Chances are that you spend considerable effort monitoring the orders you receive from suppliers. Non-compliance can become expensive for both the retailers that need to modify their operations when orders are not delivered as expected, and for the suppliers who will experience invoice deductions and even contract cancellations resulting from poor performance. But not every instance of non-compliance is worthy of real punishment. This article discusses ways to make sure you are staying on top of the most expensive issues and not being distracted by the little things.
First off, it’s critical to understand that the “perfect order” is a myth. Sure, a technically perfect order is possible and does happen with amazing frequency, but is it worth the effort required to attain? Initially, a perfect order was defined by 20 criteria first imagined by R. Wang at Constellation Research. That doesn’t seem like a lot of criteria—that is until you begin to look at just how many orders actually make the grade.
Most research shows that less than half of all orders pass all 20 criteria. Despite these abysmal results, our supply chain actually delivers products with enough accuracy to meet the needs of the buying public at an astounding rate. If the reality of delivering orders on time only requires something less than perfect, then what are the criteria that retailers should pay attention to on a daily basis?
Make it real
Static criteria may be outdated. That doesn’t mean that the basics of getting EDI document formatting right, delivering the right products and quantities on time, and to the right destination have suddenly become unimportant. But, it does mean that some issues have become even more important and should be classified as items eligible to add to scorecard results rather than subtract from them.
Suppliers are at least as interested in selling their goods to retailers as retailers are in selling to consumers, and some suppliers take extra efforts to get ahead of their end users. They invest in research and development to create what the consumer wants and take the risks involved in producing the product ahead of demand. Certainly this is what manufacturers do—it’s their role to meet or even drive demand. When demand changes or new products are introduced, the supplier that steps up to meet demand may have trouble producing a perfect order. Progressive retailers should be watching the trends and identifying suppliers who outperform the market, and reward the performance even if it falls below par.
One of the changes consumers are embracing is the ability to make purchase decisions at any time from any place, and have their products delivered at their choice of location—this is known as omnichannel retailing. If there is ever a need for the perfect order it is here, particularly when products are being drop-shipped directly to the consumer.
Enabling that kind of service can be complex for suppliers that have not fully embraced EDI and automated, real-time processing. Consumers now expect to be able to know whether the product they want is in stock, when it will ship, and when it will arrive. This depth of understanding requires integration between the supplier’s ERP and EDI systems in order to be successful. It also requires real-time updates between EDI systems and the retailer’s ERP and customer interface.
Fortunately, EDI providers are able to step in and provide the infrastructure needed to make the connection between the supplier’s and the retailer’s EDI systems seamless, and take the burden off both parties. In the case of omnichannel retailing, perfect orders may be generally easier to accomplish because the orders are less complex, often consisting of only a few items being shipped to one destination. But, this is another case in which the supplier should get “extra credit” for participating in omnichannel orders.
Tracking orders from origination to destination is practically a requirement for omnichannel orders—customers simply expect it. Having the same deep visibility into all orders can do much more to deliver the perfect order than can after-the-fact checking and invoice deductions.
Real-time monitoring of EDI documents and processes takes supply chain visibility to a new level that can deliver even better results than perfect orders. Supply chain visibility allows two important functions:
- It answers the perennial question, “Where is the order?” in real-time.
- It automatically alerts the retailer when some condition of the order is not as expected.
Both of these capabilities allow the retailer to take preemptive action based on specific knowledge of what should be happening versus what is happening. EDI service providers that manage the transfer and validation of EDI documents between trading partners are able to monitor transactions and compare them against predefined business rules. When the conditions fall outside valid ranges, corrective actions can be taken. At the high end of the scale, those actions can include automated alerts and even automated processes that resolve the problems.
When appropriate systems are in place and deep visibility with automated auditing systems monitor traffic in real-time, the perfect order becomes something better than simply an order that meets the 20 criteria that have been used to define it in years past. The perfect order can become the order the customer wants even if the process didn’t happen perfectly.
-Daniel Ford, DiCentral