CRUCIALSTEPS TO YOUR

EDIIMPLEMENTATION

S M E R E T A I L E R S

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EDI involves various aspects of the business and is intended to optimize the exchange of information between trading partners.

It’s a business solution that has proven to be effective for more than 30 years in the retail industry!

www.edigateway.com

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READER, OR ANY THIRD PARTY ASSOCIATED WITH THE READER, FOR LOST PROFITS, OR ANY OTHER CONSEQUENTIAL, INCIDENTIAL, OR PUNITIVE

DAMAGES, EVEN IF ADVISED IN ADVANCE OF THE POSSIBILITY OF SUCH DAMAGES.

TABLE OF CONTENT

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Preface

Organizational Structure

Business Strategy

EDI System Solution

EDI Integration with existing business systems

Process Mapping and Data Analytics

Establishing a B2B EDI Pilot Project

Deployment

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Preface

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PREFACE

Information is the key to success for any business and, often times, the speed of information can make the difference in revenue growth. In view of today’s global environment and the speed of information available, the need to rapidly transmit key information between businesses is now more important than ever. In business today the need to get the right product to the right place at the right time is a must in order for retailers to survive in today’s fast paced and uncompromising e-commerce market.

EDI is one of the tools that is needed to speed information in a supply chain. People tend to think of EDI as a process to solve business problems, it is not. It is, however, a very effective vehicle to move business pertinent data from one location to another in a predefined and predictable format. The key to achieving efficiencies is in the optimization of the business processes that precede and follow the data that is received.

Getting an invoice into your accounting package quickly will not necessarily optimize the business process, however, it can save the cost of the data entry of the invoice, including the cost of manual entry, as well as the risk of potential manual errors. When you consider that you may receive a substantial number of electronic invoices over a period of time, each corresponding to the movement of inventory, this may present an opportunity to reduce your demand on the cash cycle, and could also help lower your inventory cost.

The process of EDI involves various aspects of the business and it is intended to optimize the speed of information between business partners. As in the case of any business solution implementation, it requires the commitment of all stakeholders in the company as well as that of your supplier community.

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Planning an EDI implementation across a vendor community can be a challenging task and a complicated project to manage. For an implementation to be truly successful, the organization’s processes need to be examined and evaluated. Successful implementations involve most processes of the company, and can result in substantial savings in the supply chain process, such as reduction in inventory levels, and warehousing, improved cash flows, etc.

This section provides an overview of the EDI implementation and a look at the different factors involved in each step of the process:

It is important to appoint an EDI specialist to oversee the EDI implementation. Not only will this person be charged with handling the technical aspects of the implementation, but will also need to continuously evaluate the business system as it changes and becomes more responsive. It is also advisable that a single individual be assigned as your company’s contact point in dealing with all aspects of the project. Naming a project manager for this type of implementation will ensure a smooth line of communication between all stakeholders.

The process of EDI involves various aspects of the business and it is intended to optimize the speed of information between business partners. As in the case of any business solution implementation, it requires the commitment of all stakeholders in the company as well as that of your supplier community.

The implementation of an EDI project is a major project for most companies. It holds potential risks if not implemented correctly and it should never be implemented casually! There must be an underline business requirement, and a plan must be developed that includes all stakeholders.

Each assessment is as unique as each EDI implementation is.At EDI Gateway, our expertise and experience has proven that the following analysis should be performed before proceeding with an EDI initiative project. This effort will identify the following:

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Organizational Structure

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1-ORGANISATIONAL STRUCTURE

This process is a 9 step investigation of the business processes within

the organization to determine all areas that will be impacted by the EDI initiative.

INVESTIGATE ERP OR POS SYSTEM:

Investigate the primary ERP or POS system to determine what information can be processed, what can be generated and what information can be accepted by the system.

SURVEY TRADING PARTNERS:

Investigate all trading partners to determine those who are EDI capable and for which EDI transactions.

GAP ANALYSIS:

Perform a Gap Analysis to evaluate which information is readily available and what information is required for your EDI transactions, according to your requirements.

