EDI LIVES! 2004-06-28 (1)

MICHAEL GARRY

Last week the retail industry celebrated the 30th anniversary of the first live bar-code scan, which took place in June 1974 at a Marsh store in Troy, Ohio. Despite the much-heralded development of the electronic product code (EPC), the bar code remains entrenched as the main product identification tool in the world.

The development of Electronic Data Interchange (EDI), the message format by which trading partners can electronically send documents like purchase orders and invoices to each other, followed that of the bar code. It wasn't until 1982 that EDI standards for the food industry, called UCS (Uniform Communications Standard), were published, according to "Revolution at the Checkout Counter," by attorney Stephen Brown, a board member of the Uniform Code Council, Lawrenceville, N.J.

Still, by technology standards, EDI, at 22, is no youngster. Yet, like the bar code, it has enduring appeal among many companies, typically larger ones who have benefited considerably from having computers transmit basic business documents.

At UCC's U Connect conference in late May, a panel of retailers and one manufacturer made it plain that EDI will continue to play a major role in their organizations. The U Connect panel consisted of Greg Zwanziger, senior business consultant, IT business strategy, Supervalu, Minneapolis; Teresa Breshears, senior business analyst, Wal-Mart Stores, Bentonville, Ark.; Thomas Moriarity, manager of EDI support, JCPenney, Plano, Texas; Brian Akabane, business development consultant, Hallmark Cards, Kansas City, Mo.; and Don Flint, senior e-business analyst, Chep, Orlando, Fla.

One of the primary areas of consideration at the U Connect panel discussion on EDI was whether companies should replace EDI with transmissions that use XML (Extensible Markup Language), an increasingly common message format for data communication via the Internet.

The consensus among panelists was that while XML offered some attractive features, traditional EDI -- perhaps abetted by AS2 communication over the Internet -- would remain their machine-to-machine communication vehicle of choice for the time being.

"The EDI that we have works extremely well and gracefully, and we don't see moving off it to do the things we do today," said Zwanziger of Supervalu, Minneapolis. "There isn't a lot of interest in moving off it" among Supervalu's trading partners, including suppliers and retail customers served by Supervalu's wholesaling division.

Zwanziger said Supervalu uses "a couple of dozen" EDI transactions with its supplier and customer base, and the company continues to receive requests for new EDI functionality and transactions. "Companies that have sunk a significant investment in something that works and works well won't be making a switch very quickly," he said.

Still, Zwanziger said he has been predicting for at least four years that companies would eventually implement XML-based exchange of business transactions that have been sent via EDI, such as purchase orders and invoices. He continues to see opportunities "down the road." Even now, he added, Supervalu is doing "a little bit of XML," mostly for applications for which there aren't clear-cut standards or customized solutions.

Wal-Mart does not plan to migrate from its standard EDI platform, noted Breshears. "It's alive. It's not going away," she said.

On the other hand, Breshears acknowledged that should Wal-Mart encounter a different standard, such as XML, in another country where it acquires stores, it will adopt that standard.

Following the conference, Chep's Flint, who is also chairman of UCC's X12 Requirements Group (XRG), told SN most retailers felt there was "no business payback opportunity" to use an alternative format "when you have a whole EDI infrastructure to handle it." On the other hand, companies should be positioned to accommodate smaller trading partners who don't use EDI and may adopt XML.

Zwanziger answered a question by saying the industry did decide to use XML, rather than EDI, as the communication format for data synchronization. The reason is that XML, developed in 1996, has more "robustness" than the older EDI, and thus was deemed more suitable for the new Global Data Synchronization Network being rolled out this year. "We thought, if we're building something new and we want to get industries to move forward, let's build it on the latest technology," he said. XML is also considered a better way for a Global Registry to point to different data pools and for publish or subscribe functionality.

Taking a more pro-XML stand at another U Connect session, Bill Cafiero, senior consultant, Global eXchange Services, argued that while big companies enjoy EDI for its cost savings, "everyone else resists EDI unless forced because their cost/benefit ratio is too high." He declared that XML is a potential replacement for EDI because XML uses the Internet and is very flexible.

