Tuesday, November 17, 2009

Supply Chain Integration

While some companies may not see the need for a tightly integrated supply chain, businesses such as Walmart, Home Depot, Lowes, and Target could not function efficiently without the value added from these systems.

To do business with these companies, you first must be able to produce either through your own systems or through the help of a VAN (like Sterling Commerce) ISO X12 EDI transactions. Paper-based transactions are not allowed no matter the size of your company. In fact, if you start processing EDI with these companies and then fail to process EDI within a certain amount of time, you can be fined up to $150 per document occurrence!

The simplified Supply Chain EDI Transaction "chain" begins and ends as follows:

1.) The Customer (Retail Store) generates a Purchase Order electronically and sends to the vendor as an 850 Purchase Order.

2.) The Vendor (Supplier) responds with a 997 Functional Acknowledgement to show the customer that the vendor received the Purchase Order.

3.) The Vendor picks, packs, and schedules the shipping of the order by sending a 204 Load Tender to a carrier of their choice, requesting the carrier to arrive at the warehouse by a certain time/date to pick up the goods to be transported to the Customer.

4.) The carrier responds by sending a 990 Response to a Load Tender that tells the Vendor whether the carrier accepts or declines the request.

5.) If the carrier accepts the request, the Vendor submits an 856 Advance Shipment Notice to the Customer notifying them of the time and date when the goods are expected to ship.

6.) Once the goods ship, the carrier begins sending a 214 Shipment Status EDI to the Customer and/or the Vendor each time a different event occurs with the truck, i.e. cross-docking, exceptions in routing, departing/arriving at a location.

7.) Finally, following the truck leaving the vendor's premises, the Vendor sends an 810 Invoice to the Customer billing them electronically for the goods provided.

This concludes a brief introduction to the flow of electronic documents for Supply Chain Management.

David Bowles


  1. As Health Informatics continues to enjoy exponential growth, the supply of health products and services will take supply chain integration into countless new markets. The unparalleled need for timely and accurate health information will drive the need for an ever more tightly integrated supply chain.

    Issues of standardization, availability, and security will be constantly under examination. While we will ultimately benefit, the accompanying market opportunities will drive much more than simply technical and economic debate. It will likely drive national and international dialogue on how this constantly changing market will be served.

  2. Commendable post David. I was not aware of the fact that EDIs have reached this level of standardization. I used to think that EDI refers to the structured transmission of data between organizations by electronic means (which could be generic). Thank you for such a clean step wise elaboration of the process.

    In this "Service Economy", I was just curious that how things work out in Service industry. Is there any such standardized process, adorned with standard data transmission format specification which makes it different from the Product based industry supply chain?

  3. The integration of supply chain can be made on between two organizations or between organization/business and a consumer...

    This electronic integration of data and automation of business will reduces the heavy costs that occur for the transactions either between two business or either between a business and an organization...

    I came across good paper which describes supply chain integration through information sharing between two organizations Wal-Mart and Procter & Gamble .. Do read this.. Dont miss it...I feel its really important for students pursuing Information Systems degree.....


  4. Supply chain and operations management can provide managers with normative advice concerning how and what to integrate, the cost of integration and its possible negative consequences for innovation and agility.IT is a good way to think of system integration.

  5. That was a pretty good post covering up all the functional steps involved in a supply chain process. It really helped me gain more perspective in this field, since I hold more of a technical background. We had covered a similar case study featuring the Warehouse and Logistics Integration within ARCO. It's pretty amazing how EDI and RFID's can automate all the processes within the chain leading to increased efficiencies at a lower cost.

  6. Nice post David .... organizations are looking to shrink the supply chain and derive more value out of the chain ...... as interesting these technologies/protocols are to look into ... there are few issues regarding the standards and compatibility that need to be addresses .... since the inception of EDI ... its acceptability has not achieved the expected levels .... hope in near future this gap will be filled ...

  7. I work for Home Depot and in the Supply Chain. I can tell you that EDIs are used extensively in the organization. They're used in billing, tracking, reporting, and operational compliance. Any carrier that wants to deliver freight from DCs to Stores needs to be able to pass this information to us. Whats surprising (and scary) is that some of the Special Order Product Vendors still don't use EDI for order acknowledgement; some stores still use paper faxes for this notification to their vendors.