Navigating the Challenges of EDI
More than 20 years ago, Electronic Data Interchange, better known as EDI, replaced the paper-pushing drudgery of delivering freight bills for major retailers.
These days, freight bills and other documents are delivered electronically, which means more-accurate inventories. Various EDI systems also cut down the amount of time spent on handling and searching for paper documents.
Every major retailer seems to have its own system, but one feature the different systems all share is having bar codes, which help manufacturers and retailers track orders and garments with EDI.
But as easy as EDI may seem, it is still causing big headaches, according to Jim Wiebe, a Los Angeles–based EDI consultant who heads EDI workshops for nonprofit Fashion Business Inc.
In addition, smaller retailers have increasingly been adopting EDI and demanding that their vendors use the system. But adopting EDI can mean heavy costs for a small company.
Wiebe estimated a manufacturer can spend more than $10,000 to buy EDI programs and purchase the bar codes required to identify the various fashion categories a manufacturer creates.
But costs start to rise when retailers begin levying fines, or “chargebacks,” to manufacturers who make mistakes on EDI documents. For example, a chargeback can cost $150 per infraction for a simple mistake such as inputting incorrect routing information in a freight document, Wiebe said. A few mistakes can snowball and hurt a company’s bottom line.
Avoiding mistakes can be taken care of with classes about EDI, Wiebe said. Help with affording EDI also comes when big retailers purchase bar codes for smaller manufacturers so they can participate in the system.
Wiebe also advised manufacturers to become more familiar with radio frequency identification (RFID) tags, the electronic bar codes in clothing that track inventory on store floors with the same accuracy that EDI systems track inventory in warehouses. “Cash-register sales are going to become a lot more accurate. They were underreporting,” Wiebe said.—Andrew Asch
