EDI Essentials e-book WhichAddon

WhichAddOn May 2018 E-Book

EDI ESSENTIALS

WHAT IS EDI?

Every day I talk to businesses selling products – some small, some large. We specialise in helping businesses find the right cloud software for their business and we are experts in inventory management, e-commerce and manufacturing – so that’s the type of businesses we help.

Almost every day when I have an introductory scope call with a client, I need to explain to businesses what EDI is.

Unless the customer is already selling to the big chain stores, they don’t know what EDI is and even if they do, they are happy to hear it again.

EDI stands for Electronic Data Interchange.

Super Retail Group explains EDI nicely as: The electronic exchange of information in a defined and structured format between their business and their suppliers.

EDI Enables faster, more efficient and more accurate procurement increased service levels and compliance overall supply chain visibility and efficiency enhanced collaboration with our trade partners

EDI is used by large companies that have multiple stores throughout the country or around the world. Think Coles & Woolworths (for food and beverage products), Iconic, Myer or David Jones or Nordstrom (for fashion businesses), Bunnings (for manufacturing businesses) or Houzz and Wayfair (for lifestyle products businesses). Even if you want to sell your products to Kmart, Target, Walmart, Whole Foods or Rebel Sports they all use EDI. They might call it by a different name internally but it is essentially just a slightly different version of the same thing.

HOW DOES EDI WORK? Ok, so it’s exchanging data electronically, but how does it work?

Think of EDI as its own language. Like banks have a way of exchanging data between the banks that they all understand, EDI is like that.

The information exchanges are defined and structured in the same way so that the buyer (e.g.

Coles) can place a purchase order in their system and it can automatically flow into the supplier’s software as a sales order.

Furthermore, when you are working with a buyer like Coles, you need to send them an order acknowledgement, confirming if you can fulfill the order that they have asked for and if you can meet their deadline. Then of course, Coles has a lot of moving parts. You need to get the goods they have purchased from you to get to their distribution centre and then they need to distribute everything to their hundreds of supermarkets around the country.

They need to know exactly when you are sending their order to them, when it’s going to arrive and you must ensure that it is labelled correctly. This involves you sending them what’s called an 'Advanced Shipping Notice' and then printing off the shipping labels they need to successfully receive your order at the distribution centre. Finally, you need to electronically send them an invoice to get paid!

It’s a lot of back and forth. If you don’t do it on time – at any stage – you can “get a black mark” against your company name and risk losing your access completely.

Here’s a visual depiction of this process from Cin7, one of the software systems we implement for customers with Xero and QuickBooks Online that can manage their inventory management requirements and their EDI needs all-in-one.

EDI Retailer Purchase Order Received

Your Cin7 Account

EDI retailer sends through a Purchase Order Cin7 confims the order is received

Order is Reviewed

You send an order response to the EDI retailer Waiting Period

Retailer confirms updated order You send an order response to the EDI retailer

Delivery window

EDI order is completed

Order is shipped

You trigger an Advanced Shipping Notice to be sent You send an invoice to the EDI retailer

WHICHADDON CAN HELP YOU WITH CIN7

At WhichAddon we can help you to set up and install Cin7 in your business. We have helped countless businesses automate their processes using Cin7 and can get you all set up in no time.

Click here to read about how we helped Linea Di Liara automate their business using Cin7 and how we helped save them both time and money.

I WANT CIN7!

COMMON BUSINESS DOCUMENTS Listed on the following pages are document types with their ANSI numerical and EDIFACT six-letter name identifiers

PRODUCT CATALOG (832/PRICAT) Popular in the retail industry, this document allows for a a seller to issue a catalogue which includes a description of prices and the quantities available for the buyer to choose from and issue a purchase order.

CLICK HERE TO BOOK A FREE SCOPE CALL

PURCHASE ORDER ACKNOWLEDGMENT (855/ORDRSP) This document will let a buyer know that the supplier has acknowledged and will be fulfilling the purchase order

INVOICE (810/INVOIC) A request for the payment of goods which includes the prices and the quantities of what was ordered by a buyer and what is owed to the seller in return for the chosen goods.

REMITTANCE ADVICE (820/REMADV) Allows a supplier to reconcile their payments as it is a notification to a supplier that a payment has been made by the buyer.

PURCHASE ORDER (850/ORDERS) A document which outlines the terms of a sale. The document comes from a buyer and is given to a supplier, it details what is expected from the buyer for a particular order i.e. what the buyer is purchasing.

ADVANCE SHIP NOTICE (856/DESADV) This is an important document for drop shippers or those using just-in-time delivery. It tells a buyer that their goods have been shipped and the details of how they were shipped and when they will arrive.

LOGISTICS EDI DOCUMENTS There are 3 types of logistics EDI documents which relate to shipping, freight and transportation of goods.

Freight Details and Invoice (110 for air carriers, 210, for motor carriers, 310 for ocean carriers and 410, for rail carriers/EDIFACT IFTMCS): This is an invoice for shipment services from the freight company.

