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How EDI ASNs Enable Evaluated Receipt Settlement (ERS)

Just as with the Cross-Docking, Drop-Shipping and the Direct Store Delivery processes described in earlier posts, the ASN document is an important component of a successful Evaluated Receipt Settlement (ERS) process, also known as “pay-on-receipt” or “self-billing.”

ERS is a business process in which goods are purchased and paid for without exchanging an invoice.  Rather, upon receipt of goods ordered, the buyer confirms the shipment accuracy (i.e., right products, right quantities) and sends payment to the supplier based on the pricing in the purchase order.  Thus, because invoice processing is eliminated, the procure-to-pay process is greatly streamlined.

This approach was pioneered in the United States by the automotive industry with high-volume, trusted direct materials suppliers and has since been widely adopted throughout other manufacturing sectors.  The use of electronic communications between the buying company and its ERS suppliers helps ensure the smooth flow of accurate and timely data along with fast product delivery leading to an overall efficient ERS process.

So, what is the role of the ASN in an automated ERS process and how does it help?

The process begins with the buyer sending an EDI Purchase Order to the supplier. The supplier receives the order, prepares the shipment, and affixes barcode labels to the boxes or pallets and ships.  The supplier also sends an ASN containing the details of the order to be received.  Upon receipt of the ASN and the shipment, the buyer’s receiving personnel scan the barcode labels, which are then automatically matched against the original purchase order and the ASN to automatically calculate the payment. Finally, the buyer sends the payment via electronic funds transfer or paper check to the supplier.

The use of the ASN streamlines the efficiency and accuracy of the receiving process at the receiving dock. Instead of having highly-paid employees perform a slow, error-prone, manual receiving process in which they verify the quantities of items received, identify any discrepancies and record them, the receiver can simply scan the barcode on each pallet and confirm that it matches the ASN.

So, what do you need to ensure the effectiveness of ASNs in your ERS process?

  1. Electronic Purchase Order Collaboration – enable 100% of ERS suppliers to receive electronic purchase orders. Large companies may be enabled via traditional EDI, while small and medium-size businesses may be enabled using other technologies, like web forms.
  2. Advance Ship Notice (ASN) and Bar Code Labels – enable 100% of ERS vendors or distributors with the capabilities to send ASNs via EDI or web forms. Look for solutions that also allow you to generate and print the bar code labels for shipments.
  3. Data Quality Management – The ASN is one of the most complex supply-chain EDI transactions. Look for a service that includes configurable rules that can ensure that every message is validated for both standard- and customer-specific information.

There are actually many more documents that are typically exchanged in ERS process beyond the basic ones described above.  In my next blog, we’ll take a look at a sample EDI document flow in an ERS program in the automotive industry.

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