THE CHANGING FACE OF EDI

Michael Garry

While many retailers tend to be reluctant to embrace new technology, Wal-Mart Stores and Supervalu are not among them. Those two companies remain among the most forward-thinking users of technology in the industry.

Yet when it comes to electronic data interchange (EDI), the 23-year-old standard for communicating business documents between trading partners, those two technology leaders prefer to stand pat rather than take on newer forms of electronic business-to-business communication like the Internet-based Extensible Markup Language (XML) standard.

"Wal-Mart is not going away from EDI," said Teresa Breshears, senior business analyst, Wal-Mart, Bentonville, Ark., during a panel discussion titled "EDI Is Going Strong in The 21st Century," at the U Connect conference. The conference, sponsored by GS1 US (formerly the Uniform Code Council) was held in Dallas at the Gaylord Texan Resort and Conference Center, June 7 to 9.

"We keep doing more with EDI," said Greg Zwanziger, senior business strategy consultant, Supervalu, Minneapolis. Supervalu has increased the volume of goods traded via EDI by 150% the last three years, he said.

Zwanziger and Breshears were joined on the U Connect panel by Jon Sharatt, senior systems engineer, Target, Minneapolis; and Debbie Nyquist, lead supervisor, EDI technical team, Nordstrom, Seattle. It was the second year in a row that Zwanziger and Breshears appeared on a U Connect panel discussing EDI.

XML which uses the Internet as a communication vehicle, has been touted as a replacement for EDI, especially for smaller companies that may find the initial investment in EDI too high. Even larger companies like Wal-Mart and Supervalu are dabbling with XML in certain applications, depending on the market. In Wal-Mart's case, those applications are internal, Breshears said. Moreover, XML is the standard for data transport for global data synchronization, to which both Wal-Mart and Supervalu are heavily committed.

But for Wal-Mart and Supervalu, and many other retailers accustomed to EDI, the investment they have made in EDI -- and the benefits they derive from it -- continue to make EDI the B2B medium of choice for documents such as purchase orders, invoices, advanced shipping notices and many others. Wal-Mart, Breshears said, has more than 75,000 EDI trading partners, uses more than 150 EDI translation maps (converting EDI to internal formats) to accommodate those trading partners and has an EDI support desk in every country in which it does business. With that level of investment, "it would be a tremendous burden to [switch] to XML," she said.

With proponents like Wal-Mart, it's easy to see why Steve Rosenberg, director, electronic commerce, GS1 US, said at U Connect that EDI's demise "has been grossly overexaggerated." EDI is a technology, he added, "that will co-exist with newer technologies for quite a while."

EDI FOR PRODUCE

That is not to say, however, that it's the same old EDI. At the U Connect panel discussion, speakers referred to the many ways EDI is evolving.

For example, Supervalu, which does virtually all of its business with consumer packaged goods manufacturers via EDI, has recently started doing so with perishable suppliers, particularly fresh produce, but meat as well, Zwanziger said. "We're approaching 90% in fresh perishables for purchase orders and invoices," he said.

Wal-Mart has been focusing on using EDI to support communications with transportation providers, Breshears said. Providers use EDI to tell Wal-Mart what's being delivered on a truck as well as to make delivery appointments. Target, too, has been using EDI in transportation activities, Sharatt said.

Wal-Mart and Supervalu have also begun to adopt the latest version of EDI, known as version 5010, which follows versions 4030 and 4050. All versions of EDI in North America follow a standard for EDI called ANSI X12, which was established by the American National Standards Institute (ANSI). The subset of X12 developed for the grocery industry is called the UCS standard, supported by GS1 US. A year ago, the XRG group, which includes Supervalu, Wal-Mart, Ahold and others, was set up to oversee EDI standards for the retail industry, including food retailing.

Wal-Mart is using EDI version 4030 and "migrating to 5010," Breshears said, as well as targeting suppliers who are in its radio frequency identification (RFID) program, to accept that standard. Supervalu is actively using 5010 as well as supporting earlier versions, Zwanziger said.

