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The Connected Enterprise

PODCAST

Fast, Easy, and Foolproof: SPS Takes the Pain Out of EDI

Posted by Vision33 on Oct 13, 2021 12:00:00 PM

 

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Show Notes

Carl Lewis: Welcome to the Connected Enterprise podcast. I’m Carl Lewis, your host from Vision 33, and my guest is Chrissy Mathison, the VP of supplier sales and business development at SPS Commerce. She was the 2021 Women in Sales Award winner for sales directors. Congrats, Chrissy, and welcome to the podcast. Please tell us about yourself and your role at SPS.

Chrissy Mathison: Thank you, Carl. I’m a sales leader at SPS Commerce, a supply chain services company. We do EDI and connect retailers and suppliers to ensure products get onto retailers’ shelves. I've been at SPS for 15 years, focused on suppliers, goods manufacturers, and the technology partners that help those companies automate business processes.

Carl Lewis: You used one of my favorite acronyms: EDI. EDI is hard to get your head around. Can you give us the basics?

Chrissy Mathison: It’s a scary term, especially when you win your first piece of business with Target, and Target hands you a giant rule book with EDI at the front. EDI is essentially an electronic purchasing process that represents a supplier or manufacturer's business relationship with their retailer. What makes it complex is that all those big buying organizations—Target, Walmart, Procter & Gamble, etc.—don't make it easy for suppliers to electronically purchase with them because they each have different requirements, communication styles, and testing processes. So, it’s a highly technical solution for a supplier manufacturer to connect to that buying organization—on top of the other things they must do to get goods on the shelves and in consumers’ hands.

And EDI isn’t just complicated for companies to set up—those big buying organizations don’t hesitate to make changes. And hopefully, you’ll sell your products to more than one. So, the footprint continues to expand, the market changes, and the complexities from a technology perspective are expensive and cumbersome.

Carl Lewis: My first EDI experience as a consultant was for a customer with 47 trading partners. Somebody kept saying “EDI standards.” And that's an oxymoron because every company has a different way of doing it. And there are commonalities, but I wouldn't call them standards necessarily.

Chrissy Mathison: I agree. During SPS training, I watched the behind-the-scenes footage about the technology components that get toothpaste on Target’s shelves. I remember thinking, "Wow, I should be grateful every time I go to Target and the toothpaste is just sitting on the shelf." It was a new perspective.

Carl Lewis: How can EDI help customers?

Chrissy Mathison: There are benefits. But before you get them, you must meet the buying organization’s requirements. To sell goods to Target, you have to do EDI with them. If it’s a requirement to sell your products, the question is optimizing the EDI to benefit your business. We think about that as how you're receiving an order—you have to tell the buying organization when you’ll ship and send them an electronic invoice. But there are immense benefits to the business processes companies are automating behind the scenes. You're already doing all that internally with your ERP or WMS, so the question is, “How do we take those transactions or requirements and automate them in our business process?”

Unfortunately, sometimes the buying organization wants to order products in A, B, C, but in your ERP, you have 1, 2, 3. You don't want somebody manually converting that language to trigger the business processes, so you must figure out how to meet the buying organization’s requirements while optimizing the engagement of those transactions in your systems. 

That's where SPS spends a lot of time with our customers—from beginners who just sold to Target to companies with several hundred buying partners. The benefit lies in understanding you don't want an in-house EDI expert. That doesn't help you get products on shelves. You need a solution that’s the expert for you and figures out how to optimize the engagement with the buying organization.

Carl Lewis: One of my favorite EDI stories is about a small customer who came to the US from Japan. They sold an early version of home weather stations and decided to partner with a big box store. They made what they thought was a massive investment in EDI and wondered, "Will we get our money back?" Their first order was for 25,000 items at 200 stores. In a year, they went from a mom-and-pop place to a business with several hundred employees and trading partnerships with 10ish big box stores—all for home weather stations that are still on the shelves. EDI can change a business’s life.

Chrissy Mathison: In my experience with similar companies, I find they get so excited to say yes that they don't figure out what EDI means and what effect it will have. I always recommend doing the due diligence to figure that out because it's not plug-and-play technology. It's not a standard—it’s complex and changes over time. Companies often choose an EDI solution that fits them today, but as they grow, it becomes complex and weighs them down from expertise and financial investment perspectives.

Carl Lewis: Is EDI less complex than 15 years ago?

Chrissy Mathison: No—it’s more complex. Especially now, with the pandemic. Based on the order management models, 15 years ago, you either shipped to a distribution center and they got the product out to the stores, or you shipped a store. There was no shipping to people’s front doors. We’re all guilty of ordering more at home during the pandemic, which has put immense pressure on the retailer. And when they get pressure from a supply chain perspective, it falls downhill to the supplier, who must meet the demand. So, it's the same technical complexity as 15 years ago—times multiple order management models and customers who want to buy online but return to the store, an Amazon hub, etc. Staying on top of that adds layers of complexity we didn't have 15 years ago.

