October 31, 2002, 12:00 AM

Wal-Mart forces small suppliers into new round of web-based supply chain standards

Wal-Mart is requiring all suppliers to adopt a standard for web-based EDI exchange of documents, which will have a ripple effect throughout the retail industry,

Small suppliers have typically resisted moving to the Internet for supply chain collaboration. Now if they supply Wal-Mart Stores Inc., they won’t have a choice.

Wal-Mart, the leader in driving efficient supply chains, informed all its suppliers in September that they must get on board with a standard known as the Applicability Statement 2, which describes how to send and receive business documents in EDI format over the Internet. It covers such information as purchase orders, invoices and advanced shipping notices.

Wal-Mart’s requirement is expected to have a ripple effect throughout the retail industry, resulting in more web-based retailer/supplier transactions that can leverage well established EDI systems at Wal-Mart and other major retailers.

The standard is supposed to promote a higher level of collaboration between retailer and supplier. It was devised by the EDI over the Internet working group of the Internet Engineering Task Force, a group of designers, network operators, vendors and researchers concerned with the architecture of the Internet.

AS2 will usher in more EDI transactions over the Internet by supporting secure transactions of both EDI and XML data. This can make it easier to connect computer systems of retailers and suppliers. AS2 is also designed to generate more supply chain collaboration, because XML provides for integration and automated communications between computer systems, enabling companies at both ends of the supply chain to react more quickly to changes in production and demand.

To comply with AS2, suppliers must be able to handle EDI-over-Internet transactions. But that shouldn’t be a major obstacle, says Pete Abell, director of retail research for AMR Research Inc. Small suppliers not already hooked into a system set up by their retail partners have the option of signing up with a provider of Internet EDI services such as GE Global eXchange Services, IBM’s Business Exchange Services or ADX. Fees generally run about $300 per year. “Over the next two years, we’ll see a vast majority of small suppliers up on some sort of EDI/Internet form,” Abell says.

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