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White Paper:

The ABCs of EDI:

A

Comprehensive

Guide for 3PL Warehouses

EDI means a lot of things to a lot of people. As a public warehouse, EDI support oftenmeans the difference between winning and

losing a customer.

This Guide covers the critical touch pointsyour warehouse management system (WMS)must have in order to be "EDI friendly."



Introduction: The ABCs of EDI

Electronic Data Interchange (EDI) means a lot of things to a lot of people. As a public warehouse, EDsupport often means the difference between winning and losing a customer. By supporting EDI, a puwarehouse is able to support larger and more sophisticated customers. Also, once implemented, EDconnectivity is a solid foundation for partnerships with customers and it encourages more strategic a

long-term customer relationships.

It is important to highlight that this guide is focused on 3PL warehouses which manage inventory ofothers. Typically this inventory is not owned by the 3PL, but is owned by suppliers and shipped baseon the supplier's direction to retailers, distributors, businesses and consumers. This Guide covers thebasics of 3PL warehouse EDI and outlines the critical touch points your warehouse managementsystem (WMS) must have in order to be "EDI friendly." Most importantly, it will give you an EDI overvthat will help improve your bottom line.

3PL Warehouse Business Requirements

EDI provides a platform for system-to-system communication between businesses. In the world of 3Pwarehousing, the center of the universe is the supplier. As a 3PL, therefore, EDI is used to allow moefficient and accurate communications between the supplier and their trading partners which includetransportation providers and retailers.

The other nuance of a 3PL environment is that the 3PL warehouse holds inventory for multiplesuppliers. In essence, for the 3PL there are multiple individual supplier warehouses within one larger3PL warehouse facility. This 3PL warehouse business structure necessitates having a WMS systemthat can support a multi-client and multi-user environment. EDI capabilities put further demands on thmulti-client requirement of the WMS because the WMS must also address the various trading partneassociated with each supplier.

Key EDI trading partners for 3PL warehouses: Suppliers Retailers Transportation Providers

Build a Scalable 3PLWarehousing Operation

Since suppliers often have manydifferent trading partners, it is critica

to have a WMS which also cansupport multiple different EDI

connections per supplier



Across these multiple trading partners, the following are the most typical systems that areintegrated with a 3PL warehouse management system:

Suppliers: ERP/Accounting software Suppliers: eCommerce Retailers: Direct connections Retailers: EDI service providers Transportation Providers: TMS systems Transportation Providers: Direct system connectivity

What EDI Means to 3PL Warehouses

The broadest definition of EDI refers to the structured transmission of data between organizationsby electronic means without human interaction. For example, the transmission of orders from onetrading partner to another.

EDI is best known for communication between retailers and suppliers and between originalequipment manufacturer (OEM) and supplier within the automotive industry. As technology hasimproved, EDI is increasingly common for communication between a variety of trading partners.This growth of integration streamlines communications and reduces friction in any supply chain.

For 3PL warehouse, EDI includes three main categories: –Excel Documents (via email) –Files via FTP (multiple different formats) –Web Service Calls

When a supplier is speaking about EDI in the United States, they are typically referring to a familyof ANSI ASC X12 standard documents.

What are the benefits of EDI?By implementing system-to-system integrations, there are many benefits for both the 3PL

warehouse and supplier. Those EDI benefits include:

3PL Warehouse Benefits Handle more shipments per day Handle more customers Enhanced worker efficiency -- focus staff on value-added functions Increase accuracy and reduce manual data entry Secure larger and more sophisticated clients Differentiation from the competition and enhance ability to win business

3PL Customer (Supplier) Benefits Reduce manual data entry

Reduce Order-to-Cash cycle Real-time data for accurate reporting Minimize retailer chargeback fees (retailer EDI)

The 3 Components of an EDI Message



To simplify the discussion, it is helpful to separate the components that make up an EDItransmission. Some formats are transmitted by just one method. For explanation purposes, weseparate the data format from transmission method to help 3PL warehouses better classify anddiscuss EDI with current and potential customers (suppliers).

