IQ panelists give glimpse of EDI future

Discount Store News, May 5, 1997

The future of EDI (Electronic Data Interchange), carton labeling requirements and off-shore vendors were among the topics discussed by a high-powered panel at IQ'97, featuring representatives from three retailers and three manufacturers.

The panelists included: Tim hale, systems analyst, Wal-Mart Stores; Mark Swanson, vendor performance group leader, Target; Lisa Lichtenberg, vp, merchandising, Federated Department Stores; Marsha Parr, corporate vp, Haggar Clothing; Caren Kaegebein, senior systems analyst, Wrangler Inc.; and John Murphy, manager of sales systems, Playtex Apparel. Their remarks.

* Point-of-sale data and how retailer and manufacturers can use such data for EDI and electronic commerce applications: Wal-Mart's Hale noted that the retailer generates and processes all POS data in-house. "There is a fundamental disconnect when selling data to a third party who is repackaging it for your consumption. There's not enough detail and it's not timely," he said.

Target's Swanson took a similar stance. "The greatest QR response I've seen is [to have] a dedicated resource internally," he said.

Lichtenberg of Federated Logistics maintained that there are opportunities for third parties to transform POS data into usable information. "At Federated, we were sending EDI sales data to vendors that did not have a system to do anything with the data. It's raw data that says, `I sold this UPC two times in store 10 last Thursday.' This has to be translated into information."

* Vendors increase amount of raw materials transacted through EDI: Parr of Haggar said that more than 90% of its raw materials are shipped by EDI. "For several drop shipment programs, we are even bypassing raw materials storage and sending raw materials directly to cutting based on the receipts suppliers have received via the ship notice."

Caren Kaegebein of Wrangler said his company's percentage is the same: "The only thing we don't receive ship notices on are imported goods," which represent 5% to 10% of raw materials.

Murphy of Playtex maintained that nearly 70% of its vendors are using EDI.

* Measuring the benefits of EDI: Swanson of Target said that EDI has taken one to two days out of the supply chain and has reduced the time it takes to unload a trailer from 1.8 days to 3 hours. In addition, EDI has reduced the cost of receiving a carton to six cents from 80 cents (Dayton Hudson receives 1.6 million cartons a day).

Tim Hale of Wal-Mart said that all EDI processes and documents bring specific business benefits, including lead time reductions, lower labor costs, improved match rate of invoices and more timely payment, which can be quantified to measure ROI.

* Off-shore vendors and their ability to ship floor-ready merchandise: Swanson of Target noted that the discounter currently has nothing on the books because of the longer lead times (three to five weeks), although Target is "looking at a couple of opportunities in this area." With respect to floor-ready, Swanson said recommended guidelines are being met with off-shore suppliers.

At Federated, about 95% of the merchandise is floor ready, Lichtenberg said. The retailer has a few EDI programs with foreign vendors, such as gold jewelry replenishment with an Italian firm, but that represents a very small percentage.

Wrangler has made great progress in this area, Kaegebein said. The VF unit has arrangements with several off-shore vendors to ticket merchandise prior to shipping oversear.

* Vendor-management inventory programs: Wal-Mart's Hale addressed vendors, saying, "You've got to do it better than we can. If you know about your product movement better than we do, that's fine, but it's got to be a certain type of product under certain circumtances."

Target, which does the least amount of VMI and is currently testing a few programs, is "more interested in what every manufacturer has in terms of a system to analyze sales data that we as retailers don't even recognize," Swanson said. "Whether or not they can replenish our stores is a separate issue."

* Conducting EDI transactions over the Internet: Wal-Mart, Target and Federated have no formal plans in this area. "Security is a small issue; timing is a larger issue," said Wal-Mart's Hale, noting that EDI transaction sets are standardized through VICS, compared to the wide open terrain of the Internet, which has not protocols.