Who
- Sears Roebuck & Co.
- Major retailer of apparel, home and automotive products and services
- 839 full-line stores and 2,600 off-the-mall stores
- Customer base of over 60 million households
Situation
In seeking ways to competitively differentiate itself, Sears identified a 100% electronic supply chain as a necessity moving forward. Bringing its 6,000+ supplier trading partners to e-commerce compliance would increase data accuracy, reduce cycle times and logistics costs. While some of the larger suppliers were already e-commerce enabled, most were not and the task of enabling all of them seemed impossible.
Solution
The SPSConnect program EC enabled 1500 Orchard Hardware supplier trading partners as a pilot project.
First Phase Result
Sears uses SPS Commerce to enable another 5,000 supplier trading partners into e-commerce compliance
The Full Story
Over the course of several years, Sears, Roebuck and Co. had perfected its use of electronic commerce (EC) practices to increase data accuracy, reduce cycle times and manage logistics costs. For the major retailer of apparel, home and automotive products and services, EC streamlines operations within its network of 839 full-line stores and 2,600 off-the-mall stores, which ultimately benefits the 60 million households that comprise Sears customer base. Sears has successfully brought the firm's entire base of 4,500 suppliers to full e-compliance but it hasn't been easy. "Implementing EC means asking thousands of companies to conform their business practices to meet very precise standards for information flow," said a Sears spokesperson. "Those firms may be using UNIX, Windows NT or just a regular fax machine, so mandating and enabling total electronic compliance can be a extremely challenging." But for Sears, the benefits of EC are well worth the effort. "With advance ship notice and barcoded shipping labels, merchandise flows through our distribution centers on conveyors at scan speeds approaching 10 feet a second. The cartons automatically are routed to the destination store. "We don't have to count the shipment or inspect a carton, although we do routine statistical inspections just to ensure quality shipments," said a Sears spokesperson. "Logistics may be one of the few remaining competitive advantages for companies in terms of saving cost, so electronic transaction is very important to us." In fact, Sears has achieved a level of automation that most companies aspire to. "Because we're so heavily automated in logistics, failure to provide accurate electronic data would throw a wrench in the works," said a Sears spokesperson. "If we can't scan the shipping label in a high-speed scanning environment, it has to be handled manually. It decreases the accuracy of our data, and, ultimately slows us down. In addition, it may slow payment to the supplier, so it's really in the suppliers' best interest to be electronically-compliant." As a result, maintenance is an ongoing task that Sears' team considers high-priority. "As much as we'd like to think electronic transactions are commonplace for most suppliers, many just aren't enabled yet. Either we refuse to do business with them—and deprive our customers of their saleable product—or we work with them to make them compliant," said a Sears spokesperson.
The Challenge: E-Compliance for 1,500 New Suppliers
In 1997, Sears acquired Orchard Hardware to bolster its line of freestanding, off-mall hardware stores. One objective after the acquisition was to align the new stores—and nearly 1500 suppliers—with Sears EC practices as soon as possible.
But Sears knew that evaluating suppliers' compliance—and, if needed, helping them through the enablement process—was a considerable task. "Enabling so many suppliers in six to twelve months was going to add extra activity in our area and divert our attention from other pressing initiatives," said a Sears spokesperson. "That's when we began exploring ways to outsource the project."
Then the Sears team struck upon a novel concept. "What would be a demanding chore for us might be a golden opportunity for a third-party e-commerce firm," said a Sears spokesperson. "In essence, our 1500 suppliers seemed to comprise an attractive sales channel for a firm specializing in bringing suppliers to full EC compliance."
Sears mapped out its ideas for partnering with a third-party firm that would take responsibility for testing and certifying the suppliers. If suppliers needed additional help, the third-party firm would be well positioned to offer its products and services. "It seemed like a win-win proposition: they take a huge project off our plate, and in return, Sears provides a huge business opportunity," said a Sears spokesperson.
