How does EDI help manage global supply chain disruptions?
In football, good team chemistry between players is the key to gaining a winning advantage over the opposition. The opposition, on the other hand, will pull out all the stops to stand in between your team and victory. Football is a fast-paced game and involves a lot of movement on the field. The players are in a constant struggle of defence and counter-attack. Communication and collaboration are critical, and separate champions from mere contenders.
Business is a fast-paced game and involves a lot of movement both on and off the field. Just like a champion team, business relies on key players and a healthy supply chain. Procurement, production, distribution and sales all rely on the quality of the players and the health of the supply chain. Strong collaboration and communication functions readily handle changing market conditions, thereby playing a key role in surpassing customer expectations. As market complexities increase and customer needs and expectations change, so too does the frequency and severity of supply chain disruptions.
Here are some causes of supply chain disruptions:
- Unexpected business interruption
- Raw material and labour shortages
- Transportation network disruptions
- Natural or environmental disasters
- Geopolitical instability
- Telecommunication or electric infrastructure failures
- Cyber-attacks and other disruptions to the IT infrastructure and services
The differences between local and global supply chain disruptions can no longer be measured in mere degrees; your business and thousands more are interconnected more than ever before and dependent on trading partners; global disruptions affect a wide range of businesses which requires innovative solutions.
The COVID-19 pandemic wreaked havoc throughout world economies and the impact was felt by every business, both on the supply and demand side. Factory output slowed or stopped entirely, warehouses and transportation companies were operating far below capacity or closing down, and productivity slowed, mirrored by a shallow drop in consumer demand. Some estimates warned of a 20% decline in consumer demand and recovery expected to take months.
Thinking about your supply chain and how EDI can help in your recovery to have a competitive advantage is very similar to an off-season trade or recruiting a new player from your team in the football analogy we began with. In the following, we highlight a few examples of how different business teams have been affected by the most recent global supply chain disruptions.
- Suppliers – You need carriers and trucks to get your products to the market. These carriers need to be integrated with your enterprise systems so you can get messages such as load tenders to them. Suddenly you are unable to connect to them promptly and getting them connected takes time with your present EDI solution – time that you don’t have.
- Retailers – Your stores have been closed and you need 3PLs providers to ship your products directly to customers. You have no experience with direct-to-consumer shipments and have no idea where to begin integrating. Everyone you talk to is an expert with their own solution. How are you going to sort them out or integrate several shipments when time is critical and working against you?
- Logistic Services – Your services are in high demand and customers are interested in doing business with you. Your team has been integrating customers one at a time for years without a problem and you are facing an onslaught of new customers and your team is now working from home and unable to integrate with them quickly.
- Food Service – Restaurants are closed for dine-in and your sales have been impaired. You know that orders are being distributed directly to the customers through telephonic ordering and 3PLs. Going direct-to-consumer will work, but how do you get there?
Read more: The cooperative advantage of EDI integration
Consequences of Supply Chain Disruptions
Decrease in Profitability
Supply chain disruptions are more likely than ever to adversely affect the short and long-term profitability of your business with losses in market share and sales. Capitalizing on market demand outside of your normal business operation means that you have to be prepared.
Loss of Productivity
Supply chain disruptions also negatively impact the productivity and utilization of assets. The firm may end up with excess inventory for some products and experience stock-outs and backorders for others. Equipment over-utilization and under-utilization will be very likely, which could lead to poor asset and inventory performance. Retailers are taking the brunt of it. With numerous big retail companies closing down their stores, they are struggling to sell out overstocked inventories. Are you ready to trade quickly with new partners?
When the customer is unable to get what they want and when they want it they will go elsewhere. We are all consumers and if you think back on the last few months you’ll see that you went elsewhere to get the goods that you needed for your family and as an outcome of these actions your loyalties may have changed. Different brands, different stores, different locations have all become part of your normal routine. Much the same can be said of your customers. Have you been able to provide them with the same level of products and services? Have you been able to provide new goods and services and gain new customers, and if not, what stopped you?
