EDI, SRC, VMI, XMLEDI and Supply Chain Integration

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EDI, SRC, VMI, XML/EDI and Supply Chain
Integration

• Foothill College
• Electronic Commerce

2
EDI, ePoS, SRC, and VMI

• EDI - Electronic Data Interchange
• ePoS - electronic Point of Sale
• SRC - Supplier Retailer Collaboration
• VMI - Vendor Managed Inventory
• Supply chain - case study

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EDI Topic Overview

• Definition
• Why EDI?
• Benefits of EDI
• Key Components
• Applications

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EDI Definitions

• Electronic Data Interchange (EDI) is the
  computer-to-computer exchange of standard
  business documents over a network

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EDI Comparisons

• E-Mail vs. EDI
• EDI vs. WWW
• Spreadsheets
• Electronic FAX

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EDI - Users, Statistics, Drivers

• All of Fortune 5,000
• 100,000 firms worldwide
• 1 trillion annual transactions
• Drivers include
• no paper
• automatic ordering
• less inventory / better terms

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Why EDI?
Consumer Price Index
120
Labor Telco Computer
100
80
1985
1990
1995
2000
2005
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Without EDI
RFQ PO
Quote ASN Price Ack Invoice
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With EDI
RFQ PO
Quote Price Change Advance Ship Notice Invoice
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Benefits of Quick Response
PO
Min. Preparation Better Terms Order
Turnaround Reduce Inventory Fewer Errors Order
Tracking
Customer Satisfaction Order Turnaround No data
entry Fewer Errors Order Tracking
Purchasing
Order Processing
Receiving
Shipping
ASN Invoice
No data entry Fewer Errors Staff Planning Price
Updates PO Reconciliation
Customer Satisfaction Faster Payment
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Order Lead Times
Days
Paper
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Suppliers

• Better Terms
• Reduce Inventory (10)
• Increase Sales (5)
• Eliminate Errors (3)

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EDI with Customers

• New Markets
• Commercial
• Govt
• ( DOD50,000 RFQ/Orders)
• High Margin Customers

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Key Components
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EDI Networks
Telephone Network
Pacific Bell
US West
MCI

• EDI network are similar to the telephone
  network
• Multiple networks are interconnected
• Commerce Network is similar to MCI
• 90 of EDI companies use networks

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EDI Software
Supplier Customer
EDI
EDI
Proprietary Files
Proprietary Files
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EDI Software

• Basic Functionality
• Converts EDI format to paper
• Converts data entry to EDI
• Audit trails
• Communications
• Mapping Software
• Converts EDI to a file format

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SRC Supplier Retailer Collaboration

• Definitions
• Drivers
• Case study

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ePOS - Electronic Point of Sale

• Customer facing touch point
• Sees all in store transactions
• Can code to shopper ID / loyalty
• Synchronizes inventory information
• Is the front line for pulling supply chain

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XML/EDI

• Document centric vs. server centric
• XML document
• name value pairs from database
• DTD - Document Type Definition
• tells database where information resides
• Uses http Internet protocol vs. a VAN
• EDI documents created on EDI servers

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XML

• Data not presentation
• Universal data exchange
• XML may bring EDI to the Web
• Financial documents with META data
• Granularity of information in the markup
• The broader part of SGML minus HTML

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What is XML?

• Extensible Markup Language
• A syntax for documents
• A Meta-Markup Language
• A Structural and Semantic language, not a
  formatting language
• Not just for Web pages

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XML is a Meta Markup Language

• Not like HTML, troff, LaTeX
• Make up the tags you need as you need them
• The tags you create can be documented in a
  Document Type Definition (DTD)
• A meta syntax for domain-specific markup
  languages like MusicML, MathML, and CML

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XML describes structure and semantics, not
formatting

• XML documents form a tree
• Element and attribute names reflect the kind of
  the element
• Formatting can be added with a style sheet

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A Song Description in HTML

• ltdtgtHot Cop
• ltddgt by Jacques Morali, Henri Belolo, and Victor
  Willis
• ltulgt
• ltligtProducer Jacques Morali
• ltligtPublisher PolyGram Records
• ltligtLength 620
• ltligtWritten 1978
• ltligtArtist Village People
• lt/ulgt

