5 Things your EDI Company Will Never Tell You

Do you really need a 3rd party EDI Company or VAN (Value Added Network) to send and receive data such as POs, Acknowledgements, Ship Notices, Invoices, etc. to your retailers?  With a very small number of exceptions, the answer is NO.  Fortunately for these companies, suppliers are often painfully unaware of the alternatives available.  In fact, there are 5 things a company making their living by being an EDI “middleman” will never tell you: 

1.       You don’t need them to work with all retailers. There are a few exceptions, but many retailers work with technologies that allow for direct connection and communication with them – eliminating those data transfer and transmission charges. 

2.       It does not cost an EDI company any money to send and receive your data over the Internet.  As an example, consider how much it costs to stream data on one of your mobile devices.  Not all that much, right?  However, if you were to stream a movie on your mobile device at the cost of EDI transmission it would be about $240,000. 

3.       EDI companies provide the slowest way to exchange information.  Essentially it is a batch process, meaning that transactions are sent in bulk to retailers, instead of when a transaction actually occurs.  As retailer expectations become higher and higher, some EDI companies are having difficulty meeting retailer timeframe compliance requirements. 

4.       Current EDI technology has been around since the 1980s and is not keeping up with market driven needs such as real-time communication.  To do this an Application Program Interface (API) is needed that enables no cost, real-time communication of transactions to occur. 

5.       The use of traditional EDI services is largely a “black hole” restricting your ability to see and manage what’s going on inside and can impact your competitiveness. 

To complicate matters, a retailer’s help line may very well point you to a specific EDI company that they work with when you are setting up with them, even though they have other alternative(s) available.  It’s just a simple way to get you connected and it doesn’t cost them anything.  As we said previously, suppliers are often painfully unaware of what alternatives are available. 

The majority of retailers do have alternative connections available such as API, FTP or AS2 which allows you to communicate with them directly.  These are the methods that OPAL employs whenever a retailer allows it, and OPAL does not charge for this data translation and transmission  – after all it is the Internet. 

Adapting to your specific business processes (not a one size fits all solution), as well as simplifying communication with your retailers, OPAL is the only autonomous drop ship and order fulfillment software solution in the market today.  Check it out at www.meetopal.com.

The Importance of Accurate Inventory Reporting to Retailers

As I’m sure you are aware, many retailers and e-tailers require their suppliers to provide SKU inventory quantities on a regularly scheduled basis to ensure that they can fulfill the orders received or be able to determine that an item is out of stock.  It sounds simple enough, but there are some pretty major repercussions (i.e. scorecard dings and chargebacks) if you get it wrong.  

A huge problem that occurs frequently is overselling.  An example of this might be:  If you have ten (10) of an SKU in stock and report all ten (10) to three (3) retailers, you are indicating that you have thirty (30) of this SKU in stock.  If all of these retailers sell ten (10) of this SKU you’ve oversold and have to cancel orders for twenty (20) of them.  This results in scorecard problems and charge backs by the retailer. 

It’s a very real business problem for suppliers that work with multiple retailers and can cause unexpected financial problems.  To understand this problem, you need to ask the following questions regarding your business processes: 

·         SKU Inventory Accuracy – Is your inventory properly maintained, frequently updated and being decremented as orders are filled?  

·         Inventory Reporting to Multiple Retail Channels – Do you report all of your inventory quantity to each retailer?  Is it simple to allocate your inventory across retailers? 

·         Low Inventory Levels – Are you aware if a SKU’s inventory is dangerously low and cannot handle a large order? 

·         Frequency of Inventory Feeds – Are you sending inventory feeds to retailers as often as needed to keep them up to date?  Are you meeting their frequency compliance requirements? 

·         EDI Inventory Feeds – Are you sending inventory feeds using EDI?  Can your EDI provider provide the speed needed? 

If you’re managing these things either manually or semi-automatically using software systems that require manual input, it’s just going to be an uphill battle to eliminate the problem.  Your retailer, order processing, inventory tracking and invoicing all must be connected in a way that eliminates manual effort and expedites timely, accurate communication of information.  

If your current processes and investment in technology systems are unable to do this for you, then please visit OPAL (www.meetopal.com).

Do You REALLY Need EDI?

