Change Management –
Last week ec-bp.org sent out a survey regarding change management and the use of EDI for communicating changes and confirmations of the change. Some of the responses indicated that the 860 is either being used or are in plans for implementation for requesting changes from the retailers and that there is an interest in confirmations back through an 865. Certainly these are the correct transactions and I’m glad to see they are under consideration. In regards to Vendor direct to consumers, one of the challenges on the retailer side is the automation of the customer changes systemically.
Here are my findings –
- Updates - Most orders are expected to ship within a very short window of time, thus updates are rarely made. If a retailer's customer requests additions to their order, this is typically a new customer order. There may be notes on the second order to ship with the first, but usually they end up being done as separate shipments. If the customer requests a removal of an item on an order, the retailer would typically cancel and reissue a new order. I will alert both retailers and suppliers that updates can occur from both directions, meaning if there are issues with the requested order, suppliers are being asked to communicate these discrepancies. There are some that think that 865 is the right method, however in practice most are using the 855 as the supplier initiated PO Change document. If you’re interested in quick adoption I’d suggest going with what others are doing and not implement the 865 as a change request.
- Cancels – What most retailers are interested in automating are cancelled customer orders. I’ve learned that some retailers will send out orders before getting validation on credit worthiness. Thus is one reason for some cancellations, of course other reasons include customers changing their minds. Again due to the short shipping window, the need for quick delivery to catch order prior to be released for shipment is crucial. Many retailers and suppliers will share that it's quite difficult to get products back when an order was canceled but was shipped/delivered.
- Confirmation – As part of the Vendor Direct Order Cancelation process, the 865 is what is required back as confirmation that an order was indeed caught prior to carrier release.
Product returns –
When considering Direct Ship/Drop Ship Vendor to Consumer, managing customer returns must be part of your business conversations.
Below are things to consider –
1. Physical returns – It needs to be determined upfront whether customer returns go back to the Retailers facility, suppliers facility or to a 3rd Party returns center.
a. Customer returns to Vendor – With this process the Retailer's customer returns the product to the vendor that shipped the order. With this process the retailer would likely request the customers contact the retailer's customer service department to arrange for the return. Through this process, either the retailer mails/emails required return documentation, including a shipping label, or direct he consumer about action needed
b. Customer returns to Retailer - With this process the Retailers customer returns the product back to the Retailer's DC. The retailer usually indicates the return information and a return label as part of the packing slip. A section of the DC is usually allocated to managing customer returns, so with this method, the retailer receives the returns, validates acceptance, issues credit to the customer, then stores the product until the time a request will be made for multiple returns back to the vendor's facility.
c. Customer returns to 3rd Party Return Center – Similar to the returns to the Retailers, this process has the Retailer's customer return the product delivered to the Retailer's 3rd Party provider. The retailer usually indicates the return information and a return label as part of the packing slip. The 3 PL then provides the service of managing customer returns, receiving the returns, validates acceptance, communicates the acceptance so credit can be issued to the customer, then stores the product until the time a request will be made for multiple returns back to the vendors facility.
d. 3PL/Retailer returns to vendor – As indicated in 1a and 1b above, returned products are accumulated by a 3PL or the retailer, and at a point in time, a request for return authorization is made with the vendor, and upon approval the return is made and credit issued to the retailer upon receipt and confirmation of the return.
2. Electronic Return process – With the number of customer returns being higher with Direct/Drop Ship orders, automation of the returns process is a necessity. The use of EDI 180 and 812 transactions are the documents used with this process.
a. Customer Request for return – As indicated in 1a above, consumers make a request of the retailer to return products.
- If the return is going back to the vendor then the retailer will then request return authorization with the vendor as soon as the customer’s request is made.
- If the return is going back to the Retailer or a 3rd Party Provider, there is no electronic data change between the vendor at this time.
b. Retailers Request for return – Regardless of whether a return is direct to the vendor or to a retailer/3 PL, the requests are made through sending the 180 EDI transaction
- For Direct/Drop Ship orders returns, the information would reference the PO number used with the original order.
- For Retailer/3 PL managed returns, when it is determined by the retailer or 3 PL (enough product is accumulated that a return is needed) then the request is made electronically
c. Vendor return authorization – when the supplier approves the return request they confirm with a return 180
- For Direct/Drop Ship, this authorization number is communicated to the consumer and shipment is arranged back to the supplier.
- For Retailer/3 PL managed returns, shipment is packed and shipped back to the supplier referencing the communicated return authorization number
d. Credit for returns - Depending on the relationship between the retailer and the supplier, the Retailer may –
- deduct the cost of the return product less shipping costs,
- create a EDI 812 Debit for the cost of the return product less shipping costs
- the supplier will issue credit and/or send an 812 Credit memo or Reverse 810 for the cost of the return product less shipping costs upon receipt and validation of the return the supplier
If you’re not in the Ecommerce – Vendor/factory direct space, the processes above can be utilized for return management with your suppliers as well (Steps 2a – 2c).