By: Nikki Colletti – Special Projects Adviser
Today, most apparel businesses rely on sophisticated software for an increasing number of functions, and any clothing manufacturer that wants to sell to a major retailer has to have a system that with Electronic Data Interchange (EDI) capability. With the number of major trading partners and their unique requirements, the right ERP system with EDI and chargeback capabilities is a must!
EDI offers a single, standard computer-to-computer application for exchanging business documents. In the apparel industry, it’s how retailers relay order requirements to manufacturers. For example, using an EDI transaction, retailers send purchase orders directly to the manufacturer, detailing the exact quantities for styles, colors and sizes, where and when the merchandise should be shipped, even how it should be packaged. Manufacturers, in return, send other EDI transactions back to the retailer confirming the receipt of orders, shipment details, and create an invoice. Retailers and vendors using EDI are called “trading partners.”
Universal Product Code. The basic building block of EDI is the Universal Product Code (UPC). The code consists of an eleven-digit number that uniquely identifies one specific manufacturer and one, and only one, of that manufacturer’s products or parts.
Each company has its own catalog of UPC codes. Each type of EDI transaction between trading partners carries its own identifying number. A purchase order, for example, is 850, a ship notice is 856, and an invoice is 810.
EDI Integration. “Integration” is an automated process of sharing and managing data between two or more different software applications. Each application does its job and then passes the appropriate data to the next application. EDI integration automates the flow of data from the retailer’s system into an order processing system, like AIMS360, and from the order processing system into an EDI system so it can be sent to the retailer. The alternative: manually enter everything you receive into your order processing system, as well as everything you want to send into your EDI system. In reality, that’s almost impossible.
With an integrated EDI system, the trading partner’s purchase order is received by the EDI system and the data is automatically transferred into your order-processing system. Similarly, after the order is shipped and invoiced, the EDI integration software automatically communicates the shipping and invoice data back to your trading partner.
Mapping. In the EDI universe, there are standard computer specifications that identify each transaction. However, one trading partner’s computer format for a purchase order may be quite different from another’s.
To solve this problem and smoothen the flow of information from a trading partner into a vendor’s order-processing system, there are two major EDI functions: 1) Communication module which connects to the vendor’s computer network, permitting the vendor to exchange data with its trading partners and 2) Bridge software that converts each individual trading partner’s incoming electronic data so that its acceptable to the vendor’s data system. This conversion process is called mapping. Each trading partner uses different standards so, a vendor has to have a different “map” for each transaction and trading partner.
Now, with EDI comes the daunting “chargebacks”. Just like anything else, there are checks and balances required when doing EDI with trading partners. If something does not “check” or “balance”, the result can be a chargeback. When an invoice or an Advanced Shipping Notice (ASN 856) does not contain correct information, is late or doesn’t match the Purchase Order (850) or shipment, sent late, wrong pack, missing DC or store number, label was not placed correctly, etc., EDI chargebacks are issued. These penalties can be quite costly and detrimental to relationship with that trading partner.
How to reduce chargebacks and stay on top with vendor compliancy:
Understand your Trading Partner. Whomever is handling your EDI should intimately know how to do business with them. Trading Partners that do require EDI will usually provide you with documentation on how to stay compliant with them. This may include vendor, routing, and implementation guides. Make sure that you are always in contact with them as EDI requirements are constantly changing.
Stay in-tune throughout the process: Use a system that allows you to track documents and notify you of any issues. Systems such as AIMS360 allow you to track and reconcile the number of shipments with the number of ASNs that were sent. You can also set up acknowledgments (997) to let you know whether or not documents have been received within 24 hours.
Analyze and determine cause of issue: If your business receives a chargeback, understand why?
AIMS360 utilizes the most advanced EDI and chargeback systems in the industry. The ERP systems Integrated Chargeback System allows for seamless Factor and EDI chargebacks and reconciliation of statements. Learn more, contact us today!
Nikki Colletti Special Projects Adviser
110 East 9th Street – CMC Suite A-1169
Los Angeles, CA 90079