EDI is the computer-to-computer exchange of business data in standard formats, which requires no human intervention or rekeying at either end. The information contained in an EDI transaction set is similar to what would have been included on a printed document. The technology is designed to increase efficiencies. For example shipping and billing errors due to re-keying on the destination end will no longer occur. Another important advantage of EDI over paper documents is the speed the transaction can take place at, reducing cycle times, as well as eliminating the costs of manual entry.

The benefits of EDI include reduced cycle time, better inventory management, increased productivity, reduced costs, improved accuracy, improved business relationships, enhanced customer service, increased sales, minimized paper use and storage, and increased cash flow.

With such an impressive lists of benefits you may wonder why every business is not using EDI, and in most cases it is due to the costs involved for the initial set-up.

If you are going to outsource EDI you need to make sure your business partner has connectivity that is fast, reliable, accountable and secure, and is capable of integrating business systems. You want a company that can satisfy requirements for electronic purchase orders, functional acknowledgement, shipping notices, invoices, inventory status updates, forecasting and more, and has the requisite technology. This includes software, hardware and networks plus integration tools and technical expertise that can manage the mapping of data between different companies.

By outsourcing you no longer have to worry about having to upgrade your technology, which makes it more cost effective.

Overview

When an eCommerce business develops to a certain level there is normally no need for you to ship and pack the orders yourself because it is the time to start outsourcing all your order and product fulfillments. Even though all the product fulfillment centers offer similar regular fulfillment services, their individual costs and methods may help you to choose one of the best outsourcing service for you. When choosing any product fulfillment service you have to keep certain aspects in mind such as location , size, turn-around time, shipping options, order entry, communications, costs and error rate etc.

Location and Size

Product fulfillment centers are usually located all around the city, however one of the most important things to remember when selecting a fulfillment center is that you choose a center which is close in proximity to your clients or consumers place. Doing so, it will be easy to ship the products to your client conveniently. Similarly, you have to choose a fulfillment service that meets all your daily fulfillment requirements. In case you are having an order which pierces then make sure to select a fulfillment center which can handle additional workload and yet ship your orders within the desired timeline.

Order Entry

When you consider a product fulfillment service then order entry method is very much important. These useful methods include emailing the Excel spreadsheet with the orders once every day, entering every order on the web-based system of the fulfillment centers and forwarding particular order invoices to the storage houses or warehouses. Every method has a diverse affect on the business. For instance, when your business develops to a certain level you have more orders with you and so to save time it becomes important to use automatically entering orders into the centers web-based application rather than doing it manually. So, you have to select a warehouse which can offer you an order entry method which can meet all your business requirements and even fits your personal budget.

Communication

Communication is one of the most vital parts of every type of business. Whenever a business organization requires to cancel an order or to modify their clients address then they need to contact the product fulfillment centers. This is why, it is important to select a product fulfillment center which is available through phone call or email.

Costs

Every product fulfillment centers operate under diverse schedule. Some of them need contracts and use sliding scales while others charge per item or per order without contracts. Some of them can even charge base fee for storing your inventory or additional fee per item or per pallet. So, make sure that you possess a clear perceptive of the contracts and costs of fulfillment centers.

Conclusion

When you select a product fulfillment centers you have to create a checklist of all the features. Even try to contact a member of the fulfilment center in order to ensure the warehouse meets all the requirements of your developing eCommerce business. Whenever you are outsourcing your product fulfillment, the time which you usually spend managing inventories, dealing with returns and packaging orders, you can now focus on your growing business.

Inventory Management

Overview

Good inventory management has always been critical to ensuring a company’s profitability. Many companies have gone out of business due to poor inventory management before management have even recognized that a problem exists. Having too much inventory ties up cashflow while running out of inventory results in lost sales. The trick is to get it just right.

You'll need to know how and when to order, how to receive items, how to track stock and how to monitor sales and returns. Overall, your inventory management system should be able to tell you what you have on hand, what's coming in and what's going out at any particular time. Planning is required to know how much inventory you need and when you need it.