First, you need to know that EDI is nothing more than a format for a specific record type such as a PO, Acknowledgement, Ship Notice, Invoice, etc.  Depending on the retailer, there may be other non-EDI record formats, such as XML, CSV, etc. in which you can communicate with them. 

So, the real question is do you need a 3rd party EDI Company or VAN (Value Added Network) to send and receive this data for you.  With a very small number of exceptions, the answer is NO.  No matter what the retailer’s help line says when you request information about setting up as a vendor. 

Unfortunately most suppliers are just unaware of the alternatives.  As a case in point, an OPAL user recently approached Houzz about getting connected and was told that they needed to connect through SPS Commerce.  Of course, this would require the traditional monthly fees and data transmission costs of an EDI provider to do business with them.  

However, the OPAL team was aware that there were other options available:  Houzz also offers API (Application Program Interface) connectivity and we were able to complete the connection without the use and cost of SPS Commerce. 

Of the nearly 90 major retailers that OPAL is currently connected with or in the process of connecting with for its customers, less than 10% actually REQUIRE the use of a 3rd party EDI Company in order to communicate with them – and this number is decreasing all the time as retailers add new connectivity options.  All others have alternative connections available such as API, FTP or AS2 which allows you to communicate with them directly.  These are the methods that OPAL employs whenever a retailer allows it, and OPAL does not charge for this data translation and transmission which eliminates these 3rd party charges. 

OPAL is the only self-driving drop ship and order fulfillment software solution in the market today.  Adapting to your specific business processes, OPAL automates receiving orders from retailers, manages all retailer communications, processes and invoices orders through your ERP and accounting system, and creates packing slips and custom branded 3rd party shipping labels per any retailer’s requirements in as little as 8 seconds per order.  Once shipped, it sends back tracking information and invoices to the retailer, as well as tracking packages and sending inventory updates.

 

What is the Future of EDI?

All companies large or small that sell product on-line or for warehouse fulfillment to retailers and e-tailers eventually find themselves in a position where they need to rely on EDI (Electronic Data Interchange) to communicate with them.   It’s a hassle, forcing many suppliers to employ individual(s) just to manage it and keep it accurate.  But does EDI really have a sustainable future? 

Well, first, let’s discuss its evolution and the path that this technology is on.  The EDI concept was introduced in 1960 and the first EDI document was sent in 1965.  The primary motivation behind the development of EDI was to facilitate better communication in the commerce / trading world by overcoming these obstacles: 

·         Computers were not connected

·         Data Transmission costs were very high

·         There was no consistent format for data files

·         There were no standards for file format  

EDI has continued to play a significant role over the last five (5) decades.  However, over the last two (2) decades there has been a major shift in the industry because of the Internet. Business processes have changed because of the Internet and the speed of data transmission has increased by a 100 fold.  The only thing that has not changed is EDI and the new reality is that now: 

·         Computers are seamlessly connected

·         Data transmission cost is zero due to the Internet

·         There’s no need for a file format to exchange data 

Everybody wonders then why do we still have EDI?   The answer is simple – resistance to change. Traditional businesses have been using it for so long that they no longer question it.  EDI companies, on the other hand, cannot change without destroying their revenue stream. 

As business has evolved, the Typewriter was replaced by the Telegram, the Telegram was replaced by Fax, and the Fax was replaced by EDI.  EDI is now being replaced by the Application Programming Interface (API).  

Businesses in 2018 are far too dynamic to rely on such an outdated tool to be the backbone of their business operation.  APIs are a messaging format that allows data to be transmitted from one system to another in nanoseconds WITHOUT those expensive EDI Document fees.

Bulk Orders AND Drop Ship Orders? Show Me the Money!

Currently, much if not all, of your order processing may be in the fulfillment of bulk orders: LTL, truck load or container shipments.  While not simple by any means, bulk shipment orders have high revenue values and can absorb a lot of order processing and handling costs and still be highly profitable.  Unfortunately, as you begin drop ship order fulfillment, you find that much of those same costs that apply to bulk shipments now severely impact the profitability of low revenue, single package orders.

 

You receive an order, pick it, pack it and ship it to the consumer.  That is simple drop shipping.  Unfortunately, reality is never that simple.  It’s actually a time consuming, detailed and often painful process with a great deal of pressure on profit margins.  Especially if you are selling through large retailers and e-tailers; additionally, industry trends over the last five years indicate that there’s going to more drop shipping in the future, not less. 

