This Week in IDEA | September 2, 2009

The Case for Using EDI

Source: Thomas & Betts EDI Initiative Program by Woody Savage, Director of eCommerce, Thomas & Betts

Electronic data interchange (EDI) is not a new subject—it is not even a timely subject. Thomas & Betts (T&B), a leading designer and manufacturer of electrical components used in industrial, commercial, communications and utility markets, has been processing EDI orders with some of their distributors since 1989. However, the fact is, while almost every major distributor entity is EDI capable today, not all are taking full advantage of it. T&B put together a case for using EDI and distributed it to their customers in an effort to increase electronic activity across the board. Take a look at some of the findings from their recent report.

In comparison to the retail sales channel, the electrical distribution industry has a way to go. The retail industry (i.e. Walmart, Home Depot, Lowes, etc.) tends to focus more on streamlining their business processes and reducing transaction costs associated with order processing, shipping, receiving, invoicing and payments. The chart below shows a comparison for these two sales channels as it relates to order lines sent via EDI to Thomas & Betts - 99% for retail versus 61+% for electrical distribution.

Like most situations, there are exceptions to the rule. Some electrical distributors are more aggressively trying to reduce their transaction costs than others. The chart below depicts 12 major distributor organizations and/or buying groups and how they compare relative to one another (this chart is based on order entry lines sent to T&B via EDI).

Several important facts can be ascertained from this chart:

• Some distributors are very serious about making EDI a priority within their organizations (see bars 6-12) while still others are not yet on board.
• In order to have a high percentage of EDI participation, you must also have a majority of your distributor branches/members actively using EDI.
• The fact that several electrical distributors have achieved 80-90% levels disputes the notion that many electrical items cannot be ordered via EDI because they are “special” or they have a “different price” or they need to “ship right away”, etc.
• Essentially every major distributor today has the capability of using EDI whether they actively do or not.

Cost Effective Industry Solution for Transmitting EDI – IDX

One advantage we all enjoy in the electrical industry is the ability to use the Industry Data Exchange (IDX) network for transmitting our EDI transactions. This Internet-based communications hub enables trading partners to exchange business documents. It was developed by IDEA expressly for this purpose. IDX maintains a near 100% reliability record and users of this system (both manufacturers and distributors) save an estimated 30%-40% over other traditional commercial service providers.

The benefits of using eCommerce are accumulative - not just a one-time savings. The sooner you start, the greater your benefits will be and the more they will grow (see chart below for T&B’s growth over the years).

Why then, when given a choice between using EDI and sending a fax, do distributors tend to fall into the trap of sending fax orders to their vendors only to have them manually re-key these same orders into their system?

It is apparent from T&B’s data that most major distributors have a cost effective EDI capability in place, but many individual locations still tend to push the fax button instead of the EDI button when they go to transmit their daily orders to manufacturers.

It appears that manufacturers have failed to communicate the benefits of EDI versus fax and other manual methods to distributor partners effectively (at least at the branch level). Hopefully, the information that follows will help explain the underlying value of choosing EDI over fax for manufacturers, distributors and the end customers.

Advantages of Using EDI versus Manual Entry

Faster order fulfillment - The chart below shows actual order lines received by T&B over the course of a week (Note: T&B processes EDI orders 24 hours a day, seven days a week). In fact, T&B picks up EDI orders from IDX every five minutes and converts them into TOPS (T&B Order Processing System) within seconds of receipt. Customer service representatives, on the other hand, work from about 7 AM to 6 PM five days a week - they eat lunch, take breaks, etc. Manual orders may take as long as 4-8 hours on average to be processed whereas the EDI process seldom has any downtime.

Order accuracy - Reading illegible or truncated fax pages, misinterpreting quantities or catalog numbers leads to additional errors. A study of all order lines received YTD at T&B shows that EDI order lines had over 40% fewer order resolution errors than fax orders that were manually entered (see chart below).

Better user experience - 99% of EDI orders go into the T&B system without human intervention within seconds of receipt. Items allocate instantly so distributors won’t miss cut-off times for regularly scheduled shipments. EDI air orders are instantly available for pick, pack and ship to the destination.

