There’s no better feeling than walking through a retail store to find your product on the shelf, and maybe seeing a customer walk to the checkout with it. But, how do your products make it on to that shelf?
Continuing our four-part series, we’ll cover the following topics in this installment.
- What does the retailer setup process entail?
- How do products physically make it on to the store shelf?
Be sure to check out Part 1 of this series if you missed it.
What does the retailer setup process entail?
Major retailers across North America, Europe and other parts of the world are constantly tweaking their supply chain processes and vendor requirements. However, the general workflow is pretty consistent. Here is a quick overview of what to expect when onboarding a major sales channel partner.
Reaching retail buyers can be challenging, but our most successful clients know that buyers are actively looking for “the next big thing”. However, the one thing we see over and over again is that not all new channel partner relationships are created equal.
For example, some of our smartest clients will start with a small test with certain retailers. This means we may begin shipping only a handful of units to be tested on the shelves at 5 – 10 highly targeted stores, even though the retailer may have thousands of stores nationwide or worldwide. Retail buyers can work with you to identify the profiles of the ideal test stores. Part 1 of this series discusses why you may be wise to take this approach.
On the other hand, if a retailer is extremely excited about your product, willing to display it prominently in all their stores, and put some marketing muscle behind you, we’ve seen opening orders of 20,000 units shipping to a couple thousand stores. For example, if you are in the STEM toy market and Target or Best Buy wants to display you prominently in a newly featured STEM gaming endcap in every store, that may be too good of an opportunity to pass up.
Regardless of which strategy you deploy with a given retailer, keep in mind that retailers typically bring on new vendors with a 6 – 12 month lead time. A 9 month lead time is very typical when counting from the day you give a retail buyer your opening pitch to the time the product is on store shelves.
There are times when a retailer is willing to fast-track the process to get you in to their stores. However, in almost any scenario, you’ll be shocked at how much paperwork each retailer will require you to fill out. Anyone who has applied for a substantial bank loan like a home mortgage will sympathize. The data is very different, but the deluge of paperwork feels similar. Retailers will ask for detailed information about your company, possibly your financial situation, your supply chain (3PL, CM, etc.), EDI setup, and more.
EDI setup & testing
As mentioned above, most major retailers in North America, Europe, Australia, and elsewhere will ask for your EDI (Electronic Data Interchange) setup information. Essentially, the retailer is asking if you have the infrastructure in place to transmit order data via EDI. In fact, this question will likely be raised by the buyer well before you ever reach this stage. For large brands, this is usually a simple request because EDI and retailer supply chain infrastructure already exists. For startups and/or brands new to the retail world, this EDI setup can feel a little daunting.
EDI files are simply electronic plain text files that contain various pieces of order data. For example, your retailer will send you a purchase order electronically via EDI. This PO file is called an “850”. The files are often pretty cryptic, so you will need translation software that can read and interpret each retailer’s unique EDI file layout. For example, Walmart’s 850 will not include the same data layout as Target’s 850. The same is true for other EDI files like advanced shipment notifications “ASNs”, which are each called an 856, invoices (810), acknowledgements of file receipts (997), store level sell-through data (852), etc. etc.
For Rush Order’s clients working with retailers on large nationwide rollouts, we offer an automated turnkey EDI software solution. This software is linked directly to our warehousing and fulfillment operations. Our clients usually write in Rush Order as the EDI contact when filling out new vendor setup forms with any retailer. We’ll pretty much take over the order management and logistics from there. Or, our clients will send us the blank EDI setup forms and we’ll fill them in and take over from there.
Once the forms are submitted and your EDI software is setup, the retailer will reach out to initiate EDI testing. Even though we’ve integrated with nearly every retailer before, you’re still a new vendor in their system and the retailers will want to test the connection. This will be true of practically any EDI software provider you use, not just Rush Order.
