Information. So much of what a control state does depends on it. The exchange of accurate and timely information feeds every stage of the business cycle, from the minute products are received at the warehouse until the moment they leave the store. That is precisely the reason why beverage alcohol suppliers and control board officials have worked so feverishly in recent years toward a common goal: full-scale implementation of Electronic Data Interchange (EDI).
Simply stated, EDI is the electronic transmission of business documents from one computer to another, using standardized data formats. Since the early ’90s, it has been the mission of the Alcohol Beverage Industry Electronic Data Interchange (ABI EDI) Group — a collective of suppliers, control state officials, open state
distributors and retailers — to research, promote and assist in the implementation of EDI. Thus far, their efforts have met with a moderate degree of success. Automating the simple exchange of business documents (such as purchase orders, invoices and bailment reports), for example, is a fairly common practice in the control states.
On the other hand, more sophisticated business practices such as continuous replenishment techniques, automated new product introductions and computerized vendor-managed inventory still loom on the horizon. For now, their equivalent functions are carried out the old-fashioned way: manually. To automate them requires establishing a set of computer language standards — the essence of EDI — to meet the needs of a diverse group of suppliers and control states. While some progress toward that goal has been made, full-scale implementation of EDI has never truly seemed within industry reach.
On July 28, 1997, representatives of the ABI EDI Group, Seagram Americas, IDV North America and the Virginia Department of Alcoholic Beverage Control (VAABC) gathered in Richmond, VA, to assess the progress of EDI in the control states. Their goal: to finalize plans for an EDI model that would regulate an entire business cycle between a bailment state — in this case, Virginia — and each of its individual suppliers. Such a model, if successful, would dictate the electronic flow of documents from initial product orders through bailment picking, inventory management, stock replenishment and payment.
Testing on Virginia’s EDI pilot program would begin almost immediately. A positive result, everyone agreed, could drastically reduce the time and effort required at every stage in the cycle.
And, in the process, permanently redefine the nature of business communication in the control states.
The VAABC had actually been planning for this moment for some time. Already in the works was an $8 million Product Distribution System intended to carry out several EDI-related functions. An extensive package of new hardware and software would scan and track products not only through bailment and delivery procedures, but also retail purchases and warehouse replenishment. The VAABC itself would use the technology to monitor each transaction — in effect creating a computerized network linking all three tiers.
The board’s investment was based in part on return estimates showing inventory reduction leading to an annual savings of $.5 million on interest alone, as a result of improved operating efficiency. “We think our new product distribution system is going to eliminate a lot of mistakes, and that the data is going to be much more accurate,” said Virginia VAABC board member Clater Mottinger. “Information will be more readily available on a timely basis to make better decisions regarding inventories, merchandising, pricing and other areas that significantly affect our profitability.”
Mottinger, who is also a member of the ABI EDI Executive Committee, has long since acknowledged the importance of electronic commerce. “We are currently utilizing a 25-year system to manage all our different business functions,” he said. “Our system is not ‘YTK’ capable [for the year 2,000], and we were looking at having to spend three to four million dollars just to bring our current systems into compliance.”
Thus the board selected Information Technology Solutions, Inc. (ITS), a computer company based in Petersburg, VA, to develop Virginia’s new distribution system. “We specified the new system to handle EDI,” Mottinger explained. “We wanted to make sure we had the ability to communicate electronically with our industry partners. There are still business functions or transactions that need to be defined — but we are on the leading edge of defining them.”
Indeed they are. The key issue on the table at the July 28 meeting was identifying the component “transaction sets” that would represent the building blocks of a working EDI model. A transaction set is a computer file that, with the aid of translation software, takes information contained within a typical business document (a phone number, product quantity, etc.) and maps it onto a standardized data format usable by multiple partners. Examples of transaction sets currently being developed include a price catalogue, a warehouse replenishment request and a bailment billing order.
One transaction set deemed crucial by all participants was the price sales catalogue (832), which contains information regarding new products — item descriptions, label codes, vintage codes, bottle sizes, amounts, etc. Suppliers would send control states an 832, for example, whenever a product line changes, thus providing an automatic update to a standing database.
