How data integration can reduce costs, improve resilience, and increase sales
As data-driven decisions become the norm across all industries we can expect more retailers to increase the use of EDI platforms. Today, a data-driven enterprise has the best chance to succeed, especially in a challenging market.
Considering this, retailers need to consider using their existing EDI infrastructure to redeploy their own data via smart software integration. An integration like this can perform complex automations that improve sales and reduce costs.
But how can we implement this kind of integration without disrupting business, while also delivering a short time-to-value?
Multi-brand retail has always been unpredictable, but today’s level of uncertainty is through the roof.
Recent disruptions from the COVID pandemic and shipping industry have given retailers good reason to rethink their methods.
Technological solutions now promise to solve all the problems of market uncertainty for us. These solutions seemed extravagant before; now they’re starting to look very prudent.
The growth of eCommerce and omnichannel shopping is a huge factor in the evolving retail landscape. It was already a big force in the shifting market dynamics. When the COVID pandemic took hold, shoppers moved instantly to online-only shopping for the foreseeable future. Many retailers who were considering an online/omnichannel enterprise have been pushed into its head-first.
Ecommerce is great, but sales are a lot less predictable than physical retail. Online trends change quickly, and there’s no ability to guide shoppers with the traditional merchandising tricks. There’s also no clear guidance for retailers about where a customer will make a purchase. Shoppers might see an item in-store, but order online, or they may order online but want to pick it up from a physical store.
This makes it hard to have the right stock in the right place.
For retailers and wholesalers, achieving end-to-end visibility of the supply chain is becoming an essential way to keep the right stock on the shelves. It’s possible to achieve this kind of visibility with a free flow of data.
The trend towards digital is pervasive. Almost every business now recognizes that prioritizing their digital transformation offers the best hope for survival. Consumers now conduct more shopping via digital avenues, meaning that the balance of retail has shifted too.
For physical retailers there are still the same challenges, however. This includes a lack of visibility about actual stock levels and velocity per SKU. Without this visibility, any ordering decision is guesswork.
Electronic Data Interchange (EDI) offers retailers the big advantage of being able to send and receive data about orders, invoices, advance ship notices, bills of loading, customs documents, and much more. This data is usually handled by automated processes that result in increased efficiencies and reduced errors. If retailers want to use EDIs to their full potential, the next step is to link this with automated decision-making processes about stock replenishment, allocation, and reordering.
By integrating the EDI data with the inventory management system, it’s possible to gain efficiencies with data-driven automated decisions that are always right. The simple EDI system then becomes the foundation layer of a much more complex mechanism; one that enables powerful automations that can revolutionise retail operations.
There are some challenges that come with EDI integrations – but we’ll get to those later. Before we tackle the obstacles, let’s look at the overwhelming reasons why retailers should integrate their inventory management with their EDIs.
- First, it’s much easier to make the right inventory decisions when data is leading the way. Connecting the data flows between retailers and wholesalers results in a better (more accurate) flow of stock.
- The advantages for the retailer are cost reductions in the supply process and more responsiveness to consumer demand. A data-led approach means that real consumer actions are represented by data that triggers supply and inventory decisions.
- Ultimately, this makes it easier for the retailer to have what the consumer wants. Wholesalers also benefit from this unburdening of processes by automated systems. They have a clearer picture of changing demands, and they can feed data back to their suppliers too.
- Another big advantage is the time saved from automating replenishment and ordering. Underwear wholesaler and retailer Triumph is already starting to implement an EDI integration with their retail customers, with 10% now on board. Triumph has seen significant improvements via a lower error rate and a better response to consumer demand. Their system automates replenishment and ordering, which has a positive effect by reducing the administrative burden. It also means faster delivery times for their retailers. Stock velocity is up, and administration costs are down.
Stichd (who supplies many familiar NOOS items for big brands) integrated a similar solution some time ago, so their EDI integration is more mature. Using this solution, they have seen better, more accurate replenishment for out-of-stock sizes. This has resulted in a revenue improvement of 40% for one retailer in particular.
This integration builds a closer partnership between stakeholders – and retailers achieve more than simple efficiency. A lot of companies can achieve better insights with data integration. Micro Fashion, a menswear wholesaler, has found that their EDI integration has led to a closer connection with the consumer, in addition to increased revenues and shorter lead times.
Although all these companies have achieved big improvements to their businesses and partnerships, the integration process also had difficulties. It’s important to be realistic about these, so they can be anticipated and dealt with.
Retailers are frequently reluctant to introduce new data-based collaborations because they cost money and time (which is also money, of course). The best way to tackle this problem is to reduce the time-to-value. The initial investment is inevitable, but when it is quickly displaced by more profitable and effective working methods, this cost becomes much less significant.