One major change to version 5010 is its use of global trade item numbers (GTINs) instead of traditional UPC codes. GTINs are the new bar-code standard that encompasses all previous bar-code numbers, including the 12-digit UPC and the 13-digit and eight-digit EAN codes, as well as 14-digit bar codes. GTINs are also the standard used in data synchronization.

Wal-Mart uses GTINs with its 5010 EDI communications, Breshears said. Supervalu also uses GTINs with 5010, specifically to identify shipping units -- cases and pallets -- but also uses 12-digit UPCs, Zwanziger said. "Today we order cases and pallets, and we will continue to do that with GTINs," he said. "And as we do data synchronization with 14-digit GTINs, we will include them in EDI." In the meantime, during this transition period, Supervalu will support 12- and 14-digit codes.

DELIVERY BY WEB

Still another trend in EDI is the growth of EDIINT, or EDI over the Internet. In EDIINT, retailers and manufacturers use a standard called AS2 to deliver EDI documents over the Internet. (See story, this page.) It requires an investment in AS2 software but means retailers would no longer need to use costly third-party VANs (value-added networks) as intermediaries in the communications process. AS2 is also faster than other methods.

Supervalu began implementing EDIINT in 2001. "AS2 allows us to do very real-time, event-driven processes," said Zwanziger, who added that Supervalu has an EDI business group coordinator responsible for AS2 setup with trading partners. AS2 has also helped Wal-Mart become more "real-time," said Breshears, though "if you make a mistake, you can't get it back real fast." As a result, Wal-Mart also runs EDI in "batch mode."

"Target uses both VANs and AS2 communications, depending on the needs of its trading partners," Sharatt said. Nordstrom still uses VANs while working on an AS2 implementation, said Nyquist, adding, "We have a small group, so we need the administration provided by a VAN."

Supervalu has direct AS2 connections with large trading partners and even uses AS2 to connect to VANs, Zwanziger said. In addition, Supervalu has formed connections to smaller suppliers via third-party providers. "We have a failover system -- a redundant connection to the Internet -- in case we have to resend a transaction," he said.

One area in which Supervalu is shifting away from EDI is in communications of pricing information. Supervalu, for example, has used EDI (under the so-called UCS II initiative) to communicate price, but is expecting to transmit price data via data synchronization once price becomes a standard data element in that arena, Zwanziger said. But Supervalu continues to transmit DSD, promotional announcements and scan-based trading data using EDI.

As important as EDI remains to Wal-Mart and Supervalu, neither company mandates that suppliers communicate with them this way. "We're pushing it, but it's not a mandate," Breshears said.

P&G on AS2

Like retailers who use EDI, manufacturers have also altered the way they employ the communication system. Take Procter & Gamble, Cincinnati.

Prior to 1999, P&G used direct dial-up (direct bisynchronous transport) and value-added networks (VANs) to send EDI transactions. Today, with more volume covered by EDI, 65% of its transactions are sent via AS2, a standard for Internet-based transmissions, while 35% still go over VANs, but no dial-up is used anymore, according to John Duker, e-commerce specialist for P&G.

Duker led a session last month at U Connect, GS1 US' annual conference held in Dallas, on AS2 communications. Though P&G has embraced the Internet for EDI transmissions, it's not necessarily for everyone, Duker said. "I'm not advocating everyone use AS2," he said. "VANs are good, too. Small companies need to consider the trade-offs of VANs vs. AS2."

Still, Duker pointed out the many advantages of AS2, such as speed of transmissions, lower costs and secure, reliable transport. For example, AS2 uses public/private key encryption and digital signatures to secure data and ensure that it was received by the recipient. Data is sent and received simultaneously rather than stored and forwarded, and data speed is limited only on the bandwidth of the Internet service provider (ISP). AS2 requires an initial investment (five figures minimum) and support costs but has no volume-sensitive charges like VANs.

On the other hand, AS2 requires a permanent Internet connection, which means companies may need to employ multiple ISPs (P&G has four in North America) and multiple servers. It also involves initial start-up and ongoing support for trading partners. Though there are now 31 interoperable software packages, if trading partners use the same software package, the process is easier, Duker said. "If they're different, it's a little work."

Also, the encryption keys expire after a year or two, requiring replacement, which is now a manual process. The process is expected to become automated early next year, Duker said.