Electronic Data Interchange (EDI)

Electronic Data Interchange and Other E-Commerce Advancements

The produce industry is constantly changing and is in for major changes in the next few years because of EDI (Electronic Data Interchange) and other E-Commerce advancements.

The produce industry is changing rapidly and the flexibility that Produce Magic Software provides is very important. It is impossible to know what program features produce companies may need from their own software just next year. Things are changing that rapidly.

What a company needs today in a software package might be totally different than what they need next year. An important note is that wherever and however newer technology comes into the Produce Industry either for the industry or required by the industry, Produce Magic Software will already have it for you.

Our ability to provide very fast, cost effective customizing is crucial so produce companies can stay one step ahead of their competition.

What Is Electronic Data Interchange (EDI)?

Electronic Data Interchange (EDI) is basically an electronic method of automating the following transactions:

1) Purchase Orders, transmitted electronically from the Buyer to the Supplier.

2) Optional Confirmation of Receipt of Purchase Orders, transmitted electronically from the Supplier to the Buyer.

3) Confirmation of Shipment (“Passing”), transmitted electronically from the Supplier to the Buyer.

4) Invoice requesting payment, transmitted electronically from the Supplier to the Buyer.

5) Optional Payment Order / Remittance Advice, transmitted electronically from the Buyer to the Buyer’s financial institution requesting payment to the Supplier.

The financial institution mails a check to the Supplier or does a direct deposit to the Supplier. In most cases, Buyer’s develop an EDI system and require their suppliers to interface to it. EDI transactions usually go through a Value Added Network (VAN). Two well-known VANs are:  iTrade and True Commerce.

These Value Added Networks charge fees for their services, which must be paid by the supplier. That is a part of doing business with the buyer. The buyer transmits all of their electronic Purchase Orders for all suppliers to the Value Added Network via modem or through the Internet.

The electronic Purchase Order transactions go to an electronic mail box for each supplier. The supplier logs onto the Value Added Network via modem or through the Internet and checks their electronic mail box for Purchase Orders or other transactions.

There could be Purchase Orders or other transactions from any number of Buyers in their electronic mail box. Transactions can come from other Value Added Networks also, in which case there are often additional inter-connect fees involved, which can be quite costly.

In The Produce Industry, Very Little Is Standardized With EDI

If all produce companies used the same formats and methods, one interface program could be created and EDI would be simple.

Unfortunately, there are many different formats and methods of handling EDI. That makes EDI very difficult and costly for most produce companies.

The Produce Industry Is Normally A “Buyers Market”

Occasionally, a particular produce product is in short supply and it is temporarily a “seller’s market” for that one product, but overall, the produce industry is a “buyer’s market”. That lets buyers require specific services and methods from their suppliers.

If a supplier is unwilling or unable to provide the services and methods required by the buyer, the buyer simply chooses a different supplier who will do things their way.

EDI Can Be Very Expensive For Buyers and Suppliers

Buyers normally develop an EDI system that takes several years of massive programming. That is often a major investment on their part. In most cases, the labor saved by the Buyer through the use of EDI will pay for EDI programming in a year or less, which is a great return on investment.

Once buyers’ EDI systems are completed, they often require their suppliers to interface to that system with very little warning. If the suppliers are unable to do so, the buyers find new suppliers who can interface to their EDI system.

There are normally procedures set up for suppliers to manually enter the required information. Suppliers are often required to purchase specific EDI software for the particular Value Added Network used by the buyer. Then the supplier is required to log into the Value Added Network’s system and manually enter the required EDI information for each order, which is very time consuming. If there were only a few transactions for that buyer each month, the time involved would not be a major concern. If there were a lot of transactions each month, the additional manual input could require several additional employees devoted to only that task.

In addition to the massive labor cost, the supplier is also required to pay fees to the Value Added Network for each transaction. Many software packages do not offer EDI capabilities at all, at any price. Many produce software packages that offer EDI, require additional costs for EDI including: 1) Buying an additional EDI module from their company. 2) Buying a third party EDI software package to interface to a particular Value Added Network. 3) Sign up with a particular Value Added Network that the software supports. 4) Additional fee to set up each trading partner. This can be $1000 or more.