Carrier Load Tender (104 for air carriers, 204 for motor carriers, 304 for ocean carriers and 404 for rail carriers/EDIFACT CONTEN): Lists the destination of goods, shipping instructions and what the goods are. It is a tender document so it is what is used by different carriers to bid on the load.

MANUFACTURING SPECIFIC DOCUMENTS These are documents for people in the manufacturing industry. There are two types, these include: Shipping Schedule (862/DELJIT): This is the official request of goods and an order to ship them based on a specific schedule from the buyer.

Planning Schedule/Material Release (830/DELFOR): This is the shipping plan schedule. and is based on a projected forecast of possible orders in the future.

FINANCIAL EDI TRANSACTIONS There are 4 types of financial EDI transactions.

Payment Instruction and Remittance Advice (820/REMADV): Sent from a business to a bank and it is an instruction to make a payment.

Lockbox (823/DEBADV): This is used by a client of a bank who collects many payments from different individuals and business. Allows for the sorting of information.

Application Advice (824/APERAK): When there is a problem with a transaction due to wrong information being entered or a missing account number.

Debit Authorization (828/DIRDEB) Sent from a business to a bank to make a request for a debit.

FUNCTIONAL ACKNOWLEDGMENT (997/CONTRL) This is simply a note in the system that the document has been received or delivered. It does not mean that anything has happened, it is just to let you know that the computers have received/sent it.

BUSINESS PROCESSES THAT BENEFIT FROM EDI

EDI is an important part of the business process because the system can help to streamline and automate a business supply chain. EDI can also help to efficiently manage transactions within the supply chain and track them as well. There are three main areas in the business supply chain that benefit from EDI, these include: Procurement Shipping and receiving invoicing and payments

PROCUREMENT Procurement has all to do with when a buyer places an order on a seller's product.

In the EDI system the procurement process starts when the EDI buyer sends through a pruchase order. The supplier then confirms the order is received and sends an order acknowledgement form back to the EDI buyer. Inside the order acknowledgement form a supplier could make adjustments to the purchase order. For example they may not have enough stock to fultil the purchase order, so would make adjustments to partially fill the order instead. The buyer can then review this and if acceptable, send a purchase order change form to the seller. The seller can then send an order change acknowledgement form back to the buyer.

The benefits of using EDI for procurement include:: Due to not being a manual system and things being automated, things are much faster.

The EDI status documents which are sent between the buyer and the seller during the procurement process help to track information and let you see what's going on.

For buyers, it's easy to start again with a new supplier if the seller wasn't able to fill an order or the adjustments to partially fill weren't acceptable. A buyer can quickly approach another seller on the system to see if there's a better deal around.

Once all is agreed, then a deal to procure the goods between the parties can be made.

THE PROCUREMENT PROCESS BETWEEN BUYERS AND SELLERS PURCHASE ORDER SENT ORDER ACKNOWLEDGEMENT FORM PURCHASE ORDER CHANGE FORM ORDER CHANGE ACKNOWDGEMENT FORM

BUYER

SELLER

SHIPPING AND RECEIVING EDI helps to assist with both shipping and receiving orders. Similarly to what we saw with the procurement phase which was efficient for buyers and sellers because of the many forms available, there are also forms for the shipping and receiving process.

Forms in the shipping and receiving phase are particular useful for businesses using JIT (Just In Time Inventory). With forms such as the "Advance Ship Notice" businesses will know exactly where their order is, when it will arrive and also how it will be shipped.

CROSS DOCKING PROCESS SUPPLIER RECEIVES THE ORDER

BUYER'S: DISTRIBUTION CENTRE SEES THE BARCODE ON THE ASN

Benefits of EDI for shipping and receiving Visibility: You are able to see where your stock is while in transit with useful documents such as 'Waybills' for air and rail order deliveries or 'Bills of Lading' for ocean carrier deliveries.

Carrier load tender: Documents like the carrier load tender can be used to make a tender form that carriers can assess and then can use to bid on the supplier's load which might help the supplier to get a better deal.

Cross docking: Allows goods to be sent to a new location after the first dock/distribution centre is reached, this could be a retail store, another warehouse or a manufacturing centre. The 'Advance Ship Notice' can leave a barcode on the products which can be used to help to inform the distribution centre when it reaches a new location for where to send the product next.

Dropshipping: When a customer places an order with a retailer, that retailer might place an order with a supplier who can ship the product directly to a customer. The Advanced Ship Notice is an essential part of this.

Direct store delivery: When a purchaser orders a product it is possible to have it sent to their retail store across multiple locations and in different quantities. A separate Advanced Ship Notice can be sent with each order so a purchaser can keep track of it as well as the quantities coming to each store as well.

RETAIL LOCATION RECEIVES THE PRODUCT

INVOICING AND PAYMENTS EDI uses electronic invoicing. This is important because increasingly, finance teams and accountants look to make their financial management more efficient by reducing paperwork and when it comes to businesses that don't use EDI, there's a lot of paper work involved from all of the reports generated and also transactions to record.

