EDI for Retail: What It Is, Why You Need It
by George Maginnes | Originally published: June 30, 2017
Updated: April 5, 2021
How do you stock your store?
Creating and sending orders is a time-consuming, but essential, part of any retail business. Even though we have technology that speeds communication around the globe, many people still dial up their sales rep to do their weekly orders over the phone. It’s nice to talk to a real human, especially in the age of pandemic restrictions and when it’s someone you’ve been doing business with for years. Unfortunately, ordering over the phone creates a lot of opportunities for miscommunication.
Placing inventory orders really didn’t change much until the 1970s when physical counts, pen-and-paper order sheets and a phone call to suppliers moved into the computer age. Even then, though, a computer printout and fax machine replaced handwritten orders and the telephone.
Email was the next step in the evolution. This was faster, but it still took a long time to create the order and created many opportunities to make mistakes – transpose numbers, order wrong items or incorrect quantities, etc. And if you had multiple suppliers, those steps would have to be repeated.
Another step in the modernization of placing orders, depending on the supplier, came when some retailers could order through “dealers only” areas of their suppliers’ websites. This method requires searching through hundreds or thousands of products to order the items they need.
No matter which method is used, the people doing the work are paid for their time, patience and attention to detail. Adding those wages into the equation magnifies how expensive and time-consuming these methods were and still are.
There is a better way!
It is possible to bypass the hours it takes to create and receive your orders. A retail management system equipped with EDI (Electronic Data Interchange) sends your order directly from your point of sale to your supplier’s computer. Once you enter the quantities of the products you need and hit the “send” button, EDI for retail does the rest. This is a system many Paladin users have come to depend on for decades to keep their hardware store shelves stocked.
EDI for retail reduces the time it takes to put together an order by eliminating most of the steps. The amount of time spent creating a single order is reduced from several hours to less than one. If you order twice a week, how much time would you save?
If you’re entering information into your computer so you can print and fax your order, EDI dramatically reduces wear and tear on your office machines. You’ll be buying a lot less toner and paper. With fewer paper documents, you’ll also have fewer costs related to storage and filing.
When you order through EDI, part numbers and related item info in your point of sale system are used to create your order. This dramatically reduces the possibility of missing or transposed numbers or letters, and other errors caused by even the most careful humans. Your staff won’t have to wrestle with suppliers over shipments that were filled or ordered incorrectly.
Thanks to EDI for retail, employees who used to spend hours creating orders are now available for higher value tasks, like improving customer service or keeping your inventory counts correct.
EDI shortens the fulfillment process for your supplier, too. Without all that paper to deal with, the items you order will be on their way to you sooner. Shortening the entire ordering process results in fewer out-of-stock situations and canceled orders.
Now that order processing and delivery times are reduced, sellers can lower inventory levels, improve cash flow, and turn merchandise faster.
Ross Martin, who owns Caledonia Village Ace Hardware in Caledonia, Michigan, uses Paladin Data Corporation’s retail technology to keep the right mix and optimum quantities of products in stock. One of the system’s features, Suggested Ordering, uses sale transaction data and analytic algorithms to eliminate hours of price shopping and automatically generate inventory orders to maintain the ideal amount of stock on hand. Using it has helped the store achieve an in-stock percentage of approximately 98%, which Ross says helped him earn Ace Pinnacle status as a top-performing store two years in a row.
“Our store uses Suggested Ordering 100%. Ace considers 95% really good and we’re always above that,” he says.
Better for business
It’s easier to make decisions when you have good information about the status of your orders. EDI for retail makes you more agile and better able to respond to customer needs or changes in your market. This flexibility opens the door to adopting a more proactive, market-driven business model.
“You have to let technology work for you rather than you working for it,” says Dan Nesmith, owner, president and chief technical officer of Paladin Data Corporation, a leading provider of retail management technology. “Allow technology’s use of sophisticated forecasting models to automatically tailor your inventory to meet your customers’ expectations.”
Benefits beyond ordering
Once your order shows up at your door, you need to receive it. Time to figure out which items have been shipped to you and which ones haven’t. Crack open those boxes, count each item, and see if the number of items in each box matches the packing slip that came in the box, then match the packing slips to the original purchase order to figure out if the supplier missed anything and determine if some of your items were back ordered. Once you’ve figured out what was actually in your shipment, it’s time to hunker down, grab a cup of coffee and manually update all your inventory quantities for each item received. Good times!
Retailers who use EDI will receive an electronic document from their supplier when their order leaves the warehouse. This document shows which items are on their way to you. When the shipment arrives, this document is used to automatically update inventory counts in your point of sale system. You can spot check if you want, but it’s likely all you really need to do is get this stuff on the shelf.
Dave Billman simplified his life in his store, Clinton Hardware in Clinton, Maryland, just by using retail technology he researched and purchased from Paladin Data Corporation. He says mapping his store with location codes and trusting his Suggested Ordering reports has allowed him to eliminate inventory that doesn’t sell and replace them with items that do. It also lets him to track his departments and easily reorganize when he adds new products.
“With my old system, you had to be a computer genius to do anything in it. With the system I have now, Paladin, I can do by myself,” Billman says of his in-store retail technology with EDI and Paladin’s Market Driven Inventory Management™. “I have full confidence in it keeping my store stocked but not overstocked. I love it.”
“The only thing that is constant is change.” – Heraclitus of Ephesus
Who would have thought a Greek philosopher walking around in 500 BC would know so much about retail?
Prices are always changing. As a rule, they only go in one direction. Knowing when they change, and by how much, has a direct influence your profits. Continually comparing your current costs against the amount your supplier is charging is tedious, time-consuming, and totally impractical.
Suppliers who support EDI for retail will periodically send a maintenance file to your point of sale system to keep your information current. Maintenance files contain updated information about price changes and product descriptions, along with updates to several other categories. A single click revises each category in seconds.
EDI for retail just makes sense
A point of sale system with EDI capability will save you money by reducing the number of steps, the time, and the amount of people involved in the ordering process. EDI reduces human error to improve accuracy and efficiency. The time it takes to receive a shipment of merchandise is shortened by eliminating most of the paperwork and by updating stock totals automatically. To keep you on the right track, your supplier can update purchase prices in your point of sale system, allowing you to maintain your margins and remain profitable while saving you even more time, effort and money.