Sustainability in the Supply Chain Has Gone Mainstream

Sustainability in the supply chain is an important development for small businesses to understand and to prepare for. Sustainability has gone mainstream. Last week, Dan Barber in the New York Times reported that 80% of consumers now look for whether or not food products are sustainable. Fast Company says that even more, 86%, of consumers care about sustainability for any product, not just for food.

An Underwriter Laboratories survey of 1,202 manufacturing companies found 81% of them agree that sustainability affects their competitiveness in the marketplace. Two thirds of the manufacturing companies strongly agree that the environment is becoming more important to consumers. The survey was diverse and included firms that make consumer electronics, appliances, food, and building materials.

What is sustainability?

Strictly speaking, sustainability refers to biological systems remaining productive over time. For example, sustainable agriculture includes rotating crops so that the nutrients in the soil remain healthy rather than planting the same crop year after year and depleting the soil’s nutrients. Another biological example is responsible fishing that does not deplete a species of fish so that the species can replenish its population.

Here is a broader definition from the Environmental Protection Agency: “Sustainability creates and maintains the conditions under which humans and nature can exist in productive harmony, that permit fulfilling the social, economic and other requirements of present and future generations.”

The common usage of the term sustainability in the supply chain refers to responsible execution of a balance between business, social and ecological interests. Green initiatives, eco-friendly, fair trade and ethically sourced are all part of the sustainability trend.

Examples

Wal-Mart, the largest grocer, only buys Brazilian beef that does not contribute to the deforestation of the Amazon. Seafood sold in U.S. Wal-Mart stores is certified as sustainable by the Marine Stewardship Council.

Wal-Mart has developed a Sustainability Index program that applies to 200 product categories. Early this year Wal-Mart announced the program would be expanded to many more supplier categories other than food. The program measures sustainability throughout the supply chain including:

  • Raw materials that go into products
  • Processing and production of products, including packaging
  • Transportation to distribution centers and stores
  • Customers use of products
  • Disposal at the end of the product’s life, including recycling, landfill disposal

Although some certifications are available, no one certification provider has become dominant.

Target has developed a Target Sustainable Product Standard. The standard will soon be used to provide consumers with a 100 point scale that measures 7,500 products on the sustainability of ingredients, ingredient transparency and overall environmental impact. Target has on-going initiatives to reduce transportation fuel usage and the amount of cardboard that goes into packaging.

Naturally (so to speak), Amazon and other retailers all have their own programs as well. You should expect your retail partners to ask more questions and increase their requirements for the sustainability content of your products and your participation in the supply chain. Click here to read a case study about one of our fashion clients that uses ethically sourced and sustainable materials.

The EDI Impact on Small Businesses

Your retail customer’s sustainability programs may affect the frequency of their EDI orders as they incorporate sustainability practices into their transportation modes.

Packing requirements may change how you ship. For example, to reduce cardboard content, your retail customer may change how you pack product in cartons and thus affect the formulation of your EDI Advance Ship Notices.

Of course one more reason that EDI is here to stay is that EDI itself contributes to sustainability by eradicating paper orders and invoices as well as eliminating the use of fuel for the transportation of mail. Becoming EDI compliant is one more way of demonstrating your small business’s commitment to sustainability.

Contact us anytime to find out more.

2014 Retail Trends You May Have Missed

There have been important retail trends imbedded in the noisy 24 hour news cycle during 2014 that are of interest to small businesses. Here are the major trends you may have missed:

Holiday Spending

The recent Mother’s Day holiday spending of about $20 billion is the third highest among the nine highest holiday shopping periods during the year. The $600 billion Christmas season is of course by far the biggest shopping period.

Second place is the back to school/college period at about $73 billion. After Mother’s Day in order are Valentine’s Day and Easter which are almost as large as Mother’s Day, Father’s Day, the Superbowl, Halloween, and finally St. Patrick’s Day.

