06 Aug How EDI and eCommerce Work With 3PL Partners
Advances in online technology over the last decade have dramatically improved the logistical and operational capabilities of eCommerce businesses in both the B2B and B2C realm. Cloud and mobile computing technologies have further streamlined business processes, including inventory and distribution management. In this regard, let’s examine how EDI and eCommerce work with 3PL partners.
What is EDI and How is it Used?
Electronic Data Interchange (EDI) technology is used to streamline transactions between disparate enterprise systems. EDI Basics defines it this way:
“Electronic Data Interchange is the computer-to-computer exchange of business documents in a standard electronic format between business partners.”
Mainly, EDI solutions are used for B2B transactions, in order to eliminate labor-intensive manual processes that include paper, the postal service, fax machines, and email. EDI is used for sharing documents such as:
- Purchase orders
- Payment documents
- Shipment notifications
- Bills of lading
EDI technology is much older than the cloud ( has been around since the 1970s); EDI solutions have helped businesses streamline their B2B transactions ever since on-premises ERP (without cloud functionality) solutions were the norm.
Today, EDI is still used either as a stand-alone product or as part of a distribution management ERP solution. Stand-alone EDI products can be integrated with accounting software and ERP solutions that don’t have distribution management solutions.
Although eCommerce involves electronic transactions, this isn’t the same as EDI technology. The difference lies in the functionality; EDI automates PO transactions between eCommerce customers, trading partners, dropshipping partners, and 3PL partners for one-time and repeat orders, while eCommerce provides the shopping experience and has limited PO automation functionality.
Basically, most eCommerce businesses use both EDI and eCommerce together to give their customers the option of streamlining their transactions through automation. B2B buyers use EDI solutions to fulfill repeat orders, see inventory levels, and complete the entire procurement process.
eCommerce businesses can also use EDI through their 3PL partner’s solutions. Basically, this means ordering, fulfillment, invoicing, and inventory management are automated and processed by the 3PL partner’s fulfillment software with EDI capabilities.
What Type of eCommerce Businesses Need EDI Solutions?
Medium to large B2B eCommerce businesses selling physical goods need EDI solutions. This usually comes in the form of a distribution management ERP solution, yet can also come as a stand-alone software that’s integrated into ERP or accounting software (with no EDI functionality), or through a 3PL partner’s fulfillment and inventory management solution.
Also, B2B and B2C eCommerce businesses using dropshipping methods or who have trading partners will need EDI solutions to streamline and coordinate the PO process electronically between each party. For instance, an eCommerce business may be selling their products on multiple online platforms, including Amazon, Shopify, and Walmart, and then shipping them through a 3PL partner; EDI is needed to automate ordering and fulfillment processes directly between trading partners, 3PL partners, and customers.
Remember, EDI solutions are needed to translate and process electronic communications between different enterprise systems. When two or more different systems are being used to fulfill PO processes, EDI solutions are needed to translate and process transactions through automation, rather than having the eCommerce business manually process orders and invoices at every stage.
EDI solutions are also used by B2C and B2B eCommerce businesses using a 3PL partner to fulfill and ship orders without using trading partners. If 3PL partners have a software solution with EDI functionality, then eCommerce businesses can offer EDI methods to their direct customers.
Essentially, the only time EDI solutions are not needed is when eCommerce businesses serve only a B2C base and fulfill the orders themselves. In this case, there’s no need for different enterprise systems to communicate electronically with each other, yet the eCommerce business will still need some form of ERP and inventory management software to facilitate and automate their day-to-day business.
An article on MultiChannel Merchant called: “EDI or B2B E-commerce: That is the Question”, written on June 13th, 2016 by Bill Onion, explains the differences between EDI and eCommerce:
“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.
…B2B e-commerce is more than simply capturing customer orders. B2B e-commerce provides you with the opportunity to exhibit your full product or parts range in an attractive and interactive manner.
…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.”
Streamlining Ordering, Fulfillment, and Invoicing Processes
Understanding how EDI and eCommerce work with 3PL partners isn’t as complicated as it may seem. Essentially, eCommerce businesses can have EDI functionality through ERP solutions, 3PL partner solutions, or a stand-alone solution integrated into their accounting or ERP software. Mainly, EDI functionality is needed to streamline ordering, fulfillment, and invoicing processes for larger repeat orders with B2B eCommerce businesses using 3PL and trading partners.
Cloud technology has expanded the functionality of EDI solutions by bringing real-time updates and remote management capabilities. This brings real-time visibility with inventory levels and end-to-end procurement processes, as well as expanding the capabilities of eCommerce businesses to manage and automate ordering, fulfillment, and invoicing processes.
EDI solutions are still needed in our advanced cloud and mobile computing world, especially when 3PL partners and dropshipping options are more readily available to eCommerce businesses. EDI technology still helps disparate enterprise systems communicate through automated controls to complete end-to-end procurement processes.
The main difference now is EDI solutions have integrated with cloud-based SaaS-type solutions to bring the power of the cloud and mobile computing technologies to the electronic data interchange. This gives eCommerce customers the ability to streamline ordering with real-time automation while eliminating manual processes for eCommerce businesses.
EDI technology also coordinates transactions between 3PL partners, trading partners, and dropshipping partners through real-time automation. Both B2B and B2C eCommerce businesses can benefit from this automation and collaboration when their 3PL partners offer EDI functionality within their order and fulfillment software solutions.
Ottawa Logistics utilizes EDI technology within our cloud-based order fulfillment solution. Popular eCommerce platforms can easily be integrated into our solution; daily orders can then be transferred from eCommerce shopping carts to our warehouse to be fulfilled. With our help, the entire procurement process for B2B or B2C customers can be automated and streamlined for optimal results. If interested in learning more please contact us today.