What’s needed is something that helps your team to continue managing those bulk shipments while even reducing some of those order processing costs, as well as making drop ship orders easy to handle and highly profitable, too.

 

OPAL is AUTONOMOUS and bridges both worlds – container, truck load and LTL shipments, as well as giving you the capability to efficiently and profitably drop ship orders.  Take a look at this pretty common cost scenario:

Traditional Bulk Shipping

1 order worth $40,000

Order Processing Cost of $4.00 Each

1 Clerk, 1 PC and 1 Desk

2+ EDI Transaction Charges

Traditional Drop Shipping

2,000 orders worth $20 each

Order Processing Cost of $4.00 each

3+ Clerks, 3+ PCs and 3+ Desks

4,000+ EDI Transaction Charges

 

OPAL Bulk Shipping

OPAL Drop Shipping

1 order worth $40,000

Order Processing Cost of $4.00

1 Clerk, 1 PC and 1 Desk

Zero EDI Transaction Charges

2,000 orders worth $20 each

Order Processing Cost of 40 cents each

1 Clerk, 1 PC and 1 Desk

Zero EDI Transaction Charges

 

But what does AUTONOMOUS really mean?  It enables you to eliminate nearly all, if not all, of the manual steps we must all perform when processing an order. 

This includes receiving orders from your customer retailers and e-tailers, managing all of their EDI transactions, processing and invoicing orders through your ERP and accounting system, downloading or creating custom packing slips, creating shipping labels, UCC128 labels and / or other required shipping documents, getting them to the warehouse for pick, pack and ship and monitoring delivery progress of the order.  Now, imagine doing that 24 hours day, 7 days per week, and only having to focus on the few exceptions that will inevitably occur outside of your control.  That’s what OPAL does for you.

May You Never Have to Drop Ship!

If you’re not already doing it, here’s hoping you never find yourself in the position where you have to drop ship your products directly to consumers.  It is a time consuming, detailed and often painful process with a great deal of pressure on profit margins.  Especially if you are selling through the large retailers and e-tailers.  But, if the 2017 industry trends are to be believed, you may very well find that you will need to adapt.

If you’re already drop shipping, you are aware of the problems:

·         Consumer expectations are getting higher almost every day.  If they order something at 3:00am Saturday morning, they want to see an acknowledgement, tracking number and expected delivery date very quickly.  They also expect to receive that order in a few days at most.

·         Marketplaces also have increasingly high expectations, and if you don’t meet those expectations there are financial penalties.  More and more, they want their suppliers to drop ship from their own warehouse rather than one of their fulfillment centers, provide acknowledgement, tracking number, ship it in three (3) days maximum, provide accurate invoicing and provide them with accurate item inventory updates.

·         One of the highest expenses for any drop shipping business is labor.  It’s the wages you pay; plus having the correct number of employees on hand when you need them. Having more employees than orders to process can be costly and the other side of that is not having enough employees to process orders. 

·         Product profitability can be severely impacted, especially if the retail cost is low.  You may be selling more but your profit margin may be very thin or even non-existent. 

Now, on the other hand, large shipments can be very profitable because it requires much less order processing labor to handle those high revenue orders.

So, as I said:  May you never have to drop ship!  But many of you already are.  The retail world is changing rapidly with on-line shopping by consumers growing by double digits each year.  Are you ready for an inevitable change?

OPAL bridges both worlds – container, truck load and LTL shipments, as well as giving you the capability to expand more and more into the drop ship business as available without the problems we just spoke of.  It gives you the ability to grow and adapt over time, easily.

Are you striving to achieve productivity gains to increase drop ship order profitability?  Are you currently avoiding drop shipping, but see the writing on the wall.  Before dismissing the possibilities, please contact OPAL (www.meetopal.com) – the ONLY Autonomous Order Processing solution – to see what it can do for your business.  


Can You Hire an Order Processing Team for $800 a Month?