The benefits of invoicing and payments include: It helps to reduce fraud with easily trackable sources for everything in the business being able to be found at anytime, rather than being lost in amongst a bunch of papers with real time access available.

Secondly, being paperless is great for the environment!

Electronic payments are fast! There's no delay when it comes to waiting for an invoice in the mail.

There are three different types of ways for processing invoices and payments using EDI, these include: Retail: Creation of a purchase order and the creation of an invoice. This is common in the retail industry.

Recurring Services: No creation of a purchase order, only the creation of an invoice. Often for times when services are provided and there is an arrangement for a recurring service where only an invoice is needed, but the service is known.

Manufacturing: Creation of a purchase order and no invoice created. Used in manufacturing businesses for example when a manufacturer might request parts, these are sent to the manufacturer using an Advance Ship Notice, when these are received the manufacturer pays for it, similar to the retail option above.

RECURRING SERVICES ORDER ILLUSTRATION PURCHASE ORDER

INVOICE

PA YM EN T

PA YM EN T

BUYER BANK PROCESSING

ES VIC D SER VIDE O PR

SELLER The green arrows show the recurring services order the first time it's ordered. But then, the order is a recurring one. Services are expected and no purchase order form is needed the second time around, only the invoice and the payment and of course the services delivered.

USING EDI WITH QUICKBOOKS ONLINE When using EDI you will need to use a gateway to connect it and use it. One such gateway is called B2B gateway and it has connections with both Quickbooks Online and also Xero. By connecting to these systems you will be able to connect your accounting software with your EDI gateway which will allow you to keep track of your invoices.

B2B GATEWAY QBO INTEGRATION The Quickbooks connect app allows your organisation to connect with any trading partner that requires you to have EDI to trade.

Some of the benefits of the QBO integration with B2B gateway include: QBO is EDI compliant Connects to the cloud, allows for importing and exporting of files from anywhere using the cloud You can send out invoices using QBO Displays a partner list of people you know and can trade with The import history section within QBO will let you go back and look at old imported invoices Allows for the creation of sales receipts.

B2B Gateway login screen for QBO

USING EDI WITH XERO When using EDI you will need to use a gateway to connect it and use it. One such gateway is called B2B gateway and it has connections with both Quickbooks Online and also Xero. By connecting to these systems you will be able to connect your accounting software with your EDI gateway which will allow you to keep track of your invoices.

B2B GATEWAY XERO INTEGRATION The Xero app allows your organisation to connect with any trading partner that requires you to have EDI to trade.

Some of the benefits of Xero integration with B2B gateway include: Xero is a cloud based solution and provides access to files in the cloud Can handle EDI file standards such as X12, EDIFACT, Eancom, Tradacoms, PEPPOL, oioUBL. Can handle VAN, AS2, FTP, sFTP

Types of partners that use EDI and Xero that will work with using B2B Gateway

NEED INVENTORY & EDI? CIN7 CAN HELP! When using EDI with your chosen B2B gateway and either QBO or Xero to help you with your invoicing, things are pretty great. Your accounting needs are taken care of. But when it comes to keeping track of your inventory, how it changes after each sale, what you've run out of stock on or what you need to order more of, then Quickbooks and Xero just aren't enough.

When you have large inventories and need to keep track of them using EDI, you can do so with Cin7 which is specially designed for just that purpose.

EDI & CIN 7 INTEGRATION BENEFITS In Cin7's EDI dashboard your orders for your customers are displayed in your dashboard. It also displays what stage of the supply chain they are in so that you know what you need to do to get your products to your customers on time.

Cin7 has colour coded cells in the dashboard so that when you log you know which items you need to take urgent action on just by looking at their colours.

Cin7 reduces manual administration of your inventory for individual products. You can set rules within the system on certain orders to automatically process them all the way to the shipment phase with your 3PL provider.

The ability to connect with hundreds of EDI retailers from around the world.

But you will need a professional to help you install Cin7. luckily WhichAddOn can help you with your EDI and Cin7 installation. Click here to book a scope call with us.

Cin7 Dashboard

CIN 7 WOOLWORTHS EDI INTEGRATION EXAMPLE BENEFITS & EFFICIENCIES

Once your Cin7 installation by WhichAddOn is complete your system will be able to send and receive all the necessary documents in the EDI process. Here's an example of what Cin7 can do with a retailer like Woolworths: 850 Purchase Order: Cin7 translates Woolworths’ purchase orders as individual sales orders in Cin7.

856 Advanced Shipping Notice: Cin7 translates ASNs into EDI format and sends them to Woolworths to let them know they can expect the delivery of an order soon.

855 Purchase Order Acknowledgement: Cin7 sends a confirmation to Woolworths if the purchase order is fully accepted or rejected.

810 Invoice: Cin7 sends invoices to Woolworths for items dispatched to Woolworths.

Source: Cin 7 website