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A Song Description in XML

• ltSONGgt
• ltTITLEgtHot Coplt/TITLEgt
• ltCOMPOSERgtJacques Moralilt/COMPOSERgt
• ltCOMPOSERgtHenri Belololt/COMPOSERgt
• ltCOMPOSERgtVictor Willislt/COMPOSERgt
• ltPRODUCERgtJacques Moralilt/PRODUCERgt
• ltPUBLISHERgtPolyGram Recordslt/PUBLISHERgt
• ltLENGTHgt620lt/LENGTHgt
• ltYEARgt1978lt/YEARgt
• ltARTISTgtVillage Peoplelt/ARTISTgt
• lt/SONGgt

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Supply Chain Management

• GEIS
• UPS
• I2
• Manugistics
• NCR (someday)

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Supplier Retailer CollaborationPutting EDI to
Work
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Supplier Retail Collaboration
SRC

EDI
IT
Goal Increase gross margins and profitability
through efficiency and greater sales, using IT
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SRC Terminology

• IT - Information Technology
• EPoS - Electronic Point of Sale
• ASN - Advanced Shipping Notice
• EDI - Electronic Data Interchange
• RDC - Regional Distribution Center
• SRC - Supplier Retail Collaboration
• BPR - Business Process Re-engineering

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The SRC Concept

• Product logistics
• managing physical goods through the chain
• Information logistics
• handling information flow and administrative
  tasks
• Supplier Retail Collaboration synergy
• using IT to move goods and information more
  efficiently

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SRC Using EDI is About

• Operating standards
• using EDI between the RDC and EPoS
• Replenishment
• EPoS data to supplier moving product back to the
  retailer
• Information flow and administration
• EPoS data used by both retailer and supplier to
  manage inventory what is moving well or not

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Who Drives SRC?

• Mostly retailer
• theyre closer to the customer
• sensitive to changing demands and price
• as an aggregate theyre a bigger power block
• Supplier needs to be a closer partner to the
  retailer
• strategic alliance with retailer, vertical
  integration
• Global competition
• newer companies are leapfrogging old business
  processes and technology
• dont have established workforce expectations

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Who Gets the Benefits of SRC?

• SRC yields gain of 2.5 of product value
• Shared 5050 between retailer and supplier
• In the United States benefits may be up to 10
• higher diffusion of IT in the U.S.
• lower telecommunications cost
• different human resource strategies
• Customers who can shop in a global market!

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SRC Requirements

• IT infrastructure
• network infrastructure is an absolute requirement
• workforce needs to be adequately EDI -
  information exchange at required pace
• personnel EPoS data
• manage physical product flow and efficient
  warehousing
• BPR - Business Process Re-engineering
• you need to redesign rather than rethink
  practices
• there will be resistance to implementing change
• education of the benefits of EDI, EPoS and SRC

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Technology Features

• EPoS data - inventory, accounting, and sales
• manage the physical product flow from RDC to
  retailer
• sales data helps both manage cash flow and
  inventory
• EDI ordering
• reduce the time, work, and costs required for
  order handling
• ASN
• electronically transferred
• manages scheduling, ASN is an essential

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Expectations of Supplier and Retailer in SRC
Supplier
Retailer

• Cost reduction
• Better service to retailer
• Better information flow

• Better service from supplier
• Cost reduction
• Better information flow

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Emerging Technologies

• More computing power at lower costs
• The spreading of cheap TCP/IP networks
• Increasing diffusion of IT in all industries
• Commerce conducted on public networks
• Even small companies can benefit from it!

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SRC - Putting EDI to Work

• Build efficient, automated, paperless processes
• Merge EPoS data and EDI, vertical integration
• BPR will be necessary to achieve full synergy
• Internet, intranets, and extranets
• SRC will be a major factor in effective global
  commerce

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Summary - B2B and EDI

• EDI has been the workhorse of B2B
• XML based EDI is bringing supply chain to the web
• XML / EDI can be done by http protocol
• Standard documents are done in a DTD
• Data mining of real time ePOS data
• VMI and SRC - why own inventory?