Do you have a drop ship order processing team that works 24 hours a day, seven days a week for $800 a month?  Probably not, but this is what OPAL, an Autonomous Order Processing Solution gives you.  And, you do not need to have a one size fits all solution.  In fact:

·         It adapts to your specific business rules and processes

·         It works transparently with all of your retailers and e-tailers to exchange mandatory electronic information and create compliant Packing Slips

·         It works transparently with your e-commerce shopping carts to process orders and communicate shipment tracking to your customers

·         It works with your Accounting and Inventory System to create accurate invoices and decrement inventory without manual entry

·         It works transparently with your primary shipping carriers such as USPS, FedEx, UPS, DHL, etc. without having to use 3rd party software for shipping and labels or going to one of their portals.

·         And, it works effectively with and optimizes your warehouse or 3PL. 

So, think about it for just a moment.  $800 a month ($9,600 a year) as opposed to $15,000-$20,000 per year plus overheads for one person to handle order processing.  And this one individual will not be processing your orders 24 hours per day, 365 days per year.  

If you add order volume to the equation, how many orders per month can one person really handle?  If it’s 1,000 then your labor cost per order is probably going to be at least $3,000 ($3.00+ per order) versus $.80 with OPAL ($800 divided by 1000 orders).  And, the more orders processed each month reduces this per order cost even more.

 Are you striving to achieve productivity gains to increase drop ship order profitability?  Before dismissing the possibilities, please contact OPAL (www.meetopal.com) – the ONLY Autonomous Order Processing solution – to see what it can do for your business. 

 

The ROI of Autonomous Order Processing

We’ve talked extensively in the past about the productivity gains and increased revenue potential through the use of Autonomous Order Processing, especially as it relates to the huge, positive impact it has on drop ship order profitability. 

But, many times, business owners are reluctant to even consider the potential cost to their business – so much so that they don’t even investigate it to see if it is viable.  And, sometimes if they do, they have serious sticker shock and dismiss the idea.  However, what’s often not considered is the very fast Return on Investment (ROI) that is achieved and how quickly that increased profitability and productivity comes to pass for your company. 

Yes, it’s not free.  An Autonomous Order Processing System is NOT a one size fits all solution and it needs to work with a lot of moving parts within your business, like:

  •           It must adapt to your business rules and processes
  •          It must work transparently with all of your retailers and e-tailers to exchange mandatory electronic information and create compliant Packing Slips
  •          It must work transparently with your e-commerce shopping carts to process orders and communicate shipment tracking to your customers
  •          It must work with your Accounting and Inventory System to create accurate invoices and decrement inventory without manual entry
  •          It must work transparently with your primary shipping carriers such as USPS, FedEx, UPS, DHL, etc. without having to use 3rd party software for shipping and labels or going to one of their portals.
  •          And, it must work effectively with and optimize your warehouse or 3PL. 

So, for example, let’s say that you have to invest $10,000 to connect all of those moving parts discussed above.  Sounds like a lot doesn’t it, but you REALLY need to consider the following: 

1.       I don’t know what your current per drop ship order processing cost is, but in my experience it runs at least $3 per order in labor cost.  At a run rate of around 1,000 orders that would be $3,000 per month.  With Autonomous Order Processing it would be $.80 or $800 per month.  A savings of $2,200 and an ROI in 4 to 5 months. 

2.       Also, if you are growing, as I’m sure you are, and have the need to add personnel to manage the load at some point, Autonomous Order Processing eliminates the need to hire additional personnel.  A savings of $15,000-$20,000 plus overheads each year.  Once again, the cost of one additional hire more than covers your investment. 

Before you dismiss the possibilities out of hand, shouldn’t you contact OPAL (www.meetopal.com) – the ONLY Autonomous Order Processing solution – to see what it can do for your business, while also paying for itself extremely quickly?  

The Drop Shipment Train is Coming

“Tis the Season” and if you are one of those businesses that experiences extremely high order volume during the holidays you may be looking for that light at the end of the tunnel following Christmas.  Unfortunately, that light may be a train! 

The Black Friday statistic for 2017 were pretty interesting.  Foot traffic in retail stores stayed pretty steady, dropping at most by 1-2% while on-line shopping increased by over 16% according to CNN Money.  Some of the big winners between Black Friday and Cyber Monday were Amazon, Walmart and Target – all retailers that have embraced the on-line, ecommerce, drop shipping business model.  There was also a statistic reported that Amazon managed over 700 ORDERS PER SECOND.  WOW!

