A retail purchasing manager generates a purchase order. He makes a printout, walks to a fax machine and transmits the order to the vendor. The vendor keys the purchase order into an order entry system, ships the product and generates an invoice for the retailer. The retailer’s accounting department receives the invoice in the mail a few days later and enters it into the company’s accounts payable system.                                    

Bob O'Hern, vice president of information systems for Boater’s World, doesn’t mind recounting such a story these days. It used to be the way that Beltsville, Md.-based Boater’s World handled vendors’ orders for many of the products it sells through its 127 Boater’s World Marine Centers retail stores and its e-commerce site. The second-largest U.S. marine supply retail chain, Boater’s World needed to improve its communication with trading partners and vendors, O’Hern says. That meant its computers needed to talk to partners’ computers through the

process of Electronic Data Interchange (EDI).

What companies employing EDI know is that time and money are often wasted while awaiting transactional data and shipping instructions from sourcing companies. EDI gives the retailer the ability to receive more information on shipping closer to where the task occurs, thus shortening supply chain cycles.

“It increases knowledge of supply chain all around,” O’Hern says. “If a hot product is coming in, we can have our warehouse and stores prepared to handle it.”

Bolstering EDI is the emergence of Software as a Service (SaaS) applications, through which organizations are able to access business functions at competitive costs by eliminating the need to license applications. Remote hosting also reduces the need for superfluous hardware investments, and organizations are able to forego costly in-house installation, daily upkeep and maintenance of applications.

O’Hern says Boater’s World had EDI connections with about 50 of the 300-plus vendors in its supply chain, but lacked the ability to expand the use of the technology because of the toll it would take on the chain’s internal data processing resources. “We were struggling to add vendors,” he says, “because of the amount of time that it takes to go through the testing, configuration and certification process with each vendor.”

Boater’s World turned to Minneapolis-based SPS Commerce, a business-to-business integration company that specializes in outsourced EDI for retailers and suppliers based on the SaaS application model.

Approximately 65,000 suppliers use the SPS platform to connect with more than 1,200 retailers and distributors worldwide, including Costco, Foot Locker, Pacific Sunwear, Quaker Boy, Camping World and Sears.

“The beauty for us is that most of the relationship with the vendor is done by SPS,” O’Hern says. “We leverage their workforce and their expertise.”

Vendors of all sizes
Boater’s World’s global supply chain is complex, with vendors at varying stages of technology sophistication and adoption. “We have large vendors, but also smaller suppliers who make crab pots in their garages,” O’Hern says. Still, the chain was able to transition the majority of its vendors to the EDI platform within six months.

“We’ve sped up the [purchasing] process significantly, allowing the vendor to ship us product more quickly if they have it in stock,” O’Hern says. “After they ship it, we get the invoices electronically much more quickly so we can match those up to our receiving information more quickly and pay our vendors on time so we are eligible for more payment-terms discounts.”

Jim Frome, chief strategy officer and executive vice president of SPS, says the outsourced SaaS model for EDI assists retailers in completing the “integration handshake” with their suppliers. “Most people underestimate how much work is needed for supplier outreach,” he says. “It isn’t just one company that makes a change. Every single company needs to do a change on their end for that handshake to go forward.”

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