Order follow-up is more dependable – EDI orders display almost instantly in T&B Access. No need to wonder when or if the order has been entered - you can readily view the shipping status (backordered items, allocated, in shipping, carrier tracking status, etc.) at your convenience 24 hours a day, seven days a week. EDI also provides distributors with an automatic functional acknowledgment that T&B received the order in their system - something a fax transmission cannot do.

Order Flexibility - T&B’s EDI process is programmed to support virtually all types of order conditions including:

• Drop Ship Orders to end users
• Rush/emergency orders for air shipment
• Made-to-order items as well as stock items
• Future dated orders or orders with multiple request dates at the line level
• Quotations and Promos at the header/line level
• Ordering of non-stock items by the distributor without carton lot rounding
• Entry of items by Catalog number, UPC number and/or Customer Part Number
• The T&B system even checks for and eliminates duplicate purchase orders entered via EDI

Unique Benefits - T&B can “store and playback” the distributor’s customer PO line numbers and customer part numbers on various documents, labels and electronic transaction sets so the distributor can more easily match up items shipped or billed to them. They can even print stock bin locations on full case labels to aid warehouse personnel in receiving and putting away T&B items.

The bottom line is that distributors who do not take advantage of EDI and/or web order entry are putting themselves at a competitive disadvantage compared to other distributors and/or other sales channels.

Over 80% of T&B’s Order Lines are received via EDI and Web

This accomplishment has enabled T&B’s dedicated customer service teams to devote more of their time to service support needs. Now instead of spending a lot of time manually re-keying orders, they can spend more time and effort handling exception expedites, resolving order resolution issues, working with returns and other service issues critical to a trading partner business relationship.

Contact your at IDEA to find out ways you can increase electronic activity with your key trading partners closer to 100%.

We’d like to thank Thomas & Betts for helping IDEA promote the benefits of eCommerce to drive costs out of the electrical supply chain. If you have an eCommerce initiative or success story you’d like to share with the industry, please email a copy to .

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Thomas & Betts: Bronze Sponsor of the IDEA E-Biz Forum

Thanks to Thomas & Betts for their Bronze level sponsorship of the IDEA E-Biz Forum 2009. This company demonstrates their dedicated support of the electrical industry’s only annual event focused on advancing the industry through eBusiness and the latest technologies. Their leadership and support is greatly appreciated by all.

For more than 100 years, Thomas & Betts has been a leader in providing products for commercial and industrial construction, industrial plant maintenance, repair and operation, electrical utility distribution, communications and original equipment manufacturing for over 100 years. They offer one of the broadest product lines in the electrical industry, with more than 70 of the most widely recognized and valued brands in the industry. Their broad portfolio supplies over 70 percent of the items used in a typical electrical application. Thomas & Betts is headquartered in Memphis, TN.

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Forum Registration Closes Friday: Newly Added Educational Lunch Sessions Present More Opportunities to Learn

With less than three weeks to go, the Forum registration doors are closing – those not registered yet must sign-up and book their hotel room by this Friday, September 4, to secure their seat at the industry’s eBusiness event of the year. Educational lunch sessions were recently added to the agenda to bring extra value to attendees.

Get the attendee list

If you are registered or plan to register this week, don’t forget that the Forum special hotel rate of $195/night is honored three days before and after the Forum. Take this chance to extend your stay and be a tourist at the premier resort of the Southwest (all hotel reservations must be made by Friday as well).

Register AND book your hotel now!

New Educational Sessions Added to Agenda

Make the most of your Forum lunch on Wednesday, September 23 with our newly introduced educational lunch sessions:

Building the ROI Case for Small Partner Enablement - Josh Hardy, Sterling Commerce
Organizations forfeit cost savings and supply chain performance benefits by short-cutting B2B automation. It has been well over 10 years since the eCommerce revolution began. While the benefits that started this revolution continue to expand, the commitment level of most organizations still reflect the 80/20 rule, resulting in automation with only the top 20% of their partners, at best. The belief that it is not worth the time, money, or effort to automate with 100% of your partners is resulting in money being left on the table. The solutions exist for automating phone, fax, email, and postal mail business transactions and the ROI case is clear, regardless of partner size or volume. Find out how it optimizes your trading relationships with partners of any size and realize the greatest cost savings, efficiency, and visibility.

