Electronic Data Interchange

For the past several years, Ace Hardware has been successfully focusing on the application of Electronic Data Interchange (EDI) processes to improve productivity and reduce costs on a mutual basis with our suppliers. This effort has successfully converted a majority of our business, which has significantly reduced labor for both Ace and our vendors. The following percentages represent the volume of our business currently being electronically exchanged with our vendor trading partners:

Purchase Orders  95%
Advanced Shipping Notices  83%
Invoices  63%

Working together to reach such high EDI participation levels has taught us that there is significant opportunity for both our vendors and Ace to reduce expenses. It is becoming increasingly expensive to handle these transactions manually. EDI can no longer be just a goal; It must be a given in today's business environment.

During 1997, it became a corporate initiative for us to convert 100% of our business over to EDI. As a result, and as part of the Discovery Process, Ace has made EDI a mandatory requirement for all paint and sundries vendors with regards to purchase orders, advanced shipping notices and invoices. All vendors falling in this category who do not implement EDI will be assessed $20 per warehouse purchase order, $5 per advanced shipping notice and $5 per warehouse and drop ship invoice for non-compliance beginning in 1998. The purpose of these service fees is to recoup some of the labor costs Ace is currently incurring by manually handling these documents.

The following outlines the benefits that can be realized by a vendor through implementing EDI:

Purchase Orders ASNI 850

• Expedites the receipt of Ace's order which reduces the overall lead time in receiving your product.
• Improves the accuracy of the order processing by eliminating the need to manually keypunch our orders.

Advanced Shipping Notices ASNI 856

• Expedites the receipt of your products into our warehouses so your product is more quickly available for resale.
• Reduces lead times and improves service levels for your products.

Electronic Invoicing ASNI 810

• Eliminates hard copy invoices and reduces paper costs.
• Improves the timeliness of the receipt of your invoice billing which will equate to more timely payments to your company.
• More accurate processing and reduced billing disputes by eliminating the need for Ace to manually input your invoices.

When your company is ready to begin an EDI Partnership, please contact the proper Ace representative, listed below, for document implementation.

Purchase Orders --   Merchandising EDI Administrator   630-990-6750
Invoices --   Ralph Wohlberg  Operational Accounting Mgr   630-990-6479
International EDI --   John Postlewaite  Import Inventory Controller   630-990-6454

We hope your commitment to EDI is as b as ours. By working together to exchange more information electronically, we will both gain significant benefits. We look forward to hearing from you and "EDIing" with you in the near future.