Electronic Data Interchange ROI: The EDI Edge in CPG Distribution

Electronic Data Interchange ROI: The EDI Edge in CPG Distribution

Picture this: you’re a consumer packaged goods (CPG) brand whose B2B sales are increasing, and you’re getting some requirements from retailers. Including adding EDI to receive their orders. 

Sound familiar? Going through it right now or preparing to transition to big box retail and want to prepare? You’re in the right place!

EDI seems like some techy software that IT nerds love but that’s certainly not the whole story. As we described in previous blog posts, EDI is quite simply a data standard that facilitates streamlined exchange of business documents between various entities - it is not a technology. 

Implementing EDI in your consumer packaged goods distribution operation delivers hard dollar returns that go straight to your bottom line. There is a tangible return on investment (ROI) for implementing EDI, and specifically, implementing it effectively.

Here are the top areas that electronic data interchange can boost ROI for CPG brands covered in this blog, along with additional tips for getting started:

  • Cost Savings
  • Speed & Accuracy
  • Visibility & Insights
  • New Business Expansion
  • Choose your EDI software thoughtfully 
  • FAQ: Getting Started with EDI for CPG Brands

Cost Savings

First and foremost, EDI cuts your labor costs dramatically by eliminating all the manual order processing and data entry your staff does today. You’re a CPG brand, meaning you have tons on your plate as it is; manual data entry and order processing will only bog your team down.

You may have started with a web EDI portal to  make things easier. This process has multiple steps:

1. Receive email notification for a new purchase order

2. Log in and confirm:

  1. Ship windows
  2. Inventory availability
  3. Inventory expiration dates
  4. Payment terms
  5. Correct SKUs 
  6. Confirm adherence to minimum order quality. 
  7. Confirm per unit price. 

3. Download and send packing slip to 3PL warehouse

4. Confirm with warehouse on ship window dates

5. Receive packing geometry from warehouse

  1. Confirm item count
  2. Confirm carton count
  3. Confirm no mixed SKUs per carton
  4. Confirm expiration dates or lot numbers

6. Log back in to portal

  1. Confirm how many cartons
  2. Confirm weight
  3. Confirm dimensions
  4. Confirm ship window
  5. Create draft ASN
  6. Generate labels (UCC-128 labels / GS1-128 shipping labels)
  7. Generate mailing labels (if shipping provided by trading partner)
  8. Download labels

7. Email labels to warehouse

  1. If labels include shipping/tracking, no further action required
  2. If labels are just the UCC-128/GS1-128 labels, wait for tracking from warehouse

8. Log back into EDI portal

  1. Copy and paste all tracking into proper cartons in the draft ASN.
  2. Confirm and finalize ASN
  3. Generate invoice after shipping is confirmed
  4. Download pdf of invoice
  5. Send invoice to internal accounting team

It takes a minimum of 2 hours on each order for manual EDI order processing. Orders with multiple back and forth on ASNs, labels and complex shipping requirements will take longer. 

If you’re paying staff $25 per hour, you’ve just added at least $50 to the cost of goods on that order. Research shows EDI automates 60-70% of those tasks that humans now handle. When you think about the overhead involved - wages, benefits, HR costs, facilities, management - that's a ton of savings. 

Multiply those hard dollar labor cost reductions across your entire distribution organization and you’re looking at hundreds of thousands in savings or more.

Speed & Accuracy

EDI speeds up order fulfillment by up to 80%. Let that sink in. Imagine how much more product you can move to your retail partners with that kind of efficiency gain! This is such an important consideration for CPG brands, especially those that have to deal with expirations dates (food and bev, we’re looking at you!).

Instead of printing orders and having staff type them in, orders flow electronically right into your warehouse management system. That near real-time fulfillment makes your retail buyers ridiculously happy. Considering each order touch requires about 20 minutes of labor, the time and cost savings really add up. Plus, you turn inventory faster when orders get out the door quicker.

Let’s talk accuracy - manual processes average error rates of 1-2% due to data entry typos and mistakes. EDI eliminates those blunders, along with all the wasteful aftermath, which include: 

  • Chargebacks
  • Shipment delays
  • Invoicing issues. 

One large distributor calculated that automating EDI helped them avoid nearly $500k in annual chargeback fees. Those are savings that go straight to your bottom line.

Visibility & Insights

Inventory management visibility is another big ROI factor. EDI provides advance shipment notices detailing exactly what products are in transit. With that real-time data, you align incoming inventory seamlessly with current stock levels. That means far fewer losses from expired or spoiled goods. 

That’s a key consideration for any CPG brand; CPG products can be so time sensitive in nature that putting in place processes for operational excellence will always come with the additional benefit of avoiding expired goods on your profit and loss (P&L) reports.