Carl Lewis: You led right into my next question. My friends in the industry tell me EDI has seen a lot of action in terms of customers being interested in it and wanting to implement it quickly—another oxymoron—because they're under demand caused by the pandemic. What are some ways to do that? You mentioned the pandemic has expanded the EDI footprint and the urgency to make it happen.

Chrissy Mathison: At SPS, we service our customers by having the world's largest retail network. And everything we build is built for reuse, which drives down the complexity. We also apply a people-process-technology approach, which is important because when the pandemic happened, our customers went from the traditional shipping to distribution centers and stores to—literally overnight—needing to ship to consumers. They didn't have the warehouse infrastructure to break up cartons and pallets into individual pieces. But while they were figuring it out, they called us because we could quickly turn them on for that order management model.

We saw many companies quickly expand the markets they serve. We also saw all the essential products that ran out, and companies that didn't make toilet paper, hand sanitizer, or face masks suddenly get into that business. It was a huge influx of suppliers to those retailers where they needed to have new connections, and while they were figuring out their business model, they didn't want to worry about how they would connect via EDI.

We also have a network of 1,000ish third-party logistics providers (3PLs). They support our supplier and retailer customers. Suppliers had warehouses shut down with their goods locked up and inaccessible. They called us saying, "SPS, I know you have a network of 3PLs. Can you please help us?" We saw a significant increase in the new 3PLs they were connecting to because of the lockdowns. Also, all the companies bringing the essential products or changing their order management models didn't have the warehouse space or the people to break up those pallets and containers—they outsourced that functionality to 3PLs.

We've seen goods suppliers and manufacturers invest excessive amounts of time and money in technology infrastructure. Because whatever similar problems they had during the pandemic are probably not scalable. It might break, but I don't have a plan for it, or that's on a two-year roadmap. The pressure of the volume and transactions they were trying to get done broke during the pandemic, so they're replacing things like ERP, warehouse management, and transportation management applications. EDI came to the forefront because if they were working with an in-house solution or another EDI provider that wasn't scalable, there was a ton of pressure. It was awesome to see the evolution, and we're fortunate to be able to help these companies make it through the transition.

Carl Lewis: We saw that too—two-year timeframes squeezed down into six months. And it’s still happening because people did stop-gap things to get through, but now they're initiating those larger projects to prepare for a different future.

Chrissy Mathison: I saw a ton of pressure on talent, too—technology resources, consultants, project managers, etc. There are many projects on the plate, and the talent to accelerate delivery has been a challenge.

Carl Lewis: Yes. The department we most need people in is HR.

Chrissy Mathison: Recruiting.

Carl Lewis: Yes. We have a big open headcount because we have too many projects stacked up. You said businesses don't want in-house EDI specialists. But if they've decided EDI is essential for their future, what are the biggest challenges they’ll face when implementing an EDI system? And if they work with a third-party consultant like Vision33 or SPS, what should they know about that relationship ahead of time?

Chrissy Mathison: Companies often ask that question. For EDI, I would do the work to figure out if you want to be an EDI expert. If you don’t, then deploying software on-premises isn’t for you. When you're talking about EDI and an ERP implementation, let’s say they're investing in a new ERP system and must deploy EDI simultaneously. At SPS, we’re EDI experts. We know everything about the big box retailers and buying organizations. And you would expect your ERP implementer to be an expert at the ERP. Neither of us, though, are experts on your business, your processes, how you kit products, how you price, all the nuances you must uncover in this type of technology project.

You're investing in technology to make it better. Don't take the hairball in your current process and use it in the new technology. Let the experts ask the hard questions. We've been through this thousands of times, and we understand that it's hard work to get there—but it’s worth it. So, trust your partners and their expertise in your vertical.

If you're in construction, you want a partner who knows about construction, not medical devices. Industry and vertical are important. And I would look for the relationships between providers—not just your ERP and EDI providers, but all of them. If you need multiple ISV solutions, make sure they all know each other. Have joint calls. Don't try to run multiple projects with one end goal because that's where things get missed. And EDI discussions must happen early in an ERP business process design because it will change things on the front end. So, include that part of your supply chain earlier rather than later.

Carl Lewis: Great point. Many people think of EDI as phase two.

Chrissy Mathison: It's not phase two.

Carl Lewis: It's not. It must be part of the early discussions. That's good advice. What should they be aware of about EDI technology in general? We live in a world where everything's in an app that takes 20 seconds to download. EDI isn’t that. So, what would you warn them about as they step into EDI?