A Surprise

Menswear sales growth outpaced women’s in 2013 rising 5.2% compared to women’s fashions which increased 3.7%. Volume was relatively flat with most of the men’s increase driven by purchases of more expensive items.

Consumer Omni-Channel Expectations Continue to Rise

According to CFI Group, 95% of consumers sometimes or frequently shop both a retailer’s physical store and web site. 93% want to be able to return items they bought on the web site to the store. 78% consider it important to be able to pick up online orders at the store.

Retailers are playing catch up to these trends. For example, only 30% of retailers allow pickup of online orders at the store.

Smart phone Use in Stores

More than half of all shoppers now use their smart phones while in stores. The unexpected data point is that this is true across all demographics. Seven in ten shoppers over the age of 54 have used their smart phones in stores.

97% of Gen Y (18 to 29 years old) and 91% of Gen X (30 to 43 years old) have done so. 81% of younger baby boomers (44 to 53 years old) refer to their smart phones while shopping in brick and mortar stores.

Right now, most of the usage is for price shopping, but about 60% of price shoppers still bought in the store even if they found a better price online.

What About Paper Catalogs?

You still get them in the mail, right? Maybe you use them, maybe you don’t, but paper catalogs remain part of the omni-channel experience. John Koryl with Neiman Marcus reports delivery of paper catalogs still provokes an immediate increase in online sales.

Apple’s Influence

Apple’s enormous success continues to influence retailers. Let’s take a look at Best Buy, J.C. Penney and Apple itself.

Best Buy Adds Sony Experience to Stores

Sony and Best Buy have announced plans to add a “shop within a shop” to showcase Sony’s high-end TV, audio and camera equipment. Much like the Apple areas within Best Buy, the Sony area will emphasize an interactive experience with the products.

J.C. Penney Recovery

JCP continues to work on a improving sales after trying to adopt Apple’s “fun places to hang out” retail approach that employed designer boutiques within their stores while at the same time discontinuing sales items.

Discounts have now been reinstated to appeal to the almost 50% of JCP shoppers who are over 55 years of age. Same store sales were up 2% for the November through January period compared to a year earlier, ending the previous year’s downward slide.

Apple Continues to Evolve

Even as other retailers are experimenting with Apple’s impressive retail model for ideas, Apple is not resting on its laurels. Last fall, Apple hired Angela Ahrendts, the former CEO of Burberry’s, to improve both its online and retail stores.

Ms. Ahrendts is expected to make shopping online and in stores more seamless and bring to bear her experience with affordable luxury as Apple expands its brand to include wearable technology and less expensive iPhones.

Grocery EDI Transactions

Selling groceries is a very competitive and very low margin business. The average margin for a grocery store is a scant 1.3 percent according to grocery industry analyst Jeff Cohen with IBIS World. Consequently, grocery retailers have focused on operational efficiency for a long time.

The first scan of a product UPC barcode at a supermarket checkout stand was almost 40 years ago in June of 1974. Operational improvements have continued in the decades since then. The use of product barcodes has become almost universal because it greatly increases speed and accuracy.

Kroger recently deployed a combination of infrared sensors, data analytics and flexible staffing in 2,300 stores. The new system keeps the average check-out wait time for customers to no more than 30 seconds, or approximately one person ahead of them in line.

Similarly, EDI greatly improves supply chain efficiently. Electronic orders and invoices are faster and more accurate than faxes, emails, or phone calls. Every major grocer requires all of their suppliers to be EDI compliant.

Orders

Electronic orders are sent from the grocer to the supplier as either an 850 type , or as an 875 type EDI transaction. The 850 type EDI order is used in many industries. The 875 type is specific to the grocery industry and is called a Grocery Products Purchase Order.

In actual usage, the 850 and 875 types are quite similar. Both include line item numbers, prices, and quantities as well as shipping instructions and discounts where applicable. Some grocers support both EDI order transaction types. Some use just the 850.

