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Cyber Monday – How EDI increasingly powers Online Shopping

Cyber Monday is here!  Although Monday is the official kickoff of the online holiday shopping season it certainly did not stop many consumers from getting a head start on web purchases this past weekend.  Last year Forrester Research found that almost 49% of all consumers said that they shopped less in stores on Thanksgiving weekend, because they were shopping online instead.  >After the recent wave of violence on Black Friday who can blame them.  Forrester expects B2C e-commerce to grow 15% this year as compared to 2010.  One of the technologies that have been enabling the phenomenal level of growth in B2C e-commerce is B2B e-commerce. 

What does Business-to-Business (B2B) e-commerce have to do with Business-to-Consumer (B2C) e-commerce?  First, let us take a simple example.  Much of the content that is displayed on retailer’s web pages actually originates with the manufacturer.  The product description, packaging dimensions, shipping weight, warranty terms and even many of the images are sent by the suppliers to retailers using B2B technologies such as data synchronization.  But B2B’s role in holiday shopping is not limited to populating online catalogs.  B2B e-commerce, specifically EDI, plays a significant role in order fulfillment.

Many retailers use a process called €œdrop ship€ for on-line orders.  With drop ship, the retailer captures the consumer’s shopping cart and credit card information online.  The online order is then converted into an EDI transaction that is sent directly to the manufacturer for fulfillment.  The supplier receives the order, picks it from the warehouse and then ships the package directly to your doorstep.  That’s right in many cases the retailer from whom you purchased your gifts never actually held the products in inventory.

What is the advantage of using the drop ship approach for online orders?  By shipping direct from the manufacturer’s warehouse the package arrives faster and the price is lower.  If the shipment were routed through the retailer’s distribution center first and then forwarded onto the consumer, several additional days would be required.  Furthermore the shipping costs would be higher due to the use of multiple carriers and the need to involve more warehouse personnel. 

Using drop ship, the retailer does not have to hold as much inventory in their distribution center.  Drop ship is especially effective for infrequently ordered products which would not be cost-effective for a retailer to stock.  It also may be effective for expensive products such as HDTVs or home appliances, which are costly to stock in any significant volume. 

The challenge with the drop ship process is visibility to the location of goods.  In the peak of the December holiday shipping period, some packages will inevitably be improperly labeled, incorrectly routed or accidentally lost.  Of course, the retailer could track the location of the shipment by getting an EDI feed of status updates from FedEx, UPS or DHL.  However, in the drop ship scenario it is the supplier, not the retailer than initiates the process with the transportation carrier. 

In the drop ship scenario, suppliers typically send another EDI document called the to the retailer indicating that the order has been fulfilled.  Common data within an ASN includes the transportation carrier, point of origin, expected arrival date, package dimensions, content weight and the shipment tracking identifier.  Once received from a supplier, the ASN data can be stored in the retailer’s system along with the consumer’s order.  The shipment information can be exposed on the retailer’s web site or be available to customer service personnel in the call center.  Either way, the consumer’s questions about when the package was shipped and where it is located can be answered quickly.

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OpenText is the leader in Enterprise Information Management (EIM). Our EIM products enable businesses to grow faster, lower operational costs, and reduce information governance and security risks by improving business insight, impact and process speed.

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