Seven Tips for Trading Partner Community Development

The retail industry is facing what many observers call the most difficult economic environment in decades. As consumers scale back on spending, retailers face tremendous pressure to do more with less. At the same time, consumers have become more demanding about getting the specific products they want faster than ever before. To enhance efficiency and visibility with supply chain partners in this challenging environment, retailers strive for greater supply chain integration through a well-executed trading partner community development effort.

Trading partner community development, or enabling retailers to electronically integrate their data and business processes with suppliers and other trading partners, is by no means a new idea. Electronic data integration (EDI), the primary technology for achieving this, has been around since the 1970s. Despite its obvious benefits, the risks associated with a poorly executed enablement effort have kept many retailers from moving forward.

Here are seven best practices that retailers can follow to ensure success in their trading partner community development initiatives:

1. Develop a roadmap
First, retailers need to develop a plan and roadmap for the trading partner community development program. This plan should address the following three components: vendor segments, fulfillment models, and the data and information to be shared.

A successful vendor enablement initiative must accommodate the retailer's unique mix of fulfillment models, such as:

- Ship to distribution center
- Drop ship
- Ship to store
- Vendor managed inventory (VMI)
- Direct store delivery (DSD)
- Multi-party
- Private label

Finally, the retailer should evaluate what types of information it wants to capture or exchange with its trading partners. Some of the most common transactions include:

- Purchase orders and purchase order changes
- Invoices
- Advance Ship Notices (ASNs)
- GS1-128 labels (formerly UCC-128)

2. Focus on supplier relationships, not technology.
Too many enablement programs prioritize systems over relationships. While technology is important, managing vendor relationships is absolutely critical. The challenge of any enablement program is convincing hundreds or even thousands of suppliers to spend time and money on something that fundamentally changes how they do business.

Retailers need to put themselves in their suppliers' shoes. Even if suppliers are doing EDI with other retailers, implementing a new purchase order (PO), ASN or label specification requires significant effort. Suppliers will need to dedicate resources to understanding the EDI guidelines, and to mapping and testing their system.

3. Give merchandising the leading role
Merchandising department should spearhead all trading partner community development programs. To appreciate why merchandising has to take the lead, retailers need to understand how vendors will react. Be prepared for a response like this from suppliers:

-30% will enthusiastically adopt the program with no questions asked

-40% are willing but will challenge - your business case and may need validation of your commitment to doing business with them

-20% are vocal resistors

-10% are hard to predict and may not belong on the target list

In this critical step, the retailer's merchandising department sets a targeted adoption rate. This represents an appropriate equilibrium point between adoption rates and disruption to vendors. The adoption rate goal will drive the whole program including its message, tone and timeframe.

4. Be accommodating to suppliers' needs
As long as retailers can get the data they need, suppliers should be free to choose the solution that works best for them. Some suppliers have been doing EDI for a long time with many other retailers and therefore, will want to extend the system they already have and use a one-time testing effort. Others, who don't have an EDI system in place or don't want to use their existing system, need a quick and easy way to get up-and-running. Software-as-a-Service (SaaS) based services that have been pre-certified with the retailer are the best choice.

Using SaaS EDI, vendors can start doing transactions almost immediately without investing in special hardware, software or staff. These services can be accessed via a web form for suppliers with low to medium transaction volumes, or directly integrated with an accounting, ERP, packing/shipping or warehouse management system for organizations with higher transaction volumes. In addition to getting suppliers up-and-running quickly, SaaS EDI services do not require staff to handle each vendor test cycle separately and offer predictable monthly fees.

5. Make testing real
Often it is easier test vendors up-front with a generic test order. However, this creates more work down the road and can lead to problems with the production effort. It's better to spend time at the outset of the program testing real data using real transactions that are meaningful to the vendor. If multiple transaction types or fulfillment models are being implemented, multiple test scenarios using real data are needed.

In the long run, using actual syntax and actual content is time well-spent that can eliminate many potential issues associated with a real order.

6. Staff accordingly
Implementing a trading partner community development program is a focused and extremely intensive project that requires a lot of resources. The enablement campaign staff (whether done internally or outsourced to a third party provider) is responsible for:

- developing messaging
- analyzing the supplier community
- developing a rollout plan
- executing the supplier campaign
- certifying suppliers
- providing ongoing support

Each of these steps can be extremely time-consuming. For example, even a relatively modest effort involving 100 vendors would likely require the retailer to make at least 500 calls just to identify the right person to contact at each supplier in order to analyze their EDI environment. The implementation itself would require an exponentially greater amount of work.

Because of the magnitude of the effort required for a successful campaign, retailers (or their third party provider) usually need a 20- to 30-person team to get through a six-month spike of activity.

7. Scorecard data quality
Once the EDI system is in production, retailers need to remain focused to ensure vendors continue to complete all of the required transactions and send all necessary data. This phase offers an excellent opportunity to monitor and scorecard vendors. If suppliers fail to comply with the enablement effort, it's important to inform them of their status and ensure there's a consequence for non-compliance.

Merchandisers can be equipped for improved vendor discussions using dynamic scorecards that leverage data directly from their EDI environment. For example, buyers can track vendor performance by product, store and timeframe to proactively identify inventory challenges and team with their vendors to address and/or eliminate the problems.

8. Think long-term
Managing an active trading partner community should be seen as an ongoing journey, not a one-time event. Successful retailers never believe their first trading partner community development program is their last.

Once the EDI system is in production, it should be closely monitored to ensure vendors are complying with the program. After the initial campaign is completed, retailers might want to expand their trading partner community development efforts to include more suppliers, more types of transactions or more fulfillment models.

You can reach Jim Frome and learn more about trading partner community enablement by contacting SPS Commerce.
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