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5 Signs EDI Could Help You Better Manage Your Inventory

by SalesPad on August 28, 2018

For companies that rely heavily on inventory to make their world go round, inventory management affects every area of business — from the warehouse floor to customer service. That’s why many businesses implement EDI (electronic data interchange) solutions.

5 Signs EDI Could Help You Better Manage Your Inventory

EDI’s combination of document standardization, automation and electronic transmission make it a good fit for companies within the retail industry and its supply chain (and a must for companies doing business with big-box retailers).

If you’re a distribution business, inventory management has a huge impact on your bottom line. So, depending on what inventory issues you’re experiencing, EDI could be the solution you need in order to offer a better customer experience, avoid stock-outs, gain better data, and more. Let’s explore five telltale signs that EDI could help you better manage your inventory.

1. You’re selling multichannel in an omnichannel world.

Consumers are driving change in every retail sector, finding new ways to purchase the items they want. In response, retailers and suppliers alike are adding more and more sales channels to make sure that their products are where the people are shopping. While many businesses are selling multichannel (offering their products through various channels, whether storefront retail, via their ecommerce website, or an online marketplace), few are selling omnichannel — that’s a bad move in today’s marketplace. While many use the two terms interchangeably, “omnichannel” (simply put) means offering a seamless, unified customer experience throughout all your sales channels.

Without the right technology in place, new sales channels and older sales channels are siloed, putting you at risk of accepting orders through one sales channel after you’ve sold out of the product through another sales channel.

Maybe you’ve been lucky in your multichannel approach so far and you’ve never accidentally oversold a product — but the bigger you get and the more channels you add, the more likely it’s going to happen. When someone places an order and they find out it’s going to be delayed because you don’t have it in stock, they lose trust in your company and you may need to make it up to them to keep them as a customer – or keep them quiet on social media.

EDI solutions can integrate those multiple channels to help you achieve today’s coveted unified omnichannel retail experience.

2. Inventory choices are made from inaccurate, inconsistent data.

When your sales channels and business systems aren’t connected, you likely rely on manual data entry and manual processes across multiple points within your organization. Let’s set aside the most obvious problem of potential keystroke errors and how those could compound across an organization – let’s think instead about how you use the data from these systems to make inventory choices.

Even if every keystroke for every document is accurate every time, more manual processes are needed to reconcile your data so it can be used for making inventory decisions. When your systems don’t “talk” to each other, you fall into creating and using workarounds that often result in process errors and information gaps. All these problems can steer your inventory strategy in the wrong direction.

The more data you collect, the deeper insights you can gain. A sure-fire way to gain more accurate data is to remove manual data steps and break down system silos via EDI automation. With EDI integration of your vital business systems, such as an ecommerce platform, ERP, WMS, or your accounting software, you can more accurately transmit and collect data, leading to better forecasting for your future inventory needs.

3. You experience inventory surpluses and stockouts.

Because your choices are based on inaccurate and inconsistent data, you end up with stockouts and surpluses. Therefore, what looked like a spike in popularity for one of your products was just some sort of random fluke — and now you’re left with extra unwanted inventory on-hand. Or, maybe something you didn’t think was a big seller suddenly can’t be kept on the shelves and you’ve got customers threatening to shop elsewhere. EDI automation could have helped you avoid both of these situations by giving you a bigger picture of your inventory.

A lack of inventory visibility can also contribute to surpluses and stockouts. Knowing where your inventory is, where it’s coming from, and when it’s moving around reduces the chances that you’ll run out or have too much of a product. EDI can help you keep track of your own inventory, as well as offer automated inventory status inquiries between retailers and suppliers to help keep the flow of goods consistently optimized.

You may also experience inventory surpluses and stockouts if there are manual steps in your inventory replenishment process. It’s far too easy to accidentally send two purchase orders for the same product or forget to send a purchase order altogether. Using EDI automation to place a replenishment order only after inventory has reached a certain threshold can reduce or eliminate the potential for running out or overstocking.

4. You have unique inventory with specific properties or needs.

Not all inventory needs are created equal. Certain types of products have extra requirements regarding collection, transmission and retention of information, such as chain of custody traceability requirements in the food and pharmaceutical supply chain. Items that are large, heavy, or awkwardly shaped present a warehouse space issue, on top of their special shipping needs when ordered via ecommerce. Very tiny items shipped in large quantities to a retailer can present a problem for the workers who have to count and input them into the inventory system.

One solution to those issues, and many other problems related to inventory with unique needs, is automating information transmission via EDI. Your systems could be calibrated to handle the traceability information required for the medical and food supply chains. EDI solutions can ensure the product dimensions and weights are calculated into the equation from the beginning of item setup. Barcode scanning solutions combined with advanced shipping notices (ASN) through EDI can input entire truckloads of product into inventory systems in the blink of an eye.

5. You want to incorporate drop shipping into your strategy.

Drop shipping can be a win-win-win situation between the retailer, supplier and the consumer. However, drop shipping has a lot of moving parts in a transaction process that spans multiple organizations and interested parties. The order placed through the retailer’s ecommerce site (or other channel) must make it to the supplier with all the appropriate information intact to get the right products to the right place at the right time.

On top of that, the consumer can’t know that their order didn’t come directly from the retailer — and the supplier needs to be reliable to make sure the retailer looks good. Add in other potential trading partners, such as carriers or third-party logistics providers, and it’s easy to see where drop shipping can go wrong without appropriate automation.

EDI automation for drop shipping programs can ensure that the right messages are going to the right places. When a product from a drop ship supplier is added to a retailer’s website, EDI can ensure the item information is accurate, including available on-hand and future inventory. Then, when a consumer makes a purchase, EDI automation routes the order from the retailer’s ecommerce platform to the appropriate supplier for fulfillment. When the supplier packs the order, EDI can serve up the printable documents needed to reflect the retailer’s brand packing slips and shipping labels.

Drop shipping is complicated, but when it’s done right, everyone wins. A successful drop shipping program will rely heavily on the type of data standardization and process automation that EDI solutions offer.

Do these inventory issues look familiar?

For businesses experiencing any of the inventory issues we just covered, EDI is the tool that could help solve them once and for all. These inventory management solutions are just the tip of the iceberg — EDI automation offers many other functions to more accurately track inventory and help optimize your business. The more EDI is integrated with your systems and processes, the greater the potential is for inventory visibility, sales forecasting, adding new fulfillment options and more.

This is a guest blog written by SPS Commerce. SPS specializes in EDI services and software. Learn more about our partnership here.

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Topics: EDI, Business intelligence, Accounting