Invoices

Electronic invoices are sent from the supplier to the grocer as either an 810 type, or as an 880 type EDI transaction. The 880 invoice is paired with the 875 order. The 810 invoice is paired with the 850 order. The 810 and 880 transaction types are also very similar.

Why are there seemly redundant 850/810 and 875/880 grocery EDI transaction types?

In the early days of EDI the 850 and 810 transaction types were less sophisticated than they have been in more recent decades. The ANSI standards folks felt that special 875 and 880 types were needed for the grocery industry. The 850 and 810 types evolved to be much more complete and flexible over the years. However, the 875 and 880 transaction types are still around because of wide-spread use in the past by many trading partners and a reluctance to “not fix what is not broken.”

Exceptions

Some grocers require suppliers to send ASN’s (Advance Ship Notices) which are an 856 transaction type. However, 856 transactions are not as prevalent in the grocery industry as they are in many other industries. We typically see 856 ASN’s in tandem with 850 orders and 810 invoices rather than 875 orders and 880 invoices because the 850 orders have information that is useful for the 856 ASN’s.

Suppliers that deliver direct to stores in many cases do not receive EDI orders, but are still required to send EDI invoices. See the blog post on direct to store delivery transactions for more on this topic.

Contact us anytime to discuss easy-to-use EDI compliance with grocery customers.

Common Technical Acronyms Related to EDI

Today’s post covers common technical acronyms of interest to small businesses who use EDI. It is the last post of our four part series on EDI buzzwords.

ANSI – American National Standards Institute. ANSI is a non-profit organization that administers a wide variety of voluntary standards. EDI standards are one of the standards ANSI oversees.

ANSI X-12 – The standard for EDI transactions and transmissions which are administered by ASNI. ANSI X-12 is the predominant standard in the United States and Canada except for the automotive supply chain which uses the EDIFACT standard. A four digit number, such as 4010, identifies which version of the X-12 standard a particular trading partner requires. Within the X-12 standard there is considerable room for a particular company to tailor data requirements to their needs. Consequently every trading partner has unique EDI compliance specifications.

AS/2 – Applicability Standard 2. AS/2 is a rather complicated standard for encrypted transmission of files over the internet. A minority of trading partners use AS/2 rather than a VAN for transmission of EDI transactions. However, some of them, such as Wal-Mart, have large numbers of suppliers

ASN – Advance Ship Notice. An ASN is similar to an electronic packing slip and works with GS1-128 barcode shipping labels. ASN’s are sent using EDI. Many large companies require their suppliers to send ASN’s because it assists in automating their receipt of goods.

CSV – Comma Separated Value. CSV is a file format that is supported for interfaces with a wide variety of applications. Data fields are separated by a comma. CSV files can be viewed by popular spreadsheet programs such as Excel.

EDI – Electronic Data Interchange. EDI is a data file format used to send and receive electronic business documents between companies. Many large companies require their suppliers to be EDI capable. EDI files are encoded and difficult to read. EDI software is needed to translate EDI files into either a human readable format or a format that can be used to interface with an application.

EDIFACT – An EDI standard developed by the United Nations. EDIFACT is the most common standard in most countries except for the United States and Canada where ANSI X-12 predominates. However, EDIFACT is used in the automotive supply chain in the United States and Canada.

FTP – File Transfer Protocol. FTP is a common and easy-to-use method for sending and receiving files between computers over the internet.

VAN – Value Added Network. A VAN is used by most large companies for sending and receiving EDI files with their trading partners. A VAN provides security, reliability, and one point of contact. Competition from AS/2 greatly lowered VAN prices to point where outsourcing transmissions to a VAN is frequently more economical than using AS/2 in-house.

XML – eXtensible Markup Language. XML is a file format that is easily readable by both humans and machines. Tags mark the beginning and ending of data fields and can be nested to indicate hierarchy and looped to identify groups of repeating data fields. XML files are commonly used to interface with applications.

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