The 3 components of an EDI message are:#1 - Transmission Method: How data is transmitted (Email, File upload, FTP, Web Service

Calls)#2 - Document Type: Which document data will be sent - Orders (940/945), Receipts

(943/944), and Inventory Levels.#3 - Data Format : The format in which the data going to be transmitted (X12, XM

CSV, Flat File)

While business users will determine the Document Type and workflow, it is the InformationTechnology (IT) team that will work through the integration details. The optimum transmissionmethod and file format is determined by the two systems that are communicating. Determiningwhich documents will be transmitted, in what format and by what method is usually determinedbetween the trading partners and the 3PL warehouse.

#1 - TRANSMISSION METHODS

The various Transmission Methods of an EDI message are:

Email A significant improvement over manual data entry, emailing of data eliminates manual typing, bstill necessitates human involvement.

File UploadIn the world of 3PL-focused WMS systems, file upload is quite common and can be handled byeither the 3PL front office staff or directly by the customer. One example is the uploading shipmrequest - AKA Warehouse Shipping Order. This could be done once a file has been emailed to t3PL warehouse operator or could be uploaded directly by the customer thought a web portal. Fi

uploads are a terrific way to empower customers while minimizing the need to manually type (oretype) data.

File Transfer Protocol (FTP)FTP is an Internet standard method of sharing files between people or systems in a reliable andsecure fashion. FTP is how the majority of system-to-system integrations are implemented. Themechanics of FTP revolve around a shared file location setup on a computer (FTP server) that iaccessible by both trading partners (i.e. Supplier and 3PL) via the Internet. This allows one tradpartner to "post" a document to the FTP server at any time. The receiving trading partner checkthis shared location on a regular basis (typically every 15 minutes) to see if a file has been posteOnce retrieved, the sent file is archived and the process is repeated for the next batch of ordersValue Added Networks (VAN) often use the FTP protocol to exchange data.

Web Service Call

The World Wide Web Consortium (W3C), a trade association focused on Internet standards,defines a web service call as "a software system designed to support machine-to-machineinteraction over a network.” Web service calls are formatted in XML programming language andtypically follow the SOAP protocol. The biggest benefit is that all communications are real-time asynchronous -- making Web Service Calls the best solution for modern systems.



#2 - DOCUMENT TYPE

There are a limited number of document types that are typically shared between 3PL warehousand others. These primary documents focus on the receiving and shipping process. These"standard" documents are pre-formatted X12 data structures which could also be transmitted in other file format. For this reason, there is a brief description of the document to help highlight itspurpose and content of the document.

Key EDI X12 Documents

940 - Warehouse Shipping Order Request for shipment includes consignee, item numbers,quantities, shipment method, etc. – often originates from a retailer 850 Purchase Order.

943 - Warehouse Stock Transfer Shipment Advice Notice to a warehouse from a supplier that receipt will arrive including item numbers and quantities.

944 - Warehouse Stock Transfer Receipt Advice Notice to a supplier that a receipt arrivedincluding actual quantities received.

945 - Warehouse Shipping Advice Notice to a supplier that a 940 has shipped and includes caIDs, UCC-128 carton numbers, and tracking numbers where appropriate -- often converts into aretailer 856 Advanced Ship Notice and 810 Invoice.

947 - Warehouse Inventory Adjustment Advice Notice to a supplier when inventory has beenadjusted.

A full list of X12 EDI transaction sets can be found here:http://www.x12.org/x12org/docs/EDITransactions.pdf

#3 - DATA FORMATThe four most common data formats for EDI are: X12, XML, CSV, Flat File (tab-delimited, fixedposition).

X12 - ANSI ASC X12X12 is the standard developed by ANSI ASC X12. It is a fixed position with a fixed number ofcharacters (width) per position. This format provides consistency, but is generally limited in itsflexibility.

XML - eXtensible Markup LanguageeXtensible Markup Language (XML) is an open Web standard for encoding documents in machreadable form. The most common XML-based language is SOAP which is used to facilitate Webservice calls. XML is extremely flexible and terrific for system-to-system application programmininterfaces (APIs).