It also means less stock-outs that make your buyers unhappy. One study showed brands can reduce inventory costs by 7-12% with automated EDI shipment visibility.

In addition to the hard cost savings, EDI provides major strategic benefits. The data insights unlocked by EDI integration allow more informed decisions about inventory levels, supplier relationships, sales projections, and more. With the detailed business intelligence EDI makes available, you can optimize everything from warehousing to transportation.

New Business Expansion

Here’s a big one - EDI opens the door to major new business opportunities that may have been out of reach before. Large retailers and grocery chains increasingly require EDI capabilities from distributors. With integrated EDI, you can onboard new high-volume partners quickly thanks to Crstl’s library of pre-configured mappings. The increased revenue from landing those big new accounts delivers massive ROI.

On top of all that, automated EDI means your staff is free to focus on more value-added tasks. Instead of doing data entry and order processing, they can provide top-notch customer service, find operational efficiencies, and identify new opportunities for growth. That translates into higher employee satisfaction along with better service for your trading partners.

Choose Your EDI Software Thoughtfully 

It's also crucial to choose the right EDI platform. Look for a solution where EDI is their core expertise, and that it integrates easily with your other systems like WMS, ERP, and accounting software. Make sure it includes top-notch onboarding assistance, customer support, and the flexibility to scale as your needs evolve.

The more optimized your EDI implementation, the faster you'll see major efficiency gains, cost reductions, and revenue growth. There’s no question that for CPG brands, a well-executed EDI strategy delivers game-changing ROI. Want to improve your profit margins? Contact us today to implement Crstl for EDI now.

FAQ: Getting Started with EDI for CPG Brands

If you're looking for other specific info about EDI for CPG brands, here are some other frequently asked questions that should help clear the air. If you don't see it here, just reach out to us and we can help clear up any questions.

Here's what CPG brands are frequently asking about EDI:

What is EDI?

EDI, or Electronic Data Interchange, is a technology framework that allows the transfer of data between different companies electronically without human intervention. It is standardized through specific formats, making it possible for companies to exchange documents like purchase orders, invoices, shipping notices, and many others efficiently and accurately.

Why is EDI important for CPG brands?

EDI streamlines business processes, improves transaction speed, enhances accuracy by minimizing manual errors, and can significantly reduce costs associated with paper-based processes. For CPG brands, which often deal with high volumes of transactions, EDI can ensure faster supply chain operations, improve partner relationships, and lead to better customer satisfaction.

How do I get started with EDI for my CPG brand?

  1. Assess Your Needs: Understand the types of documents you frequently exchange and identify the business processes you wish to streamline.
  2. Choose an EDI Provider: Select a provider that specializes in EDI solutions for CPG brands and offers the flexibility, scalability, and support you need.
  3. Set Up and Integration: Work with your provider to set up the EDI system and integrate it with your existing business systems (like ERP, WMS, etc.).
  4. Testing: Before going live, test the EDI system with your trading partners to ensure smooth and accurate data exchange.
  5. Go Live and Monitor: Start using EDI for your transactions. Continuously monitor the system for any issues and work closely with your provider for any necessary adjustments or support.

What are some common EDI standards for CPG brands?

  • ANSI X12: Widely used in North America across various industries, including CPG.
  • EDIFACT: An international standard more commonly used outside of the United States.
  • GS1: Focuses on global standards for exchanging business items and service information.

Can small CPG brands benefit from EDI?

Absolutely. Small CPG brands can significantly benefit from EDI by enhancing their operational efficiencies, improving accuracy, and establishing stronger relationships with retailers and distributors. Many EDI providers offer scalable solutions tailored to smaller operations, making it accessible and cost-effective for brands of all sizes.

What are common challenges in implementing EDI for CPG brands, and how can they be addressed?

  • Complexity in Integration: Ensure your EDI provider has experience with your specific business systems and offers robust integration support.
  • Compliance with Trading Partners: Work closely with your trading partners to understand their EDI requirements and ensure compliance.
  • Costs: Evaluate different EDI providers and consider cloud-based EDI solutions that offer subscription-based pricing to reduce upfront costs.
  • Training and Adoption: Invest in training for your team and choose a provider that offers excellent customer support and resources to ease the learning curve.

How do I choose the right EDI provider?

  • Industry Experience: Look for providers with experience in the CPG industry.
  • Scalability: Ensure the solution can grow with your business.
  • Integration Capabilities: The provider should offer seamless integration with your current systems.
  • Support and Training: Opt for providers that offer comprehensive support and training resources.
  • Security: Ensure the provider follows strict security protocols to protect your data.