An ideal inventory management system will have just enough inventory to meet needs at any given time, minimising the cost of keeping extra stock or causing delays by running out of items in demand. Holding too much stock is a major cash drain. Items sitting in your warehouse for long periods represent idle capital that could be put to more productive use. It is crucial to know the minimum amounts your business needs to have on hand.

Benefits

An effective inventory management system should help you increase turnover and meet on-time delivery. It can also reduce carrying costs, improve the ordering process and maximize the order flow. It ensures you get items on hand when you need them, reduces waste, and increases customer satisfaction. Overall, it is essential to you running a smooth, efficient and profitable business.

Warehouse Management System

Inventory management is part of warehouse management systems (WMS). Incoming inventory should be verified, documented and entered into a WMS in real time and allocated a tracking number so that its movement can be tracked within the warehousing facility.

It also needs to recognize that some goods have a limited shelf life. They may be goods with expiry dates or seasonal fashion items, or perhaps computers or electronic goods that quickly become obsolescent or discontinued.

Stocktakes

Inventory management should include regular stocktakes. This is best done on a cyclical basis, and depending on the level of turnover can be done between 2 and 8 times a year. If you choose to outsource your inventory management there are companies who will give you a money back guarantee if your inventory does not add up. This is the sort of company you want to deal with as it shows commitment and a high level of accuracy, which will help your business.

Conclusion

Effective inventory management allows you to reduce your total inventory held, and therefore the money tied up in that inventory, without reducing the level of service you provide to your customers. It involves balancing the cost of lost sales due to insufficient stock with the cost of carrying too much stock. Inventory management is complex and requires specialized software. When outsourcing your inventory management look for a company with expertise in this area who are prepared to offer a money back guarantee if they fail to keep track of your inventory.

Overview

Point of Sale distribution is an activity that promotes the visibility of your company and products. Point of sale (POS) campaigns can often represent a significant amount of a marketing budget. They often consist of kits that can be made up of many different component parts often sourced from a range of specialist suppliers. Given the investment in time and money it is not advisable to leave the packing and distribution until the last minute, or risk something going wrong.

Point of sale distribution can be outsourced, just like any other logistics operation. You will need to outsource to a reliable company who will not only get things right, but deliver on time.

Assembly

Often POS sets need to be assembled from components that come from a variety of different suppliers. This means receiving stock and verifying the number and type of items from each supplier. In many cases all packs are made with exactly the same contents, but sometimes packs have variable content depending on their destination. You need a company that understands the importance of careful packing and labeling that can carry out your campaign instructions, and has the flexibility to handle variable content. This means they have to have accurate stock control.

Timing

All destinations need to receive the goods a t a set time in line with the marketing schedule, and you need to have proof of delivery available for all destinations.

Quality Control

It is important that POS distribution gets the right products out to the right location on time. There needs to be quality control procedures in place to ensure the right numbers and items are initially received, that the packs are assembled correctly with no omissions including organizing different combinations of items to different destinations, and that the destinations receive the goods at the right time. You will also want to minimize the amount spent on freight and ensure your goods were received.

Communication

The company that you outsource to should be able to keep you informed at any stage of the operation from the creation of the distribution list to the shipping and tracking. A good partner will understand the importance of careful packing and labeling to ensure material arrives on time and can be identified. They will work closely with you to ensure correct packing and fast turnaround.

Conclusion

The management of point of sale distribution can be outsourced to a fulfillment company that has expertise in this area. You need to choose a company that understands the time critical component of your campaign and the capacity to receive and assemble components that may come from several different suppliers. They must be able to manage variable content, if required. They must be able to deliver your kit packs to multiple destinations and have state-of-the-art tracking systems that will allow them to monitor your packs, have quality control procedures, have proof of deliveries and continuous reporting so that you can be aware of the state of your campaign at any point in time.

Overview

Order processing covers the stream of work involved with processing incoming orders from your customers, managing the payment received and verifying it is the right amount, answering and managing customer enquiries, packing and dispatching the orders. How you process orders can have an impact on your business, because if the customer is not satisfied with the process they are unlikely to return to deal with you again. You want to minimize the time between them placing their order and receiving their item, but it is also important that items are well packaged and that the shipping prices you charge are competitive. You can outsource this part of your business to a fulfillment service.

