Lean supply chain management has become increasingly popular in the manufacturing industry. When a company adopts lean supply chain best practices, they experience a number of benefits. This is especially true for positively impacting a company’s bottom line. But what exactly is lean supply chain management, what tools can help to implement a lean supply chain approach, and how can different types of furniture retailers use lean supply chain practices to streamline their company? Does your company need to start understanding EDI benefits to make the supply chain management efficient?
What Is Lean Supply Chain Management?
Essentially, lean supply chain management is a theory by which companies reduce or eliminate unwanted components (waste) from a process. This can apply to both manufacturing processes and procurement processes.
How Lean Supply Chain Management Streamlines
Sometimes, furniture retailers have multiple departments who get involved in purchasing. They think that purchasing is naturally complicated, so they involve multiple teams and purchasing functions end up being duplicated. Multiple contracts with multiple vendors at the corporate purchasing and local purchasing levels create confusion. Multiple records in a company’s computer system can lead to duplicate purchasing, which translates into creating waste. A streamlined supply chain gives vendors each a single point of contact within the company and there are just one contract and one price.
By streamlining the procurement process, waste is never generated. Duplicate products or supplies are never ordered, and the company only receives what it needs. Responsible parties within the company can use data to estimate their future needs for a specific time period, ensuring that those needs are met without overflow. Staff members don’t waste time and resources on tasks that aren’t needed.
An Increase In Growth and Productivity
Furniture retailers that practice lean supply chain management almost always experience an increase in their growth and productivity simply by streamlining. Profits increase because less money is being wasted. Team members who were once devoting time to procurement when they didn’t need to are able to take on other work and products, so more gets done in the same amount of time.
There’s not a lot of drawbacks to a lean approach. Companies who adopt the practice become more efficient and more effective overall.
EDI in Lean Supply Chain Management
Electronic data interchange sounds complicated, but it’s not as difficult a concept as one would think. Generally, electronic data interchange, or EDI, helps facilitate lean supply chain management by providing a system by which procurement can be organized.
EDI is used to control different processes, including purchasing, invoices, and shipment notifications. It’s how your company communicates critical information to vendors who may be using different systems than your company. Information is transferred electronically, ideally removing the need for interaction from staff members. This reduces the likelihood of human error, which is a critical factor in eliminating waste.
How Does EDI Apply to the Lean Approach?
Procurement transactions in the past were detailed and involved a lot of different steps. First, the order is created and printed. Then the order is mailed or faxed to the vendor. The vendor puts the information into their own system, and prepares and prints a Purchase Order Acknowledgement. The vendor then mails or faxes the Purchase Order Acknowledgement back to the purchaser, who then inputs that data into their own system to recognize exceptions. The process is repeated for invoicing, shipping notices, and other types of documentation between vendors and purchasers.
EDI eliminates many of these different steps. Using EDI, the purchaser creates an order, which is sent automatically to the vendor electronically. The vendor’s system then immediately creates and sends the Purchase Order Acknowledgement back to the purchaser’s system. The Acknowledgement is automatically reconciled with the original purchase order and creates an exception report. These steps typically happen very quickly, without any staff involvement. In the furniture retail industry, automating processes wherever possible is the key to adopting lean supply chain management practices and eliminating the waste of time, resources, and product.
Who Can Benefit from EDI?
Any furniture retailer can benefit from understanding EDI and using it to streamline procurement and manufacturing processes. Here’s a look at how both large and small retailers can use this tool.
First of all, we have a big myth to bust: small retailers may think that something as advanced as EDI isn’t for them. Yet nothing could be further from the truth. Even very small furniture retailers stand to benefit greatly from automating processes using EDI.
1. Eliminating Time-Consuming Admin Work
Paperwork takes time and resources that simply aren’t necessary with the technology that is available today. EDI can help small furniture retailers cut down on the amount of paperwork they have to deal with. They can also reduce the time spent on administrative activities that can be done electronically and automatically.
2. Repurpose Staff to Increase Sales
Staff members that are no longer involved in tedious administrative activities can be repurposed to customer-facing activities. Whether sales or service, this can benefit companies in two ways. More sales staff can move product, while more service staff can handle customer issues quickly and effectively.
3. Saving Money
Consequently, streamlining processes and automating administrative work can help your business save money. In some cases, EDI allows companies to cut down their workforce, thereby reducing labor costs and increasing profits.
4. Better Communication with Logistics and Manufacturers
When multiple staff members and multiple vendors are involved, purchasing and delivery can get complicated. Mistakes are made and waste is increased. Communications can become strained. EDI allows purchasers and vendors to communicate flawlessly with each other, making your job and their job easier.
Next, let’s take a look at how some of the large retailers, like the Furniture Today Top 100, use EDI. While they are more significant in size compared to some small retailers, large retailers also stand to benefit greatly from using EDI to streamline processes and save money.
1. Move Inventory Faster
The time it takes to fax or mail purchase orders and acknowledgments back and forth hinder the company’s ability to move product as quickly as possible. When this is eliminated, sales staff have more to work with. For example, if a retailer sells a popular brown futon, EDI automatically generates the purchase order to replace it. The system communicates to the vendor, the vendor sends the futon, and the futon is back on the sales floor. Large retailers don’t have to wait for products to come back into stock as long as they did with old purchasing methods, meaning inventory can be moved in and out at an increased pace.
2. Ecommerce Management
With larger retailers come more vendors and more moving parts to keep track of. EDI helps manage these factors seamlessly, without human error.
3. Analyze Data Sets for Merchandising
EDI also allows retailers to create and analyze data sets for merchandising. It makes calculating sales, inventory, and projected sales easier than ever before, without having to dig through paper reports and manually crunch the numbers.
4. Improved Communication with Logistics and Manufacturers
Larger furniture retailers have even more staff members and even more vendors than smaller retailers, which can get extremely complex. With EDI, companies can improve their communication with logistics and manufacturers, solidifying business relationships within the industry.
Is EDI for Lean Supply Chain Management Right for You?
Perhaps the better question here is if there’s any business that EDI for lean supply chain management isn’t right for? Above all, it’s important to start understanding EDI benefits for your business. Let us help you.