Welcome to the third blog in our series about third-party logistics management via electronic messaging/EDI! The first blog explained that outsourcing distribution to 3PLs is popular with companies that are expanding into new markets or want to focus on their core strengths and let the logistics experts manage the physical storage and distribution of their goods.
We also discussed that in 3PL automation projects, interactions can be generalized into two master file exchanges and five transaction scenarios. Part 2 delved into the master file exchanges, and this blog, the third and final blog of the series, focuses on the five transaction scenarios.
At a high level, warehouses are simple operations. Goods arrive, goods are moved around inside the warehouse, and goods are shipped. In the “real world,” things get a little more complicated, as goods can be damaged, stolen, expired, and have other issues that require inventory adjustments.
Another factor (for a future blog), is the value-added services 3PLs provide to repack items into different forms and partner numbers. This “conversion” of inventory is similar to production environments where components are removed from inventory and new inventory is created with no physical receipt or shipment process. However, today we’re focused on the basic 3PL process for the simple distribution of finished goods.
To understand the basic premise of the X12 document’s intent as it relates to warehousing, imagine we’re commencing a new relationship. We’ve sent the item catalog information to the warehouse, so they know the item numbers and characteristics of the items they’ll be housing. The first step in the process is to ship goods to the warehouse. In a best practice scenario, we’ll send the warehouse a notice of in-transit goods so they can plan the receiving and storage activities. In the X12 standard, the document that fits this scenario is the 943 Warehouse Stock Transfer Shipment Advice. The data in this document can have many sources, such as a planned inter-warehouse shipment, purchase order, or ship notice from a related party. Regardless, it lets the warehouse know that goods are coming with a high level of detail.
When the goods arrive, the warehouse should inspect and possibly count the goods to make sure that what was scheduled to arrive did. If the goods are coming from a vendor, it’s essential to validate invoices and payments. The document that fits this purpose in the X12 standard is the 944 Warehouse Stock Transfer Receipt Advice.
The next logical transaction in the 3PL relationship is the X12 standard’s 940 Warehouse Shipping Order, which gives the 3PL the details to integrate into their internal systems for accurate fulfillment of the shipment.
We want to know the goods were shipped and have details on freight carrier information, freight costs, lot numbers, serial numbers, and other crucial details for accounting and inventory control purposes.
The last common transaction in the 3PL process interaction is the Inventory Adjustment Process. Because there’s always the possibility of inventory loss through errors and obsolescence, we’ll need a means for the warehouse to communicate what’s being disposed of and why. This scenario is covered nicely in the X12 standard by the 947 Warehouse Inventory Adjustment Advice.
Achieving a finely tuned 3PL process flow can deliver significant benefits to a business that distributes goods through outsourced warehousing. The discussion today is supported by the X12 EDI standard, but that’s not a prerequisite of a successful endeavor. Other formats, such as CSVs, XML, EDIFACT, JSON, and others can also do the job – but they require careful evaluation and implementation, as they are not supported by a highly evolved standard such as the X12 standard.
We hope you find this information useful in understanding a simplified approach to 3PL project implementation. Again, you can find part 1 here and part 2 here. If you have questions, please contact us at email@example.com or www.datamasons.com. And be sure to subscribe to our blog so you don't miss our next post!