Receiving orders

Incoming orders from your customers can be received via the internet, email, post or fax. A good order processing partner will have the technology to download and import orders from many popular shopping cart systems. Orders may have differing items and quantities of each items in them.

Receiving payments

The system needs to be able to capture pre-approved credit card payments automatically. Payment may be received in the form of cheques, money orders, credit card or cash and the banking of these payments must be managed, as well as verifying the correct payment amount has accompanied each order.

Customer enquiries

If you are outsourcing order processing then you will probably want them to also handle customer enquiries about the orders on your behalf. Part of the order process may involve sending confirmation emails to customers.

Pick and pack

The type, weight, size and destination of the items you ship will dictate the type of packaging required. Different items may require different packaging types. Invoices, packing slips and shipping labels have to be produced quickly and accurately.

Shipping and handling

You should list shipping and handling charges separately to the costs of the goods, and calculate the charge by weight and not as a percentage of the costs of the goods. This will be more meaningful to your customers. Don’t try and make a profit on your shipping costs, but aim to break even, as many customers can be lost if you overcharge on shipping. Records must be kept of shipping dates, tracking notes and status codes etc.

Communication

Make sure you receive emails, invoices and reports to inform you of what is happening and that there is a system in place that can track and report on every single order from receipt to dispatch.

Conclusion

Order processing can be outsourced to a fulfillment company, allowing you to focus on your core business. This is done by storing your products, barcodes and other unique packaging at the fulfillment company’s facilities. They receive the orders and payments and then pack and ship the items. They can also handle customer service if required. Obviously there are costs involved, but you need to consider the cost savings you make on storage space, payroll and staff. You will need regular reports to ensure the timely and accurate processing of your orders.

Logistics

Overview

Logistics is the management of the flow of goods, information and other resources, between the point of origin and the point of consumption in order to meet the requirements of consumers. Delivering your product to your customers undamaged and on time is more difficult than you may think, but it's worth taking the time to develop a successful logistics management strategy for your business. Getting it right can put you ahead of your competition. The type of product you sell will influence whether you need a logistics company that offers more than just the standard logistics and transportation services.

Third-party logistics (3PL) providers can offer a range of integrated services that can include transportation, electronic order processing, automated reporting, credit management, warehousing, inventory management, kitting, materials handling, packaging, distribution and returns management (reverse logistics). Logistics management also covers purchasing, including supply chain management.

Expertise and experience

It is important for a company to focus on their core competencies rather than being 'jack of all trades'. Outsourcing to a logistics company, also known as a “third-party logistics provider” or “3PL”, allows you to focus on growing your business instead of the minor details of product delivery.

There are logistics companies and carriers that specialize in every industry from clothing to perfume. Search for one you feel confident can get your product to your customers in the same condition that it left you.

Stay current

Logistics efficiency can be maximised with electronic data interchange (EDI). EDI software can do anything from gathering customer requirements to providing tracking information. Make sure you stay current on the logistics industry. Companies need to stay apprised of the latest industry news including rules and regulations and technology like Radio Frequency Identification tags (RFID) and Global Logistics.

Communication

A successful logistics strategy is about getting the right product to the customer on time and in good condition. Monitor the service level of the logistics company you choose by regular contact with them. Choose a company that you can contact via phone or email. You can communicate and confirm with your logistics company all transactions, via email, to keep a record of deliveries and issues.

It is also useful to check your customers' feedback and industry trends for successful logistics management. Requesting feedback from your customers on your website or through follow-up calls is a good way to find out if you are getting good quality service from your logistics company.

Costs

As fuel costs rise, so do shipping costs, and there is no way round this. When petrol prices are fluctuating often some logistics providers may change their charges more often than others, so from time-to-time you need to reevaluate the costs of your company's logistics.

Conclusion

To grow your business it is best to concentrate on your core business strengths and outsource the important role of logistics to a company with specialist demonstrated expertise and experience of this dynamic and evolving industry. As your business grows your requirements will change so look for a company that has technologically advanced systems and processes, operational disciplines, and an outstanding customer service ethic. Delivering your products quickly and efficiently can give you a competitive edge against your competitors.

