Business to Business Ecommerce

What is EDI?

Electronic Data Interchange (EDI) is the computer-to-computer exchange of business documents such as Purchase Orders and Invoices between companies, using a public standard format. Rather than mailing a paper document or sending a fax, EDI users exchange business data directly between their respective computer systems.

The use of EDI is not limited by differences in computer or communications equipment among trading companies. It bridges the previous information gap that existed between companies with different computer systems. EDI is also independent of users' internal computerized application systems, since it interfaces with those systems rather than being integrated with them. However, the degree of effectiveness of the EDI operation itself, as well as the internal management information available from its use, will certainly be greater if application systems are up-to-date and efficient.

It's Time To Get Involved in EDI
    By Bryan Stewart

The Efficient Foodservice Response (EFR) movement began in the United States in late 1994, with the goal of analyzing the initiatives spearheaded by the Efficient Consumer Response (ECR) committee, and to determine how they would fit within the foodservice sector. While ECR dealt mainly with 'food prepared at home', EFR addresses issues pertaining to increasing supply chain efficiency for suppliers dealing with fast food chains, restaurants, hospitals, prisons, cafeterias and caterers. In other words, EFR deals with 'food prepared away from home'.

ECR is a North American initiative involving the entire food industry. The goal is to develop a responsive, consumer-driven system in which manufacturers, brokers and distributors work together to minimize the supply chain cost. This is accomplished by implementing common, more efficient business procedures.

While the ECR and EFR initiatives involve similar issues and processes, the EFR committee's goal is to find ways to eliminate non value-added costs from the foodservice supply chain. The EFR supply chain focuses on activities among all members including: operators, industrial, manufacturers, distributors, and brokers.

The U.S. EFR committee's mandate is to review efficiency in five main areas:

The Canadian EFR initiative is initially concentrating in three areas:

E-Commerce a Key Component

It is imperative for companies seeking to get involved in EFR to make the e-commerce aspects of their business a priority. E-commerce, specifically Electronic Data Interchange (EDI), is an effective means of reducing the workload for all members of the supply chain.

In Canada, there is an EFR subcommittee focused on e-commerce. This subcommittee is co-chaired by Jim Greenwood of the GFS Canada and Murray Webb of Lipton Monarch with the goal of benchmarking e-commerce activities in Canada and developing a roadmap for the successful industry-wide implementation of e-commerce.

Through this evaluation process, the e-commerce subcommittee conducted interviews with several companies within the foodservice industry representing operators, manufacturers, distributors and brokers. The findings: EDI has resulted in increased efficiency and lower costs in the foodservice industry.

EDI is the computer-to-computer transmission of business information between trading partners. Standards have been developed for all regular business-to-business communications. These include purchase orders, invoices, advanced shipping notices, price change notices, promotions, deals and finally fund transfers. By eliminating the confusion, clerical, mailing and other costs associated with paper-based information, EDI reduces costs, time delays and errors.

In order to maximize savings with EDI, there are three critical success factors:

  1. Integrate EDI within the business process. To simply retrieve data, print and re-enter it is an expensive and non-productive means to transfer information. If properly integrated, efficiency and data integrity can be achieved.
  2. Expand the use of EDI. Today there are several means to communicate business documents. These range from traditional EDI with a Value Added Network (VAN) to the small business Internet based solutions.
  3. Ensure that EDI has an executive sponsor. EDI usually involves a change to the existing business process and, in most cases, the existing process is not automated. Without the commitment of the senior decision makers we have found that adequate resources have not been committed.

Cathy Chan, manager of e-commerce with Toronto-based SERCA Foodservices Inc., is an enthusiastic supporter of EDI. With several hundred of its suppliers receiving purchase orders electronically from SERCA, Ms. Chan estimates that time savings of up to four hours per day per buyer have been achieved by using EDI as a means to transmit purchase orders. As a result, her buyers are no longer bogged down with time-consuming paperwork and are instead free to tackle aspects of their job requiring their experience and expertise.

