Understanding Electronic Data Interchange (EDI)

Electronic data interchange (EDI) can improve your efficiency and provide numerous other benefits. However, you may encounter a few hurdles along the way. Understanding EDI and its various capabilities can help a company grow its business through its compatibility with large retailers.

What is electronic data interchange (EDI)?

EDI is a system through which two different organizations can exchange business documents using agreed messaging standards. With no requirement for human labor, businesses are able to send and receive various documents through this technology. Beyond supply chain management, EDI systems are used for tax reporting, administration, education, travel booking, and interaction between healthcare practitioners and insurance carriers.

Through EDI, computer systems can send and receive standardly formatted data while being 100 percent automated. With EDI, you can enter complex information from purchase orders (POs), invoices, advanced shipping notices (ASNs), or any other documents into your system.

To get more technical, an EDI message is typically called a transaction set. A set starts with a header and ends with a trailer. Between them are a data segment or group of data segments that contain information typically included in business forms or documents. Within the segments are elements that represent singular information, separated by delimiters, and lined up in a data string — typically called a data segment when referencing the whole thing.

What types of information are exchanged within EDI?

Within a supply chain management setting, the relevant data is typically the elements of information within purchase orders and invoices, such as the following:

  • Model number
  • Stock keeping unit (SKU)
  • Quantity
  • Price
  • Ship date
  • Address
  • Terms

Replacement for fax, mail, and email

Due to the automated design of EDI, the purchase order is sent directly by the computer system of the customer to the vendor, with the vendor’s system automatically sending an invoice in response. This exchange is significantly more efficient than the traditional method of sending physical documents between parties, often encountering human error.

The benefits of adding EDI to your business

Beyond the savings in time and labor, there are many other benefits of EDI. It exchanges the necessary data with minimal error, to ensure your documents are being processed faster and more efficiently. Not only does it help save time and money, but EDI also reduces the carbon footprint through a transaction to digital from paper-based.

Most importantly, EDI is a requirement of many major retailers today. Transitioning to EDI will allow for growth opportunities within a business and allow for strong relationships with retailers.

What are typical EDI hurdles?

Although EDI provides a company with many benefits, occasional obstacles will arise too.

One of the biggest hurdles to overcome with EDI is the use of bad data. EDI should reduce your rate of errors in your documents. However, any problem that you can have with an invoice, purchase order, or any other type of business document can occur with EDI data – because you can always have bad data.

Data anomalies lead to impact on or suspension of an incredibly high volume of business transactions. For instance, you might accidentally duplicate a purchase order, or the wrong price might be listed on it. In other cases, a PO might include a product that is discontinued or out of stock.

Stronger data governance can mitigate the issue. You want the product availability dates, PO validity, and prices to be monitored within your EDI system through business rules.

While EDI does standardize data a great deal, there are still variations in transaction sets from one industry to another or one customer to another. The different business rules throughout your customers can get tricky.

Time to get on board

It is clear that EDI can be valuable to your organization. However, you want to avoid warehousing bottlenecks and other EDI-related problems. The best approach is to tap the expertise of specialists like our team here at Distribution Alternatives.

Let us help your business get on board with EDI so your company is ready to partner with large retailers as you grow.

Click here to learn more about our EDI services.

What is a 3PL?

The ability to deliver goods efficiently and quickly to your customers is a major factor in the growth of your e-commerce operations. Refining your warehouse management allows you to optimize the way you store, handle, and ship products. While many companies keep order fulfillment and logistics in-house, some choose to work with third-party logistics (3PL) providers – also called simply 3PLs. Since handling your own logistics can be a large source of expense, you may find third-party logistics to be a cost-effective solution that frees your time to center on your core business.

3PL is simply having an expert third-party organization that specializes in logistics manage and perform this part of your business for you.

What is logistics?

Third-party logistics may seem to be a dense technical term. However, it is easy to understand once you break it into its parts. Let’s look at logistics first.

Logistics is the planning and execution of efficient storage and transportation of products between their origins and customers. Initially used for managing the movement of goods, equipment, and personnel within the military, today logistics typically references the movements of commercial goods between points in the supply chain. Excellent logistics is both cost-effective and fast.

Success with logistics management meets the following needs:

  • having the goods you need when you need them;
  • getting them in impeccable condition to the proper location; and
  • delivering them to the right customer, whether internal or external.

What is 3PL?

3PL is simply having an expert third-party organization that specializes in logistics manage and perform this part of your business for you. Experts on managing the various elements of fulfillment and procurement, 3PL providers offer outsourced logistics services. You can get powerful warehouse management and distribution through a 3PL while not having to incur the expenses of personnel training and management, equipment handling, facilities, and vehicles.

