Thanks to Electronic Data Interchange (EDI) piles of paper created in communications between retailers and manufacturers are a thing of the past now that business partners exchange orders, delivery notes and invoices electronically. 
Management Summary Electronic Data Interchange (EDI)
Electronic Data Interchange (EDI) describes the exchange of structured and standardized information between computers. Thanks to EDI business partners can now exchange and automatically process orders, delivery notes and invoices without any mistakes. As a result EDI is the basis of all customer-driven processes in retailing and manufacturing.
Paper masses decrease
Now that EDI transmitted data can be processed automatically EDI is more than merely sending documents by fax or email. Electronic Data Interchange ensures information is readily available to all parties involved and reaches them quickly. METRO Group has been using EDI for communications with its suppliers since 1989. Now the majority of its business partners are participating in EDI. The retailing group is using EDI to optimize both its business processes and communications with manufacturers and is reducing its costs significantly.
How does EDI Work?
EDI requires all parties involved to put their messages in the same language. For that purpose the United Nations Economic Commission for Europe (
www.unece.org) defined a globally applicable standard. UN/EDIFACT (Electronic Data Interchange for Administration, Commerce and Transport). This standard ensures that any information segment contained in an EDI message has its own exactly defined place. The most widely used EDIFACT application standard within consumer goods sector is EANCOM.
In EANCOM messages every product is identified by a 13-digit Global Trade Item Number (GTIN) - formerly EAN - and each business partner by a 13-digit Global Location Number (GLN) - formerly ILN. The EAN standard also includes the Serial Shipping Container Code, SSCC in short. Virtually all transactions within a company’s supply chain have a corresponding EANCOM message standard.
Now consumer goods companies can use 44 internationally valid message types. The most widely used are INVOIC, the electronic invoice, and ORDERS, the electronic order.
Now consumer goods companies can use 44 internationally valid message types. The most widely used are INVOIC, the electronic invoice, and ORDERS, the electronic order.
Which business processes can be reflected electronically?
Today modern retailing companies use the so-called GTIN. They refer to product information contained in merchandize management systems. Products bear the GTIN as bar code and can be read by scanners. Store scanner check-outs record the quantities and articles sold enabling permanent inventory controls. Suppliers can use EDI to check sales figures and plan their production capacity. If the store is running low on stock it can use the EANCOM message format ORDERS to order the required quantities timed to demand. As a result inventories can be reduced considerably.
Suppliers pick the orders and inform retailers about the time and content of the delivery using the EANCOM message type DESADV. Following an electronic order check the retailing company in turn acknowledges receipt of the goods using the format RECADV. After successful delivery suppliers forward invoices to the retailing company using the EANCOM message INVOIC. The system automatically compares goods entry and invoices and provided there are no discrepancies accounting initiates payment and informs the supplier electronically about payment dates using the settlement advice REMADV.
Suppliers pick the orders and inform retailers about the time and content of the delivery using the EANCOM message type DESADV. Following an electronic order check the retailing company in turn acknowledges receipt of the goods using the format RECADV. After successful delivery suppliers forward invoices to the retailing company using the EANCOM message INVOIC. The system automatically compares goods entry and invoices and provided there are no discrepancies accounting initiates payment and informs the supplier electronically about payment dates using the settlement advice REMADV.
Which advantages does EDI offer?
Electronic Data Interchange accelerates data exchange between manufacturers and retailers and improves data quality. The advantages of EDI are apparent throughout the supply chain:
- EDI works internationally, there are no language barriers and using a so-called converter EANCOM messages can be translated into the required company format.
- EDI prevents mistakes that are easily made when entering product and processing data manually. An additional system checks EDI transmitted data to see whether the delivery of the goods tallies with the order.
- Improved flow of goods: addressees receive their information more quickly, reducing the lead time between issuing orders and incoming goods. As a result, stores are guaranteed high levels of goods availability and a reduction in storage costs which makes it easier to meet customer demand.
- Staff no longer needs to get involved in time consuming data collection and can concentrate on other important tasks such as customer service.
Which supplier communications channels does METRO Group use?
Suppliers can use three different channels to exchange electronic data with METRO Group:
- EDI Classic: business partners produce their order documents or invoices using their own IT system and store these in the company’s file format. A so-called EDI Gateway (converter) transforms the files into a standard EANCOM format, the resulting EANCOM messages are then exchanged between business partners via a mailbox system or via the internet (EDIINT AS2), a method particularly suitable for large amounts of data.
- MEC – METRO Group EDI Center: a EDI tool developed by METRO Group allows retailing partners to exchange data online. Suppliers record their invoices in MEC or transfer them in ASCI file format (American Standards Code for Information exchange). METRO Group’s converter then converts the ASCII files of MEC into the standard international EDIFACT format and sends invoices to MGP METRO Group Account Processing. In return, EDI files are made available to manufacturing partners for orders issued by the retailing group. Manufacturers can then print the information or file it in ASCII format in their IT systems.
MEC is suitable for manufacturers who mainly supply METRO Group and for whom the implementation of EDI Classic is not cost-effective on account of its considerable investment. - WebEDI: In addition to METRO Group’s MEC (METRO Group EDI Center) solution, suppliers can use a variety of additional WebEDI services on the Internet. Independent WebEDI provider portals enable suppliers to receive, record and send electronic messages. Internet sites make it easy for manufacturers to log in with their user name and password and organize, send and archive orders, delivery notes and invoices for trade partners all in the same session. WebEDI platforms are particularly aimed at suppliers who also deliver to other companies outside the METRO Group and for whom the investment required to implement EDI Classic is not cost-effective.
Data Capture – from paper to PC
METRO Group is pushing EDI: now 95 percent of suppliers are submitting their goods invoices to the retailing group electronically. There will however continue to be a number manufacturing partners who are either unwilling or unable to use EDI and send paper invoices. For these exceptions METRO Group is presently testing the new Data Capture software which converts original invoice data into the language used by EDI messages. Paper invoices need to be scanned first and then Data Capture completes the process automatically. Thanks to this software it is no longer necessary to enter data into the merchandise management system manually. A decision if it will be cost-effective to introduce Data Capture throughout the retailing group will be taken after field-tests at Metro Cash & Carry Spain have been completed.
Which EANCOM formats is METRO Group using at present?
METRO Group’s decision to exchange electronic data with a supplier is based on the following steps:
- Both partners sign a master EDI contract.
- Initial electronic transmissions using the EANCOM message format INVOIC will mainly involve invoices. Approximately 94 per cent of food suppliers are already forwarding their invoices to METRO Group electronically.
- During this cooperation suppliers are also to send price lists and product catalogs by EDI to METRO Group via the SA2 Worldsync data pool, the message format being PRICAT. The electronic catalog contains information covering the product itself, logistics and price.
