that companies have different terminology for the same document, these standardized transaction codes can be referenced.
A standard EDI format is used to exchange documents in order for computers to read the data. Without a standard format, varying software systems may have difficulty communicating.
What are the commonly exchanged documents for an EDI transaction?
Warehouse Stock Transfer Shipment Advice (EDI 943)
Notice sent from the merchant to the fulfillment provider letting them know that a stock replenishment shipment is on its way. We call this transaction an Expected Arrival at Fulex.
Warehouse Receipt Advice Transaction (EDI 944)
Communication from the fulfillment provider to the merchant to confirm the receipt of inventory stated on the EDI 943 (Warehouse Stock Transfer Shipment Advice).
Purchase Order (EDI 850)
A request from the customer to the merchant, known simply as an “order” in Fulex. It typically includes the product name(s), quantities requested, and pricing.
Purchase Order Acknowledgement (EDI 855)
Lets the retailer or merchant know that the data has been successfully received by the fulfillment company.
Advance Shipping Notice (ASN) (EDI 856)
Document sent from the fulfillment company to the customer after an order has shipped, letting them know the order is on its way.
The Complexities of Electronic Data Interchange
EDI compliance is a necessity when working with many retailers. However, a simple plug and play solution isn’t typically an option. Fulfillment providers understand the common challenges that an ecommerce business owner will face and can help accommodate the needs of its customers.
There are many types of EDI transactions, and requirements can vary from partner to partner. For example, retailer A and retailer B order the same quantity of the same product. However, each trading partner may require different business documents and may have additional data requirements.
In order to meet these requirements, an EDI integrator is needed to ensure everyone is speaking the same language. Fulex’s fulfillment system has the capability to automatically receive and send data to an EDI integrator, who then converts it to the required format.
ELECTRONIC DATA EXCHANGE
With an EDI integrator, information can automatically communicate between trading partners’ systems, eliminating the human element from the equation for faster, more accurate order processing. Automation is a key piece to this process, as it would be nearly impossible to manually process orders to meet Electronic Data Interchange requirements.
Let’s walk through a common example of a fulfillment process which uses EDI.
- A merchant has a new t-shirt available in their Spring line. They order the t-shirts from the manufacturer/supplier, who makes the shirts using raw materials and ships them to the merchant’s fulfillment provider. The manufacturer also sends the fulfillment provider a Warehouse Stock Transfer Shipment Advice, which alerts them of the incoming shipment and allows them to prepare to receive the inventory in their warehouse.
- The t-shirts are successfully received and stored in the fulfillment provider’s warehouse. This is communicated from the fulfillment provider to the merchant using a Warehouse Receipt Advice Transaction. Inventory can now be used to fill orders.
- A retailer places an order with the merchant because one of their retail locations has run out of t-shirts, and they need another shipment. The Purchase Order indicates that they need 100 blue t-shirts in size medium, sent to 500 5th Avenue, New York, NY 10018. These details are sent to the fulfillment provider.
- The fulfillment provider lets the merchant know that the t-shirt order has been received by using a Purchase Order Acknowledgement document. If there are any adjustments needed on the order, such as pricing adjustments or out of stock items, that information is conveyed to the merchant. If the order is accepted, then it is ready to be picked and packed.
- When the t-shirts are ready to ship, an Advance Shipping Notice document is sent from the fulfillment provider to the merchant, letting them know that the order is on its way to the retail stores, and informs them of what day they can expect the items to arrive.
As demonstrated in this example, there are many EDI documents that are used in a single transaction. Being able to automate the flow of EDI between your fulfillment system and EDI integrator helps to alleviate some of the complexities and gives you the opportunity to work with trading partners who use EDI.
What are the labeling requirements for Electronic Data Interchange?
In addition to EDI data requirements, most retailers also have labeling specifications. After picking and packing an order, a retailer-specific label, called a GS1-128, is generated. This label makes it easy for the person receiving the products to determine what is in each box and/or pallet by simply scanning the barcode included on the label.
Once the barcode is scanned, information is tied back and validated against the data in the Advanced Shipping Notice, which has already been sent to the retailer.
Trading partners often have their own specific requirements surrounding how the labels should be displayed and formatted. Failure to meet these requirements can result in financial penalties, so it is important to know what is required prior to shipping.
By understanding the needs of retailers and the complexities of EDI transactions, you’ll be equipped to take on new business. Fulex’s fulfillment software may have the capabilities to help you meet EDI standards. Fulex has also established partnerships with EDI integrators such as SPS Commerce and TrueCommerce to make setting yourself up for EDI compliance is as easy as possible.