Virginia Adams, the VAABC’s director of wholesale and retail operations, explained in concrete terms what this would mean to her department: Suppliers currently send her office a standard quotation form with information such as price per item, bottles per case and case weight. “We get those forms quarterly — if there is a price change, a levy change, a bottle per case charge — and key the information into our system,” she explained. “What [an 832] would do is send the same information electronically, dump those changes into our system and eliminate all the keying in.”
According to Adams, other EDI transactions — such as the replenishment request (940) and bailment receipt advice (944) — would provide additional benefits. “There are two ways in which EDI is going to benefit us right away,” she said. “It’s going to reduce the our manual data-entry keying, and it’s going to provide the suppliers with more accurate, up-to-date information for them to stock our warehouse. If we send suppliers our weekly inventory levels and monthly forecasts electronically, and they’re getting them in a more timely fashion, they in turn can restock our warehouse better and reduce our occurrences of stockouts.”
Which, of course, couldn’t be better news for suppliers. “When suppliers reduce their inventory in our bailment warehouse,” Mottinger explained, “that frees up money to use on marketing and promotions, which helps our sales. It’s an exponential factor regarding profits and savings.”
Perhaps that is why companies like Seagram Americas, IDV North America, Brown-Forman Beverages Worldwide and Bacardi-Martini USA have expressed such a strong interest in this project. In fact, several major beverage alcohol suppliers have already implemented EDI systems which they are using to conduct business with open state distributors. These suppliers can provide valuable input into developing an effective EDI model for control states, and their participation in Virginia’s pilot program is viewed by everyone as critical to its success.
“We’re very committed to this process,” said Robert Frowenfeld, director of Electronic Commerce for Seagram Americas and member of ABI EDI’s Executive Committee. Frowenfeld has been chosen to facilitate supplier participation in the upcoming months as parties work through the final stages of the pilot program. “EDI gives us a level playing field,” he observed. “It provides a common language by which people trying to do business together can communicate.”
No one has suggested that implementing EDI on an unprecedented scale will be piece of cake. On the contrary, before Virginia’s pilot program can be set into motion, there’s at least one major issue still to be resolved. As it turns out, that issue goes well beyond the scope of EDI.
Here’s the problem: In order for each supplier to conduct business electronically with more than one control state, and in order for control states themselves to track the sales of specific items, a standard method of identifying products is required. Such a standard will enable a control state with the proper equipment to scan a case, identify what product it contains and instantly download that information into an inventory management system.
Control states have long since grappled with the issue product identification. States collectively took a major step forward recently by adopting a uniform multi-state case code label, one that includes both the UPC product code and individual state (NABCA) or SKU code. Additionally, suppliers have agreed to affix the 13- or 14-digit Shipping Container Code (SCC) in a bar code-readable format to all cases of product. The SCC provides more detailed or special information about the products, such as gift packaging or non-uniform bottle size. Currently, most major spirits suppliers are using the SCC as the standard unit of identification on cases.
The question then becomes, which coding label — the UPC, SKU, SCC — would be used for an EDI-capable system?
Robinson Brown III, assistant vice president at Brown-Forman Beverages Worldwide, believes it would benefit control states to use the SCC code, particularly in an automated system. “The advantage of the SCC is that it will ultimately move us away from multiple inventories,” he said. “Historically we’ve had to generate a different inventory for each control state, because each state had a different label. If a case has a West Virginia label, we can’t ship it to Iowa — so we have to produce to order. The SCC would enable us to reduce the number of specialized inventories that are required because of individual labels.”
While Brown said his company uses and fully supports the SCC label, he also recognizes the obstacles it presents for control states. “It costs money for a state to make the conversion from a state code to the SCC,” he said. “It’s a big job, and it can’t be done overnight. You have work with the system you’re already using; you have to find a way to introduce the new system without disrupting the flow of business.”
