July 14, 2003, 12:00 AM

Why some retailers are moving to direct Internet connections with partners

Near-term cost savings and long-term improvements in distribution and inventory management--along with pressure from Wal-Mart Stores Inc.--are luring more retail industry partners to plan direct Internet connections, Yankee says.

 

Retailers and their trading partners stand to save millions of dollars over the next few years in the total cost of operating supply chains by incorporating more direct Internet connections with their trading partners, Yankee Group says in a study released this week, "Electronic Supply Chain Cost of Ownership."

Yankee said a survey of 21 companies indicated they will save a cumulative $5.7 million over the next three years by establishing more direct connections with partners over the Internet that will result in lower transaction fees and lower IT maintenance costs.

But over the longer term, retailers and others stand to benefit from improved business processes stemming from direct Internet connections, such as faster and more accurate transfer of purchase orders and advance shipment notices, Yankee says. "Direct-connect technologies, and in particular the AS2 standard, help companies achieve these business objectives by providing unprecedented electronic supply-chain control and flexibility," Yankee says in the report. "These advantages can reduce time to market, improve customer intimacy and cut inventory costs."

Yankee adds that Wal-Mart Stores Inc., which is requiring its suppliers to transmit trading data through the AS2 standard, which supports EDI over the Internet, is helping to push an estimated 12% increase in supply-chain integration spending in 2003 over 2002.

 

 

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