At ARAMARK Canada Ltd. in Toronto, EDI has given the company up-to-date visibility of product movement, or sales reporting, through their channel. his detail allows ARAMARK to react in a timely manner to sales within the organization. "Without EDI, this would not be possible," says Tom Forestell, ARAMARK's vice-president of Purchasing. "EDI allows us to capture the data electronically and work with it in our business analysis systems in a timely manner."

Scott Lynch of W.T. Lynch Foods in Toronto has been involved with EDI for the past four years. His initial involvement was at the request of his customers. To date progress has been slow due mainly to the complexity of using multiple EDI Standards (UCS & VICS) and Releases (2000-3040). With the endorsement of one common EDI standard and release, VICS 4010 for both the food and foodservice industries, he believes critical mass can be achieved. Without achieving this critical mass, Lynch says his company must maintain two processes, one manual and the other electronic. "As e-commerce becomes more central within the EFR process, savings will finally be seen."

As for those companies who have not yet gotten involved in EDI, there has never been a better time to get started for three reasons:

  1. The food industry is adopting one common EDI standard (VICS 4010).
  2. Year 2000 is forcing the entire industry to be on the same release of this standard.
  3. Small business solutions are available. These include everything from faxing, to small business forms, as well as Internet solutions.

At present, pilot projects are underway within the foodservice sector to demonstrate real value with EDI. These pilots will help the e-commerce subcommittee develop an effective roadmap for companies to follow to cut costs and improve efficiency through e-commerce. The committee will share these results upon completion of the pilot projects.

Bryan Stewart is a Sales Executive with the Distribution Industry, for IBM Canada Ltd. He is also a member of the EFR subcommittee on e-commerce.

What is the standard format used?

In order to align itself with the Canadian grocery, chain drug and general merchandise sectors, the EFR Electronic Commerce Committee recommended that the Canadian foodservice sector adopt the VICS EDI Guidelines version 4010 as the industry standard. This version of the EDI guidelines is year 2000 compliant and can accommodate all Canadian foodservice business requirements.

In order to facilitate EDI implementation, the EFR E-Commerce Committee has developed a VICS 4010 EDI implementation guideline entitled "Canadian Food & Drug Retail, and Foodservice Implementation Guidelines for EDI". This document contains all the approved message formats required for EDI implementation.

Pilot Projects

Participating companies are currently implementing two pilot projects to demonstrate the benefits of EDI in the foodservice sector. These projects are: the SERCA Foodservice and Lipton Monarch pilot; and the Lynch and Gordon Foodservice (GFS) pilots.

  1. The SERCA Foodservice and Lipton Monarch pilot has been designed to measure the efficiencies gained from implementing a full suite of EDI transactions. Commencing with the 832 Price Sales Catalogue to permit item master database synchronization, and followed by the 850 Purchase Order, 855 Purchase Order Acknowledgement, and the 810 Invoice, this pilot will measure the cost savings and efficiencies provided by EDI from item set-up through to invoicing. Pilot results are scheduled to be completed at the end of the first quarter 2000, and will be documented in an EFR EDI Roadmap publication.
  2. The Lynch and Gordon Foodservice (GFS) pilot has been designed to measure the efficiencies gained for a medium-sized supplier exchanging Purchase Orders and Invoices via EDI with a foodservice distributor. The results of this pilot will also be documented and made available to the entire sector.

Electronic Commerce Committee

The Electronic Commerce Committee is composed of volunteers from foodservice manufacturers, brokers, operators and distributors. The Committee's mandate is to develop pilot projects and recommendations to integrate electronic commerce (EDI) into common business practices, from the order through to reconciliation. The current focus of the Committee is to promote the use of Electronic Data Interchange (EDI) in the foodservice sector by demonstrating its benefits through pilot projects and making implementation recommendations.

URL: http://www.efrcanada.org/eng/etools/ecommerce.html
Copyright © 2000 EFR