Private equity firm Apollo Global Management will take Rackspace private in the all-cash deal.
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But developments over the last few years in web-based technology are offering an alternative at a fraction of the cost of EDI. “Four years ago, we all knew that the lower-end vendors wouldn’t be able to connect with EDI systems,” says Cheryl Layne, a former EDI project manager for J. C. Penney Co. Inc. who now is director of product marketing for ecVision Inc., Newark, N.J. “Now, with Internet-based systems, you can bring in even mom-and-pop vendors. You’d be hard-pressed to find any supplier that does not have at least e-mail for transfers of documents.”
In some cases, getting small suppliers into a web-based system enables a retailer to continue leveraging its existing EDI system. At Best Buy, an evolving program of electronic data sharing, including a corporate extranet for small suppliers, has done away with cumbersome modes of communication that small suppliers often prefer, such as the faxing of purchase orders, invoices and other documents. This has enabled Best Buy to get all small suppliers connected to its EDI system. “We haven’t done faxing for two years,” Johnson says.
Best Buy’s extranet, ExtendingTheReach.com, enables any supplier with a web browser to access web forms that they fill out online to electronically transfer purchase-order acknowledgements and other documents into Best Buy’s EDI system. The extranet also makes available information that suppliers need regarding product and shipping specifications so they know exactly how the retailer wants products to arrive at distribution centers.
Johnson says Best Buy found it fairly easy to bring along its suppliers to its policy, announced two years ago, of requiring an all-electronic system of transferring documents. Some small suppliers initially resisted, preferring to continue exchanging documents over fax machines. But once Best Buy met with suppliers and showed them how easy it is to use its extranet, their attitudes quickly changed, Johnson says. “It was really easy to teach them how to use ExtendingTheReach.com,” he says, “and they realized that it was easier than doing all that faxing.”
The result, he adds, is that Minneapolis-based Best Buy has improved its ability to keep its shelves and floors stocked with merchandise, since it deals with far fewer discrepancies in deliveries from small as well as large suppliers. And like more and more retailers, Best Buy is striving to extend the benefits of its supply chain improvements to all of its retailing channels, including its Music Land and Canadian-based Future Shop stores as well as its three Best Buy-branded channels of catalog, web and stores. “Our mission is that, when you go to a Best Buy store and go to that shelf, the product will never be out,” Johnson says. “We want to make sure that product is available to buy.”
For many smaller suppliers, the fastest and easiest way to get on board with a web-based supply chain system is by simply using a browser to access a web-based application for sending data, such as the web forms on Best Buy’s extranet. A web forms application can also sit on a third-party server, such as at QRS Corp., which charges $69 a month plus $2 to $7 per document.
Other options include sending flat files through an FTP, or file transfer protocol, network connection, or using software that can translate the data into Extensible Markup Language and then transfer it over the Internet to a retailer’s electronic data interchange system. The smallest of suppliers hand over their information via fax, phone, e-mail or other means to a service bureau, an option offered by QRS and other supply chain software vendors. For a monthly fee of generally less than $100, the bureau forwards supplier data to a retailer in whatever form it wishes to receive it. Like web forms, there may be additional charges of a few dollars for each transmitted document.
Guaranteed no chargebacks
Besides being relieved of having to dedicate personnel or computers to directly accessing web-based systems, some small suppliers opt to use a service bureau for the guarantee service bureaus typically offer against chargebacks.
For its larger suppliers, Best Buy continues to exchange documents directly over its EDI system. Eventually, it hopes to move all document traffic to an Internet-based EDI system to save on transmission costs and provide for more real-time exchange of information. This would also support Best Buy’s interest in conducting more collaborative planning, forecasting and replenishment with its suppliers. In the near future, Best Buy will operate several e-commerce systems on a platform from Minneapolis-based Retek Inc., which will serve as the central communication foundation for forecasting and other supply chain capabilities from vendors including i2 Technologies Inc. and webMethods Inc.
Like Best Buy, Food Lion LLC, a supermarket chain based in Salisbury, N.C., plans to have all EDI transactions conducted over the Internet. It hopes that by November of next year it will connect to all small suppliers that way, says Carolyn Hager, manager of e-business. Food Lion has handled 94% of its purchase orders over its EDI system for several years, accounting for most of its communications with large and medium-size suppliers.
But with EDI over the Internet, “we’re reaching more of the small ones,” she says. Food Lion deals with niche suppliers of specialty items as well as major food manufacturers. So far, the migration is proceeding well. Food Lion already has moved 25% of its EDI transactions to the Internet under a program started earlier this year.
To help with the transition, Food Lion is working with vendors including QRS, Richmond, Calif., which makes it easy for small as well as larger companies to use EDI over the Internet, Hager says. Large and small suppliers alike can migrate to the Internet without having to purchase and immediately implement new software, she adds. While larger companies can have QRS redirect their VAN transactions through the Internet to reach Food Lion, smaller companies can either fax information to QRS for translation into an Internet EDI transmission or access web forms that can be filled out online and forwarded by QRS to the retailer.