Retail business process model
On-Line Stores have changed a lot and are growing. Consumers love the convenience. In 2011, US consumers spent $194 billion shopping via OnLine stores according to the US Department of Commerce. According to Forrester Research that number will grow to $279 billion by 2015.
Doesn't matter if they are “stand alone” OnLine store or a branch of a “brick and mortar” store, the efficient business model is the same. Everybody describes the process as “E-Commerce”, but the backbone of the whole progress is really EDI.
Way back when, I had an On-Line store which sold postcards. An order would come in, I went to a file cabinet, found the merchandise and walked down to the post office. But this business model would not work if I had any volume, had to order product, or didn't like standing in line at the post office.
I have laid out three charts showing a common scenario for an On-Line Store (or for an OnLine branch of a “brick & mortar”). The slides are broken down by process: ORDER CYCLE, SHIPMENT CYCLE, INVOICE/PAYMENT CYCLE. These charts are intentionally not overly technical. Implementer will still need an EDI analyst to populate the required segments. Feeds will also be required into internal systems (accounting, CRM and, maybe, ERP).
In the ORDER CYCLE, a customer enters the WebSite and shops. At the “check out”, customer goes to a “shopping cart” or to a “button” that completes the purchases. The store-front has two things: a merchant account and a payment gateway account. The customers will then walk through the process of adding their mailing address and credit card information to complete their online shopping. The orders will be sent to the payment gateway to be processed. The transactions will be forwarded through a “switch”, (banking private network) to the bank that issued the credit card and they will verify the credit card and information that was provided on the order forms. As the customers wait on the shopping website, the bank will make a deposit into your merchant account, and inform the shopper that their order was accepted. If the bank sends back information that the card has been declined, the website will notify the buyers that there is a problem with their card or the information that was provided. The payment gateway finalizes this process by sending transaction details and information to the merchant's On-Line store. PayPal and other similar plans operate basically the same way through a secure “private” network.
So now only valid orders reach the On-Line Store. At this point, the remainder of the ORDER CYCLE is relatively simple. The On-Line Store wants the customer data to go to the supplier as a purchase order. Remember, The On-Line Store has NO inventory, It just own an Internet “store-front”. Here is where EDI first steps in.
Before we address the SHIPMENT CYCLE, we need to understand that the “boxes” I show might be different depending on how the manufacturing company actually works. The “factory”, “warehouse”, “3PL”, and “express company” might range from one entity to four. The factory might have its own fulfillment center and actually operate as a 3PL shipper. The warehouse might be a 3PL because many of them are in this business too.