Why Multi-Tenant Equals A New EDI Order

By Jim Frome, Strategy Officer & Executive Vice President, SPS Commerce

Electronic data interchange (EDI) provides visibility of items moving through the supply chain. Yet enabling EDI has typically been a burdensome experience for most manufacturers, requiring considerable time and financial investment. Technical professionals have long strived to improve the way they perform EDI, through standardized transactions to in-depth education. Yet amidst these difficulties, a new approach has emerged that has transformed this cumbersome data exchange into a newer model that is more aligned with today's global sourcing environment.

Doing It Yourself Only Recreates the Wheel EDI is necessary for consumer packaged goods (CPG) manufacturers doing business with large retailers the likes of Wal-Mart and Target. However, the conventional approach to enabling EDI has been flawed. This involved creating detailed maps to reconcile data between an organization and each of its retail customers. Manufacturers invested in inhouse hardware, specialized EDI software, and highly paid technical personnel to build and continually update these maps. Yet these maps are the exact same maps being built by every other manufacturer doing business with that retailer. In addition, there are lots of moving parts to watch, fix and take care of when you have a system that is transforming data into multiple formats and moving it between multiple locations and applications. To complicate matters, diagnosing and resolving problems often involves cooperatively working with your customer's EDI staff. Sometimes the problems are caused by the manufacturer. Other times, they are caused by the manufacturer's customers. Playing the "finger pointing" game when this occurs requires a tricky balance of diplomacy and technical expertise.

All manufacturers face specific rules for how to electronically exchange business information, such as purchase orders, inventory status, shipping and packing information, sales forecasting data, and invoices with its retail partners. Since each manufacturer must conform to the same rulebook or EDI guidelines as all other manufacturers, and build out the maps exactly the same way as mandated by the retailer, many companies are essentially paying a whole lot of money to reinvent the wheel. This begs the question: Why would a manufacturer need in-house IT expertise to perform a task that is not core to their business and does not provide any competitive advantage? Moreover, whenever a map change or a communication exchange problem arises, each company's team has to learn on its own the best way of solving the problem. For example, each time Wal-Mart revises its mapping rules, there could be hundreds of manufacturers around the globe, each with its own technical team, left with the same conundrum—yet each one left to solve the problem on its own, in a vacuum.