After contacting the EC/EDI service branches of several major consulting firms, Sears decided to pursue a relationship with a smaller, dedicated e-commerce services company. "The big players weren't eager to jump into an unproven business model, and their lack of enthusiasm made us wary," said a Sears spokesperson.
"It made more sense to work with a smaller firm dedicated to e-commerce, with no ancillary businesses. We wanted someone whose fortunes were tied to the quality of customer service, someone willing to stake their reputation on the quality of work they do to bring our suppliers up to speed," he said.
The challenge was finding the right firm for the job. Although hundreds of e-commerce services firms were dotting the market landscape, Sears had an unconventional business proposition and stringent requirements for its prospective partner.
"Customer service was extremely important to us, since the partner would be responsible for testing and certifying the suppliers whose products are sold at Orchard hardware stores," said a Sears spokesperson. "We also wanted a firm whose services were strong and flexible enough to support the entire Orchard supplier base, regardless of their experience with electronic transactions. It's much easier to enforce 100% e-compliance if you offer several options and allow suppliers to choose the approach that fits their business."
SPS Commerce Takes the Bet
Sears evaluated a number of smaller firms including SPS Commerce which—like Sears—is a pioneer in EC/EDI. Established in 1981 as a regional consulting firm in Minnesota's Twin Cities, SPS Commerce quickly found its niche in electronic data interchange and e-commerce. Today, the firm offers a broad range of software products and services designed to help businesses become compliant and leverage the latest e-commerce technology.
"We were very impressed with SPS Commerce's proven dedication to e-commerce, as well as its breadth of options for serving our suppliers," said a Sears spokesperson. "On top of that, we liked them as people. We knew that our suppliers would have a positive experience with them."
Meanwhile, SPS Commerce recognized the value of a relationship with Sears. Steve Waldron, CEO of SPS Commerce, saw the opportunity as a pilot program that could lead to new sales channels and an entirely new service offering for other hubs. "Sears was offering us a foot in the door to help hundreds of suppliers acquire or improve electronic capabilities within Sears aggressive timeline," Waldron said. "Given our customer service infrastructure and our total focus on e-commerce, we knew we were equipped to help Sears meet its goals for 100 percent supplier e-compliance."
Over the next few months, Sears and SPS Commerce ironed out their plans for testing and certifying the 1500 Orchard suppliers. The first test was always free for each supplier to avoid putting the suppliers in double jeopardy if they had already invested in compliant EC systems. Following the first test, non-compliant suppliers were free to improve their systems however they wanted—on their own, with SPS Commerce or with another service firm.
The Right Tools for Virtually Every Supplier Need
It wasn't surprising that a majority of the suppliers opted to work with SPS Commerce. "Given the high volume of e-commerce service firms in the market, our partnership with SPS Commerce was unique because it offered quality assurance for many of our suppliers. That is why we chose them," said a Sears spokesperson.
SPS Commerce provides an array of services to support even those suppliers who are not equipped to do it any other way. SPS Commerce can even help suppliers print bar code shipping labels to comply with Sears advance shipping notice requirements.
SPS Commerce provides services that manage the electronic flow of data and messages between trading partners, substantially reducing the cost and time associated with manual business processes. These systems let suppliers easily send and receive routine business documents to and from Sears.
For suppliers that aren't equipped with the basic EC tools, or for those businesses that prefer the "old fashioned" way, SPS Commerce covers all the bases with its Document Exchange service offerings.
- Web
With intuitive online forms, suppliers can submit information to SPS Commerce for EDI translation and transmission to Sears. - Fax
Suppliers can fax data and, using optical character recognition (OCR) technology, it is translated to EDI and submitted to Sears. As an added precaution, SPS Commerce staff proofs the OCR translation for accuracy. - Application
Suppliers can send data or flat files directly from their application to SPS Commerce for mapping, translation and transmission to Sears as an EDI document. - Paper
Suppliers can mail or fax paper-based data to SPS Commerce for manual data-entry and translation to EDI. SPS Commerce then forwards the data to Sears.
