OKLAHOMA CITY -- Fleming Cos. will dramatically expand its use of electronic data interchange in the year ahead.
The company here will roll out an expanded EDI-based electronic funds transfer program to several of its distribution centers later this year, said Rick Rowan, manager of EDI communications. Fleming is now testing the program at a single site in West Sacramento, Calif.
The wholesaler also will launch a series of EDI pilot programs in 1995, primarily with manufacturers, including transmitting invoice corrections and item maintenance requests.
The problem of inaccurate invoices, in particular, has been a point of contention among suppliers, wholesalers and retailers. By implementing a more efficient system, Fleming hopes to reduce at least some labor expense and misunderstanding involved in this area.
"We will be able to transmit item-level deduction information to a supplier or broker. Right now, if a manufacturer's bill is incorrect, we deduct that amount from the payment manually by filling out a paper document and mailing or faxing it to them. What this [program] will do is transmit that same information through EDI."
Rowan said the use of EDI for this process is still fairly new in the industry. "I don't know of anyone offhand that is doing it," he said, adding that Fleming expects to begin the program within a year. "I don't have an exact time frame, but it would probably be a year from now, at the best."
"Currently, a person has to sit down and write the information about the discrepancy. They have to put in an invoice number and univeral product code, as well as a description of the manufacturer's billing error and the amount we believe is the correct price. It's basically creating an invoice back to the supplier, telling them why we believe they owe us money," Rowan said.
"It's very labor-intensive, and the quality of the document is only as good as the person's handwriting and how much data they put on it. Plus, every distributor and retailer has a different form going to a manufacturer," he said.
Under the new system, Fleming's mainframe will generate the appropriate forms and transmit the information in a standard format using EDI transaction 820.
Fleming is also developing a system to use EDI to update and expand item files more efficiently and accurately. "The item maintenance transaction, number 888, is now in development," Rowan said. "It will allow manufacturers to transmit changes to item descriptions -- size, weight, item characteristics. Currently, the industry has to use paper transactions."
A related EDI transaction, number 893, will allow quicker updates of item files, he said. "We'll request that the manufacturer transmit item maintenance data for specific items, so we can refresh our files on a particular item or establish a new item in our files."
Rowan also is excited about the expansion of Fleming's electronic funds transfer program, which initially went on-line in June at the wholesaler's northern California distribution center.
"EFT is still in its infancy. We just developed [EFT] this year. It's in production at one division at the moment, but we'll be rolling it out to other sites later this year -- to other distribution centers, as well as manufacturers," he said.
With the EFT initiative, the process of wholesaler-to-retailer billing will be streamlined and quicker. "It will allow us to pay our suppliers electronically, rather than writing out a check and mailing it. We'll send a transaction to our bank, instructing our banking system to debit our account and credit the manufacturer's bank account," Rowan said.
By using EFT, Fleming also stands to gain higher cash discounts from manufacturers. Currently, wholesalers are rewarded a 2% discount if a bill is paid within a certain time period. Rowan said manufacturers are offering distributors who use the faster moving EFT programs discounts of 2.5% or 2.75%.
Manufacturers who want to participate in the program will be chosen based primarily on whether they, and their banks, have the necessary technology to process EFT transactions, which will use EDI transaction 820, he said.
"If we generate a transaction to send to your bank, your bank needs to be EFT-capable," Rowan said. "The bank turns the information into a transaction that they forward to an automated clearing house." After the transaction is processed by the clearing house, it is forwarded to the manufacturer's account at its bank.
But manufacturers would not require as much technology as Fleming. "It requires more EFT dependency on the sender's bank than the manufacturer's bank. Once the money is moved to the receiver's bank, I don't think it takes a great deal on the receiver's side to accommodate it."