SEQUENCE DIAGRAM:

Create a sequence diagram to describe the flow of data between each step of the processes. That will enable to demonstrate which processes are impacted and where the data will be going.

MAPPING REQUIREMENT:

Prepare Mapping Requirements to provide to your trading partners so they are able to determine what information will be exchanged.

INITIAL VENDOR TESTING:

Identify a group of vendors for initial testing purpose

LAUNCH LETTER:

Inform your vendors of your EDI initiative by writing an EDI initiative Launch Letter.

ROLL-OUT AGENDA:

Prepare a schedule and determine timelines for your roll-out.

ROLL-OUT TESTING AND SET-UP:

Document and set-up the testing process.

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Tip: Here are some great Change Management books we thought you would appreciate!

Through this phase we are going to additionally examine areas of resistance. These are generally areas where adoption might have a substantial impact on the existing processes, and frequently, where different levels of resistance to change may be experienced. These areas will be looked at to evaluate the degree of reluctance. By doing this, you will concentrate on getting individuals on board with change management programsthus lowering resistance.

“

Leading Change,

by John P. Kotter

Who Moved My Cheese?

By Spencer Johnson

Switch: How to Change Things When Change Is

Hard by Chip Heath

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Business Strategy

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2-BUSINESS STRATEGY

The advantages of an EDI system may vary among companies. To distinguish the area of your company in which an EDI system can make the most improvement, you mustperform an EDI survey of your actual organization’s supply chain actors. Your company will discover the most effective profits in areas where an EDI system is normally supported by many, or few, high volume vendors.

The most significant benefits of an EDI implementation is the degree of adaptability and personalization it provides for B2B integration:

Many large organizations have started an EDI implementation within their purchasing departments in an effort to maximize business process management (BPM) of supplier purchase orders (850 EDI Purchase Order).

Manufacturers are likely to find material release documents an excellent place to begin for their EDI systems because it enables you to cultivate just-in-time (JIT) manufacturing strategies.

Suppliers usually use an EDI system for sales order transactions since the majority of their primary customers want to send POs electronically.

Accounts payable will benefit from an EDI system, with the integration of vendors that have numerous invoices.

Retailers in the purchasing position (HUB) frequently have the power to demand EDI of their suppliers as a mandatory condition to doing business with them. For this reason, purchasing is frequently the initial target of an EDI implementation.

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EDI SYSTEM SOLUTION

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3- EDI SYSTEM SOLUTION

You should carry out a cost-benefit analysis to further determine the best corporate applications for the EDI system deployment and to list the priorities.

Consider that a cost-benefit analysis needs to be brief enough to keep up momentum for completing the EDI system implementation. It should incorporate the specifications of the current systems and determine how the EDI implementation can improve those systems.

Managing every type of business document is dependent on human and machine interactions; this should be the starting point to focus on in order to select efficiencies that may be maximized with an EDI system.

To define where your company could benefit most from EDI services, you need to consider the following:

What are the EDI capabilities of your vendor community?

How many vendors are involved in each business cycle?

How much paperwork is involved in each business cycle?

How much time does each business cycle currently require?

Can an EDI system reduce or eliminate repetitive steps in the business cycle?

Can an EDI system reduce or eliminate repetitive data entry, clerical effort?

Will it reduce the need to carry inventory?

Can an EDI system improve or support relationships with the trading partners and customer service through improved delivery times, larger business strategies (ex: JIT manufacturing)?

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TIP: We encourage companies who are implementing EDI to evaluate the methods to improve the current systems before automating since automating an inefficient system has the impact of magnifying the inefficiency. Improving a process before EDI system deployment might take more time and financial resources in the beginning, but will definitely provide maximum financial return in the long run.

Common benefits of an EDI system implementation

Following an EDI implementation, you’ll notice a radical cutback of documents and paperwork. Nevertheless, the main savings won’t be in paperwork and mailing reduction but rather in the following critical business elements:

Inventory reductionsIncreased operating capitalShorter order cyclesImproved order accuracyImproved labor productivityBetter retailer/vendor relationships

High Level EDI System Analysis

You must also consider the following system analysis:

Data required by current systemData required by trading partners yet missing in current systemData required by EDI standards

A business cycle contains each of the processes and documents associated with carrying out a transaction.