The additional cost for EDI modules and required software is often $5,000-$10,000 or more, plus the set up fee for each trading partner.

Another problem is that the Value Added Network that is required by their software package, is often not the Value Added Network used by your buyers. That often means you have additional inter-connect fees for every transaction. The Value Added Network fees are expensive enough without adding inter-connect fees to link to other Value Added Networks. Inter-connect fees are sort of like paying for unlimited free long distance on your cell phone, but being required to pay expensive roaming charges on a lot of your calls.

Belonging To Multiple Value Added Networks May Be Required

Each different buyer could require a different Value Added Network.

Meaning, you must sign up with each of those Value Added Networks and pay the required fees for each one. Since Inter-connect fees to connect with other Value Added Networks can be expensive, it is often best to join the Value Added Network for each of your major trading partners. Some Value Added Networks might not interface with your Value Added Network at all, which further complicates the situation. The EDI formats are often different for different Value Added Networks. The EDI formats are often different for each company on the same Value Added Network.

This means that in many cases, the software needs to be customized extensively to avoid entering EDI information manually.

Produce Magic Software Takes The Work Out Of EDI For Our Customers

EDI is included in the price with Produce Magic Software!

We do not feel that EDI is an optional module for produce companies. Many produce companies do not need EDI right now, but we feel it is changing rapidly.

Experts felt 33% of produce transactions have gone through EDI by the end of 2002, and over 50% by 2009, and much more since. We feel that almost every produce company will be required to do extensive EDI for some of their buyers within the next year or two.

We write our own EDI translation software to the specifications of the trading partner or their Value Added Network. So third party EDI translation software is not normally needed. In some rare cases, the trading partner or Value Added Network may refuse to provide the needed file format information, which would require getting their third party software for the conversion. To date, trading partners and Value Added Networks have been cooperative and have provided the file format information so we could interface directly to their flat file formats, without going through their third party software for the conversion. We write the needed programs to put the data in the flat file formats needed by the trading partner and their Value Added Network. That makes the conversion from Produce Magic Software information to the needed EDI format very simple and fast. We charge a low flat rate per trading partner to interface Produce Magic Software to their needed EDI files and Value Added Network, provided the trading partner will supply the flat file formats that are needed. Our low flat rate per trading partner is very reasonable since some interfaces can be complicated and could take hundreds of hours of custom programming.

In some cases, third party EDI conversion software might be required by the trading partner or their Value Added Network at an additional cost, but that is normally not needed. This flat rate does not include setting up the Product Code translations, but that is a simple process to take care of.

Product Code Translation For Trading Partners

We have Product Code translation files that allows our customers to input the trading partner’s Product Codes and Product Description and each of the company’s Product Codes and Descriptions that can be used to supply that Product Code.

In many cases, multiple Supplier Product Codes can be used to fill one buyer Product Code. Buyer’s Product Codes are often not nearly as defined as supplier’s Product Codes. A buyer’s Product Code might be defined as “Large Fuji Apple”.

The supplier might have a dozen different Product Codes of different grades and different sizes that can be used to supply the Large Fuji Apples for the buyer. In those cases, there could be a dozen translation entries for the one buyer Product Code. In many cases, buyers only order ten or twenty Product Codes from the supplier, so it is easy to build the Product Code translation table. Salespeople normally know what company Product Codes can be used to supply each of the Product Codes requested by the buyer.

When an EDI translation match is found in Order Entry, the buyer’s Product Code is inserted into the Reference field so it prints on the various documents, such as the Invoice, Confirmation of Order, Confirmation of Shipment (Passing), etc.

PEIB’s Coding for Fresh Produce and Produce Marketing Association EDI Standards

We support PEIB’s Coding for Fresh Produce and Produce Marketing Association EDI Standards.

PLU Codes are supported for bulk produce. UPC Codes for packaged produce – Including Item Number (5-digit Product ID), Region Area (Origin of the produce at a country or state/province level), Variety, Grade, and a combined size/weight/count attributes. PLU and UPC codes can be entered in the Product Codes where they are required.

