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  NOVEMBER 2013
 

 

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Vendor Compliance from a 3PL Perspective: An Overview of Key EDI Transactions
Scott Weiss, Taylored Service

In today's automated distribution environment of RF based scanning, facility automation, and real time information, seemingly every client expects their third party logistics provider (3PL) to maintain accurate inventory to pick product in a timely manner. More and more, technology has played a critical role in the manufacturer/3PL/retailer relationship - so much so that one can argue that a 3PL is really a technology company disguised as a logistics provider. Technology is king and can be the difference between a good 3PL and a great 3PL; a long-term, productive relationship and a disastrous relationship. In past articles we have reviewed how untimely or failed EDI transmissions to the retailers is the number one source of chargebacks. So today we will walk you through the key EDI transactions between client, 3PL, and retailer so you can understand the process flow.

 

In general, third party warehouses store products for manufacturers which then instruct the warehouse to ship to other locations. This process, utilizing EDI, generally follows this sequence:

  • Upon establishing a partnership, the manufacturer will provide the 3PL with an EDI 832 Item Master. This transaction set is used to electronically request or provide the prices of goods or services in the form of a catalog. The 832 replaces the paper catalog and is used by manufacturers to provide detailed product information to their supply chain, including retailers, distributors, dealers and the like.
  • At some point, the manufacturer will receive an EDI 850 Purchase Order transaction set, used to place an order for goods or services. The 850 is generally transmitted to the manufacturers, although, at times, the manufacturer will ask the 3PL to receive it directly. The EDI 850 provides the same information you would find in a paper Purchase Order (PO) document, including items, prices, quantities ordered, and shipping details.
  • Prior to shipping product to the warehouse, the manufacturer sends a shipment notification to indicate to the warehouse that inbound product is on its way; this is done using the 943 Warehouse Stock Transfer Shipment Advice transaction.
  • Upon receipt of the product into the distribution center, the warehouse confirms receipt by transmitting an EDI 944 Receipt transaction.
  • The manufacturer periodically submits an EDI 940 Warehouse Shipping Order to the warehouse. This transaction directs the warehouse to ship product from its stock, usually to customer locations such as retailers or other manufacturers.
  • The warehouse confirms shipment of the order using a 945 Warehouse Shipping Advice transaction.
  • With the information from the 945 document, the manufacturer can prepare and submit an Advance Ship Notice (EDI 856) to the customer, along with an Invoice (810 transaction). In some instances, the manufacturer will have the 3PL transmit the EDI 856 directly to the retailers. This becomes problematic when a manufacturer utilizes multiple distribution centers and providers but can flow very easily when using only one DC/provider.

Taylored Services

There are a few other transaction sets that are also utilized throughout the process:

  • EDI 947 transaction set can be used to inform a warehouse/depositor of a quantity or status change to inventory records. This transaction set provides detailed information concerning the internal adjustments which occur between a warehouse and a depositor.
  • Some trading partners such as JCPenney, Cabela's, Kohl's and The Exchange use an EDI 753 Request for Routing and 754 Routing Instructions to communicate final routing information for purchase orders, purchase order overrides and to authorize shipments.

Two of the most common questions asked by the client are:

  1. How long does it take to set up these EDI transactions?
  2. What is the cost?

A good rule of thumb for a safe set-up time is 90 days. The time can really depend on whether or not the 3PL will be transmitting ASN's to the retailer, the IT capabilities/resources of the manufacturer/3PL, and if there is any customized work to be done.

In terms of costs, the rate can be based on the 3PL's structure and (again) if there is any customized work to be done. The 3PL can provide an hourly rate, a flat rate per transaction, or, at times, even agree to absorb the charge in exchange for a long-term agreement (typically 3 years or more).

The above is a high level overview of the key EDI transactions between manufacturer/3PL/retailer. Of course, there is much more that can be discussed on this topic, so next month we will explore further.


Scott Weiss has been in the 3PL industry for over 15 years. As Vice President, Client Solutions for Taylored Service, Scott is responsible for new business development and client satisfaction. Taylored operates multiple distribution centers strategically located by the Ports of Los Angeles, Long Beach, and Newark and works with many consumer product companies to ensure compliance with retailers' delivery requirements. Scott may be reached at sweiss@tayloredlogistics.com or (562) 977-7620.

 
 
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