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 electronic data interchange (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.
Advantage of EDI
Implementing EDI into an organization provides many benefits, including:
- Automation for Sales Transactions: EDI automates the ordering process for capturing customer Sales Orders (inbound Purchase Orders). This also usually automates the sending of Advanced Shipment Notifications (ASNs) as well as customer invoices. This reduces the manual effort for capturing orders and eliminates the cost of sending paper invoices.
- Automation for Purchase Transactions: EDI also automates the process for sending Purchase orders to vendors (outbound Purchase Orders). This can also automate the process for receiving Advanced Ship Notifications (ASNs), as well as vendor invoices. This can reduce manual effort for sending POs (whether paper or email) as well as processing Vendor invoices within the three-way match process.
- Easier to Do Business: Implementing EDI for both Sales and Purchasing transactions can help companies be easier to do business with, easing the relationship between a company and their customers. This can lead to increased customer satisfaction and longer term relationships.
Disadvantages of EDI
Of course, there are a few disadvantages of EDI. These include:
- Coordination with Customers and Vendors: Once implemented, EDI will only work with others who are also transacting with EDI. Generally, only larger companies implement EDI, usually for the top 20% of a customer and vendor base.
- Rollout Schedule: A rollout schedule for implementing EDI is tied to the targeted customers and vendors. If certain customers or vendors are not ready to start, then that customer or vendor does not start leveraging EDI.
- Proactive vs. Reactive: EDI does not proactively market to customers for additional items. It only captures what the customer desires to purchase. It does not cross- or up-sell, offer promotions, highlight new items, etc.
- Purchase Decision: Generally, the PO that is passed through EDI is created by a purchasing agent, not the end user of the item. This eliminates the opportunity to interact with the end user, potentially offering up-sell opportunities.
Implementing EDI does require a dedicated resource to manage the EDI process and proactively manage the EDI transactions.
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. This can significantly reduce the cost of transactions.
- Item Catalog: The item catalog provides rich, technical, and specific item information for customer research and prospecting, as well as high quality images and videos.
- Customer Self Service: B2B 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?
- Marketing: B2B ecommerce provides a 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
- Digital Catalog: The digital catalog provides a venue for prospecting for new customers with detailed catalog information on the internet (and a registration process for new leads/prospects/customers).
- Google Search Results: Most buyers perform a Google search when looking for new products or vendors. B2B ecommerce puts your information on the web and available to Google.
- Rollout Schedule: When implementing B2B ecommerce, you control the rollout schedule. When you are ready to launch, you can launch the site.
- Mobile Platform: B2B ecommerce provides mobile-ready platforms for customer ordering, allowing your customer to order from their desktop, tablet, or phones.
- Quoting: Advanced functionality in B2B can provide for an ‘Add to Quote’ function (instead of Add to Cart). This can be very important when using the site as a demand generation and prospecting platform.
Disadvantages of B2B Ecommerce
- B2B ecommerce sites generally do not integrate with the end-customer’s ERP/Purchasing system.
- Catalog Data: At times, the item master data is not 100% accurate and some data clean-up is needed before launching the site.
- Sales Team: When launching a new B2B site, the sales team can view the site as a competitor, rather than a complement to them. This needs to be addressed early and the strategy shared.
New Revenue Channel: Launching a new B2B site should be treated like an entirely new revenue channel. As such, it needs support from every segment of the business.
So, Which is Right for Me?
EDI: 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: 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.
Both of these options help to automate the ordering process, but deciding the best approach can be a challenge. Overall corporate goals should be considered when making the decision, and remember, sometimes the correct answer is both.
Bill Onion is Managing Director of Briteskies, where he has a distinguished track record helping B2B and B2C companies integrate ecommerce solutions.