Thanks to EDI, or electronic data interchange, retail businesses can send and receive data in a standardized digital format, replacing manual processes like faxing or handling paper-based orders. EDI — for the retail industry, specifically — simplifies procurement, invoicing, and shipping, making supply chain management more efficient. By streamlining these tasks, it enhances communication with suppliers while significantly reducing the cost associated with traditional methods.
EDI Industries
EDI in Retail:
A Guide on How to Enhance Supply Chain Management
Before electronic data interchange (EDI), the retail industry relied on manual processes like phone calls, faxes, and endless paperwork. Placing an order meant typing up a purchase order, printing it, and sending it to the supplier. A single typo, like an incorrect product code or quantity, could create delays, and tracking shipments or payments often took even longer.
With EDI, however, retailers send digital purchase orders that suppliers confirm within minutes. Shipping updates, invoices, and payments happen automatically, minimizing misplaced orders, missed shipments, and frustrating delays.
Overview
In this guide, we’ll explain how EDI simplifies operations for retailers, making it easier to keep shelves stocked and customers satisfied.
01
What Is EDI in Retail?
Common EDI Transaction Sets in Retail
EDI uses standardized numeric and alphabetic transaction sets to ensure seamless data exchange across industries. While hundreds of codes exist, the retail sector frequently uses these seven:
EDI 810 (Invoice)
Suppliers use EDI 810 to request payment for goods or services. For instance, a supplier shipping leather handbags to a retailer sends an EDI 810 detailing quantities, unit prices, shipping fees, and payment terms, ensuring transparency in the billing process.
EDI 820 (Payment Order)
With EDI 820, retailers notify suppliers of payments. For example, when paying for kitchen appliances, a retailer specifies payment details like amounts, currencies, reference numbers, and discounts, ensuring clarity in financial transactions.
EDI 832 (Price/Sales Catalog)
Suppliers share product catalogs via EDI 832, listing descriptions, pricing, packaging, and availability. A sportswear supplier might send a digital catalog to help retailers update inventory or plan promotions.
EDI 850 (Purchase Order)
EDI 850 allows retailers to place orders with suppliers, specifying item types, quantities, delivery schedules, and agreed prices. A retailer ordering units of organic skincare products, for example, would use this document to initiate the procurement process.
EDI 855 (Purchase Order Acknowledgement)
Suppliers confirm purchase orders with EDI 855. A supplier receiving an order for skincare products would use it to confirm availability, propose adjustments for inventory issues, or communicate shipping delays, ensuring clear communication.
EDI 856 (Advance Ship Notice (ASN))
EDI 856 lets suppliers notify retailers of pending shipments. A supplier shipping LED TVs would use this transaction set to provide tracking numbers, carrier information, and estimated delivery dates, allowing the retailer to prepare for the shipment’s arrival.
EDI 857 (Shipment and Billing Notice)
This one is common in grocery retail. It combines shipping and billing details into one document. A supplier delivering fresh produce would use EDI 857 to specify the items shipped, pallet details, and packaging information, simplifying the receiving process.
02
How EDI Benefits Retailers
EDI offers a multitude of perks to retail businesses that adopt the technology, from improving accuracy to strengthening partnerships. Here’s a closer look at how EDI benefits the retail industry:
Minimize Human Errors
EDI automates supply chain workflows, reducing manual tasks prone to errors and inaccuracies. With human intervention minimized, retailers experience smoother data exchanges, faster order fulfillment, and higher customer satisfaction.
Improve Inventory Visibility
EDI provides real-time updates on stock levels, enabling better inventory management. Retailers can monitor demands, avoid stockouts, and maintain a well-balanced inventory to meet customer needs.
Expand and Streamline Order Fulfillment
EDI automates order processing, speeding up the order-to-cash cycle. This efficiency supports scalability and helps retailers manage high order volumes and peak demand periods without disruptions.
Improve Customer Experience
Retailers can leverage EDI to provide accurate, up-to-date inventory data and process orders quickly, ensuring timely deliveries. These capabilities enhance customer satisfaction, fostering loyalty and trust in the brand.
Automate Processes
EDI simplifies supply chain processes, from procurement to shipping, through automation. By removing repetitive manual tasks, it frees up resources and allows for consistent, efficient operations.
Improve Product Management
EDI integrates with internal systems like ERP or WMS to offer insights into product trends and performance. Retailers can adjust inventory strategies to align with customer preferences and seasonal demands.
Increase Data Security
EDI uses secure protocols like encryption to protect sensitive customer and financial information during data exchanges. Real-time monitoring adds another layer of control, mitigating risks like unauthorized access and data breaches.
Save Time and Money
EDI reduces reliance on paperwork and manual labor, cutting operational costs while improving workflow efficiency. Automation also reduces environmental impact, aligning with sustainable business practices.
Enhance Transactional Accuracy
Because it eliminates manual data entry, EDI ensures consistent and error-free transactions. This accuracy reduces miscommunications and fosters stronger relationships between trading partners.
Simplify Supply Chain Management
EDI facilitates real-time data exchange, improving coordination and decision-making across the supply chain. Retailers can optimize inventory, procurement, and shipping processes for greater efficiency.
Strengthen Partner Collaboration
EDI creates a standardized platform for seamless communication between retailers and suppliers. By ensuring accurate and timely document exchanges, EDI fosters stronger partnerships and smoother transactions.
03
Common Challenges and Solutions in EDI Retail Adoption
While EDI offers retailers numerous benefits, it also presents some potential challenges. The first step to overcoming these hurdles is understanding what they are. Here’s a closer look at common obstacles and how to address them effectively:
Lack of Data Validation
Customers occasionally submit item numbers that aren’t configured in enterprise resource planning (ERP) systems, causing order disruptions due to incompatibilities.
Solution: Modern EDI systems validate data upon receipt or transmission, checking for errors, inconsistencies, or missing details against predefined standards. If it flags a new item number, the system escalates it early so orders are fulfilled accurately and on time without unnecessary delays.
Pricing Discrepancy Issues
Suppliers often encounter mismatched pricing between their records and customer orders.
Solution: Establish a process to handle discrepancies efficiently. Options include accepting the order as-is and reconciling pricing during invoicing or requesting a corrected purchase order. Modern EDI systems can automate this process based on predefined rules to make sure all parties are aligned.
Inaccurate Invoicing Discounts
Billing errors frequently arise when discounts, payment terms, or promotions are applied incorrectly.
Solution: Automate discount validation by coding agreements and promotional offers into EDI processes. This ensures accuracy and eliminates scenarios where customers are over- or under-discounted due to mapping errors or miscommunication.
Shipping Data Mismatches
New or incorrect shipping details added to purchase orders can complicate fulfillment and delay deliveries.
Solution: Integrate your EDI system with a warehouse management system (WMS) to verify shipping data at multiple checkpoints. Modern EDI tools can flag and validate unrecognized or incorrect addresses before order fulfillment, preventing misrouted shipments and ensuring accurate deliveries.
EDI Document Submission Delays
Delays in submitting purchase orders, invoices, or shipping notices can disrupt supply chains and frustrate customers.
Solution: Implement web forms and automation tools to streamline document creation and submission, even when ERP systems experience delays. These tools keep order processing timely so customers receive the prompt communication they expect.
04
Sell Smarter With a Trusted EDI Retail Partner
Ready to bring the power of EDI to your retail operations? Connect with an EDI expert and take the first step toward a faster, more reliable supply chain today.
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Sometimes, the best way to learn is by talking to someone who’s been there. If you have questions, we have answers. Chat with one of our EDI experts and take the next step towards simplifying your operations.