Using IDW Data to Optimize Customer Pricing & Internal Gross Margin - Randy Hughes, epaCUBE, Inc.
Electrical distribution companies have spent years implementing technology and processes to reduce the cost of doing business. While vendor costs and customer sell prices are among the more significant variables affecting an electrical distributor’s profitability, relatively few dollars have been spent automating the evaluation, impact, and modeling of these critical data elements. In addition, the complexity of customer and vendor price agreements and lack of accurate, unblemished product data in their ERP system makes the job of modeling an almost impossible task for any business. Join us in this session to understand how companies are using IDW product data loads to evaluate and manage changes and the impact of those changes on their gross profit and bottom line.

Check out the rest of the final schedule.

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NEMA’s enLIGHTen America Initiative Marks First Anniversary

Mission to Build Awareness of Lighting Renovation’s Value Grows

The National Electrical Manufacturers Association (NEMA), the association of electrical and medical imaging equipment manufacturers and part owner of IDEA, expects that its enLIGHTen America initiative will reach a wider audience in 2010 with its message about energy and costs savings through lighting renovation. Launched in August 2008, enLIGHTen America has primarily targeted executives in the building owner/operator markets. It provides tools and information on the advantages of upgrading old lighting products and systems.

"We have reached hundreds of thousands of people during our first year of operation, and our members think we are making a difference," said Ron Runkles, NEMA Lighting Industry Director. "In our second year, we plan to continue our focus on building management executives and also expand our message to reach contractors, distributors, and lighting maintenance companies. These are natural partners to help us grow lighting upgrade and renovation activity in the United States."

Lighting accounts for up to 40 percent of a building's energy use, and organizations that have upgraded have achieved rapid payback on their investment. EnLIGHTen America research has shown there are plans to upgrade the lighting in 41 percent of the nation's five million commercial, industrial and institutional buildings during the next year.

To learn more about enLIGHTen America, visit http://www.nemasavesenergy.org.  

NEMA is the association of electrical and medical imaging equipment manufacturers. Founded in 1926 and headquartered near Washington, D.C., its approximately 450 member companies manufacture products used in the generation, transmission and distribution, control, and end use of electricity. These products are used in utility, industrial, commercial, institutional, and residential applications. The association’s Medical Imaging & Technology Alliance (MITA) Division represents manufacturers of cutting-edge medical diagnostic imaging equipment including MRI, CT, x-ray, and ultrasound products. Worldwide sales of NEMA-scope products exceed $120 billion. In addition to its headquarters in Rosslyn, Virginia, NEMA also has offices in Beijing and Mexico City.

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IDX Hot Fact: EDI is Not Just About Orders

Source: Thomas & Betts EDI Initiative Program by Woody Savage, Director of eCommerce, Thomas & Betts

EDI can play a key role in reducing transaction costs whenever there is a large volume of reoccurring transactions. Some examples include:

• 810 Invoice can help to streamline the payment process by allowing you to match invoice data with shipment data electronically.
• 812 Credit/Debit Adjustment helps to resolve payment discrepancies.
• 820 Payment Order/Remittance Advice helps to streamline the payment process.
• 832 Price/Sales Catalog provides pricing and catalog marketing data.
• 844/849 Product Transfer Account Adjustment and Response speeds up the Ship & Debit claims processing.
• 845 Price Authorization Acknowledgment/Status provides pricing info.
• 850 Purchase Order speeds up the ordering process and reduces errors.
• 852 Product Activity Data allows the distributor to provide the manufacturer with a current stock status so manufacturers can ensure distributors have the right stock at the right time to meet their customers’ needs.
• 855 Purchase Order Acknowledgment confirms the purchase order was received and the expected ship dates.
• 856 Ship Notice/Manifest can provide shipping details of material in transit providing the data necessary to auto-receive shipments.
• 870 Order Status Report provides comprehensive status of orders.

These are just a few ways EDI can work for you - relieving you from manual processes that get in the way of important business goals.

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