EDI LOWERS TRANSACTION COSTS FOR TEXAS GROCER

PETER PERROTTA

SAN DIEGO -- Implementing a Web-based, electronic data interchange system to communicate with most of its suppliers has saved United Supermarkets, Lubbock, Texas, up to $400,000 a year in transaction costs.

In fact, United officials have been so pleased with the EDI program that United plans to expand it to produce suppliers as well.

"It's very easy to move into this [EDI] world today," said Scott Gilmour, vice president and chief information officer at the 44-store chain.

During a presentation entitled "Supply Chain Collaboration" at Food Marketing Institute's Marketechnics 2002 show here earlier this month, Gilmour provided a case study detailing the implementation of United's EDI program.

Gilmour said that by making the transition to EDI with its suppliers, the retailer can now process purchase orders, receipts and invoices much more efficiently. It also enables United to have real-time communication and tracking capabilities.

Moreover, United reduced its per-transaction costs by $5 to $6, Gilmour said.

Since the chain processes about 60,000 documents a year, the savings range anywhere from $300,000 to $400,000 annually, Gilmour said.

United completed the implementation of its EDI program in July 2001.

Gilmour said United made the transition to EDI as part of a total e-business plan once it reduced its dependence on wholesale suppliers and established a self-distribution supply model.

United moved to a self-distribution model after building a 500,000-square-foot distribution center in Lubbock in 1999, he explained.

The new business plan included establishing new systems for purchasing, warehouse management, invoice matching, store billing, store online ordering, demand analysis and replenishment forecasting, Gilmour said.

"We really took a fresh look at EDI when we decided to establish an e-business plan. We wanted to start doing electronic funds transfers with our suppliers and improve collaboration with our suppliers as well," he said.

United contracted with E-Com Systems, Gaithersburg, Md., to provide the Web-enabled EDI services, Gilmour said.

The implementation was done in two phases. United's 20 major suppliers -- who provide about 65% to 70% of its goods -- were put online first, he explained. This phase took about six months.

Getting the second-tier suppliers to become EDI-compliant in accordance with United's new system took a bit longer, Gilmour said. Letters had to be sent to the small and midsize suppliers informing them of the switch.

"It wasn't that difficult," Gilmour said. "All they [suppliers] need is a Web browser and a computer, and they can link in with our system."

According to Gilmour, there was not a big initial investment involved in installing the EDI system. He declined to give specifics on the cost of the program, however.

He said besides lowering transaction costs, the new EDI system eliminates time delays involved in paper transactions and also saves on labor costs.