STUDY TRACKS SAVINGS FROM EDI, TWO PILOTS

DENISE ZIMMERMAN

WASHINGTON -- Retailers implementing electronic data interchange can trim $23 from the cost of processing a typical business transaction, according to a report released today by the Joint Industry Project on Efficient Consumer Response.

By replacing paper-based transactions with electronic transmission of information, some supermarket companies have eliminated entire layers of manual processing and enjoyed significant labor savings. Cost reductions attributed to EDI were quantified by trading partner in a survey conducted by Deloitte & Touche LLP, Wilton, Conn., as part of a report prepared by the Integrated EDI Work Group, a subcommittee of the ECR Best Practices Operating Committee. The report, titled "Integrated EDI: Purchase Order Through Payment -- An ECR Best Practices Report," was released on the eve of this week's ECR Conference in Dallas. It follows closely on the heels of two other ECR Reports published this month, "Computer Assisted Ordering Practices and Benefits" and "Value Added Network Services." (See related story, Page 34.)

While the new EDI report concluded that retailers saw the most dramatic labor savings with EDI, direct suppliers using paperless transactions also were able to cut costs, about $18 per transaction. Wholesalers using EDI for major transactions like purchase orders and invoices estimate processing costs were reduced by $11.30 per transaction, the report said, while brokers using EDI saved from $4.62 to $8.06 per transaction.

Other benefits attributed to electronic data interchange --

such as reduced clerical errors and shorter cycle times -- are documented in the report. In addition, results from two EDI pilot programs are presented: one in which EDI was used to facilitate electronic funds transfer, and another that illustrates the role of EDI in a continuous replenishment program between H-E-B Grocery Co., San Antonio, and Pillsbury Co., Minneapolis.

In the latter example, EDI was cited as a key enabler to the CRP, which drove sales volume from 10% to 30% higher than pre-CRP levels and allowed both the chain and supplier to spend more time on effective merchandising and less time on order management. In addition, H-E-B's inventory levels were reduced from 15% to 50% across two product categories; retail service levels averaged at least 99.5%, and unsalables in one category were expected to decrease by 20% to 40%.

The report examines Uniform Communications Standard EDI transaction sets for merchandising, ordering, financial and business support, outlining best practices and identifying benefits according to trading partner.

Direct suppliers and brokers receiving the 875 Purchase Order transaction, for example, can reduce data entry costs and errors while cutting order cycle times. Retailers using the same EDI transaction for ordering can reduce on-hand inventory by the number of days eliminated from the order turnaround time and improve order integrity, according to the report.

Peppered throughout the EDI report are implementation tips ranging from basic guidelines, such as "Select EDI trading partners purposefully," to more innovative suggestions, such as "Get EDI data from non-EDI trading partners." The latter implementation tip cites as an example a distributor who placed computer terminals in its lobbies, enabling suppliers' sales representatives to enter product promotion data after presenting deals to the purchasing staff.

Other ECR reports expected to be released later this month include: "Direct Store Delivery Best Practices Report," "ECR Technology Guide," "ECR: Wholesaler and Independent Retailer Getting Started," "Getting Started in ECR: Building Your Company Roadmap" and "Category Management ECR Best Practices Report."

All ECR reports are available from the 11 trade associations involved in the joint industry project: American Meat Institute, Arlington, Va.; Food Marketing Institute, Washington; Grocery Manufacturers of America, Washington; Grocery Products Manufacturers of Canada, Don Mills, Ontario; International Dairy Foods Association, Washington; National-American Wholesale Grocers' Association, Falls Church, Va.; National Association of Chain Drug Stores, Alexandria, Va.; National Food Brokers Association, Reston, Va.; National Grocers Association, Reston, Va.; Private Label Manufacturers Association, New York, and the Uniform Code Council, Dayton, Ohio.