B2B companies in this day and age are repeatedly encouraged to invest in electronic commerce to drive down the cost of customer interaction. Traditionally, B2B organizations first look to EDI as an approach for this. However, more recently, B2B eCommerce has become another options for companies. Considering the fact that both systems process orders digitally, what exactly is the difference between them? Also, which is the better option for companies that are looking to add one or the other?
EDI: Electronic Data Interchange
EDI is a great communication tool between organizations. Generally speaking, this system is very good at processing purchasing transactions on the buy side and sales transactions on the sell side. EDI is primarily used to place large recurring orders from the customer side to the vendor side. EDI automates these tasks by removing human intervention and thus increases ordering accuracy and decreases the cost of transactions.
Advantages of EDI
Implementing EDI into an organization provides many benefits. This solution automates the ordering process for capturing customer sales orders and usually automates the sending of advanced shipment notifications as well as customer invoices. EDI also automates the process for sending purchase orders to vendors, which can automate the process for receiving advanced shipment notifications and vendor invoices.
Like with B2B eCommerce, all of these automated processes can reduce manual effort for capturing orders, sending POs, and capturing and processing vendor invoices. This can make it easier to do business and ease the relationship between your company and your customers.
Disadvantages of EDI
Of course, there are a few disadvantages of EDI. Once implemented, EDI will only work with others who are also transacting with EDI, generally larger companies. Additionally, EDI is a reactive system, not a proactive one. Unlike B2B eCommerce, there are no marketing capabilities or chances to interact with the end user.
B2B eCommerce is more than simply capturing customer orders. B2B eCommerce provides you with the opportunity to exhibit your full product or parts range in an attractive and interactive manner. This allows your customers to navigate effortlessly through your products and it assists them in making a well-informed buying decision. Additionally, B2B eCommerce allows you to proactively market cross- and up-sell items, as well as new items to your customers.
Advantages of B2B eCommerce
B2B eCommerce has several advantages for companies, including automation. When fully integrated to your ERP, B2B eCommerce automates the Sales Order capture process with customers. B2B eCommerce also provides a self-service portal for customers to find the answers to many questions, including the ‘Big Three’ of B2B:
- What is my price for this item?
- Do you have this item in stock?
- What is my Order Status? Have you shipped my order?
Perhaps the biggest game-changer of B2B eCommerce are the number of marketing opportunities, including:
- Cross-sell, up-sell, and related items
- New and/or discounted items
- New lines of business/geographies
- Email marketing to remarket to customers and prospects
Additionally, B2B eCommerce provides mobile-ready platforms for customer ordering, allowing your customer to order from their desktop, tablet, or phones.
Disadvantages of B2B eCommerce
B2B eCommerce solutions rely heavily on catalog data, which, at times, isn’t 100% accurate and requires some data cleanup, which can be time consuming. We’ve also seen adverse reactions to the B2B eCommerce site from the sales team, who can view a new B2B site as a competitor rather than a complement. But, addressing that concern early and sharing the strategy can solve that issue.
So, which is right for me?
EDI is best suited for high volume order processing, especially when the customer knows exactly what they want. So, if you have existing customers that order the same products over and over again, then EDI might be a good choice.
However, a key question to ask is, “Are my customers asking (or pushing) me to use EDI?” If not, then the adoption rate might be smaller than desired.
B2B eCommerce is best for driving out costs from the ordering process (through automation) and selling more (and more effectively) to customers and prospects through marketing. B2B is great for prospecting to new customers, and selling and marketing to existing customers.
We wholeheartedly support B2B eCommerce and have a lot of experience implementing it and integrating with ERPs. However, if you decide that ESI is the best fit for you, we highly encourage that you complete an EDI Business Process Review before you implement EDI and once it has been in place for a while to ensure efficiency.
EDI Business Process Review Customer Example
We worked with a client who, like many organizations, was running multiple EDI processes to communicate with customers and vendors. They were experiencing a number of pain points in their EDI environment, however. The main challenge was that their EDI environment contained duplicated software tools and business processes. This resulted in tasks taking too long to complete. As an example, things like adding a new customer or making changes to an existing customer’s information were taking an extraordinary amount of time to complete.
This client already knew that the technology layers were in bad shape, but they wanted a second opinion. Our team took a look and analyzed how to approach these issues in a Business Process Review of their EDI instance.
The Business Process Review
For any BPR, our process includes spending some time on-site with our client investigating the people, technology, and processes at play.
Starting with the people, our team spent a few weeks interviewing both executives and those people on the front lines of EDI processes. This included getting an idea of the skill sets of those on the client team and determining where their strengths lie. From there, we compiled a matrix of skills and resources.
From there we evaluated things at the technology level, including the different tool sets the client was using. We found that they had some duplicate tools running, so we investigated the strengths and abilities of those tools to figure out which should stay and which could be replaced or removed.
Finally, we took a deep dive into their EDI processes to get a better idea of what their environment looked like. From setting up new customers and documents, reviewing the documents being traded, and troubleshooting processes that weren’t as efficient as they could be, we spend more time evaluating the processes than anything else.
We took that assessment of the people, technology, and processes and gave each item a red, yellow, or green score, along with explanations for those scores. From there, our team assembled a matrix of 20 recommendations of things to do moving forward. With the client team’s input, each recommendation was ranked low to high on effort to implement and impact to the business. To begin making changes, we recommended starting with those recommendations ranked as high impact, low effort.
With the priorities identified, we put together a timeline of next steps in terms of weeks, months, and quarters, as well as which recommendations could be completed internally and which would require outside help.
By following those straightforward steps, our client now has a plan to improve processes and technology, consolidate their environments, and make their infrastructure more straightforward. They also know which business processes need improving and what training is required for their team.
This is an assessment that our team can do for any client, and any EDI customer should at least think about doing one. By evaluating your current people, technology, and processes, you gain a better understanding of what’s working and what isn’t. With those specifics sorted out, you can better plan for future improvements.