Zack Kanter’s experience as an auto parts manufacturer gave him an insight into the challenges of connecting with retailers via EDI, so he’s building a business to make it easier.
Zack Kanter is many things: a former owner of an auto parts manufacturer, a technologist, and currently the founder of the startup Stedi, an EDI integration platform for brands to connect with retailers.
In May, he also penned a missive about Amazon that crystallized the retail and web services giant’s uncatchable advantage over everyone else.
I first came across Kanter on Twitter and via a podcast he did with the investment publication the Motley Fool. Kanter’s thoughts on Amazon are detailed and incisive. As both a vendor and seller to Amazon during his auto parts days, he gathered a unique perspective as to how Amazon operated.
To Kanter, the key to Amazon’s success is not about its culture or Chief Executive Officer Jeff Bezos’ “vision.”
“It’s the fact that each piece of Amazon is being built with a service-oriented architecture, and Amazon is using that architecture to successively turn every single piece of the company into a separate platform – and thus opening each piece to outside competition,” he wrote in his seminal piece, published in TechCrunch.
“I believe that Amazon is the most defensible company on earth, and we haven’t even begun to grasp the scale of its dominance over competitors. Amazon’s lead will only grow over the coming decade, and I don’t think there is much that any other retailer can do to stop it.”
Amazon’s success and Kanter’s own startup are related.
“I came across EDI running the auto parts company,” Kanter said in a July interview with American Shipper. “EDI is a well designed taxonomy. It’s nicely laid out, with 300 message sets. On the other side, it’s a file format and exchange protocol. The advantage of EDI is everyone is on same standard. There are some variations within those standards, but if I’m with Amazon, I’m 95 percent of the way with Kroger. EDI is so mature at this point, it’s sorted out. I’ve rarely come across someone wanting to deviate from X12 standard.”
Much has been written in recent years about the limitations of EDI (including in this publication), especially as it relates to connectivity between shippers and logistics companies and their carriers. But Kanter said EDI is still integral in the connections between sellers and retailers.
“EDI is a pain, but once you do it, you can rubber stamp it across 500 connections with some configurations,” he said. “It’s a miracle that the industry has adopted a standard that everyone agrees to. Groups of competitive companies don’t cooperate in this way often, and it’s helpful.”
Where Stedi, which is currently in beta mode, comes in is connecting brands to retailers with a self-service platform where brands can perform actions like sending an order to a 3PL to ship, creating FedEx or UPS labels, generating a bill of lading, creating barcodes, or exporting to an ERP system.
“You start selling to Amazon or another major retailers, as long as they can receive files, they don’t care if you’re using IBM, Stedi or a server in a garage,” Kanter said. “We facilitate the connections with the retailers, create a single interface, where a brand can see all purchase orders from various retailers, create response docs (like PO confirmation, ship notification ASN, or the invoice).”
Stedi, which has a tentative public launch set for the fourth quarter of 2017, is competing in a field with large established players, like SPS Commerce, TrueCommerce (owned by the supply chain software provider High Jump), and CommerceHub.
Kanter is an avid proponent of application programming interfaces (APIs), which are being put forward as a more modern alternative to EDI for logistics system-to-system connectivity. But he said the reality is that retailers have such extensive reliance on EDI, it’s impractical to expect them to rip that infrastructure out in the short term.
“APIs are highly useful if you have customers who are able to consume them,” he said. “If there are 5,000 companies who have developers on staff and need to integrate some aspect of logistics, it makes sense. Our customers want integration with Oracle and Netsuite. They’re not in that box. They don’t want to code to our API. If each retailer built their own APIs, some will be better designed than others. But they’ll all be different. If you need to integrate with 5,000 retailers, you now have to code for all these APIs in all these regions.”
Some technology providers are tackling this issue by creating templated APIs that are mostly standardized for certain logistics processes and can be easily configurable to a shipper’s or 3PL’s or carrier’s specific business. But Stedi isn’t trying to solve those carrier connectivity questions.
The challenge Stedi is trying to solve is giving brands a quick, easy-to-use, self-service mechanism for connecting to their retailer customers.
“If you want to create a connection to a retailer, the process takes weeks or months,” Kanter said. “We set up an interface so you can be up and running in a few hours. The idea is to be able to onboard with an EDI trading partner without ever talking to us, sort of like TurboTax. So much of an EDI implementation is waiting, scheduling, doing an hour, waiting some more.”
Stedi has already mapped out these EDI connections with major retailers like Amazon and Walmart. For smaller retailers, the company will wait for a customer to drive it to build those connections.
“It’s a really fun process,” Kanter said about connecting to retail, his tongue firmly in cheek. “You might have a 25-page PDF from a retailer explaining what each field is for. We map that.”
The company raised its first funding round of $1 million in February, which included investment from Ryan Peterson, CEO of the freight forwarder Flexport. On Monday, its second round netted another $2.7 million from five investors.
“When you look at enterprise tools, you think, it shouldn’t be this hard,” Kanter said. “Software doesn’t solve all problems, but it should make things easier.”
Kanter’s own experience as a shipper drove him to find a better way, but he’s realized even more building Stedi. The straw that broke the camel’s back from his time as an auto parts maker.
“Basically we’re building the way that you’d expect it would have already built it if you were outside the industry,” he said.
“Most well-known EDI has hardcoded UPS ground as the default. We had a situation where dozens of orders that were supposed to go next day air were going ground. But we only figured it out in an audit, because these things are hard to catch. You can’t log in and say ‘show me the mappings.’ You just find out later. I said, ‘There has to be a better way.’”
Part of that journey is in helping brands navigate the challenge and opportunity Amazon presents.
In the TechCrunch piece, he pointed two other notable things. First, the way Amazon found out its open service structure prevented the stasis found in other vertically-integrated companies.
“The revenue bonanza is a footnote compared to the overlooked organizational insight that Amazon discovered. By carving out an operational piece of the company as a platform (its server business, Amazon Web Services, or AWS), they could future-proof the company against inefficiency and technological stagnation,” he wrote.
The other point was that Kanter sees Amazon getting into logistics and parcel shipping as a no-brainer, not just because those are critical service component pieces to its retail business, but because they are significant cost line items, like server space.
“It seems obvious to me that Amazon will move into small-parcel shipping (UPS/FedEx/USPS) within the next five years,” he wrote. “They are thumbing through their income statement and picking off the largest categories to ‘productize’ – first technology (AWS), then fulfillment (Fulfillment by Amazon, or FBA), then COGS (the actual products themselves via Amazon’s various private label programs), and next shipping.”
New EDI platform Stedi aims to connect brands with retailers