Increase in Costs
Disruptions can increase the costs associated with
expediting, premium freight, obsolete inventory, additional transactions, storage
and moving, selling, and penalties paid to the customer. Also, the loss of
reputation and credibility associated with disruptions may require firms to
increase their marketing expenses to reinstate their credibility and
reputation. Furthermore, it can make it more expensive to raise capital as
investors may ask for a higher premium to lend to firms whose credibility and
reputation is questionable.
Factors that Exacerbate the Effects of Global Supply Chain Disruptions
Supply chains change, partners change, this process continues year after year making it increasingly important for everyone who interacts with a product as it moves from origin to destination to stay in touch, to know systemically where that product is and who has interacted with it and it becomes increasingly difficult to stay on the same page without a well-planned communication channel. How else would businesses know that best practices and important policies are being followed?
Poor communication leads to untimely deliveries, or worse, deliveries than cannot be made resulting in a slowdown in other activities further impacting your customers and your business. The costs associated with this are far beyond the confines of just poor customer experience, negative brand recognition and reputation.
Electronic communications in EDI are particularly efficient. Fast load tenders to your carriers faster than your competitor can mean the difference between getting your products to market and tomorrow’s pickup and as they say, “nobody wants a brown banana’, EDI processes that automatically create, transform and transmit transactions as they occur are more efficient than those old manual processes that take a phone call, an email and a walk next door to accommodate.
Read more: What EDI can mean for your business?
Slow Response to Technology
In an age where you can order from Amazon, receive an instant response and get a package the same day, are your process taking all day? You hear about things like E2E visibility, transparency and agility and how these are drivers in creating a lean and responsive supply stream. Today, concepts like Big Data, Internet of Things are reported to be crucial to a company’s success story. Where is your success story? Do you rely on error-prone manual processes and is your business slow to respond to rapid technological advancements? Are you facing rising labour costs, retiring workers, older technologies, inefficient service delivery and reduced transparency?
Consider the case of the frozen foods industry in the US. Restocking of frozen foods requires transport containers known as REFERs, i.e. refrigerated containers. When frozen foods were flying off the shelves, retailers sought to restock them and in short order. The result was a shortage of refrigerated containers which impacted the supply chains of other refrigerated products, fresh produce like milk, cheese and meats among others. When there are no refrigerated containers available to bring the produce to markets, the supply chain is impacted and so are customers.
EDI is the answer
Supply chain disruption means (1) you need to operate at peak efficiency when you interact with your trading partners, and (2) you need to be able to act quickly to seize an opportunity or overcome an obstacle when that time comes. A reliable and scalable EDI solution helps you address both whether it’s a local disruption or a widespread supply chain disruption such as the one as a result of the COVID-19 outbreak. EDI provides visibility into what your customers want, what your suppliers have to offer and where your goods are in the middle of uncertainty.
Exchanging business data with trading partners and organizations does not have to be expensive or technically challenging and while many EDI solutions charge by transaction, they discourage smaller partners from establishing critical lines of communication. It doesn’t have to be that way and with Visionet’s PartnerLink, it’s not. If your current EDI solution fails to scale, has trouble with high volumes or is becoming sluggish under peak loads negatively impacting your business, there is another way.
Visionet’s PartnerLink will help you overcome challenges related to supply chain disruptions. It is the perfect tool for B2B communication for your EDI and non-EDI trading partners alike.
- PartnerLink comes installed and is easy to use and maintain.
- PartnerLink simplifies the onboarding process with easy configuration and business rules.
- PartnerLink supports robust, multi-user, ‘log in anywhere’ access.
- PartnerLink maintains a wide variety of standards and formats.
- PartnerLink increases throughput by scaling to thousands of transactions per hour.
- PartnerLink has real-time error detection and ‘fix on the fly‘ remediation.
- PartnerLink has built-in access to leverage various transport protocols.
- PartnerLink keeps users informed with a real-time dashboard and detailed reports.
- PartnerLink even includes an AS2 solution.
- It’s all included with PartnerLink, there’s nothing else to buy.
When your supply chain runs at peak efficiently, your business operates better and is more likely to overcome supply chain disruptions. An easy-to-use, easy-to-deploy, reliable, secure, and integrated EDI solution will help your business prepare for the next supply chain disruption and make sure that you come out on top.
Discover PartnerLink and PartnerLink will help you discover the value of frictionless EDI. Talk with our experts and see it for yourself.