If Kmart, Wal-Mart, Sears and other retail giants had been around in 1776, Betsy Ross would have been only half done when she finished sewing up the first Stars and Stripes.
Next she would have been required to provide the computerized bar-coded shipping tags that such mighty customers increasingly demand from even the smallest of their merchandise suppliers.
That famous poem might have to read:
Shoot if you must, this old grey head;
But spare your nation’s flag,
And its EDI tag.
Ethan Berger, chief executive of Betsy Flags Inc., the Lake Bluff company that produces American flag display sets sold in red, white and blue cartons in all those stores, knows all about flag etiquette and EDI.
EDI is the acronym for electronic data interchange. It is a bit of alphabet soup that is increasingly well-known to small companies like Berger’s.
As Berger noted in an interview, just about everybody with something to sell in today’s digitized marketplace endures intense pressure from big corporate customers to do business electronically and thus save the big firms some money.
In recent weeks, as his factory has rushed to turn out incessant copies of Old Glory for the big Memorial Day/July 4 rush, Berger has spent much of his time on the EDI front while a work force of about 70 workers sewed up a storm.
Berger said he has been making sure that the product will leave his warehouse carrying the computer-coded tags that the chains will use to shuttle batches of flags to each of their hundreds of stores.
And while he is glad to have the business, Berger says he could have done nicely without having his big customers force a chunk of their transportation and logistical costs on him by demanding that he supply the EDI data they use to route their inventories.
“They come to see you and they say something like, `Hey, we like your flags and we sure want to keep stocking them, but we’ll have to look at your competitors more closely if you can’t do the EDI,’ ” recalled Berger of one jawboning session with Kmart.
“Is it blackmail?” he asks rhetorically. “I guess not. But it sure is business.”
Enter Jim Parker, founder of Vendor Logistics Services, a new company in Itasca that serves relatively small outfits like Betsy Flags and supplies the high-tech labeling the big operators are forcing on small factories.
To bolster the new consulting firm’s efforts at helping small firms like Berger’s handle computerized shipping information, Parker hired Lance Dailey from Sears, Roebuck and Co., where Dailey had been EDI director.
The term EDI, Dailey explained, describes a massively complex but standardized computer language that businesses everywhere can use to identify, route, inventory and locate their merchandise.
The codes in question are set by the Washington-based American National Standards Institute, or ANSI, which acts as a clearinghouse for the standards that industries have established to interact with one another.
ANSI codes set everything from which key you hit on a keyboard to get which character on the screen to how thick a roll of steel must be to qualify as sheet metal.
Dailey explained that the ANSI standards for electronic data interchange set codes that allow companies to eliminate the vast majority of paperwork involved “in the process of making widgets and getting them onto the shelves of your local widget store.”
EDI consists of long strings of numbers that encode things like price, item number, order number, destination, method of transportation and expiration date.
Among paperwork that the EDI process eliminates, Dailey said, are all the transfer slips, routing sheets, manifests, inventory ledgers, packing sheets, bills of lading, order forms and other documents that used to be generated internally at big retailers.
The data that used to go on those forms can be reduced to computer codes that can be sent by phone-linked computers from one player to another in the vast supply-and-demand chain.
Then the actual physical merchandise can be marked with standardized bar-codes to allow the companies that receive it to use computers and other technological gadgets to move it along.
As the EDI technology evolved, explained Vendor Logistics Services founder Parker, big companies like Kmart and Sears first did the computerization work internally and then realized it would be much more efficient-and, for them, cheaper-to have the EDI work done by suppliers.
In the beginning, the pressure to go the computer route hit big companies that already had extensive computer departments and thus were easily able to meet demands for reducing all paperwork to electronic form.
When Sears started pressuring suppliers of its TV sets and kitchen appliances to go EDI, the suppliers had little trouble meeting the demands, Dailey recalled.
But the switch to electronic paperwork had a revolutionary impact on the merchandising business when the big companies realized the process could allow them to eliminate much of the warehousing and other logistical expenses that used to be a major cost of doing business.
“With EDI,” said Parker, “your factory assembly line and the back of your truck become your warehouses. The seller knows what is going to be needed and when it is going to be needed and how long it is going to take to get it to the shelves.
“So they don’t order something until they know they can sell it, and the age of just-in-time inventory has begun.”
He noted that it was the “genius” of Wal-Mart Corp.’s founder, the late Sam Walton, to implement just-in-time inventory and other efficiencies that allowed Wal-Mart to overtake Sears for the title of America’s largest retailer.
These computer-driven efficiencies include such highly complex techniques as marking each package with labels that robotic truck-loading devices can use to load each shipment for the most efficient possible delivery.
It is to allow that efficiency that big retailers require firms like Betsy Flag to mark merchandise.
So Parker’s company has placed the needed computers in Berger’s Lake Bluff factory, and now Betsy Flags accepts orders from major retailers electronically and is given the data the customer wants it to mark on each carton.
On the warehouse floor are small computer terminals that print out the customized EDI labels for each customer. Betsy Flags’ shipping clerks carry infrared label-reading scanners much like the ones used at cash registers to make certain that the right label is slapped on each box.
Berger, who agreed to talk about using the EDI service at Parker’s request, said, “We save money by dealing with Jim because we don’t have to supply the in-house computer expertise.
He added, “And by providing EDI to our customers, we make certain that they will remain our customers and not switch to a bigger supplier just because the big guy has computers we lack.”
But he also acknowledged that selling the nation’s most venerated symbol was a bit more idyllic in 1976 when his father, Sol Berger, started the firm.
The elder Berger did so because he couldn’t find an American flag to commemorate the U.S. bicentennial in the Ace Hardware store in downtown Lake Bluff.
“We wanted to make sure that American flags always are going to be available in places like that,” said Ethan Berger. “And if it takes supplying bar codes to do that, then we’re going to be more than happy to supply bar codes.”