That allows printing them on various required documents: SCC-14 UPC Case Codes – SCC-14 Designation (01), 12 Digit Core # (7 digits for the Case Vendor and 5 digits for the database key to cross reference), 1 digit Check Digit. SSCC-18 License Plate – SSCC-18 Designation (00), Package Type (Such as 1 for Pallet), 7 digit Company Prefix, 9 digit Serial No, 1 digit Check Digit. Many fresh-cut produce products contain supplier defined UPC item codes and are handled in the same manner as grocery dry goods in EDI transactions. Main EDI formats recommended by Produce Marketing Association are: 875 Grocery Products Purchase Order, 857 Shipping and Billing Notice, 820 Payment Order / Remittance Advice, 888 Item Maintenance, 997 Functional Acknowledgement.

EDI Formats That Are Supported By Produce Magic Software

ANSI X12 EDI Standard Uniform Communication Standards (UCS), administered by the Uniform Code Council (UCC) Voluntary Inter-industry Commerce Standards (VICS) 875 Grocery Products Purchase Order – This document is normally generated by the buyer and transmitted to the supplier. When the supplier is responsible for maintaining specific inventory levels, this can be generated by the supplier and transmitted to the buyer’s system for approval.

810 Billing Notice –This document is primarily used as an “Invoice” for payment generation to the supplier, but it could also be used by the buyer for receipt planning. This document could also be used as a “Passing” to provide notification to the buyer that the product was shipped and to provide shipping information and when to expect it.

857 Shipping and Billing Notice – This document replaces the “Passing” that many suppliers fax to the buyer. It provides notification to the buyer that the product was shipped and includes shipping information and when to expect it. This document is used by the buyer for both receipt planning and payment generation.

820 Payment Order / Remittance Advice – Sent to a financial institution that is set up to handle 820 EDI transactions so they can mail a check to the payee, or do direct deposit to the payee.

888 Item Maintenance – Can be used to synchronize product codes for the two trading partners (buyer and supplier). In most cases, it is much easier for buyers and suppliers to synchronize Product Codes by faxing or emailing product codes lists and descriptions.

997 Functional Acknowledgement – Notification to the sender that a particular document was received and that it passed syntax requirements. It does not indicate that the receiver will act on the transaction, just that it was received and passed syntax requirements.

EDI Formats Not Directly Supported But Could Be Implemented If Needed

855 Purchase Order Acknowledgement – Supplier informs Buyer that they received the 875 Purchase Order and acknowledging that the Supplier intends to fulfill the order.

The 855 Purchase Order Acknowledgement can also be used by the buyer to place an order (replacing the 875 Purchase Order).

856 Ship Notice / Manifest – Used for the shipping manifest or Bill of Lading. This document contains all of the SSCC-18 (pallet tags), when they are used.

880 Grocery Products Invoice – Basically this is the EDI equivalent of a faxed or printed and mailed invoice requesting payment.

Any Non-Standard Format Could Be Required By the Buyer

The EDI formats listed above include the ones that are recommended by the Produce Marketing Association. But in many cases, buyers will have their own unique EDI format that requires customizing.

Our low flat rate per trading partner includes the customizing that is needed, provided the trading partner will supply the flat file formats that are needed.

Two EDI Formats Could Be Used For The Entire EDI Interface

In many cases, the 875 Grocery Products Purchase Order and the 857 Shipping and Billing Notice are sufficient for the Vendor Purchase Order from the buyer to the Supplier and the Passing and Invoice from the supplier to the buyer. These two documents would need to suit the requirements of both trading partners, of course.

The buyer often dictates what formats are required.

875 Grocery Products Purchase Order – This can be generated by the supplier and transmitted to the buyer’s system for approval. It can also be generated by the buyer and transmitted to the supplier.

857 Shipping and Billing Notice – This document replaces the “Passing” that many suppliers fax to the buyer.

It provides notification to the buyer that the product was shipped and includes shipping information and when to expect it. This document is used by the buyer for both receipt planning and payment generation.