News Room

EDI Inertia Hampers ECR Progress, According to Unusual Open Letter to U.S. Grocery Industry

January 20, 1999
         WASHINGTON, D.C. — Jan. 20, 1999 — Little progress is being made in the U.S. grocery industry’s implementation of electronic data interchange (EDI), according to a new report by the Electronic Commerce Process Improvement Group of the Joint Industry Project on Efficient Consumer Response (ECR).

     This inertia threatens the benefits of EDI for those companies that have implemented the communications technology and is hampering the progress of the ECR efficiency movement, according to the new report 1998 EDI Business Process Survey Results. The report was authored by the work group and the Deloitte & Touche Consulting Group.

     In an unusual Open Letter to the Industry, members of the work group said, "The 1998 survey . . . sends a clear message: Little progress has been made to apply electronic communications to ECR processes."

     The letter is the preface to the report, which charts a lack of progress in the application of EDI in the industry. The survey found that only in the areas of replenishment purchasing and financial settlement have any strides been made in applying EDI communications.

     "The lack of progress in applying EDI to other processes, such as efficient product introduction, item maintenance and efficient promotion, is not due to technical limitations," the letter states. "Widespread adoption of the EDI processes is hampered by an inability or unwillingness of trading partners to simplify and synchronize their business processes.

     "The most common reasons cited for this nonalignment include the need for trading partners to collaborate in the redesign of inconsistent and complex business processes. Many industry experts believe that these issues are the largest barrier to acknowledged success."

Most Processes Still Manual, Paper-Based

"Here we are almost six years since the official kickoff of ECR in January 1993, when EDI was hailed as one of the chief paths to achieving the efficiencies that will save the industry some $30 billion," said work group Co-chair Dave Hutchings, who is director of electronic commerce at Kraft Foods, Inc.

     "And what do we find? We find that a large portion of the business is still being done manually — with paper.

     "The 1998 survey indicates that the grocery industry knows the importance of EDI," he added. "The problem is that the readiness to work with partners seems lacking, and the readiness to change the basic structures of daily business upon which EDI implementation is based is low."

Lack of Execution Beyond Rudimentary Levels

His counterpart, work group Co-chair Tom Schaumburg, vice president of supply chain initiatives at Ahold U.S.A. Inc., echoed these sentiments: "While the industry has essentially reached close to 90 percent implementation of EDI for invoicing, purchase orders and some areas of the replenishment, execution of additional transactions have been woefully lacking and even appear to be stalled.

     "Despite this loss of momentum, we shouldn’t loose sight of the progress that has been make in the area of electronic communication. EDI is a fundamental enabler of ECR, and many companies across all segments of the industry have streamlined their business processes and have found supply-chain partners to join them in the new efficiencies and cost savings."

     Schaumburg believes that industry may be stalled as many companies may be delaying new EDI applications for several important reasons. For many companies, resources are being devoted to Y2K and not the implementation of additional EDI transaction sets. While Y2K has absorbed most companies’ efforts, we must also recognize that there are other significant barriers including the lack of trading partner readiness, unclear benefits and older legacy system issues.

‘Glue That Holds ECR Together’

As the industry looks to the future, many view the Internet as a major opportunity for EDI. The Electronic Commerce Process Improvement Group shares some of this enthusiasm. "However, what we all need to be clear about is that the Internet is basically a communication medium. It too will require all the information standards that the industry has adopted for EDI. Because it is fundamentally information and process standards that facilitates industry efficiency not the choice of the medium by which we communicate that information."

     "EDI is the glue that holds many ECR processes together. A failure by the grocery industry to move forward in EDI will be a severe setback to the ECR initiative and a barrier to industry success and innovation in the 21st century."

     The new EDI survey report is available from any of the 16 associations that sponsor the joint industry ECR project. It is the newest in a library of more than 45 reports that the project has published.

The Joint Industry Project on Efficient Consumer Response was launched in 1993 to streamline operations and distribution throughout the grocery industry and to ensure that the industry is providing the products and services that meet consumer needs. This unprecedented effort to help the industry manage change involves 15 associations representing every major segment of the business, along with the Uniform Code Council. The project has published more than 40 reports on disciplines ranging from category management to activity based management to continuous replenishment. It sponsors an annual educational conference; the 1999 event will take place February 8-10 in Atlanta, GA. For more information, contact any of the member associations listed on the project letterhead or visit its Web site (http://www.ecr-central.com).
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Food Marketing Institute proudly advocates on behalf of the food retail industry. FMI’s U.S. members operate nearly 40,000 retail food stores and 25,000 pharmacies, representing a combined annual sales volume of almost $770 billion. Through programs in public affairs, food safety, research, education and industry relations, FMI offers resources and provides valuable benefits to more than 1,225 food retail and wholesale member companies in the United States and around the world. FMI membership covers the spectrum of diverse venues where food is sold, including single owner grocery stores, large multi-store supermarket chains and mixed retail stores. For more information, visit www.fmi.org and for information regarding the FMI foundation, visit www.fmifoundation.org

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