Overview

Outsourcing is the transfer of a business function to an external service provider, and allows small businesses to obtain services and expertise they could never develop in-house. Outsourcing allows businesses to focus on their core competencies and when the outsourcing partner is selected wisely it will result in increased efficiencies and lower total costs.

To determine what functions to outsource, consider what actions your company performs that give you a competitive edge, and keep these activities in-house. Anything else is a candidate for outsourcing.

Reasons for Outsourcing

There are dozens of reasons why companies choose to outsource some of their functions. Some of the major issues most companies address are cost savings, cost restructuring, quality improvement, increased knowledge base, operational expertise, staffing issues, capacity management, and risk management. Businesses often outsource information technology (IT) functions, real estate management, cleaning services, accounting, and logistics functions such as warehousing, distribution and fulfillment. Outsourcing can remove the task of having to maintain infrastructure and update software. It also means you don’t have to train staff in functions that are not part of your key business.

Shop Around

When choosing a company to outsource to it is useful to ask for referrals from companies similar to yours. Contact these companies and ask them what they find good and not-so-good about the provider and how outsourcing is benefiting their business. Decide which of your business functions are candidates for outsourcing and have a look at what is available in the market. The decision to outsource is taken at a strategic level and a business case determining the scope of services to be outsourced needs to be established before you choose your outsourcing partner. Use due diligence to ensure the company has the facilities, staffing and infrastructure to deliver what they promise and see if they have an established track record.

Contracts

Once you have chosen a company to outsource to and have investigated their location and the costs that will be involved you need a contractual agreement that defines how you will work together. This is a legally binding document that will specify the date the contract becomes active and when the supplier will start to provide services. There needs to be a Service Level Agreement to determine the quality of the services, and when the contract is reaching an end you need to be able to terminate the service (for example by changing to a different supplier) or to renew the contract.

Conclusion

There has been a huge increase in outsourcing over the past decade, as the technology and expertise required to undertake key activities have become increasingly complex. Outsourcing allows a business to concentrate on its core competencies and utilise other companies that are specialists in their field. This allows better cost management as well as improvements in service delivery in most cases. It is vital that you select an outsourcing partner that can meet your needs now and in the future, when your business grows. You need a company that is accessible and has a proven track record.

Overview

Distribution is the physical logistics of moving inventory along a chain of distribution. In today’s business environment, the way a company handles distribution operations and inventory management is vital to their financial performance, sales and customer satisfaction.

Customers expect your distribution operations to meet their own tight and demanding deadlines whether it is small orders direct to your customers or large bulk orders to retail outlets. It is critical that your distribution facilities can deliver the right product, in the right place at the right time. You also want a distribution network that will satisfy customer demand to the required service level at the lowest cost. This is why most businesses outsource distribution to a logistics provider who has the distribution facilities, systems and the process expertise required to supply a competitive advantage.

Distribution centres

In an ideal world both demand and supply would be consistent and reliable. By using a Just In Time (JIT) approach, products would flow directly from supply to customer. However in the real world there are fluctuations in customer demand, inconsistent supply and all manner of glitches that can occur in a supply chain. For these reasons, products need to be held at distribution centres within supply chains to act as a buffer to allow for these variations in supply and demand, and meet customer service requirements.

Distribution channels

There may be a chain of intermediaries that move products down the chain to the next organization, before it finally reaches the consumer or end-user. This process is known as the 'distribution channel.' There are various distribution channels that can include selling direct, such as via mail order, internet and telephone sales, agents, who may sell direct on behalf of the producer , distributors or wholesalers who sells to retailers, and retailers who sells to end customers.

Costs

The costs in distribution are based on many variables including customer location, order size and frequency, transport costs, transport vehicle types, transport modes, warehouse (distribution centre) size, location, resources, costs etc, service level requirements, factory and supplier locations, ports of entry for imported products, and many other factors.

Quality

The quality measures for distribution are that the right products are being delivered to the right customer in the required timeframe and with minimal product damage.

Distribution software is used for planning, projecting and implementing the chain of distribution. It allows tracking of items from the source to their current location and the identification of cost elements associated with the movement of goods. This facilitates the ability to consolidate orders on one invoice or multiple deliveries on one order or across multiple orders.