The on-line, ecommerce world with its inherent need to drop ship directly to consumers has been experiencing double digit growth year-over-year for a while now – it’s apparently unstoppable.   So, the question is, how many seconds does it take you, as a supplier, to process a drop ship order?  It’s pretty clear that there are going to be more and more each year.  Are you going to be able to keep up? 

To compound matters, expectations are getting higher and higher regarding supplier performance.

If a consumer orders something at 3:00am Saturday morning, they want to see an acknowledgement, tracking number and expected delivery date very quickly.  They also expect to receive that order in a few days at most.

Marketplaces want their suppliers to drop ship from their own warehouse rather than one of their fulfillment centers, provide acknowledgement, tracking number, ship it in a maximum of one to three days, provide accurate invoicing and provide them with accurate item inventory updates on a frequent basis.

Unfortunately there aren’t a lot of good tools to automate this and make it feasible to really fill all of the orders you possibly can without adding a bunch of seasonal staff.  Much of what is available is cumbersome, requiring you to cobble disparate technologies together to ease some of that labor intensity.  This usually includes things like an Enterprise Resource Planning (ERP system), a method to translate, send and receive data to / from the marketplace, software to automate management of that data and software to communicate with shipping carriers – all of which usually still requires some level of dedicated staff and time to ensure everything goes smoothly.

This dramatic supplier need led to the creation of OPAL (www.meetopal.com), the first and only smart platform that combines all of the needed capabilities into one place for drop shipping.  It automates and enhances your ERP order processing capability, requires no human intervention, works 365x24, is fully compliant with all marketplace requirements, provides document data translation and transmission without errors at zero cost, and works with your 3PL or warehouse to provide all labels and information needed to pick, pack, ship and track an order.

And, best of all, it will process those drop ship orders in less than 8 seconds.  How many seconds and how many people do you currently need?

Managing EDI and Other Financial Impacts on Drop Ship Orders

Unlike bulk orders worth thousands or hundreds of thousands of dollars, drop ship orders are problematic in terms of managing your cost components well enough for a product to be profitable, especially when it’s retail price is less than $40 or $50.

A lot of operating costs can severely impact your profitability:  The manufacturing of the product, warehousing, EDI costs associated with communicating with your Trading Partner, order processing handling by staff, pick, packing and shipping by the warehouse, and the technology investments needed like an ERP or simple inventory and accounting system, shipment scheduling / tracking tools, etc.

To complicate things, drop shipping is becoming a preferred business model for many traditional brick and mortar retailers, in addition to the many e-tailers that have already shaped the e-commerce market over the last few years.  For suppliers, this will mean an exponential increase in small orders to process, shorter and shorter acknowledgement and shipment deadlines and more and more staff to keep up with the load.  And, of course, there’s the retailer commissions charged for allowing you to sell on their marketplace.  All of which impact profitability on drop ship orders even more.

So, what can you manage?  Well, from a retailer perspective, there’s not much you can do other than ensure that they are complying with your Minimum Advertised Price (MAP) Policy to protect your margins and brand.  And I’m sure that you have already and are continuing to reduce costs in your supply chain, and have probably optimized your warehouse operations and / or negotiated the best cost possible with your 3PL.

So what’s left?  EDI charges and order processing costs!  These alone are commonly more than $5 per order!  That’s at least a 10% margin loss on a small order.

Depending on your drop ship order volume this $5+ cost can be reduced to $1 or significantly less with OPAL.  That’s a $4 gain per order without even trying.

If you are doing a great deal of drop shipping to customers and are struggling with the cost of EDI when doing business, please take 15 minutes of your time to view a demonstration of OPAL (www.meetopal.com) so that we may answer your questions and see how it can solve the problems you are encountering and improve efficiency and profitability. 

OPAL is an autonomous, cloud based order processing and fulfillment solution and works 24 hours a day, 7 days per week, even when there’s no one in the office.  It works with and enhances your ERP investment and automates drop ship orders – processing them in less than 8 seconds – and prepares all of the necessary information, packing slips and shipping labels necessary for a warehouse or 3PL to pick pack and ship the order.  It even tracks the order and notifies you when there’s a shipment issue.  All without any EDI costs or additional software tools.