EDI Order Processing Description (Supply Chain)
EDI Order Processing described in this blog presents and explains the retail order cycle application. There are four major functions in the EDI Order Processing:
- Inventory Status (to determine what to order)
- Purchase Order creation (by retailer or by vendor)
- Purchase Order Acknowledgment (by vendor to retailer)
- Invoice what product to order (by vendor to retailer)
Inventory Status is essential for the ordering cycle. Without information on stocking levels, an effective inventory system is impossible to maintain. The items that must be maintained in an Inventory status system are:
- Vendor Information
- Item Identification (UPC, Vendor Number, Retailer SKU)
- Product Descriptions
- Inventory quantity on-hand
- Inventory changes
- Quantity on-order
- Quantity in-transit
- Special needs
Prior to a Purchase Order being created, Inventory status is used to determine what merchandise should be ordered. This information can be derived in many ways.
Electronic Sales Data to update “in-house” inventory systems
This method has sales data captured at the store level either via the retail Point of Sale (POS) or capturing on a scheduled basis the quantity and item information using a hand held scanner. This information is pulled back to a head office inventory system. This system assists the central buying office in the creation of a Purchase Order. If merchandise scanning is used, inventory levels will only be accurate for the day of the scan. All subsequent changes in inventory will not be reflected in the inventory system. If scans are done every two weeks, then a delay of two weeks is built into the system. If scans are performed more often, accuracy improves but the cost to capture the data is greater.
If POS data is used, the retailer will gain through a reduced effort to capture data and accuracy of data as it is captured daily. The problem with this system is that retail inventory systems can rarely track information at the lowest level of detail (UPC). In this scenario, the retail POS data must be rolled up to a class level. This makes the ordering at the color/size level impossible. Another problem in retailing is that using POS data will only be successful if other changes to inventory (such as theft, merchandise transfers, returns of sold merchandise, returns to vendors etc.) are entered in at the lowest level of detail. Even if information is kept at the lowest level of detail, it must be entered in on a timely basis. Traditionally, retailers using POS data will also perform a full scan of merchandise every three months to correct inventory accuracy.