CSV - Comma Separated Values A comma-separated values (CSV) file is a simple text format for a database table. Each record the table is one line of the text file. Each field value of a record is separated from the next by acharacter (typically a comma.) CSV is a simple file format that is widely supported. It is often usto move tabular data between different computer programs that support the format includingMicrosoft Excel.



Flat File (tab-delimited, fixed-length) A flat file is a plain text file which usually contains one record per line. Within such a record, thesingle fields are separated by delimiters such as tabs or can be separated by having fixed length

The chart below summarizes the accuracy and efficiency of the most common transmission

methods and data formats combinations:

Fully-Automatic: FTP & Web Service Calls

X12 XML CSV Flat Files

Semi-auto: Email / Direct Import

CSV

Manual: Manual Data Input Accuracy Automation

Real-Time Da

B e t t e

r

I n c r e

a s i n

g

W o r s e

Fully-Automatic: FTP & Web Service Calls

X12 XML CSV Flat Files

Semi-auto: Email / Direct Import

CSV

Manual: Manual Data Input Accuracy Automation

Real-Time Da

B e t t e

r

I n c r e

a s i n

g

W o r s e



Real-Life EDI Scenarios

The best way to truly understand how the technology previously discussed works together is toillustrate some real-world scenarios. The five most common 3PL warehouse EDI scenarios are:

1. Retailer Orders via Direct Supplier Connection2. Retailer Orders via EDI Service Provider3. eCommerce Shopping Cart Integrations4. B2B (Non-Retailer) Orders Directly with Supplier5. Communication with Carriers/TMS systems

SCENARIO 1: Retailer Orders via Direct Supplier ConnectionThe most common reason for a 3PL warehouse to need EDI capabilities is to support retailerorders for their supplier customers. Historically, supporting EDI is one of the most difficult 3PLwarehouse functions. Today even very small 3PL warehouse can competitively support EDIrequirements with the combination of modern WMS systems and EDI service providers.

This diagram highlights the document flow between retailer, supplier and 3PL warehouse. As youcan see, the primary integration is between supplier's ERP/Accounting system and 3PL warehousWMS system.

Supplier/Importer E D I X 1 2

E D I X 1 2

E D I X 1 2

E D I X 1 2

Retail Customers

Web Stores

Salesperson Samples

Manual Orders ERP Systems (SAP,Oracle, etc.)

EDI 850/856

Standard Formats via FTP(X12, Tab-delimited, Fixed

Position Flat File or XML)

UCC-128 Lab els

3PL Warehous

945 WarehouseShipping Advice945 WarehouseShipping Advice945 WarehouseShipping Advice

940 WarehouseShipping Order



Web Service

(XML via HTTP)

or Excel File 944 Warehouse Stock

Transfer Receipt Advice944 Warehouse StockTransfer Receipt Advice944 Warehouse StockTransfer Receipt Advice

943 WarehouseStock Transfer



Some of the 3PL’s challenges executing retailer EDI include:

Capturing Shipment Request (EDI 940) by Customer/Retailer – Necessitates system that supports many customers doing business with many retailers

Pick, Pack, Palletizing and Labeling Orders Correctly – Assigning unique carton IDs – Generating retailer-compliant UCC-128 Labels – Proper label placement

Routing and Printing of Bill of Ladings (BOL) –Support for EDI 753 routing requests –Batch BOL (if necessary)

Capturing and Returning ASN (EDI 856) Data –Includes carton level details



Without a strong WMS system, a 3PL warehouse must do a variety of workarounds and manualtasks to meet each Retailer’s specific requirements. Here is a list of workarounds and the pitfallsassociated with each:

Manually downloading orders from an external system and entering into your own system(Supplier’s ERP or EDI provider’s web account):

– Significant chance for data entry errors – Does not allow you to leverage pick tickets to have location and allocation (FIFO) rules.