Third-party logistics does not need to be comprehensive but applies to any service related to storage or shipment. The functions organizations typically seek from 3PL providers include the following:

  • fulfillment services including pick, pack, and dispatch;
  • supply-chain stock picking;
  • local, nationwide, and worldwide shipment of products;
  • last-mile delivery; and
  • compliance with transportation laws locally, nationally, and internationally.

Difference between 3PL & fulfillment

Another term that is typically associated with e-commerce is fulfillment. In contrast to the broader realms of logistics and 3PL, fulfillment is simply steps taken by a merchant to deliver orders to customers. This concept specifically refers to the process by which you receive, package, and ship product orders. The fulfillment process includes inventory storage, picking and packing, and shipping orders.

Example of how 3PL works

While a book publisher has experience in hiring and contracting with authors, editors, and graphic designers, they do not want to handle the book ordering and shipment process. The book company works with a 3PL to fulfill orders and ship its freight.

Rather than maintain a supply and distribution capacity in-house, the publisher is able to contain costs and focus on book production through a 3PL services contract.

Why work with a 3PL?

Beyond allowing you to focus on other aspects of your business, there are various other reasons that companies form partnerships with third-party logistics services. Five of the top reasons are the below:

  1. risk mitigation – By having a third-party handle logistics, you pass off the responsibilities it entails. If goods are lost or damaged, you are protected. If shipment is delayed, the 3PL must expeditiously find an alternative way to fulfill the orders.
  2. insight – You can benefit from the knowledge and experience of a third-party specialist, particularly if you are just launching. The logistics operations of your business can be immediately improved as they are guided by specialists in the field.
  3. cost reduction & savings – Working with a 3PL makes you part of a larger operation. Since these organizations have many different customers, you gain access to that higher order frequency and volume. In turn, you take advantage of greater negotiating leverage with carriers. Plus, you can save significantly by not having to maintain your own staff and space.
  4. stronger customer experience — Through the more established and efficient distribution network of a 3PL, you can expedite delivery. Making delivery ultra-fast with next-day or same-day options is increasingly critical given the Amazon effect on customer expectations.
  5. scalability — Typically the demand for businesses’ goods will rise and fall at different times of year. Instead of having to invest capital for a level of operations you may not always need, you can better manage your peaks and valleys with a 3PL.

Your 3PL strategy

While you may be interested in exploring third-party logistics, selecting the right 3PL is critical to your success. At Distribution Alternatives, we have been distributing merchandise for more than 80 years. Explore our flexible and accommodating 3PL solutions here.

Split Case Picking: 4 Models and 9 Technologies

Manual labor accounts for more than half (55%) of total warehouse costs. Part of that is because of how tedious picking and packing can be, with three-fifths (60%) of the time it takes consumed by moving products and walking.

Workers gathered in the center of the warehouse for kitting and assembly.

Pick and pack becomes especially labor-intensive when grabbing individual items from different places and putting them straight into shipping cartons (as opposed to picking cases or full pallets) — a process called split case picking, piece picking, each-pick, or broken case picking.

The challenges of this newer approach to picking are driving 3PL warehouses to optimize the operation for accuracy, efficiency, and speed. Key metrics used to evaluate models and technologies for piece picking include throughput, acquisition cost, cost of ownership, space utilization, storage density, and velocity (the pace at which inventory is moving).

4 common models of split case picking

There are various ways to approach piece picking. Evaluation of specific approaches will have to do, in part, whether picking is performed by item or by order. In the case of the former, sorting must occur downstream, while that step is not needed with the latter.

Various models of split case picking are as follows:

#1. Discrete order picking (a.k.a. basic order picking)

The most frequently used and most easily understood form of picking, discrete order picking is highly suitable when picking is paper-based. Unfortunately, it is also quite inefficient since travel time exceeds that of other options.

This approach involves one order-picker going line by line, picking an order. Orders can typically be picked at any time on the given day, since generally each shift has a single window for scheduling orders.

#2. Batch picking (a.k.a. multi-order picking)

Small batches are created by picking numerous orders simultaneously. Depending on the environment’s average picks per order, batches will typically include 4 to 12 orders. Pickers can make multiple picks in one area of the warehouse, significantly decreasing travel time when there are few picks per order in an operation.

Procedures and systems are needed so that orders are not mixed up, since more than one are being picked together. A consolidated pick list is used by an order picker to take a single pass and pick all the orders. Often the picking cart that is used will be multi-tiered, with each order designated its own carton or tote. For optimal consolidation of orders that include similar items, sophisticated logic is commonly incorporated into batch picking systems.

Orders build up in the system until the batches are able to be formed out of similar picks. While this delay greatly improves batch pick productivity, it does not work for many same-day shipping operations.

