Retail Supplier, are you falling prey to the Silent P&L Killer (EDI ERRORS!)???

In this episode of The Savvy Supplier, Boyd Evert and Al Frank discuss the common EDI errors that retail suppliers face, emphasizing the importance of understanding and monitoring EDI transactions. They explore the role of EDI translators, the impact of communication breakdowns between suppliers and retailers, and the necessity of having third-party monitoring to ensure accurate transactions and recover lost funds. The conversation highlights the need for suppliers to be proactive in managing their EDI systems to avoid costly discrepancies.

Takeaways

• EDI errors are often undetected and costly for suppliers.
• Understanding EDI is crucial for financial health.
• Communication breakdowns can lead to significant issues.
• Regular monitoring of EDI transactions is essential.
• Assumptions about EDI systems can be misleading.
• Third-party support can help recover lost funds.
• Suppliers should proactively manage their EDI systems.
• EDI translators must be properly configured.
• Retailers and suppliers need clear communication.
• HRG provides expertise in EDI management.

Chapters

00:00

Understanding EDI Errors and Their Impact

02:39

Common EDI Discrepancies and Their Consequences

05:20

The Role of Technology in EDI Management

07:56

Communication Breakdowns Between Suppliers and Retailers

10:28

Best Practices for EDI Implementation and Monitoring

Welcome to “The Savvy Supplier,” your go-to podcast for navigating the ever-changing landscape of retail supply! Join us as we dive into expert insights and actionable tips to help retail suppliers save time and money. From tackling inflation to optimizing operations, we’ve got you covered. Tune in every week for strategies that empower you to thrive in a competitive market. Don't miss out—subscribe now and become a savvy supplier! 💡

www.HRG-audit.com
www.SavvySupplierPodcast.com

Need help with managing Deductions and implementing Supplier Best Practices?  Help is here!
Email:  Boyd.Evert@HRG-audit.com

#RetailSupplierDeductions
#RetailSupplier
#Post-AuditClaims
#HRG

"Wiser Decisions, Fewer Deductions"

Transcript

EDI errors are common, but they often go undetected by suppliers and it costs them a bundle. Is it happening to you? How can you tell? Next on the Savvy Supplier. Welcome into the Savvy Supplier, where we save you time and money. I'm Al Frank. As always, Boyd Evert the CEO and co-founder of HRG is here. Boyd, you know, there are so many things that retail suppliers need to be aware of these days. I wonder how many are aware of

common EDI problems.

EDI is like high blood pressure. It's the silent killer. You don't know if you have high blood pressure until you take your blood pressure, right? There's no other science. The same thing with EDI is out of sight, out of mind, and maybe out of pocket. so we're dealing with an issue earlier today. So EDI, I would say, comes up three or four times a year in a big way. By big, I mean we're into seven figures. And since you're looking at the volume of business,

Typically, it's just those allowances that are under a percent or maybe just a little over a percent and after a while it adds up very quickly and once that happens then there's a whole cascading series of other issues that involve but it all begins with not having that line of sight into your EDI.

Well, let's take a look into that then. Let's talk about some of those common ways that EDI discrepancies lead to invalid deductions.

(01:32.032)
Right, so just right out of the gate, it would be the EDI translator. So everyone has their own ERP system, Oracle, SAP, what have you. And in that ERP system, you're setting up receiving of purchase orders and then invoicing against those purchase orders. And you need to convert those transactions from native language of your ERP system into that universal language of EDI. And it's

That's where I'd say a majority of those mistakes are made is that that connector is just not quite configured properly. And sometimes it's configured initially, it's configured with an error that you don't see until something happens or something changes. And then suddenly it creates, it just wreaks havoc. And one particular case we were dealing with recently was the assumption that

Only off invoice allowances go to, I'm sorry, often voice allowances fund promotions and the way this particular supplier was doing the business that was true. But then there was an ask of one of their major customers that they would offer a warehouse allowance. And suddenly that often voice allowance wasn't just for promotions. And so then that led down this whole.

series of issues that didn't come to light until several years. I think it was over 10 years. They were telling me we were walking through the system. In fact, I remember them reading off the system information and they said the last update to their EDI translator was 2016. And they said, well, we haven't touched it since then.

And we started to ask some questions, the team, suddenly we found out, but one of your major customers decided to start taking advantage of one of these allowances. the system, whoever programmed that connector, put all of their assumptions of retailing, which most of them were wrong. They built that into the translator. And then that error just laid dormant until it was, until

(03:52.111)
the retailer began to transmit that allowance.

Well, from your experience, how frequently do retail suppliers look at their EDI EDI transaction logs for discrepancies? Is that a problem? Are they doing it often enough? And how often should they review those?

Right, so just like somebody again, not to beat the analogy too much, you get a stroke and then you realize, I should be on high blood pressure medication. It's not until leadership asks where, you know, we're a little, we're being short paid on some of our invoices. Can you look into it? And then, right, then that unearths some issues. And I think one of the reasons for that is, you know, back in the day, again, with

the state of medicine, had to go into a doctor to get it because you just couldn't afford to buy a high blood pressure cuff. Well, in today's retailing world, we're back in the Stone Age as far as tools because you can spot check specific invoices, specific PO's with most translators. You can't go in and run a report, show me all of the orders and all of the invoices that have this allowance. Most translators just

don't have that capacity. So I would say the only time people look into the EDI is when leadership asks them what's going on. And that's typically when we get a call.