An example of a business cycle would be as follow:

SIMPLE RETAILER CYCLE OF A TYPICAL PURCHASE ORDER

To maximize the benefits of your cost analysis, it is preferable that you assign a resource that has extensive knowledge of a variety of system types.

In this situation, EDI consulting is available and can be an extremely beneficial move to ensure your organization’s investment in an EDI system produces the best possible return.

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Tip: When you are working with a 3rd Party EDI provider, such as EDI Gateway, you are benefitting from an unbiased partner in this field, since we do not sell EDI systems and can introduce you to the best system provider, based on your requirements.

Tip: For cost analysis purposes, make sure to incorporate all costs inherent in the present system if it does not include data required by trading partners.

Overview of EDI Survey

The EDI analysis presented by the EDI Project Manager should include detailed information concerning the financial, management and deployment points of view, to assist in the final decision process. Here is an overview of what the document should include:

Project scopeCurrent system strengths and weaknessesAlternatives to current system that offer considerable process improvementAlternatives considered but not chosenRelative financial information on alternative systemsSchedule and Budget for EDI system developmentStaff required for effective EDI implementationEDI implementation expected launch date

Solution Development

Once management has evaluated and approved the EDI solution, based on previous analysis, the project moves forward into the development phase. In this stage, five essential parts of the EDI system will contribute to its launch:

Telecommunications channel

Telecommunications software

EDI Translator

EDI Interface

EDI Application Software

The organization’s current telecommunications environment must also be evaluated. Many companies choose to transmit EDI data through third party value added networks (VANs) instead of building their own data networks for EDI. The Internet also offers a cost effective and viable alternative.

The information on possible document size should be defined throughout the evaluation phase of business processes to determine the required network capacity for current and future needs.

Determine your system requirements by answering these questions:

Does your present internal network have enough capacity to handle EDI traffic?

Based on expected EDI system usage, what are the cost differences in managing multiple or individual trading partner’s vs using a single connection to an EDI VAN?

What are the internal programming needs relative to meeting data capacities required by EDI standards and trading partners using your internal systems?

How easily can an EDI system be integrated with existing internal applications?

These questions are intended to assist your company to determine the preferred type of EDI system to address your requirements in the most efficient and cost-effective way.

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EDI Application Software

The selection of an EDI application software is a very essential aspect to the success of the EDI project. Choosing the right software package is crucial.

Choosing an EDI Network

EDI network communications exist in two primary methods: point-to-point communications and value added networks (VANs).

Point-to-Point (P2P) Communications—P2P communications occur between trading partners when lines are established using standard communication protocols such as AS2 or FTP (SFTP). The preferred method today is AS2 as it offers the most protection of data integrity and guarantees immediate delivery since it requires a full successful acknowledgement back from the receiver.

Value added networks (VANs)—VANs are a widely used method. VANs provide a store-and-forward mailbox service. The sender connects with the VAN and sends its EDI transactions to the recipient’s mailbox where they are stored. The sender then disconnects from the service. When it is convenient, the recipient connects to the network and receives those transactions from its own mailbox. With this approach, it is expected that both sending and receiving parties use the same EDI standard transactions. Some VAN’s will validate data.

Telecommunications Channel (EDI Network)

The first part of EDI is most commonly known as value added network (VAN).

Telecommunications Software

This second part is not specific to the EDI system; however, it plays an important role in the execution of an EDI solution.Typically, the functionality of this software mimics MS Windows dial-up networking.

EDI Translator

The primary function of the EDI translator is to convert the data sent via EDI from the X12 format into a format that is compatible with your in-house systems and applications. Additionally, an EDI translation package may have several subsystems including the handling of the EDI envelope, document management/audit trails, compliance checking, and generation of a functional acknowledgement. The functional acknowledgement is more or less equivalent to the postal service return receipt to confirm delivery. The EDI translator is usually a package licensed from an EDI software company or VAN provider.

