Being a Good Customer means working with your suppliers to improve ASNs. Companies (especially those in the retail sector) with a complex, multi-tier supply network have traditionally seen themselves as being at the center of their own universe. Even a map of their networks will tend to depict that status visually. However, for the sake of their continued health and competitive advantage, it is useful to look at this complex array of suppliers from another angle, which can lead to new opportunities and a new competitive edge.
The ASN Breakthrough
The increasing complexity of supply chains has generated new needs for managing quality. All tools for that management depend on transparency, including cross-chain visibility and traceability. In a sense, the value of the information flow rivals the value of the product itself. Because of the availability of new tools for managing the information flow, it’s important for companies to have a good grounding for designing a quality assurance investment strategy. One of the tools an increasing number of companies in the retail sector have chosen to use is a seemingly modest piece of documentation: the ADVANCED SHIPMENT NOTICE (ASN).
The ASN is defined by the Council of Supply Chain Management Professionals as “detailed shipment information transmitted to a customer or consignee in advance of delivery, designating the contents (individual products and quantities of each) and nature of the shipment.” It is most often sent in an electronic format. The word “advance” emphasizes its key utility: it facilitates the receiving company’s ability to plan production with more certainty. The electronic format allows the ASN to include other key information such as markings, carrier information, product descriptions, and packaging. In addition, it can be quickly compared to purchase orders and it can interface with a company’s warehouse management system. Any discrepancies can be quickly highlighted. According to research*, costs associated with receiving processes can be cut by up to 40%.
“The uninitiated might view an ASN as an insignificant, low-value data transfer but leading retailers know otherwise. ASNs provide visibility of what is and what isn’t on its way. This knowledge support supply chain planning, control and exception management. Though ASNs won’t solve every fulfillment problem, their availability, accuracy, and proper use set the stage for timely, low-cost flows across the retail supply chain”*
The advantages that ASNs provide are obvious. However, they are not without their own challenges when it comes to their use. If the data is not entered on time, or if it is inaccurate, the speed of transmission and the volume of data are not relevant. A large study* conducted in 2011 showed the following:
- 78% of the companies surveyed required ASNs
- Only half of these retailers who require ASNs actually received them from all of their suppliers
The 22% who don’t require ASNs cite connectivity issues as barriers. In addition, they lack the clout to enforce their demands, but as of the dates of the study, 90% of all the companies not yet requiring their use feel that they will institute them in the near future. According to the authors of the survey, the non-users believe that the systems will be made faster, more efficient and will be equipped with better compliance reporting.
The major challenge facing ASNs, as their adoption progresses through various industries, is accuracy. In 2011, the accuracy rate was estimated to be between 93 and 97%. The inaccuracies cluster in three categories: they don’t contain the required information, they can’t be read by the retailer’s system, and the ASN information doesn’t reflect what is in the shipment.
Faced with these discrepancies, retailers use audit programs (a secondary system, to manage the primary system) to spot-check shipments. Processes are provisional and differ by retailer, which means suppliers who sell to various retailers also face different feedback from audits. In spite of the wide-ranging nature, the consensus among retailers is that an error rate of over 2% is intolerable. Errors undermine the accuracy of inventory records, which lead to lost sales, markdowns, problems with invoices and accounting, all leading to extra costs for both retailers and suppliers.
Meeting the Challenges
Given the problems that inaccurate ASNs can cause, are they worth the trouble? According to the study, they are more than worth it, they are necessary. When they are effective, they allow for control, transparency, visibility, all leading to both cost and quality control. These benefit both the retailers and the suppliers. Both can increase revenues as well as profits. This is why GSQA® provides the ASN as part of its e-COA® delivery process.
The tactics of retailers for improving ASN effectiveness cover a wide spectrum. Some focus on suppliers who consistently miss the mark in ASN accuracy. Another approach assumes that newer suppliers need more follow-up than tried and true business partners. Yet others select the suppliers who ship more complex, mixed SKU cases for special treatment because they assume the risk will be greater.
From the supplier perspective, the problems can be just as serious. Lower revenues and profits are immediate problems, but in the longer term, a supplier whose inventory never makes it to store shelves loses access to consumers and the brand is diminished. In addition, time and money is lost investigating their customers’ claims, with specialized personnel required to manage the system for charge-backs.
For many suppliers and co-manufacturers, GSQA® with its e-COA®/ASN functionality may provide the means to deliver the ASN electronically for the first time.
The study asserts that “while retailers widely perceive ASNs and audits to be important, only a small group is devoting significant resources and effort to meet accuracy targets.”
In the face of this challenge, what are the most effective tools either a retailer or a supplier could use to meet it?
- In addition to any formal audit process, based on tested guidelines, companies should implement software systems that are standardized, and can be understood by both retailers and suppliers across cultural and language boundaries.
- Using both the information gathered from their software platform and the audits described by the study, companies should use the state-of-the-art electronic reporting system enabled with SPC (statistical process control) for data mining. Data mining will allow companies to see the financial impact of both accurate and inaccurate ASNs.
- When the financial implications are clear, both the retailer and supplier can see the impact of their processes on the financial success of either or both sides of the partnership.
- Most importantly, all the efforts to improve the system should recognize the interdependent nature of the relationship. Retailers and suppliers should work together to improve the process.
When initiatives designed to improve the accuracy of ASNs are proposed in the spirit of collaboration, both sides will see improved revenues, profits, and long-term customer satisfaction. Retailers will benefit greatly by asking themselves how they would want their own customers to approach any problems in their relationship: they would most certainly want the customers to work with them to resolve the problems and build a mutually loyal relationship over the long term.