On the other hand, suppliers also conduct business under different sets of circumstances — an important consideration for participants in Virginia’s pilot program.
For example, if company X considers a particular transaction set critical to their needs while company Y deems it not so critical to theirs, a potential roadblock to EDI may result. “Realistically, we’re only going to fill probably 90% to 95% of everyone’s needs,” Mottinger confirmed. “There are individual concerns on both supplier and control state sides — things that each side wants to keep or does not want to give up — that might not fit easily into our EDI model.”
Nevertheless, a core group of transaction sets was identified that was deemed vital by everyone, and a solution for potential conflicts over the other sets was offered: they would be included in the model but would not have to be used by everyone. In addition, Mottinger said that Virginia would be quite willing to adapt its product distribution system if a particular transaction set became a major point of contention. “We’ve got to keep a cooperative spirit to reduce as many of those uncommon areas as possible,” he added.
Indeed, the spirit at the EDI gathering was one of cooperation and shared commitment. While the short-term goal was to finalize an EDI model that Virginia could use in its wholesale environment, the long-term goal was to ensure that all control states and suppliers would become equal partners in EDI. “We want all control states to join the EDI arena,” Mottinger said. “There have been pieces of the current model that other states have been using [such as Washington, Pennsylvania, Utah and Idaho]. We want their advice and expertise, especially in these areas.
A similar question was then thrown back to suppliers: Are they willing to share information and agree to a model that may be more ideally suited to one manufacturer than another? Absolutely, said Seagram’s Frowenfeld. “The beverage alcohol industry is extremely competitive,” he acknowledged. “But that does not mean manufacturers cannot work together toward a common goal that will ultimately benefit all of us — suppliers, distributors and retailers as well.”
In the upcoming months, the VAABC will be working with their provider, ITS, to perfect the component transaction sets and begin implementation of their product distribution system. Careful monitoring of daily business transactions will provide the first real indicators of the efficiency of EDI on a broad scale. In the meantime, members of the supplier community will band together to ensure that best possible EDI system is put into motion.
“The more of us that buy into this process,” Frowenfeld concluded, “the more legitimate it becomes for everyone.”
As if the technology weren’t complicated enough, deciphering the terminology of Electronic Data Interchange (EDI) can seem just as overwhelming. Here, then, is a description of some of the key words and phrases needed for a fundamental understanding of EDI.
Alcohol Beverage Industry (ABI) Electronic Data Interchange (EDI) Group
an independently-funded group of suppliers, control states, distributors, retailers and trade associations whose mission is to develop ASC X12 and EDIFACT Standards for use in EDI technology
the principal standards governing EDI transactions today, as outlined by the American Nation Standards Institute (ANSI) Accredited Standards Committee (ASC)
automated replenishment system
an EDI transaction in which warehouse depletions are automatically prevented from dropping below a certain level through the action of an electronic purchase order
Data Interchange Standards Association, Inc. (DISA)
a nonprofit organization that supports the development and implementation of Electronic Commerce; also the governing body of the Accredited Standards Committee
a nine-digit number assigned by the Dun & Bradstreet Corp. to identify a business location; it is commonly used on EDI envelops to represent the sender and receiver of the transmission
a comprehensive guide to the latest EDI standards, published regularly by the ABI EDI Group
a project that in the next several months will test the effectiveness of a model EDI business cycle, conducted by the Virginia Department of Alcoholic Beverage Control
Shipping Container Code (SCC)
a 13-digit shipping code label that identifies unique characteristics of a particular case of products, such as variations in bottle size, gift packaging and promotional add-ons
a computer program that maps information onto standardized data formats that can be used by multiple partners
transaction set status
“production status” indicates that the transaction has been fully piloted and approved for production; “pilot status” indicates the transaction set is being used in place of conventional paper-based communications; “draft status” indicates the transaction set has been approved but not adequately tested
software used to process and decode the “symbology” of EDI transaction sets into usable formats
Uniform Pricing Code (UPC)
sometimes referred to as a consumer or product code, it is the standard bar code for identifying individual products at the retail level