This testing usually requires a fair bit of back and forth submitting files in both directions, and sometimes submitting sample carton labels. Lead times can take anywhere from four days to four weeks, depending on the retailer. Most of that lead time is spent waiting for the retailer to respond with approvals.
If the retailer offers other connection methods that are easier, quick, or cheaper to setup, we evaluate those options too. These options are usually cheaper to setup upfront. However, they are generally more expensive to operate on an ongoing basis because they require manual copying and pasting of data into a web-based portal.
Sometimes this manual approach is ideal if you are doing a limited test in a few stores with a particular retailer, as mentioned above. More often than not, Rush Order’s staff is logging in to these portals to enter inbound orders and outbound shipment data. Even though the process is manual, this still creates a single “owner” of the entire process end to end, thereby successfully linking our clients’ EDI feeds to our fulfillment operations. Whether you outscource or insource your fulfillment operations, this linkage is critical. Also keep in mind that you can switch to a fully automated integration once the sales volume picks up and the manual processing becomes overwhelming.
In general, a fully automated EDI solution that connects the retailer to your fulfillment infrastructure makes a lot more sense when you think you’ll have dozens of POs per year to a retailer’s multiple distribution centers. Automation also makes sense when a retailer asks you to ship small quantities directly to their individual stores, or when drop-shipping from the retailer’s website to individual consumers. These latter scenarios would be nearly impossible to manage with manual tools.
How do products physically make it on to the store shelf?
So, you received your orders via EDI, the shipment window is drawing near, and now it’s time to move some inventory! The next step is to prepare each shipment to your retailer’s distribution centers, stores, or consumers.
Nearly every major retailer will provide you with a lengthy routing guide to follow. Essentially, the routing guide is the book each retailer publishes that mandates “this is how you will ship to us”.
The routing guide describes how the retailer’s orders must be prepared, labeled, and shipped. For example, the routing guide may specify when to ship via a small parcel carrier like UPS or FedEx, and when to ship via a bulk freight carrier on pallets.
The routing guide may specify the type of boxes, banding, pallets materials, plastic wrap and other materials to be used. It will also dictate how to stack cartons on pallets, including height restrictions, and how to label each individual carton.
Many of the details from your EDI files will need to flow through to your carton labels within these shipments. As an example, here is a screenshot of required label data and label placement from Best Buy’s routing guide. It’s possible to download labels from some manual EDI web portals but, this is another good reason to automate your EDI whenever possible.
More often than not, retailers will ask you to ship in varying quantities to their distribution centers (DCs) scattered around the country. As a US-centric example, Target may ask you to ship in varying quantities to any number (or all) of their 26 DCs. Target will then distribute your products out to their 1,800+ stores on their own. By creating compliant carton labels, you are essentially helping Target route each box correctly through their internal distribution network.
Nearly the same process exists for other retailers as well, but there are exceptions. For example, Bed Bath & Beyond frequently requires us to ship in very small quantities (perhaps 2 units at a time) to each of their individual 1,500+ stores.
As another example, Best Buy typically routes our shipments in bulk through their DCs. However, when in a last-minute pinch before the holidays, we are sometimes asked to bypass the DCs and ship directly to Best Buy’s 1,000+ stores. These situations obviously have huge implications for your fulfillment costs. Again, automated EDI is a must-have when generating this many discrete shipments that still require a high level of on-time performance and labeling requirements.
Drop-shipping is also becoming more and more popular. As an example, many of the products on Kohls.com, Costco.com, Walmart.com and others are not actually shipped by those retailers. Drop-shipping requires that you put the retailer’s packing list in the box and use the retailer’s shipping label when sending an item directly to their customer’s doorstep.
Ensuring that you have a well vetted EDI and fulfillment solution in place is critical to making all this work. Contact us if you would like to discuss any of these strategies in more detail. We will gladly share our experience and best practices.
Join us next month for installment three of this four-part series. We will cover the hot button topic of when it makes sense to use a distributor in your retail supply chain, and when it makes no sense at all.