Making EDI Affordable

What may help EDI survive is that Web-based transport processes, known as EDIINT, have emerged to make it more affordable. For example, while continuing to use EDI as a message format, Supervalu has changed its transport protocol (how the messages are sent), largely switching from a VAN (value-added network) to Web-based EDIINT transmissions using standards like AS1 and AS2.

Since 2001, when Supervalu began implementing EDIINT, the wholesaling and retailing giant has developed direct EDIINT connections with more than 100 high-volume trading partners, said Zwanziger. In addition, Supervalu has formed EDIINT connections with more than 3,000 suppliers via six third-party providers.

Today, more than 99% of Supervalu's trading partners now connect with it via EDIINT, either directly or through a third party, Zwanziger said. Supervalu's EDIINT software supplier is Cyclone Commerce, Scottsdale, Ariz.

EDIINT offers several advantages over VANs, notably cost savings. A UCC/Drummond Group study concluded that EDIINT systems could reduce VAN costs up to 90% and realize a payback within 10 months. EDIINT also delivers "almost instantaneous transmissions," said Zwanziger.

One wholesaler that decided to employ EDIINT last December is Associated Wholesale Grocers, Kansas City, Kan. Michael Hopkins, AWG's manager of EDI, told SN the company is sending direct EDIINT transmissions using AS2 to 15 suppliers to whom transmission had previously been sent via a VAN or bisynchronous transport. He credited Wal-Mart with driving EDIINT adoption in the industry by mandating it to its suppliers. "Wal-Mart benefited us by moving people," he said.

Hopkins said EDIINT is more cost-effective and faster than prior methods. What took 40 minutes over the phone lines on bisynchronous transport takes one minute via EDIINT, he said.

What's Next

Panelists at the U Connect session also discussed the next version of EDI and what it would mean for retailers. EDI in the United States was set up by the American National Standards Institute (ANSI), which established X12 as the standard for EDI. The newest version of X12 is known as Version 5010, which recently followed Version 4050. Supervalu's current system uses UPC codes and has been configured so that EDI transmissions need not include descriptive information. That is not a standard scenario in the industry, but will become one with the use of GTINs (Global Trade Item Numbers) and data synchronization. The new version of X12, 5010, which was posted online last week, incorporates GTINs and GLNs (Global Location Numbers).

According to Zwanziger, Supervalu plans to implement Version 5010 late this year. The company's strategy is to begin using GTINs, but continue handling UPC formats used in the grocery industry. Supervalu will start trading GTINs with suppliers doing data synchronization. "We'll look to move strictly to GTINs as we get all of our trading partners on data synchronization," he said.

Zwanziger pointed out that since the industry is moving toward widespread adoption of GTINs (or at least 13-digit bar codes) at the point-of-sale by January 1, 2005 (the so-called Sunrise Date), retailers and suppliers should follow suit by upgrading to the next version of EDI, 5010. "I think you'll see most retailers and wholesalers will move up instead of retrofitting [earlier versions], though there's not necessarily a mandate of January 2005 to be on EDI standards that support GTINs," he said.

Supervalu does have trading partners that send it GTINs in 4010 version of EDI. "We will encourage them to move up quickly, but we're not looking to mandate a specific date to be up," he said.

Breshears said Wal-Mart plans to publish a "strategy letter" on its Retail Link site regarding Version 5010 adoption by suppliers. During Wal-Mart's rollout of 5010, which will take approximately 18 months, adoption will be optional. However, it will be required after that time.

EDI's Latest Watchdog

Not quite a year ago, a group formed to oversee electronic data interchange (EDI) standards for the retail industry, the X12 Requirements Group (XRG).

X12 is the standard message format for EDI in North America set up by the American National Standards Institute (ANSI). XRG, supported by the Uniform Code Council, maintains guidelines and updates changes for the food industry (the UCS standard), VICS (nonfood retail) and industrial/commercial applications, said Don Flint, senior e-business analyst, Chep, Orlando, Fla. Flint is also chairman of XRG. In addition, XRG handles EDI for DSD (direct store delivery) applications.

Companies participating in XRG include Supervalu, Ahold, Wal-Mart, Target, Kraft, General Mills, Best Buy and Dillard's.