Receiving pre-printed UCC-128 labels via mail, PDF files via email or printing them on separatelabel printing software:

– Time consuming – Compliance Issues – Possible issues with label quality (via PDF) – Accuracy issues from retyping of information between systems

Manually typing carton level ASN information into an external system on shipments that haveshipped:

– Time consuming – Accuracy issues from retyping of information between systems

As the workarounds detailed above highlight, handling retailer shipments without a strong systemdifficult and error prone. Unlike non-retailer shipping errors, retailer misshipments and mislabelingwill result in significant financial penalties, which retailers call "charge-backs." Thus, having aWarehouse Management System that can fully support multiple customers, retailers and compliaretailer UCC-128 labels is critical.

SCENARIO 2: Retailer Orders via EDI Service Provider This second scenario is very similar to Scenario #1, except instead of a supplier connecting directo retailers, an EDI service provider handles the translation from the variety of retailer-specific X1formats and normalizes them into one data feed. So, EDI service providers serve as both VAN antranslation/transformation engines. Some of the larger EDI Service Providers include: DiCentral Inovis/GXS SPS Commerce Sterling Commerce TrueCommerce

EDI service providers offer many significant benefits for both suppliers and their 3PL warehousesThe biggest benefit is the elimination of the need for a staff of EDI programmers; instead, the 3PLoutsource this function to the service provider who is responsible for maintaining the many retaileERP system and 3PL warehouse WMS connections. This model is also very cost-effective, sinceonce a retailer connection is established that connection is reusable for other service providerclients. With this capability, expenses for the 3PL are generally limited to the service providertesting required to ensure the transmission of supplier data through the pre-wired connection.



This diagram below highlights the integration of an EDI Service Provider into the overall solution.The corresponding steps in a typical order workflow are:

1 – Retailer sends EDI 850 order to Supplier2 – Supplier receives 850 PO3 – Supplier reviews and sends 940 warehouse order to 3PL4 – 3PL receives 940 warehouse order to ship goods5 – 3PL sends 945 shipping notification once shipped6 – Shipping notification 856 goes to Retailer7 – Shipping notification 945/856 goes to Supplier

8 – Supplier sends Retailer invoice 8109 – Retailer receives electronic 810 invoice

RetailCustomers Supplier

1,300 plus Retailersand Distributors in our

network

12,000 Supplier /Logistics customers

our network

Meets Retailerrequirements

Flexible to meet anycustomer requirements

Pre-wired in tegration

850 PO 850 PO

810 Invoice810 Invoice


856 ASNWhse ShippingAdvice 945 / 856

945 WarehouseShipping Advice


E D I

E D I

E D I

E D I

E D I

E D I

E D I

E D I

E D I

E D I

E D I

E D I

3PL WarehouseUCC-128 Labels

1 2

3

4 5

67

89

EDI ServiceProvider

(e.g. Sterling, DiCentral,SPS Commerce)

SCENARIO 3: eCommerce Shopping Cart IntegrationseCommerce Shopping Carts have sophisticated application programming interfaces (API) whichare interfaces implemented by a shopping cart program that enable it to interact with othersoftware. eCommerce engines typically provide these APIs as Web Service Interfaces for theexport and update of orders in real-time. These Open APIs include the ability to:

Query Orders Update Orders with Shipping Details Update Inventory for Always Current "On-Hand" Stock Levels



Since orders begin at the eCommerce shopping cart, having these same interfaces available on3PL warehouse's WMS system will allow the process to be initiated by the shopping cart with Wservice calls made from the shopping cart to the WMS system. A typical workflow would be asfollows:

1. A consumer goes to an online store and searches for a product they wish to purchase;2. Store provides information on items that are in/out of stock;3. Consumer adds products to their cart and places order;

4. Orders are automatically transmitted to the 3PL's WMS (since the inventory is located at the3PL warehouse which ships on behalf of the supplier);

5. The 3PL warehouse receives the order and picks, packs and ships the goods to the consum6. The shopping cart software is then updated by the WMS or by calling the WMS open APIs s

there is visibility that the order has shipped and provides tracking number details back to theshopping cart;

7. The consumer's credit card is charged and an email is sent to the consumer notifying themtheir order has been shipped.

