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Those Nasty and Evil EDI Testing Fees PDF Print E-mail
Written by Rob Guerriere   
Oct 10, 2011 at 07:04 AM

A Halloween Special Edition

Suppliers and most EDI providers hate them.  They love to vent their frustrations on bulletin boards and blogs (reply with your thoughts).  Bottom line: testing fees add value to the buyer and the entire supply chain if the buyer, seller, and EDI testing outsourcer employs best practices in executing an on-boarding event.  Now for the readers who know me, you are either laughing or just in disbelief.   But let me explain how testing services and fees should work and even give an example of how best practices are being employed at one of the largest retailers in North America. 

Many suppliers have had a bad experience.  The service was bad, the support was bad, the entire process fruitless and for usually around a grand or two per retail customer.  Talk about adding extra work and cost to a supply chain.  A thousand dollars pays for a lot of paper purchase orders.  Where is the efficiency and cost reduction gained?  Many times the professionally skilled EDI seller is dealing with a EDI provider with an inexperienced staff and bad data.  Talk about frustrating.  It's no wonder that so many Directors and VPs of Supply Chain have suffered that black mark on their career.  Previous to the testing kick-off many of these Directors and VPs repeated the sales pitch back to me, "a couple thousand dollars is a nominal fee that our suppliers have no problem paying [suppliers expect paying these types of fees to their customers]." Perhaps they should have had a Kaizen circle discussion on it.  There is a way to implement EDI testing fees and service that does add value and limit cost to the supply chain.

For the buyer it makes sense... they get suppliers on-boarded with the latest processes and transaction sets with added support services paid for by the supplier.

For the seller it does not make sense... added work and unexpected and non-calculated cost added to the supply chain.  And if the testing in not effective; worse.  Many suppliers end up paying the buyers selected third party more in testing fees than the annual EDI service that handles their transactions.  And sometimes the supplier is more capable then the buyer which adds insult to injury.  As testing fees become more common place with big retail buyers, times the testing cost and overhead resource cost by every customer.  Now figure the margin per item.  How many extra items need to be sold to cover the cost?

Five fundamental best practice steps for a buyer to take in implementing an EDI testing and on-boarding rollout:  (1) survey the supplier base on capabilities, (2) communicate the process and manage in waves.  (3) Notify and enable the EDI providers first and allow them to support their client/your suppliers.  Many providers offer a common platform with validation rules that apply to groups of suppliers. (4) Lastly implement a deadline for the remaining and/or preferred EDI capable supplier for testing. (5) Everyone else goes through the testing process.

There is one major retailer who has employed and is currently executing these best practices with their supplier base.  I'll leave it to that particular retailer if they wish to share their results in the comments below.

What suppliers can do to avoid paying EDI testing fees:  Be more pervasive than your customer on EDI.  Request an EDI connection from the customer before they charge you a couple grand for the privilege.  Even if a supplier only gets ONE purchase order a year, many times if they are using an outsourced provider, it is just a matter of the buyer flipping  a switch.

Do more than just rant on a blog.  Show your support below use this to petition a buyer looking to implement EDI testing fees.

Rob G.

 

 


User Comments

Comment by davies on 2012-01-10 08:36:51
Rob, you raise some very interesting points of which I believe I am in agreement with you to some extent. I am interested in the five fundamental best practices you have outlined and i'd like to know more about how a large enterprise actually rolls out such a program and methodology. For example, surveying a supplier base, communicating the testing process and notifying their EDI providers is an enormous task. There are over 200 EDI providers in north america alone, the supplier community could consist of thousands of global suppliers and the large enterprise may only have access to a customer service rep within most of their supply chain partners (crazy, but this is often the case). How much time and effort following your best practice steps does it take for a large enterprise to work through this effort, while at the same time continuously on-boarindg EDI capable suppliers? Is the upfront effort of steps 1 through 3 worth the time and cost to the large enterprise? In my opinion the testing fees for suppliers should actually be covered by the large enterprise. If done properly the cost for the large enterprise should be an upfront fee to establish the program (maybe a website) build the maps for testing and define the testing automation processes (total cost could be $100-$200k). The cost per supplier at this point to go through testing should not exceed 2-3 hours of support from the EDI testing vendor. So why should a large enterprise cover the costs? The benefits in return are huge. Less overhead hand holding suppliers through manual testing and on boarding, faster on boarding and more available resources to work with larger more complex suppliers or redeploy resources to customer EDI projects (extremely important and complex in manufacturing environments). The bigger challenge is getting the supplier base EDI capable on solutions that work for them and their organization. If they then have EDI automated testing processes to follow they are effectively on boarding themselves and not waiting for the large enterprise to respond and put them on their schedule. 
Interesting article.  
Andy Davies, President DWG,

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