EDI Interface

EDI interface completes the final translation and reformatting of the exchanged data. When the EDI translator completes the conversion of the data, the interface reformats the data into a format that can be easily used by the in-house EDI application software.

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Legal Requirements

EDI implementation will alter more than just the way a business performs every day processes and communications. Through the integration of an EDI program, an organization might experience transformations in the organizational policies. For instance, the implementation of EDI could change the way documents are stored, archived, and restored. Auditors must understand and support these new procedures.

Furthermore, EDI changes the way legal considerations are performed as well. Rather than every document including the terms and conditions of a transaction, these same legal conditions are covered with EDI documents that describe and establish what terms are in effect throughout the EDI transmissions. It is necessary for the legal counsel to draft, review, and approve these terms and conditions.

These terms and conditions will also need to be specified in your vendor contract, and stipulated in the business rules for your vendor community to acknowledge.

Deciding what type of EDI network depends on several variables. The following considerations should be made when choosing the network type for your EDI system:

In-house data processing operationsInvestments and on-going costsNumber of partners in the EDI trading communityTrading Partners’ capabilities

This aspect of business operations can be a more significant factor in choosing an EDI network capability than how modern the technology the vendor is using. When using a VAN, trading partners are free to connect with the network, transmit or receive data, and then disconnect as the data is not actually sent to the trading partner but to the server that routes the data into the correct mailbox. When using AS2 or FTP, the receiver computers must be available at all times.

It is recommended to identify the members of the trading community and their capabilities before determining the most effective method of communication.

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EDI Integration with existing

business systems

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4- EDI Integration with existingbusiness systems

Work can start on system configuration upon the selection of the EDI software and network.

A complex EDI system that fulfills several departments and makes use of EDI integration with corporate applications needs significant data routing and internal programming. The most significant development task that EDI systems typically deal with is EDI integration with current corporate applications. EDI mapping is required to capture data out of internal applications and transport it via the EDI software. Therefore, developing EDI integration software can often be the most significant cost of an EDI system. Methodologies employed for system prototypes are developed prior to the coding of systems.

EDI integration typically consists of 3 key activities:

Analysis of data during EDI mapping

Using EDI software to map data

Custom interface programs and user exit development

You should ask as to whether the above mentioned second and third items have been completed by the software development company, as this can impact whether your back-office systems can be integrated without requiring any extra costs.

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Process Mapping and

Data Analytics

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5- Process Mapping and Data Analytics

For the EDI implementation, you must begin with data analysis with an end result in mind. For example, if the initial scheduled transaction to launch is the outbound purchase order (PO), you must start with analysis of the order processing system’s requirements. For this part of the project, you must include the person that has the most knowledge about the application.

Data analysis starts with a comparison of the end goal data structure to current data structure. Once all of the fields have been identified, origin content and end goal content should be compared closely. If there are differences between the number and nature of the data format, a cross reference file can often make the field(s) available.

For example, the major groups of records in the original purchase order in the X12 format are header, detail, and trailer. An outbound invoice in X12 also has header, detail and trailer as major groups of records. However, the invoice may originate in an accounts receivable system that has shipment header, shipment detail, order header, order detail, and a customer master file. If a customer number is not usually sent, one may be built into the cross-reference file via an EDI Sender ID.

Particular care needs to be given to primary keys such as customer PO, PRO bill of lading number, claim number, invoice number, and so on. Secondary key data can include customer department number, service provider ID, carrier code, store number, etc.

Industry-wide codes make EDI implementation easier and are suggested for EDI implementation, if such usages are currently being used. Examples of valuable industry-wide numbers are:

Dun and Bradstreet (DUNS) http://www.dnb.ca/

Standard Carrier Alpha Code (SCAC) http://scac.vpweb.com/

Universal Product Code (UPC) http://www.simplybarcodes.net/ or your 3rd Party EDI provider may provide

National Drug Code ( NDC ) http://www.fda.gov/

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Also to be viewed with suspicion would be custom edits per trading partner. For example, it is not the responsibility of an outbound EDI interface or translator to avoid Sears Canada freight charges. Rejection of such charges by Sears Canada quickly comes to the attention of the EDI coordinator, but should be addressed further upstream in a Vendor Business Rule Guide. If a warehouse is submitting charges incorrectly, the warehouse software must have additional edits made.

