This is part 2 of my earlier post about the critical role that B2B e-Commerce technologies play in the supply chain for back to school season. If you are planning to purchase supplies for back-to-school season then chances are high that you will be fewer than six degrees of separation from B2B e-Commerce technologies. Read my post below to learn about the various different steps that are involved with getting products to retail locations in your neighborhood.
Shipping
The first step in the multi-phased shipping process is to transport the goods via a truck from the supplier’s plant in Shenzhen to the nearest ocean port, perhaps in Hong Kong. At the port goods are loaded onto a steamship for travel to the US. The supplier may arrange for their own transportation or they might outsource the function to a specialized freight forwarder. Communications between freight forwarders, exporting suppliers and ocean freight carriers such as booking requests and freight invoicing are often automated via EDI. It is very common for either an importer or exporter to purchase cargo insurance for goods transported via ocean freight. An insurance policy provides financial reimbursement in the event of a loss or damage to goods caused by collision, sinking, explosions, piracy or inclement weather. There are specific EDI transactions which are utilized to request cargo insurance policies and submit claims between importer-exporters, transportation carriers and insurance underwriters.
B2B e-Commerce Document Flow in the Retail Supply Chain
Exporting and Importing
Export declarations need to be filed with the local customs agencies before the steamship may depart. For goods destined for the US, import declarations and customs filings must be completed 24 hours before the ocean vessel departs from its point of origin. Import and export declarations are becoming increasingly complex as regulations on homeland security are extended and free trade agreements between nations are expanded. Consequently, many buyers and suppliers are hiring specialized customs brokers to manage the declaration process. Both import and export declarations are highly digitized process using B2B technologies. For many shipping hubs such as Singapore and Hong Kong the speed with which import and export processes can be performed is a key differentiator for the country’s logistics providers. Consequently, the ability to eliminate inefficient paper-based processes from international trade is a key focus area.
Ground Transportation
Once the goods arrive in the US and clear customs inspections, the containers will be transferred to a railcar or truck for routing to their final destination. Perhaps the destination for this specific container is the department store’s distribution center outside of Chicago. Again, EDI will be used to arrange for the transportation with specialized messages for load tendering and booking. As the goods are transported the trucking or rail company may provide a shipment status update electronically to the buyer and/or supplier. And when the goods arrive at their final destination, the transportation carrier will typically send an electronic proof of delivery back to the supplier in China as a confirmation.
Invoicing
Upon confirmation of delivery, the supplier will send an electronic invoice to the department store requesting payment. The retailer’s accounts payable group will validate the invoice to ensure that the arithmetic is correct and that the bill matches the original purchase order. The retailer will also compare the invoice to the actual goods received. In some cases, the goods may have been damaged while in transit. In other cases, the supplier may have shipped the wrong quantity or type of product. Consequently, a deduction or debit is posted against the invoice. Suppliers are notified of debits against their invoices by a specialized type of EDI transaction and offered the opportunity to dispute the retailer’s deduction. Upon resolution of any disputes between the retailer and supplier the invoice is approved. However, approval does not necessarily equate to a payment.
Factoring
Retailers often have extended payment terms with their suppliers which specify that payment is not due until 60 days after receipt of the invoice. Suppliers can elect to receive payment faster through a number of commonly available financing programs. For example, the supplier can bundle the invoice with other receivables and sell them to a third party factoring company such as CIT. Another popular option is a supply chain finance program, in which, the retailer’s bank will pay a supplier as soon as the invoice is approved. In both of these models, the supplier is paid immediately in exchange for a 1-2% discount against the value of their invoice. And in both of these models, the use of electronic invoicing is a critical to ensure the approval and payment processes can be expedited.
How Supply Chain Finance Works
Payment
Let us assume that the supplier did not elect to receive an early payment for the invoice. In such a scenario, the retailer will wait until a few days before the invoice matures then sends a payment instruction to their bank to transfer funds to the supplier. The electronic funds transfer may be performed immediately using a wire transfer system or in 1-2 days using an Automated Clearing House (ACH). In either case all of the electronic funds transfers leverage B2B integration technologies. The retailer sends the payment instruction to the bank in a specialized EDI or XML document. The banks use electronic transactions standardized by the National Automated Clearinghouse Association (NACHA) to affect the funds transfer. In addition to the payment, the retailer will also send the supplier a remittance advice in EDI format. The remittance advice provides a detailed explanation of the payment made as well as any credits or debits issued against the invoice.
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