Using pick trolleys, batch picking can be conducted cost-effectively in a non-automated environment. Automated material handling equipment and zone picking are often used alongside batch picking in high-volume operations.

#3. Zone picking

Fans of basketball are likely familiar with zone defense, in which a player is responsible for a certain section of the floor. The same principle can be applied to picking. With zone picking, the warehouse is chopped up into a number of zones, with certain SKUs belonging to each of them. When an order picker comes in for a shift, they only pick within one zone.

To make sure the flow is consistent, it is critical to balance the number of picks in each zone. Typically there are one or two pickers in each zone (which, in turn, helps determine the size of the zones).

There are two different types of zone picking, which each address the need to combine items from numerous zones differently:

  • Simultaneous zone picking, a.k.a. pick and merge – With this model, the different zones are picked concurrently. A packing station is then used to consolidate pieces from the various zones.
  • Sequential zone picking, a.k.a. pick and pass – In this system, order boxes are moved from zone to zone, often via a conveyor belt. Rather than consolidation of zones at a packing station, the items of each zone are added one at a time. Strong productivity with this model is highly dependent on locating particularly fast pick areas near the conveyor.

The speed of order fulfillment is optimized by pick and merge, due to its parallel structure. Whether that system or pick and pass is used, very busy operations can benefit from a decline in picker congestion. A downside is that zone picking is a costlier model than batch picking.

#4. Wave picking

In this model, the order picker focuses on one SKU and one order at a time, just like discrete picking. With wave picking, the processes of picking, packing, and shipping are better coordinated through scheduling windows. This model allows order scheduling so that picking occurs during specific times of day.

Comparison table

The following table compares the different methods in terms of order volume and number of picks per order:

Total orders Picks per order
Discrete order picking low moderate to high
Batch picking low to high low
Zone picking moderate to high low to moderate
Wave picking low to high moderate to high

9 technologies sometimes used for split-case picking

Along with determination of a picking model, 3PL fulfillment companies can also utilize various technologies:

#1. Vertical lift modules (VLMs)

An automatic extractor/inserter accesses columns of trays at the front and rear of the equipment, in which medium- and slow-moving cases and items are stored. To better utilize space, the stored positions of trays are adjusted dynamically via integrated controls, using sensors to evaluate each tray and gauge how tall items are.

#2. Pick-to-light

The aisles and shelves that pickers should access are illuminated via light guiding.

Unfortunately, in operations with many pickers, this system can be confusing. We deployed it in the past but ultimately determined its restrictions outweighed its benefits.

#3. Floor robots

These automated guided vehicles typically grab racks with inventory and move them to stations where pickers select specific items. This solution, in which capacity is expanded over time through the acquisition of more robots, is intended to enhance storage density.

A downside of these solutions is that they are costly, in part because of initial programming and ongoing maintenance.

#4. Horizontal carousels

The technology is designed for use in picking cases and items that are moving at a slow to medium rate. The solution consists of an oval track, transporting items to pickers via a number of horizontally rotating bins. To achieve optimal throughput and productivity, a workstation or pod will often have various integrated horizontal carousels.

#5. Vision picking

This technology is used to enable a hands-free environment. Outfitted with augmented reality (AR) glasses, pickers can scan item tags automatically. They are directed where to go and what items to pick.

#6. Automatic storage and retrieval systems (ASRSs)

The selling point for these solutions, capable of accessing racks as high as 100 feet, is that they bolster storage density. However, retrieval times can be long, and they are quite expensive.

Rows of racks make up an ASRS, with a retrieval unit for every row. The retrieval unit puts away items and picks products, moving along the rack horizontally and vertically. One primary category of this technology is the unit-load type, which stores and moves sizable unitized loads (such as pallet loads). The other is the mini-load type, which stores and moves bins or trays of items.

#7. A-frame

Besides replenishment, no labor is needed for this technology. Portable versions are sometimes used seasonally or during promotions.

The A-frame standardly offers three automated picking and dispensing modes: pick-to-shipper, pick-to-tote, and pick-to-belt.

#8. Voice picking headsets

A hands-free, paperless environment is enabled by this technology: products are picked with verbal confirmations. Headsets are used to guide pickers to the correct aisles, shelves, and items.

#9. RFID or barcode scanners

To double-check accuracy, packers can scan the RFIDs or barcodes with these devices. To make sure that they are grabbing the correct items, mobile scanners can be useful to pickers too. This versatile technology can also be used in order checking, cutaway, pallet loading, and case picking.

We use scanners and find them to be highly effective.

Finding a trusted 3PL provider

Are you in need of technically advanced 3PL fulfillment services for expert split case picking? At Distribution Alternatives, we have been distributing merchandise to the retail trade for more than 80 years.