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Why West Marine moved its suppliers onto the Internet
Multi-channel retailer West Marine has improved its inventory replenishment, helping to drive up its profit margins and net income, after getting its key suppliers into Internet EDI. Now these suppliers are fined $100 if they send paper invoices.
Managing Editor, B2B E-commerce
West Marine Inc., with $500 million in multi-channel sales in 2001, decided two years ago that it could no longer handle the thousands of paper invoices and purchase orders channeled through its East and West Coast distribution centers for its web site, catalog and more than 250 stores. "We were definitely keeping the Post Office in business," says CIO David Schenk.
But the retailer now has more than 350 suppliers transmitting purchase orders and other documents through a web-based EDI system, accounting for about 70% of transmitted documents, Schenk said during a recent webcast sponsored by SPS Commerce Inc., West Marine’s provider of Internet EDI services.
Because those 350 suppliers represent the bulk of West Marine’s products, the retailer’s move to Internet EDI has already proven a major contributor to improved financial performance through better distribution and fulfillment operations. "More than 98% of inventory replenishment is automated," said President John H. Edmondson. And that has been a key reason that West Marine posted year-over-year gains in 2001 of 29% in gross profit margins and 88% in net income, to $13.9 million from $7.4 million.
Schenk says it’s important to allow plenty of time to test how suppliers will work under an Internet EDI system before setting high expectations. At the same time, however, he says it’s important to implement strict policies to assure compliance by all vendors. For example, some of West Marine’s suppliers sent duplicate invoices, both paper and electronic, after migrating from paper documents to a web-based EDI system. So the retailer began charging suppliers $100 for every paper invoice they sent. "That cleared it up really fast," he says.
Schenk says he supported the move to Internet EDI by hiring three part-time specialists to handle back-end software development and one full-time EDI administrator. He also worked an industry trade group, the National Marine Manufacturers Association, to establish a standard format with other marine retailers for sending Internet EDI transmissions.
The biggest pay-off, he says, is the ability to electronically receive from suppliers advance shipping notices, which enable West Marine to prepare for deliveries and unexpected changes. "The whole effort has been worth it for what ASNs can do," he says. "It’s amazing what you can do with that insight."