Speaker 1 (05:22.254)
And I've noticed that HRG is able to unearth some of those issues. What is it about what we're doing that's different from the suppliers that they're not able to see, but we are?

Right. Great question. So the genesis behind HRG was essentially we're founded by people who had audited on behalf of retailers. And on the other side of the business, you're used to seeing several billion rows of information or I should say working with it, not seeing it, but filtering and sorting down against billions of rows. Whereas on the supplier side, typically they haven't really needed to do that. And so

What HRG brings to suppliers is we bring the same technology, same techniques and approaches that retailers leverage to make sure their business is healthy and profitable. We use that same sort of technology and tools. And so we're set up, we get auto forwarded and carbon copied and all the transactions going over the wire. We preserve all of those in the native format of raw EDI. So

And we also ingest it into our warehouse. All that is to say, we're using the same best practices that were developed over decades on the retailer side, and we're using that in behalf of suppliers businesses.

What role would you say communications breakdowns between suppliers and retailers playing into all of this?

(06:54.414)
I think first and foremost is assumptions. There's certain assumptions that, well, the translator is going to do exactly what I intend it to do, right? And so they'll spell out the business rules. This is what we need it to do. And so an example where those assumptions break down is whoever implemented that system back in 2016 for our client,

Either communicated in an inaccurate way or communicated it to them that they had to change the wording of it. the way they communicated to our team, I'm sorry, the way it was communicated to us was every allowance that is going to be transmitted on an order is going to be converted down to the line level, which is no retailer I know of.

ever wants you to move an allowance from the top of the invoice down to the line level. Usually you keep it at the summary level or you keep it at the item level. You don't move it around. Whereas we were in a recent call just a few days ago, we were told, well, this is a feature of this particular software that it takes it and automatically converts it. I'm like, that's not a feature. that's so it's, I don't know if it was implementation or if there's a misunderstanding, but essentially you have.

You have more than one person that's responsible, right? So you have somebody saying this is what we need you to do for us and Translating it and then you have somebody taking those instructions They may or may not understand and then they they put that into code and then whoever is verifying it They might not know what to look for right and so since our HRG's business is based on We need to unearth any errors that are impacting the revenue and profit

which means pretty much any transaction involving money, we're constantly on the lookout for any sort of discrepancies. Whereas people testing the software, they're using maybe a sample size that's not realistic. And so they don't unearth these errors until much later.

 (09:00.002)
So there's someone listening to us right now and they're thinking, you know, maybe we're not up to date on EDI standards and best practices. What would your advice be to that person?

I would call us or contact us sooner rather than later because the worst case scenario would be everything's fine. And then we would give you that peace of mind. But if you don't know what's going on, or worse yet, you trust the people that are looking at the transaction to spot something that they're not trained to spot. right? And so

HRG, we have the technology and expertise both on a technical level as well as on a business understanding level. So we're able to find, locate those issues. And often cases we're on the phone with the EDI implementation team, helping them properly implement that. And then we can even test it because we'll get those raw transactions. We can look at it and give them feedback. But frankly, if I were a supplier, I wouldn't want to...

to have an EDI system in place that didn't have some level of monitoring from a third party such as HRG.

So let's say there's a supplier that's wanting to make a change. They're ready to do it. They implement, but they want someone to make sure that it's the way they're intending. What would you suggest for them to do?

(10:25.912)
Well, first of all, they're my favorite clients, the ones that reach out to us before they make a decision and before they make a change. But we've helped implement many changes through the history of HRG. And in those cases, the way it usually works is they reach out to us and say, our customer is asking us to provide this allowance or this discount on the invoice. Could you please work with us to make sure we implement that properly? And usually the changes were

that are made, usually we get it right the first time or they get it right the first time. But sometimes and often cases is the case is EDI is handled by a third party, right? Most companies aren't big enough to justify we're going to have our own EDI team. And so we've been on the call with the accounting people with their EDI third party and our internal EDI resources working with them. And typically the way that works is they will make those changes

then they will transmit their invoices overnight. Then we take a look at them and we'll assess whether those are accurate. And if they're not, we recommend the changes to be implemented. We test that out. And then after the dust settles and they're now properly transmitting their invoices, then we'll go back and document those errors and help them recover those lost funds. So in short,

best practice, you want to have a third party that understands your EDI transactions as well as the business model. And also a company that not only can do that, but also knows how to get your money back, right? Because there's a lot of companies can say, you're right, they owe you that money, they owe you $100,000 for that. And then the supplier will say, well, how do I get it back? Well, that's your client, right? That's your customer. So good luck with that. Here's our bill.

Well, HRG is, we're with you to the very end in helping you get those funds back. So it's a minimal risk situation where any mistakes are made. We're there to document those errors and help collect those funds back.

 (12:39.246)
Well, that's a great invite to check us out and to give us a call for a free strategy call by going to our website at HRG-audit.com, HRG-audit.com, or you can call us at 479-616-1600, or you can email us at info@HRG-audit.com. Again, and always, HRG is ready and able to help you. And our wish for you is this, wiser decisions.

fewer deductions. See you next time. on the Savvy Supplier.

you