How Electronic Document Interchange delivers the goods for FMCG businesses: a case study

By Ian Ford

In a business where timing and efficiency is critical, FirstB2B’s EDI solution handles a complex sequence of electronic messages effortlessly, ensuring things happen when they’re supposed to.

In troubled economic times, all businesses look for ways of cutting costs and increasing efficiency. And none more so than fast-moving consumer goods (FMCG) manufacturers. The speed, complexity and reach of their operations means constant communication with third parties, generating a huge volume of paperwork: orders, invoices, delivery notes, queries, stock updates, load plans and much more.

Processing these documents takes up a significant amount of time, effort and resource, which in turn pushes up costs.

Electronic Document Interchange (EDI) can change all that, handling monotonous, repetitive document-processing tasks with speed, efficiency and accuracy. It helps companies cut costs, streamline their operations and deliver faster, better service throughout the entire supply chain.


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The company: a global FMCG player with a complex UK operation

One of our clients is a multi-billion dollar global food manufacturer whose brands are known around the world. Its products are found in every supermarket and foodstore throughout Europe.

In common with many FMCG companies, margins are always under pressure. Whilst most of its sales are to big retailers, they also distribute to smaller buying groups and wholesalers. So the company needs to keep fixed costs as low as possible to maximise operational efficiency. In addition, in a fast-moving and dynamic environment, it needs the flexibility to react quickly.

In common with many organisations our client has outsourced the operations of warehousing and logistics to third parties. The result is complex network of hauliers and warehouses, but also one of the most efficient logistics operations in the sector.

 

The challenge: maintaining control, visibility and flexibility

Outsourcing delivery means having millions of pounds’ worth of goods outside the company’s systems. It’s crucial that they maintain visibility and control of those goods. However, this involves a wide network of partners.

While the goods are in transit with a third party, they still belong to the company, which needs to be able to track them. It requires detailed information on orders and deliveries of goods from wholesalers to retailers, and movements by hauliers to and from warehouses.

They could force logistics and warehouse providers to use their systems, but that’s not without problems, which include licensing, training and security. They could use warehousing software, but it’s not really the right tool for the job: good at warehousing, but poor at keeping all supply-chain partners informed, updated and coordinated.

In addition, there’s the learning curve for partners. Every time you change providers, or integrate a new one, staff need retraining. This means extra time and cost, with a knock-on effect on efficiency, service and cost per pallet delivered.

Logistics providers have transport management systems, which are good at planning movement from point A to point B with an optimum fill, but not suited to enabling information exchange throughout the supply chain.

The manufacturer could put a logistics planning unit in place, but that has time, cost and resource implications. Or it could outsource it to a logistics company.

Whoever handles it, the traditional approach has involved a lot of people communicating by phone, email and fax.

It also involves significant complexity, trying to reconcile often conflicting aims. Hauliers, for example, want to wait for a full load before committing to a delivery. But retailers need goods on a certain day, at a certain time.

Manufacturers don’t normally get a full-load order going to a single customer. Instead, they have to manage orders from multiple retailers. This can mean that optimal capacity is rarely reached.

Traditional systems also lack flexibility. Once a haulier has com- mitted to a date, and confirmed by email or fax, that can’t then be changed without further human intervention, often involving not just the Haulier and the warehouse but also the manufacturer to ensure that all systems are synchronized. Once the load plan is in place for a 20-pallet delivery, it’s locked down. If four more pallets need to be added to the order 10 minutes after lockdown, the system can’t accommodate the late change.

So simply because of system limitations, two separate loads are scheduled: one for 20 pallets, one for four. This pushes costs up, and is bad news for sustainability, with an increased number of trips and delivery miles.

The lack of visibility also means that the resolution of any queries – missing goods in a delivery, for example – involves significant time and cost.

 

Technical complexity and legacy systems

Solving this multinational customer’s problems wouldn’t be difficult if their partners’ systems spoke the same language. But they don’t. The company has 10 different hauliers, using eight different systems. There are three warehousers, each using a separate system.

So the potential number of combinations means complex data integration. In addition, if the company adds any new partners to the mix, the number of combinations – and associated complexity – increases further. Even partners with the same systems can prove a challenge, if they use different versions of the software.

The company itself has very specific data needs. Its Proof of Delivery (POD) document has strict guidelines about what information must be included. Hauliers’ systems often have difficulty handling this data, as it’s customised and required only for this one client.

For FMCG organisations, Electronic Document Interchange can revolutionise the operation of their supply chain.

The first steps

Our client’s existing system was heavily reliant on manual entry of data. It was also difficult to integrate haulier and warehouse systems into the company’s system.

When to client decided to implement SAP they saw an opportunity to also improve the way they worked with their third party logistics partners.  SAP would handle accounts, customer orders and stock, but not warehousing and logistics. The company still needed a way of integrating partners into the supply chain that was compatible with its SAP implementation.