Business Process Mapping: Defining to the EDI Software

After data analysis has been completed for EDI system implementation, the resultant map is defined to the EDI translation software. Most comprehensive EDI software systems let you define the map, which is similar to a basic database definition.

Once the information has been mapped, the EDI software stores the map. When an appropriate transaction reaches the EDI translation section, the mapped data is used to determine if and how to reformat the data.

Development of Custom EDI Interfaces

EDI interfaces occasionally require logic that is beyond the capabilities of the most robust EDI mappers. The somewhat complex structure of the accounts receivable databases might call for a selection or pre-processing program. This program could build outbound header, detail, and trailer records for example, a structure similar in nature to X12.

Occasionally a field conversion may be necessary. Such conversion may be done in a pre- or post-processing program or in a user exit callable by the EDI program. An example is conversion of a date in century, month, year, day format to X12’s CCYYMMDD format.

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Establishing a B2B EDI Pilot

Project

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6- Establishing a B2B EDI Pilot Project

Once development and testing of the EDI system is completed, it is essential that several other system tests be performed in pilot with selected vendors to allow the necessary refinements of the system. If all goes according to plan, it also provides a good assessment of how EDI will impact performance. The pilot project should commence with a few EDI experienced vendors. Also, the first document to use should be a main one, such as the Purchase Order (EDI 850).

In practice, some testing of the system will already have been completed. When VANs connect organizations to their systems, they also conduct tests. Companies transmit data to the VANs who then verify that transmissions are reliable. Pilot partners execute an equivalent series of events. Documents are transmitted to pilot partners for evaluation. After the pilots verify that they can process the data accurately, they return the data for testing. Upon successful completion of these tests, pilots send production Purchase orders on real schedules to assess whether the system can respond to daily processes. Once both trading partners are comfortable that the functionality of the EDI system meets the current process performance, paper transactions can be abolished.

Trading partners coordinate a timeline for phasing out paper transactions in parallel. This timeline can range from a few weeks to a few months, based on the complexity of the EDI system.

Results from the pilot project must be analyzed internally to answer the following questions:

Will the EDI system maintain control over data transactions?

Do the benefits projected in the original EDI analysis business strategy appear to be provided by the EDI system?

Will the EDI system be set up to handle anticipated traffic?

Will internal EDI users find results satisfactory?

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Tip: You may extend the pilot phase of the EDI project to continue to be an isolated system that handles only high-volume vendors rather than moving into a broader base of trading partners. The final step of your EDI implementation should be the onboarding of your smaller trading partners.

Deployment

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7- Deployment

Most companies will put together, or have their EDI 3rd Party come up with, an EDI training plan for their vendors, as soon as they decide to extend the EDI system to the remainder of their trading partners. Getting your entire vendor community to become compliant is an integral process in the success of an EDI system deployment.

Hub and Spoke Supply Chain Model

With the hub and spoke approach, the retailer (the Hub) deploys its EDI program to its vendors (the Spokes). The degree of support and amount of flexibility that large organizations offer their suppliers can vary. Often times, vendors will receive a notice advising that in order to maintain a business relationship, they must become EDI compliant.

Vendors could be hesitant to embark on an EDI initiative. The hub may conquer almost any resistance by applying a communication campaign that would be launch into effect with an EDI consultant or a 3rd party EDI provider.

The campaign would describe the effects of EDI on the business relationship in order to mollify resistance and objections.

Some typical objections are:

Fear that set-up costs and licensing fees for EDI software and order processing systems may be significant

Cash flow or budget considerations

MIS priorities including network and PC upgrades

Workload and planning cycles

Lack of consultants or employee candidates with EDI experience

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Organizations that are unable to hold a conference due to geographical or other restrictions, can opt for the use of webinars.