Conclusion

Delivering products to customers when and how they expect and managing the logistics of the delivery is a vital part of many businesses. For most businesses it makes sense to focus on their core business and the sale of the products, and outsource the total logistics of reliably getting product to their clients to a reputable third party. The benefit of outsourcing such a function is that a company has access to logistics expertise without the costly investment of a fixed infrastructure.

To reduce the worry of products being lost, stolen or wrongly delivered you can pick one of the elite companies that offer a 100% money back guarantee. This means that in the unlikely event that anything is misplaced they will cover the cost so it won’t affect your bottom line.

Fulfillment

Overview

Fulfillment, also known as order fulfillment or product fulfillment, is the process where a person or company fulfills their obligations to send a person an item or product that the person has ordered, purchased, or requested from the organization. How you fulfill orders can have a major impact on your business.

Order fulfillment is in the most general sense the complete process from point of sales inquiry to delivery of a product to the customer. Sometimes order fulfillment is used to describe the narrower act of distribution or the logistics function, however, in the broader sense it refers to the way that firms respond to customer orders. Fulfillment services can be outsourced to a company that can store items, receive the orders, package, and then ship the ordered items to the end consumer.

Communication

Once an order is entered into the system, it needs to be handled with speed, accuracy and efficiency. The right products need to be picked, packed and dispatched as quickly as possible, and the system needs to track each order from receipt to dispatch.

The company that you outsource to should be able to provide you with reports at any stage of the operation, and be contactable via phone or email. A good partner will understand the importance of careful packing and labeling to ensure material arrives on time and can be identified. They will work closely with you to ensure fast turnaround.

Technology

Choose a fulfillment company with the latest technology. You need a total order management, order import, and order processing automated solution for your business, whether you take orders online, by phone, over-the-counter or some combination of all three.

The system should have the ability to manage each client as a separate company and maintain separate inventory and customer information for each company while processing all orders from a single screen. Order entry screens and order review screens should be capable of being tailored to the customers requirements so that information is captured accurately and efficiently.

Costs

Most fulfillment companies typically charge fees per order and per item shipped. However, there may be other fees that can include receiving merchandise, receiving orders via mail order, processing credit cards, making bank deposits, answering phone calls, responding to customer email correspondence, providing reports, and much more.

To make sure you will be able to forecast your costs you should look for bundled pricing where all fulfillment activities are bundled into a set price per order fulfilled.

Conclusion

The way you fulfill orders can impact on your business as customers will look elsewhere if your items are poorly packaged or slow to arrive. It makes sense to concentrate on your core business and outsource fulfillment activities to a company with expertise in this area.

Ensure you clearly understand the pricing structure you will be working with as several different types are used, and make sure you understand the level of service your customers will receive. The fulfillment company is a major customer interface with your business, so choose wisely to ensure you get satisfied customers who will repeat business with you.

Supply Chain

Overview

The success of a business can often depend on the success of their relationship with their suppliers and with those who they supply. Businesses that rely on other businesses are in a supply chain typically involving distribution of product from the supplier to the manufacturer to the wholesaler to the retailer and to the final consumer.

A supply chain encompasses all organisations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer. Supply chain activities transform natural resources, raw materials and components into a finished product that is delivered to the end customer.

The primary objective of supply chain management is to fulfill customer demands through the most efficient use of resources, including distribution capacity, inventory and labour. It includes activities such as production planning, purchasing, materials management, distribution, customer service and forecasting. The supply chain seeks to match demand with supply and do so with the minimal inventory.

Supply chain vs logistics

There is often confusion between the terms “supply chain” and “logistics”. In general “logistics” refers to activities within one company or organization involving the distribution of products whereas the term “supply chain” also encompasses manufacturing and procurement and therefore has a much broader focus. It involves multiple enterprises, including suppliers, manufacturers and retailers, working together to meet a customer need for a product or service.