The criteria for such a solution were clearly laid down. It would have to:
• increase visibility, so the company knew where stock was at all times
• allow for changes and unplanned events
• permit flexibility: pallet splits, refused loads, late additions
• reduce the number of delivery miles
• improve sustainability

 

The solution: optimised electronic communication throughout the supply chain

The initial project that FirstB2B undertook was on load planning. Optimising this was crucial to operating more efficiently and cutting costs. We analysed the process flows, and designed a system that allowed fast, efficient communication to all parties.

Key to this was generating notifications with multiple, simultaneous recipients.

When the company sends a delivery request, notification immediately goes to the warehouse to let them know that the goods are needed at a specific time. The haulier is simultaneously notified when the goods are needed.

The haulier plans the load and sends an electronic load plan to the FirstB2B hub. The first B2B service then validates the Load Plan according to agreed business rules, sends a copy to the appropriate warehouse so that they can plan their work load and a separate copy to the customer.

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A faster, cheaper, more efficient operation, with significant ROI

All of this is made possible by Electronic Document Interchange (EDI), using a SaaS (Software as a Service) implementation. This is not the old EDI of inflexible standards and restricted documents, this is EDI where the content of the data is more important that the format. This allowed the hauliers and warehouses to use data formats that their systems could already generate, so saving them time and money. This outsourced, pay-as-you-go model of EDI allows companies to transmit and receive documentation electronically to all partners in their supply chain.

In a business where timing is critical, and efficiency is everything, FirstB2B’s EDI solution handles a complex sequence of electronic messages effortlessly, to make sure things happen when they’re supposed to. Everybody is kept in the loop, with changes instantly factored in, and appropriate adjustments made.

The entire process is tracked, recorded and updated. When the driver turns up at the warehouse, a goods-issue message is automatically generated. This is sent to the owners of the goods, so they know precisely where they are. The same message goes to haulier.

This data is then used for the next step in the process: proof of delivery (POD). If the goods are successfully delivered, an electronic POD form is sent back by the haulier. If the load is refused in its entirety (because it’s late, or no longer wanted) all partners are similarly notified.

And if it’s part-accepted, because for example a case is damaged, then the system splits the load and informs everybody involved. It does all of this electronically, avoiding the added paperwork and admin of credit notes and queries.

This flexibility is key to FirstB2B’s EDI solution for this multinational organisation. The system doesn’t lock them in to pre-defined processes with single outcomes, but can remain flexible and react to the situation on the ground.

FirstB2B achieved this by analysing the customer’s processes in detail, and adapting the solution so that it worked seamlessly with their existing operation.

Flexibility is key to FirstB2B’s EDI solution. The system doesn’t lock them in to pre-defined processes with single outcomes, but can remain flexible and react to the situation on the ground.

Delivering the goods for FMCG

In a world that’s fast-moving by definition, EDI provides an automated, highly efficient and cost-effective solution.

This organisation’s largest supermarket customers have strict KPIs that must be met, and FirstB2B’s system helps them do this. The accuracy of the goods delivered is a key measure, and EDI ensures this is kept at the very highest levels.

Goods delivery notes are automatically sent back to the owners, and integrated into their systems. Invoices are automatically generated and stock ‘downdated’ (revised downwards). If partial deliveries have been made, the undelivered stock is assigned to the haulier, who’s still responsible for it.

All of this is achieved with documents exchanged between the parties in seconds so that all systems are in a synchronized stated.

Key to this process is FirstB2B’s ability to ‘spin’ data. As a hub, we take information from one partner in the supply chain and modify or combine it in a way that another partner needs. In effect, we’re simultaneously translating data from incompatible systems to ensure the supply chain never stops.

This is a process we call ‘data enhancement’. And it simply cannot be done if there isn’t a hub connecting all the partners in the chain.

It necessarily involves some customisation, as each company’s setup is individual. With our multinational food manufacturer, we analysed their operation, their needs and their interaction with their partners. Then, we devised a solution to spin data and generate electronic messages at every stage of the process, often going in multiple directions.

In the first month of operation, we handled 100,000 individual documents between all parties in the supply chain.

By close cooperation with the client, hauliers and warehouses, within three weeks, the UK subsidiary achieved a level of operational efficiency that was expected to take three months. And it continues to set the standard, as the process is refined and improved.

 

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Lower costs, a more efficient supply chain and a competitive edge

Our client has a typical FMCG setup: complex, dynamic and challenging, with multiple partners and systems.

They needed a solution that was flexible, fast and accurate. A solution that would keep everybody in the loop, and provide near-realtime updates on stock movements. They wanted to maintain agility and react fast. They also wanted to meet targets for sustainability, while cutting costs and improving efficiency.

A SaaS EDI solution does all this and more.

For FMCG organisations, Electronic Document Interchange can revolutionise the operation of their supply chain. In troubled economic times, it’s a key way to cut costs, increase efficiency and gain a competitive edge.

About the author

Ian Ford is the founder and Managing Director of FirstB2B, the first company in the UK to offer an outsourced EDI service back in 2001. FirstB2B has over 1,200 live trading relationships, with over 4 million business documents exchanged each year between these relationships.

For more information, visit www.firstb2b.com

Contact: Ian Ford
Telephone: +44 (0)1246 350001


Email: ia[email protected]

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