Tuesday, November 17, 2009

Wal-Mart and Supply Chain Financing Require EDI

In Saturday's Edition of the Wall Street Journal (November 14, 2009) there was an article called Wal-Mart Program Will Aid Suppliers by Vanessa O'Connell. The article described how Wal-Mart, in partnership with Wells Fargo & Co and Citigroup, have created a new Supplier Alliance Program designed to provide supply chain financing to their suppliers.

I have been involved with similar supply chain financing programs in my role as an SAP EDI consultant. These programs most often require EDI and B2B connectivity to work well. Why? Let me first explain the process. It is all about the supplier getting paid faster. That means instead of waiting 60-120 days for payment from the retailer, the supplier delivers the products and then factors the invoice amount through a participating bank and receives payment within 10-15 days. In this case the interest rate and fees charged by the banks are less because of Wal-Marts participation.

The key to getting paid faster is being able to navigate the retailer's invoice and approval processes faster. EDI and B2B connectivity removes the postal service delay, data entry delay and paper processing components of the process. With EDI the electronic invoice is directly integrated with the retailers' automated accounts payable workflow process.

EDI between the supplier and retailer makes the invoice process go faster. EDI between the retailer, supplier and the bank make the factoring process faster. In order for supply chain financing to work well, it requires a good EDI integration between all parties.

If EDI is not possible with a segment of suppliers, then there are companies like BancTec that retailers can contract with that provide outsourced or insourced services to scan/OCR all inbound paper invoices and to process them so they are entered into the SAP or other ERP system quickly.

SAP users can work with SAP Partners OpenText and Crossgate (SAP co-owns this EDI exchange) to automate and optimize their accounts payable processes nicely. Crossgate provides the EDI/B2B integration and OpenText through their Vendor Invoice Management system can automate the invoice approval processes.

If you would like to discuss these in more detail email me.

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Author Kevin Benedict
Independent EDI, B2B and Mobile Computing Consultant
www.linkedin.com/in/kevinbenedict
http://b2b-bpo.blogspot.com/
http://kevinbenedict.ulitzer.com/
http://mobileenterprisestrategies.blogspot.com/
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1 comment:

  1. Hey Kevin - A nice post. I fully agree that until a retailer has a mature supplier/vendor integration in place they would find it difficult to cut vendors' order-to-cash cycle time. This helps boost vendor morale.
    Equally important to a faster invoicing processing system is invoice reconciliation.

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