EDI has become the cornerstone for many manufactures and suppliers working with the Big Box, or (Main Tier) retail and consumer outlets. The EDI mechanism, its standards, and requirements can be a daunting challenge for any business. One of the most often overlooked and at times misunderstood components of EDI are the contractual aspects of EDI, and the cost penalties associated with violations which can often be resolved by process review and improvement.
Measure - The challenge, GDS was asked to review a steady increase in EDI penalties by a large power equipment manufacture that were being levied by one of the largest consumer hardware organizations in the world. The solution. GDS began an operations review by working closely with the client’s finance and accounting teams. This review then extended into IT, and warehouse operations.
Perform - Our findings were mixed. While identifying an internal change in EDI processing by the client’s IT which had been designed to add efficiency in transmitting and receiving orders it was discovered the change in process unknowingly created a timing issue which automatically triggered penalties by the customer due to a violation in the EDI agreement. Although easily corrected this turned out to be part of a larger problem. The client had recently relocated its distribution center to a new area forcing a change in staff, management, and processes.
Excel - During the GDS operations review process it was discovered this shift in warehouse location created several inefficiencies including customer awareness regarding shipping and load configuration, and delivery standards. These inefficiencies contributed significantly to a lose in profit due to contractual violations.