This 7 step workflow is typical of any modern system where Order Creation (940 equivalent) andShipment Details (945 equivalent) data is shared bidirectional to provide real-time information toconsumers and suppliers.

SCENARIO 4: B2B (Non-Retailer) Orders Directl y with SupplierEven though retailer related orders are the most common type associated with EDI, manybusinesses never do business with retailers yet benefit significantly from EDI. One example of tis for manufacturers. Manufacturers leverage EDI to manage the purchase and delivery of rawmaterials for their manufacturing/assembly plants. In this scenario, orders would be auto-generaby the manufacturer and sent to their suppliers ERP system. Once approved and ready forshipment, orders would then be sent from the supplier ERP system to the 3PL warehouse forshipment. Thus, to maintain a strong supplier supply chain, a 3PL must have a system which iscapable of integrating with 3PL customers (suppliers) as seamlessly as the supplier integrates wtheir customer(s).

SCENARIO 5: Communication with Carriers /TMS systemsThe final scenario involves EDI with carriers or Transportation Management Systems (TMS), asrelates to tendering a shipment. The workflow for communication with carriers includes these st 1. Warehouse Management System processes shipment and facilitates pick and pack process;2. When ready to ship, details are transmitted via EDI to the carrier;3. Carrier schedules a pick-up;4. When delivered, carrier transmits proof of delivery information back to WMS for updating andnotification of the supplier.

Although not as common of an EDI connection as order management, the efficiencies gained frintegration with carriers and backend TMS systems could yield some significant cost savingsdepending on shipment volumes and business processes.



“Having a WarehouseManagement System thacan fully support multiplecustomers, retailers and

compliant retailer UCC-12labels is critical.”

SummaryHaving EDI capabilities can substantially enhance a 3PL’s competitiveness in the industry andimprove the bottom line. By understanding the ABCs of EDI as described in this Guide, any 3Pwarehouse is well on its way to mastering the EDI world.

Remember, a good place to start is to ask the following questions to current and prospectivecustomers who inquire about EDI services, they are:

What trading partner(s) are you connecting to? Does your customer require an Advanced Ship Notice (856)? Does your customer require special labels like UCC-128 label(s)? How do you want to exchange electronic documents? How are you doing EDI today? Are you using in-house software, or are you working w

an EDI Service Provider?

We wish you good luck and hope the knowledge shared today will help you grow your 3PLwarehouse operation.


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AUTOMATED PROCESSES

- ORDER MANAGEMENT

- RECEIVING OPERATIONS

- AUTO NOTIFICATION MESSAGES

- ONLINE REPORTING

- INVENTORY MANAGEMENT

- UCC-128 LABEL PRINTING

- SHIPPING MANAGEMENT

- BILLING MANAGEMENT

- IN-HOUSE EDI SUPPORT

Web‐Based/SaaSUNIQUE ADVANTAGES

Web-based applications are rapidly overtakingtraditional software. Its numerous advantages arecompelling and are making traditional, installed

software obsolete. Web based software, alsoknown as SaaS (software as a service), convertsthe costs of a WMS from a large capital expense a subscription for a service.

This on-demand pricing structure is ideally suited how 3PL’s run their business. Aside from makingrobust applications affordable, SaaS allows 3PL’spay for what they use. Other benefits include:

Full functionality is available anytime from anyinternet-enabled PC.

Set-up and integration is simple andinexpensive.

No IT investments – no expensive hardwarerequired.

Product improvements are accessible to allusers at the same time.

No long-term contracts.

No upgrade fees.

About 3PL CentralBUILT EXCLUSIVELY FOR 3PLs

3PL Central is the only web-based WMS builtexclusively for the unique needs of a 3PL.3PL Central provides easy-to-use, on-demandwarehouse management software (WMS)exclusively for third-party logistics companies.3PL Central’s product, 3PL Warehouse

Manager, helps 3PL’s run more efficiently,grow their business and satisfy customers –

beginning at less than $500 per month perwarehouse.

Based in the Los Angeles area, 3PL Central isone of the fastest growing software providersto the third-party logistics industry.

To learn more, contact 3PL Central:1-888-375-2368, or at

[email protected].