In the ups and downs of a global economy, distributors increasingly rely on their relationships with third-party logistics (3PL) providers to support supply chain functions such as order fulfillment, warehousing, and transportation. 3PLs support distributors at specific stages in the supply chain. It’s a complex and beneficial synergistic relationship that elevates a distributor into a full-service solutions provider.
But there’s a downside. The complexities of outsourcing service delivery across third-party providers drive an increasing need for greater transparency and higher efficiency. This is the sweet spot where electronic data interchange (EDI) platforms can help.
The 3PL-Distributor Relationship: It’s Complicated Without EDI
Instead of buying a truck fleet or expanding warehouse space to meet demand, you can partner with a ready-made infrastructure provider.
An outsourced 3PL vendor relationship offers distributors support in:
- Inventory Management
- Picking and packing
- Custom labeling
- Customs brokerage
- Freight management
- Shipment tracking
3PL vendor partnerships allow even small companies to compete with enterprise-level distributors. But there are plenty of communication challenges between these disparate companies with a mishmash of technologies. Distributors must tie closely to their third-party logistics providers for greater visibility and seamless operations.
Distributors and 3PLs leverage EDI platforms to create visibility within the snarl of exchanged business documents such as purchase orders, invoices, and shipment notices. EDI enables this flow of information in a standardized, structured format for a faster and more transparent process, bridging communication gaps between these separate but interconnected companies.
Legacy approaches to communication no longer keep pace with today’s demands. Customers expect real-time product availability and immediate shipping. They have little tolerance for delays, manual errors or a lack of information.
EDI connects distributors with 3PLs to improve communication, speed up supply chains and strengthen the relationships between channel partners.
What Challenges Does EDI Solve?
If the 3PL tracks and maintains transactions and inventory levels with a manual process or an outdated software system, it creates enormous problems for distributors. Phone calls, emails, and other manual processes are a poor substitute for the intelligence of an EDI platform.
The lack of end-to-end real-time visibility causes headaches, which naturally bleed over into the distributor relationship. But unfortunately, many 3PLs and distributors have yet to make this investment in their relationship. Here’s why they should.
Benefits of This Technology for the 3PL-Distributor Relationship
Benefits of EDI in the 3PL-distributor relationship include:
Faster Order Processing
One of the primary benefits of EDI is that it enables faster and more accurate order processing. EDI eliminates the need for manual data entry and paper-based processes, which can be time-consuming and error-prone. With EDI, purchase orders, and other documents can be automatically transferred from the distributor’s system to the 3PL provider’s system, eliminating the need for manual data entry. Stock transfer transactions are seamless, too. This can help reduce processing time, which is critical in today’s rapid-paced business environment.
Improved Inventory Management
EDI platforms improve inventory management. With EDI, the distributor can receive real-time updates on inventory levels and order status, which can help them plan and manage inventory levels more efficiently. This visibility helps prevent stockouts and overstocking leading to lost sales and excess inventory costs.
EDI also provides enhanced visibility into the supply chain. With these tools, both the distributor and the 3PL can track the status of orders, shipments and inventory levels in real time. These tools improve communication and collaboration between the two parties and enable them to respond quickly to disruptions or changes in demand.
EDI improves accuracy and reduces errors in supply chain processes. With EDI, data is entered into the system automatically, eliminating the need for manual order entry. Automation reduces human error, such as typos or data-entry mistakes for greater order accuracy that prevents disputes and delays in the supply chain. Automation can even affect labor costs, helping teams work smarter.
Finally, EDI platforms reduce supply chain costs. With EDI, there is no need for paper-based documents, which can be expensive to print, store, and transport. Additionally, EDI reduces labor costs associated with manual data entry and document processing.
EDIs can automate your way into error-free fulfillment. These tools have been around for decades and have rapidly improved how we do business. When implemented properly EDI is a bridge-builder between distributors and 3PLs, improving the relationship by easing the stress of these complex interactions.
Have questions about how EDI technology can improve your vendor relationships? Contact our experts to find out more.