You can accelerate the implementation of integration by adopting a purpose-built solution like Retailisation’s. With a solution that ‘plugs-in’ to your existing EDI, it immediately starts delivering value via data-driven decisions. The solution converts the data already being collected into the best possible decisions, resulting in better operational effectiveness in just a few weeks. This means the hottest items are always in stock, and that slower-moving items are replenished at just the right pace to avoid overstock or stock-outs.
It’s also easy to think of the wholesale-retail-customer supply chain as a perfect ‘contained system’ where every item is always accounted for. Anyone who has ever worked in a retail environment knows this is not the case.
Just because there are 32 pairs of a particular sneaker ‘on inventory’ doesn’t mean they are still in store or accessible. Sales errors, theft, delivery errors, and disposal of damaged goods often go undocumented. To deal with this there needs to be a change of methods to account for real stock levels.
This is a big one. Most businesses have an innate fear of introducing systems that give others a clear window into their activities. This is especially true of detailed sales figures.
This fear can hamper progress and create resistance to implementing and maintaining a new system. Building sufficient trust between partners can take time, and this is essential for the level of transparency required. Focusing on developing this relationship between partners will help reduce friction.
Sharing data may not come naturally to many businesses. Whether we like it or not, however, it’s ultimately the way things are moving. Many advantages come from data sharing, including a more collaborative partnership model. Closer collaboration can achieve greater resilience to market shocks or sudden shifts in sentiment.
Companies that use data to direct coordinated actions will be able to adapt and respond better and faster to new realities using granular insights. An easy way to allay fears about data sharing is to put a Non-Disclosure Agreement (NDA) on the table, for both parties to sign.
The fears of retailers need to be addressed but also countered – by illustrating the positive effects once the integration is up and running.
An important thing to highlight is that it’s the retailers who’ll achieve the most immediate benefits. Data-driven automated decisions will be more accurate and reduce the administrative burden. The entire supply chain ultimately benefits from a more data-driven enterprise, but the retailers will always be the first to see this benefit first-hand in their daily experience. They will actually experience improved sales, smoother replenishment, and an absence of overstock.
Knowing what to expect will make it easier for staff to make changes to old ways of working. It can be helpful to outline exactly which data will be needed for the inventory management integration to work. The most essential data is about Location, Product, Stock, and Sales. These need to be made available to empower the integration.
The implementation process consists of just a few steps, but there will be a learning curve as new systems and methods are adopted (and as old habits are discarded). By outlining the EDI integration as a few key steps with an ultimate goal, it’s easier for retailers to adopt changes and motivate staff to get on board.
Think of the implementation as an adolescent phase – it can be awkward, and there can be some resistance. But it’s a relatively short-term issue that will pass – then you can get on with enjoying the longer-term rewards of your new automated systems.
We’ve already looked at the big business case advantages of EDI integration: faster ordering, accurate (automated) replenishment, lower error rate, reduced administration costs, increased operational agility and responsiveness, and improved relations with partner companies and stakeholders.
But there is another big advantage that everyone can appreciate – and that’s a massive reduction in waste.
With data taking the lead, operational decisions about stock can be more finely calibrated to actual demand. The result is that what gets delivered is what’s going to be sold. Nothing more and nothing less.
While Stockouts are a missed opportunity for retailers and suppliers alike, Overstock hurts everyone. It’s bad enough for the retailer who needs to recoup capital via markdowns and clearance events. But overstock doesn’t stop there. Without any data about consumer demand, manufacturers have no reason to reduce production – leading to mountains of waste.
With data-driven decisions, the retailers will never have significant overstock (outside of a planned, well-defined margin). Furthermore, the data is fed further up the chain to ensure that the flow of stock matches the rate of consumption. With enough transparency and collaboration, this means that manufacturers can receive and act on early demand signals. They can then ensure they don’t overproduce in the first place. This effectively eliminates the ‘need’ for waste in our system altogether.
Of course, there is a huge financial benefit from reduced waste. Much more importantly though, is the fact that mountains of unused clothing and shoes will not need to go into landfill sites – or get incinerated. Everyone’s happier.
And – of course – waste reduction is something all stakeholders can experience in the office too – because less time is wasted on tasks that are better suited to a machine.
If you’ve already implemented an EDI solution, it’s very easy to move to automated ordering. This saves time on manual order processing and guarantees error-free order processing. The key to unlocking all the efficiencies we have discussed is data. Data brokers play a vital role here, because of the richness of the data they hold. Retailisation has partnered with data brokers to harness the untapped potential of retailer’s data. This is something that all partners can benefit from. With the data leading the way, it’s easier to make the most impactful decisions and actions – automatically.