Technology

The supply chain process involves multiple steps taken on the part of both vendors and retailers to ensure products are successfully ordered, shipped, received, and invoiced. By their nature, supply chains are complex and data intensive. As a result, smart tools for supply chain design, planning, optimisation and execution are essential. If you are relying on spreadsheets or the knowledge of a few key individuals you are highly unlikely to be optimizing your supply chain.

Outsourcing to a company with appropriate EDI software application makes it possible for all partners in a supply chain to use one simple system to submit orders, process requests, coordinate shipping and arrange billing. EDI facilitates communication between different systems on the retailer side and those on the vendor side to ensure orders are processed quickly and correctly. Having access to an EDI system also gives both retailers and vendors more visibility into the supply chain process as a whole to help combat any problems that may arise.

Collaboration

While technology solutions can support greater data visibility and integration of dispatch and distribution with production scheduling, a key element underpinning the management of the supply-chain is collaboration.

Collaboration means firms share information in an accurate and timely manner so that everyone in the supply-chain can adequately plan forward inputs and outputs, dispatch product, manage risk and maximise return on investment. This improves the overall functioning of the supply-chain and ultimately an individual firm's bottom line. The key to collaboration is communication which is done most efficiently via electronic transfer of information.

Conclusion

Firms can become more competitive by making improvements to internal practices, but ultimately the ability to do business effectively depends on the efficient functioning of the entire supply-chain. Effective supply chain management can boost performance ratios such as return on capital employed (ROCE) by reducing operating costs, increasing asset turnover and improving customer service levels.

When choosing a partner to outsource this function to look for a company with experience in the quick, accurate and cost-effective supply chain process created by the use of EDI applications. Also look for a company that is a member of the Supply Chain and Logistics Association.

Overview

A warehouse is a commercial building for the storage of goods. A warehouse can be as simple as a garage-like space at a self-storage facility or as complicated as a vast facility where the operators not only store your goods, but accept shipments, maintain and track inventory and send materials out. If your business has inventory then you need to know about warehousing, as storing goods efficiently is a key to a profitable business.

Most small to medium businesses don’t have the available capital to invest in their own warehousing infrastructure, and instead choose to outsource. Outsourcing means you don’t have to invest in infrastructure and maintain it, allowing you to have better control over your costs.

Location and size

An important decision is whether you need to be near to your warehouse or whether this doesn’t matter for your business. Many internet based stores have no requirement to actually handle their own stock, perhaps using drop-shipping or other arrangements, and in this case the warehouse location is completely irrelevant. For other businesses a location close to major clients is important.

Don’t choose a warehouse that is only capable of handling your current capacity as hopefully you will be working on growing your business. Consider if you have special warehousing needs such as climate control or refrigeration. Most importantly you need to be certain that your goods will be secure 24 hours a day.

Technology

Some warehouses are completely automated with products on pallets moved on automated conveyors and automated storage and retrieval machines, while others use manual labour and forklifts to move stock around. A Warehouse Management System (WMS) is used to corodinate the tracking of goods in the warehouse. A good WMS has a range of warehousing features and can be interfaced with order processing, freight management, and accounting applications as well as with material processing equipment. Radio frequency technology and bar code readers can be used to optimize efficiency.

Communication

A good warehousing partner should be able to supply you with on-line reporting systems and detailed inventory reports on a daily, weekly or monthly basis. They should also have complete audit trails for all materials.

Costs

Before deciding on your warehousing solution always contact several providers to get an idea of costs. If you are considering investing in your own warehousing infrastructure make sure you consider all the costs of maintenance, updating and developing that infrastructure. After doing the sums most small and medium sized businesses realize that outsourcing is the most cost-effective solution.

Conclusion

If you have warehousing and distribution needs, choose a warehousing provider with state-of-the-art equipment such as paperless warehouse management using radio frequency technology, and with a large capacity warehouse. This will provide you with the potential for quality service. Make sure the warehouse has security either in the form of back to base alarms, 24 hour monitoring or video surveillance technology. Make sure they can provide you with detailed inventory reports as frequently as you require, and have on-line reporting systems.

Ideally you should look for a company where all stock transactions and stock takes are based on techniques and guidelines recommended by the Australian Production and Inventory Control Society, as this society fosters professionalism in supply chain activities.