Chrissy Mathison: EDI is a technology solution that represents the business relationship between you and a buying organization. You must be actively present in business knowledge and provide a person in the implementation who can talk about the order management models, how you build your SKUs, etc. to accurately represent how that solution should be deployed. Be wary of the provider or technology solution you buy. For example, SPS is a full-service provider. We apply the people-processing-technology framework, and we come with that giant network.

Other providers will say we're the same. If you hear that, do the diligence to figure that out. Ask the questions. Like, "What role do I play in the EDI implementation? Do I have to call Target's EDI department? Or do you, as the EDI provider, do that? Am I responsible for testing in the goal life process, or is the EDI provider responsible for that?" Those are critical questions to ask up front. And for after. “When we go live in six months, do I call Target if I'm missing an order, or do you, EDI provider?” That will offer a clear visual of what resource time you’ll have to spend in an implementation. And probably more importantly—although you don't think it's important during an ERP go-live until post go-live when you're in a support mode—what the spend is. People get stuck there because they didn't ask those questions up front.

Carl Lewis: One other thing is that EDI isn’t new technology. It’s older than AI and machine learning. What do you think will happen with EDI from a technology standpoint? What's the next big EDI thing?

Chrissy Mathison: The business relationship represented by EDI will continue to evolve. It will require more information. For example, if you sell goods online, your customers want to know if what they want to buy is in inventory. Does it have the item attributes consumers want to see before they purchase? So, complete item information and attributes in inventory levels are sometimes required now. You’ll see a hypersensitive requirement there because retailers won’t carry the product if they can't accurately represent the entire item and everything a consumer wants to know about it, along with inventory levels.

EDI is mainly around purchasing, shipping notices, and invoices. Only occasionally do you have to send item information and inventory. But we’ll see suppliers get a ton of pressure to provide them, which is a technology nightmare. Consider item information. Some is probably in an ERP, some in a WMS, some in the company's online ordering system or eCommerce platform. They’ll have to collect all that item information and send it to each retailer in a different way, which is very complex.

SPS is already helping customers do that. We've had these services for a long time, but there’s increased demand for them because companies want to store their item information in one place. Not to be confused with the reasons you'd want item information in an ERP.

I speak to people who claim they built the EDI standard in the 80s. And say it will be around forever. I believe them because it’s been here since the 80s. But we’ll see a new spin on it, like APIs. EDI will move at the speed a retailer moves. You can even think about giant buying organizations. EDI won’t go away until that buying organization gets to the end, which will probably take a long time. And all that will happen is it will be replaced by some electronic purchasing requirement that represents the business relationship. I don't think the technology aspect ever goes away.

Carl Lewis: Definitely not. It might morph, but only when the retailers want it to. I've been an advocate with our customers for years about getting better master data management, whether that's attributes and other things. Everybody wants to do as little as possible when it comes to keeping inventory data. But I agree it will probably be demanded by customers and retailers going forward. 

Chrissy, as VP, you have multiple sales teams under you, which probably represents a lot of individuals. And the pandemic hasn't just been about our customers—it's also been about us. How has the pandemic affected communication among your teams?

Chrissy Mathison: SPS is headquartered in Minneapolis. Most of my team is local, so we spent a lot of time together in the office pre-pandemic. When we went into the first lockdown, we were like, "What are we going to do?" We figured it out and even carried some of our traditions into the cloud. I wasn't a big meeting person before the pandemic, but now my days are filled with Zoom. I think you see one-on-one conversations recreated on Zoom, somebody you'd see in the hallway or at their cube.

We use Slack internally. We have a ton of groups and lots of one-on-one Slacking. I'm a direct person, so my communication style has stayed the same. We've had some fun along the way, but there has also been frustration, mostly because we have a strong team culture and genuinely miss each other. And everybody's on a different journey. Some folks have somebody at home who’s at risk, so they don’t come into the office. Some folks have had COVID or been vaccinated and don't have the same level of concern.

The conversations and connections and respect, understanding, and empathy have been awesome. The pandemic has been tough on every human on the planet, but we’ve done a good job of communicating positive things too. We do a ton of work in the community, which is fun.

Carl Lewis: Have you talked about what's next? Will you be hybrid? Everyone returns to the office? No one returns to the office?

Chrissy Mathison: Our executive team is exploring all those options. If our CEO were in this conversation, he’d say that the pandemic changes every minute, so planning beyond a week or two is tough. We've been optional in the office the entire pandemic, except during the mandatory lockdowns. Now, some people are coming back. The common spaces, offices, and conference rooms have changed. We don’t know what we’ll do yet.

Carl Lewis: Most of us are there. We thought we were changing three months ago, but no. The pandemic is still in charge of many of those decisions. 

Chrissy, thank you for joining us today. It’s been great. And to my listeners, until we see each other again, stay connected.

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