SPS Commerce eliminates the need for suppliers to purchase additional shipping label software to comply with shipping label requirements, enabling suppliers to print their own shipping labels or SPS Commerce will print them for them. SPS Commerce also performs shipping label testing, certification and support.
"Our client services group is trained to deal with trading partners of all levels, from those fluent in electronic transactions to those who have never heard of it at all," Waldron said. "What sets us apart is our dedication to helping businesses make the right EC decisions. We're ready to assist companies as they grow and as their needs change."
Pilot Program Leads to Continued Success with SPS Commerce
"The program has been very successful. We are pleased by how quickly and seamlessly the suppliers adapted their systems to become electronically compliant," said a Sears spokesperson. "Naturally, that has a very noticeable affect on our entire shipping process, as well as our supplier communications overall."
Sears benefited greatly from the priority its program received from SPS Commerce. "SPS Commerce added the resources and intellectual capital to expand their operations to meet our business needs. They were willing to dedicate a new service division with new staff and management oversight to make this project work," said a Sears spokesperson. "The project was successful because of their outstanding customer service and the quality of their offerings."
"Our suppliers need a strong partner like SPS Commerce to make sure they meet the requirements and guide them through the process," said a Sears spokesperson. "And so do we. As a result of the success of this program, we're looking at SPS Commerce to help us achieve some EC objectives in other areas."
But a Sears spokesperson admits a significant part of Sears relationship with SPS Commerce is its effect on Sears logistics expense. "In just a few months, we have achieved a level of electronic compliance that would have taken considerably longer if we'd done it ourselves," said a Sears spokesperson. "That means we're enjoying the speed and cost-saving benefits of EC-enabled automation ahead of schedule."
"Outsourcing did not impact our budget," said a Sears spokesperson. "We enjoy the benefits of electronic transactions without diverting our attention from other pressing initiatives. In addition, by complying with our requirements, the suppliers have equipped themselves to do business more easily with numerous other firms in an industry where the trend is toward mandating electronic transactions. SPS Commerce developed a broad new customer base, and they're equipped with an excellent program to help other hub businesses do the same thing Sears did."
Second Phase Result: E-Compliance of Financial Transactions for 5,000 Suppliers
SPS Commerce enabled a second phase of transactions (electronic Payment Order/Remittance Advice and Credit/Debit Adjustments) for 5,000 of Sears, Roebuck and Co.'s trading partners. Now, Sears, Roebuck and Co. sends and receives all payments electronically with these 5,000 suppliers and avoids the cost and fraud risks that can occur when paying with non-electronic methods. The company transcended the traditional e-commerce model by pursuing e-compliance of its entire supplier base, encompassing a paperless environment with both internal and external suppliers for financial transactions and cross-departmental functions.
"The full implementation of our required suite of electronic transaction requirements has enabled us to make full use of the cost saving benefits of this technology," said a Sears spokesperson. "SPS Commerce has been a key partner and valuable resource in helping us reduce merchandise cycle time, increase data accuracy and manage supply chain costs."
"The continued success of Sears, Roebuck and Co. trading partner enablement illustrates our ability to implement and create new, innovative e-commerce solutions for businesses that are outside the realm of traditional e-commerce," said Steve Waldron. "Our partner enablement program is paramount to our strategy to help businesses increase their efficiency and productivity by attaining a 100% electronic supply chain."
This model was used to quickly implement large groups of Sears, Roebuck and Co. suppliers in diverse industries ranging from hardware to apparel. It demonstrates the flexibility by shortening the compliance period for electronically enabling the second group of 5,000 suppliers to just four months. Sears Vendor Management organization is able to monitor progress of the suppliers' compliance throughout the enablement process through SPS Commerce's tracking tools.
