EDI for toy retailers and toy suppliers

by | May 9, 2018

People who work in the retail industry, especially the retail supply chain, are already aware of how competitive that market is. But of all the verticals in that field, the toys vertical is insanely competitive, especially in the modern digital retail landscape. The demise of toy giants like K.B. Toys, FAO Schwartz and most recently Toys R Us that had reached heights of popularity are just a few examples of how high the stakes are in this $20.7 billion industry.

There are a lot of businesses out there vying for the disposable dollars that people spend on toys and other forms of kids’ entertainment and edutainment. But thanks to new technology and new supply chain efficiencies, the landscape is changing for toy retailers and suppliers.

Suppliers are competing with each other to better serve retailers.

  • They’re offering drop ship capabilities, managing the retailers’ e-commerce fulfillment on their behalf, using retailer-branded packaging.
  • They’re using EDI to provide inventory transparency, letting the retailer show the supplier’s product counts and information on their own website.

Retailers are competing with each other, looking for new ways to keep each other happy.

  • They’re offering services like Buy Online, Pickup In Store (BOPIS) and ship-to-store to customers who don’t want to wait two days for their package to arrive.
  • They’re offering in-store e-commerce fulfillment — shipping items from the closest store to the customer — to offer cheaper and faster shipping to compete with Amazon.
  • Some of them are even offering their own version of free two-day shipping, especially if they can use in-store fulfillment and supplier drop shipping.

And retailers and suppliers are even beginning to compete with each other.

  • Some suppliers have begun selling directly through third-party marketplaces, like Amazon’s Marketplace, both as a way to increase margins and to test market or introduce new toys to the public.
  • Suppliers are also beginning to sell products via their own e-commerce stores.

EDI (electronic data interchange) can make all of this happen. EDI is the process where suppliers and retailers are able to exchange information through a system that standardizes all product data, information, and inventory counts. It’s how purchase orders, PO acknowledgements (POA), advanced shipping notifications (ASNs), and order-to-invoice reconciliation three-way matching are all done.

The way EDI works in the retail toy industry is that the retailer places an order in their ERP system. That order is sent via EDI to their supplier, who receives it and replies with a confirmation (the POA) or the purchase order change request if needed. That order is passed on to the warehouse, where all the units are picked and scanned, and the system confirms that the products and quantities are correct.

As soon as the truck is loaded, the supplier sends back the ASN to let the retailer know what is being shipped and when it will arrive. Once it arrives at the warehouse, the barcodes are scanned and compared to the original order and the ASN, and the in-warehouse inventory counts are updated.

When the supplier sends the invoice, it gets compared to the PO, the POA, the ASN, and sometimes the packing list and if everything matches up, the invoice gets paid. This all happens automatically, without human intervention, to save a lot of time and effort. If there is a mismatch, the transaction gets flagged, and a human then reconciles the order to find the error.

EDI is similarly helpful for distribution center models, with much of the same functions as far as facilitating communication within the inventory and order management process across the appropriate involved parties. POA and ASN details, for example, can be used by the retailer to manage communications with the Retailer/Suppliers joint customer and keep all the documentation straight. Then ASN is used by many retailers to conclude the collection of payment with the customer.

Did you see how it all happened? There was no data entry, there were no emails and phone calls, and there were no faxes. Everything happened within the EDI system, mostly automatically, where both parties can track all forms and requests to troubleshoot any errors.

What this means for toy retailers is that they can get a better handle on their inventory and get faster orders and deliveries. They can also receive general sales data from their suppliers to get a better handle on how a particular toy or product line should be selling. Suppliers can also benefit from sharing sales information, because they can spot which regions and stores are having better luck moving their products.

Additionally, retailers can reduce their staff overhead by letting the EDI system handle most of their order input, inventory updates, and document matching. The only time a human needs to be involved is when the quantities for a particular order don’t match and someone needs to investigate why this happened. This lets you reallocate staff resources to other parts of the company that may need additional support.

Toy suppliers, vendors and manufacturers can also benefit from EDI. Retailers are using SPS Commerce’s Retail Community to find suppliers who can meet their particular requirements, like drop shipping, or suppliers that are already using EDI. With our system, retailers can more easily find those suppliers who can deliver the toys they need when and where they need them.

And by being compliant with retailer EDI requirements, suppliers can avoid being hit with non-compliance fines that retailers often levy against suppliers that use a wrong form, don’t send ASNs, or don’t send their data in a particular format. Plus, the automatic 3-way matching capabilities means suppliers are more likely to get paid on time without having to wait for any delays or mismatched information on POAs and packing lists.

EDI greatly improves the chances of inventory consistency and reliability. It offers greater transaction efficiency and shipment tracking. Just by improving how quickly your suppliers can exchange and process POs and invoices through EDI, you can avoid inventory problems and out-of-stock issues.

A cloud-based EDI solution like SPS Commerce’s can make it easy to find and add new vendors and products. Looking for a new toy supplier or someone closer to your warehouses? Our Retail Community can help you identify these suppliers and then add them to your system quickly and easily. For more information on SPS solutions, please visit our website to contact one of our representatives for a free demonstration or to answer your questions.

Streamline and improve workflows with EDI.

Streamline and improve workflows with EDI.

Enhance supply chain predictability and connect to the retail industry’s largest network with EDI.

Scott Bolduc

Scott Bolduc

Director of Supply Chain Strategy at SPS Commerce
Scott Bolduc is a multi-time winner of the Supply & Demand Chain Executive Pros to Know. He has worked with e-commerce retailers on their growth strategies and helped retailers transform their freight spending strategies to maximize efficiencies.
Scott Bolduc

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