EDI compliance stressed at forum

Home Channel News, May 24, 1999 by Jason Gonzalez

Home improvement retailers make message clear at Hardlines Technology Forum

COLORADO SPRINGS, COLO. -- At the 10th Hardlines Technology Forum, held here in late April, four of the industry's 10 largest home improvement retailers and the three major dealer-owned buying groups set up booths to convey the need to establish electronically based relationships with their trading partners.

During the three-day forum, sponsored by the American Hardware Manufacturers Association, officials from Home Depot, Lowe's, HomeBase and Sears Hardware, as well as several technology experts, delivered this clear warning to attendees who have so far resisted standardized electronic communication: If you want to keep playing ball in the big leagues, you'd better become EDI (electronic data interchange)-compliant real soon.

Home Depot and Lowe's took even higher profiles at the addressed topics ranging from financial EDT and measuring EDT benefits to enabling small-to medium-sized suppliers to trade electronically. Both retailers stressed how critical EDT was to their current and future business operations.

"EDI benefits are real -- they do exist and they can be measured," said Guy VanHorn, Home Depot's EDT manager. He said that since Home Depot began EDT in 1992, it has continually established metrics and rates to quantify EDT processes, costs and benefits. "The growing number of EDI applications affords us to continue driving costs out of the procurement process," he said.

Bridgett Gardner, Lowe's financial EDT supervisor, said the retailer's EDT vendors have grown to nearly 2,000 in 1998 vs. only 1,000 in 1995. Seventeen percent of those EDT vendors are also conducting electronic funds transfers, a process whereby EDI formats are used to automate payables and receviables.

Even though 80 percent of the 5 million invoices Lowe's processed in 1998 were electronic, the retailer is pushing for even greater compliance among vendors. In a harder stance, Lowe's is requiring vendors that invoice Lowe's more than 100 times per year must do so electronically.

Much discussion at the forum, in fact, centered around how best to prod reluctant participants into the EDI family.

HomeBase distributed literature that listed its current EDI capabilities but, more importantly, stated that vendors that could not support those functions would soon be assessed penalties to "defray the additional costs of processing their orders and payments manually."

"The question is [whether] it's the carrot or the stick?" asked Andy Duncan, president and CEO of the EC Co., a Palo Alto, Calif.-based company that manages EDI transactions over the Internet. Sticks, which Duncan said refer to strict deadlines, penalties and threats of ending the relationship, may "work a little better" but should only be used sparingly.

"Be sensitive," he advised. "These companies are under enormous pressure to become more technologically savvy."

In light of its tougher requirement, Lowe' s is suggesting ways for its smaller suppliers to get electronically linked and held a joint seminar with the EC Co., one of several low-cost EDI facilitators that Lowe's is suggesting.

Thomas Adams, director of EDI solutions, for DynamicWeb, a New Jersey-based Internet firm, described a "carrot" method that one of his non-hardlines clients -- drug chain Rite Aid -- used to coax its suppliers into EDI. Rite Aid developed a Web site for its smaller vendors to begin doing business over the Internet. The vendors get a code, log on and can send invoices and download purchase orders in a low-cost fashion.

Rite Aid benefited by getting closer to its goals of a paper-free office and lower personnel expenses. The "carrot" for the suppliers is access to detailed store sales information via the Web site that was never before available to them.

For the most part, however, attendees said they understood that the majority of dealers and manufacturers are either at, near or just beyond the first turn on the technology learning curve. In a best practices session hosted by Home Depot and PricewaterhouseCoopers, Dennis McGinnis, e-commerce director for the consulting firm, summed up this new dynamic.

"Electronic relationship building is not something you are used to doing," he said. "You're all still learning to do that."