Case Study: How to Survive EDI
Even before Jody Kozlow Gardner and Cherie Serota knew what it was, they dreaded electronic data interchange (EDI). Belly Basics, their New York City maternity-clothing start-up, counted Federated Department stores among its largest customers, and last winter the scuttlebutt was that Federated was mandating EDI soon. "We had just started shipping product and weren't ready to change our operations," Serota says. "It was happening so fast." In February Federated told suppliers to be EDI-ready by August.
Ignoring EDI and dropping the customer wasn't an option for the $1.5-million company, which owes 25% of its sales to Federated stores. "Whatever it took, we had to do it," says Serota. EDI requires suppliers to receive computerized purchase orders from the retailer and return invoices in the retailer's chosen electronic format. Belly Basics' old modemless PC wasn't up to the task. So Serota and Gardner sought the most cost-effective solution.
First the partners reread Federated's letter. Their panic subsided a bit. They realized that being small gave them an advantage. Their line was limited to about 20 items, so changes such as computerizing inventory items wouldn't take much time. And since the company had been putting UPC bar codes on its products from the start, it had already met one EDI mandate.
The biggest challenge was the electronic order processing. The partners had two options: process the orders in-house by purchasing a $10,000 software package and better hardware, or hire a third-party service firm. Outsourcing won. "If 100% of our business were with Federated stores, we might bring EDI in-house," Gardner says. "But for two purchase orders a month, it's much better to go with a service."
Gardner gathered several names from her fulfillment warehouse and her Bloomingdale's EDI contact. She also talked to other companies in the same shoes. "One hadn't even done anything yet, and that was a relief," she says. "I was panicking, thinking the whole world was on EDI, and that's not the case."
Prices were comparable at the half dozen service companies Gardner called. She looked for the service that could make the process as painless as possible and explain it without jargon, and finally chose Intercoastal Data, in Carrollton, Ga. At a cost of about $40 an order -- about $1,000 a year for Belly Basics -- Intercoastal processes purchase orders sent directly from Federated and faxes them to Belly Basics the same day. Belly Basics forwards the orders to its Long Island warehouse, as it always has. When Intercoastal receives an invoice from Belly Basics, the company sends it and a shipping notice back to Federated in the required electronic format.
In the end Belly Basics met Federated's deadline, which had been extended by several months for all suppliers. Says Gardner, "The whole thing sounded a lot scarier than it is."