A shift is under way within the grocery sector relating to the way transactional information is exchanged between retailers and suppliers. A change that will significantly impact on the way suppliers do business with the big supermarket chains.
With such large numbers of transactions, it is hardly surprising that grocery retail chains were early adopters of electronic data interchange (EDI) technology, having used in-house systems supported by value added networks (VANs) to electronically exchange orders and invoices with key suppliers for the past 30 years. According to the EDI Cost Savings Report published in September 2010 by the global standards organisation GS1 UK, in conjunction with Cranfield School of Management, some 27 million orders are made in the UK grocery sector every year. Some 84 per cent of orders by retailers and 87 per cent of invoices from suppliers are transacted using EDI technology. The report into the UK’s top 15 grocery retailers - covering 90 per cent of the sector - finds that the industry saves £650m per year in costs by using EDI instead of manual, paper-based processes for its orders, invoices and dispatch advices.
Although EDI is well established in the grocery sector, GS1 UK’s report highlights that, at present, only 38 per cent of the orders made by UK grocery retailers use dispatch advices, a situation which presents an opportunity for the sector to save a further £200m a year through full EDI implementation.
An increasing number of retailers seem to be recognising this opportunity and are now pushing for even greater supply chain efficiencies by demanding more information from suppliers, such as dispatch notes/advanced shipment notifications (ASNs) and a more frequent exchange of this information.
At this present time, several of the large supermarket chains are looking to move their electronic trading capabilities to outsource service providers on a fully managed basis. Sainsbury’s is in the process of transferring 4,000 of its suppliers onto a single b2b platform operated by Wesupply to significantly improve visibility into critical supply chain processes.
Suppliers to the grocery retail sector have the opportunity to use b2b EDI technology to their advantage, bringing IT and administrative costs down and pushing supply chain performance up across all their customers. Grocery retailers have recognised the benefits of outsourcing their EDI capabilities; perhaps their suppliers should be thinking along the same lines.
David Grosvenor is chief executive of Wesupply
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