Our approach as a 3rd party EDI provider is to use the following:

Launch Letter, communication campaignOnline Training videos of your EDI requirements and Business RulesFrequent webinars (recorded for video tutorials) Phone & E-mail communicationsEDI Personalized Support

EDI System Testing

In the past, leading VANs and Hubs lessened the effort required for a faster, large scale EDI implementation. The first step towards this effort was testing procedures. Here is a walk-through of the process:

Before testing, trading partners receive a one or two page procedure explaining what to expect.

Creating a Trading Partners Conference

You can boost the number of trading partners and compliance speed, along with improving the return of the company’s EDI investment, by offering EDI training and assistance to suppliers. Trading partner resistance is generally overcome by communication and education. You should determine whether EDI training is going to be offered by the organization or by a contracted 3rd party EDI provider.

The Hub may host a supplier conference where vendors could learn about the EDI program, the benefits of EDI, as well as the options available to them.

Here are some tips for a successful conference:

A non-technical, high-level member of the organization (preferably CEO, CFO or COO) extends the invitationThe high-level person should open the conference, relating to the suppliers and business objectivesProvide vendors with understandable,straightforward requirements and expectationsHave an EDI consultant talk about the options available with a Q&A period at the end of the conference

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Additional Transactions

If your EDI implementation includes multiple transactions down the line, the subsequent transaction should be selected and viewed as a separate project, once the EDI implementation of the first transaction has been completed with a substantial percentage of trading partners deployed. The second transaction often needs to interface with different applications; therefore, the technical EDI members of the first transaction’s team often work on the second transaction project rather than members involved in EDI implementation and deployment.

Since the second transaction often involves a different user department, the challenges are analysis, motivation, and education. If the second transaction involves the same trading partner community, pilot testing and deployment is usually simpler.

Trading partners, Hubs, and VAN personnel use this document as a checklist during testing. Because these procedures enable training of Hub and VAN personnel on specifics, as opposed to general EDI standards, there is rarely a need for extensive EDI experience. Additionally, Hub or EDI VAN testers use tools.

Generic purchase order information is retrieved by the Hub or VAN where the trading partner’s receiver ID is applied. Others set a flag in the supplier database which then replicates production purchase orders. Because EDI VANs and service bureaus use generic data, Hubs that outsource EDI testing must realize that only a portion can be outsourced and only the trading partners’ EDI systems can be tested. It is the Hub’s task to test accuracy and business meaning of data by processing production data through the EDI system into an order processing ERP or similar system. This will thoroughly test the Hub’s product data files.

Phased Implementation of the First EDI Transaction

EDI implementation should be approached in phases. The same pilot test procedures are used once the organization decides how many trading partners it can handle at once. Dual testing and dual operations schedule should be firmly followed. EDI objectives are used to select groups of new trading partners. For example, if the objective is to reduce accounts payable processing, high paper volume trading partners should be implemented first.

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Tip: We encourage you to evaluate your EDI project by learning as much as you can through various tutorials, blogs and white papers. EDI Gateway produces such content in order to help you in your decision making process and through your first EDI implementation.

EDI Gateway is Canada’s leading EDI Outsourcing Center providing complete EDI solutions to corporations across North America. Founded in 1993, EDI Gateway is uniquely positioned to offer electronic exchange of business documents and transactions in a simplified fashion, within the supply chain, whereby allowing for a seamless and affordable transition from paper to e-commerce. With over 7000 trading relationships in retail, manufacturing and grocery sectors, EDI Gateway has assisted a wide variety of companies, from small to large multi-nationals, become EDI compliant and e-commerce capable.

With an impressive Microsoft partnership that includes Biztalk Azure, TAP program and a membership on the Partner Executive board, EDI Gateway prides itself in its ability to understand and analyze complex business processes as well as supply chains in order to optimize operations, increase profitability and reduce costs. Our accomplishments also include certification in ISV, BI and application data as well as Digital WPC blogger. Being Microsoft Gold certified, and part of the Microsoft Partner Network (MPN), has allowed us to distinguish ourselves and the solutions we offer. This highest level of certification, under Microsoft’s Partner Network, is a true testament to EDI Gateway’s extraordinary level of commitment, expertise and client care.

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