Welcome to The eCommerce Experience - the podcast that turns YOU into an eCommerce expert. Your host, Andrew Rogencamp, shares his wealth of B2B and B2C business experience to take you on an eCommerce adventure.

Each month you'll hear from industry experts and meet people just like you - looking to take their business to new heights online.



Andrew: Hi there, everybody, and welcome to the eCommerce experience. My name's Andrew Rogencamp, and I bring this podcast to you just to talk about different eCommerce concepts around B2B and B2C, in Australia and around the world.


So, here we are in August, 2020. Victoria, Australia is now in Stage 4 lockdown and eCommerce continues to be a really important part of business continuity within the economic environment. It's playing a really important part.


So this week I want to talk about a thing called Sales Order Automation. And if you recall, back to my very first podcast, I talked about two different types of B2B eCommerce; and one of them is B2B for manufacturing and distribution.

That's where we've got a manufacturer or distributor that's actually selling to another business. And they're typically on-selling from there. 

(The other type is manufacturing for business use. So, that's typically the likes of companies like Staples and companies like that that are selling products to customers that are using them in the business. It might be stationery, it might be cleaning equipment and that sort of thing.) 

So, sales automation plays a really important part in the manufacturing and distribution part of the B2B eCommerce sphere. Because what happens in reality is that you've got sort of three types of customers that exist in that manufacturing and distribution environment. And I guess you could break them into small, medium and large. 

1) So, if we look at the small companies first that are buying off you, typically, they're really happy to be buying using your eCommerce website. They'll get on, they'll place orders, they'll use templates, they'll look at their favourites and all of that sort of stuff, and they'll place the order for you. So as a company that's got that eCommerce application, you're actually able to have a great cost of service saving.

And by not having to key those orders in yourself into your sales or ERP system, and the customers also get benefit out of it, of course, by being able to self-serve themselves online; they don't have to wait for a sales rep or send an email or a fax or anything like that. It can just easily go through. 

 

2) So what I want to cover now is the other end of town and that's the big end of town. And that might be in Australia, where you're dealing with companies like Bunnings or Woolworths, any of the large end of town. They're normally going to be dealing with you in a couple of ways. Some of the ways those big companies like Bunnings deal with you is they actually want your sales reps to be inside their store doing a thing called merchandizing, where your sales reps are actually working out what the customer needs and pretty much placing orders on their behalf; it's your responsibility to fill their shelves. 

But the other main way that those big companies are going to deal with you is via EDI. Now, EDI is a tool that's been around literally since the 80s, maybe even before that. And EDI stands for Electronic Data Interchange. 

And it's pretty much what it says is that those companies like Bunnings will send you a purchase order in the form of a electronic document. They take several different formats these days. EDIFACT is a really old way of doing it. More common ways these days are in formats like cXML and things like that. 

So essentially, they're sending you an electronic order and that will go directly, if you've got an EDI application at your end, that will consume that. You'll send them, it will create a sales order in your ERP system so that you can ship that to them and then you'll send them back things like a purchase order acknowledgement. There's other documents in the EDI chain like advanced shipping notices and invoices; you can send them back. 

In a true EDI environment, you can really automate that whole exchange of information to deal with what products you customer wants and how you're going to invoice them, you can really automate that. 

Downside to B2B is that it's pretty expensive to implement from both sides. So, unless you're a big supplier of some of these large companies like Bunnings, they typically will rule the roost in terms of how they want to interact with you. So, they'll just say, “We're going to deal with you via EDI. Here's our spec, you must comply.” And that's to reduce the cost of implementation for them. They just want it to be the same for everybody. So, they're the big customer. They will dictate how things work in that environment. 

From your point of view, if you want to deal with the customer EDI, you need to have somebody software. You're going to be paying per transaction and often, the implementation is long and drawn out because there's a lot of work from both your side and your customers side to make sure all of your stock codes match up, that the pricing is right and all of that sort of stuff. 

Typically, in my experience, I've really mainly seen EDI at that big end of town. Because there's a high cost barrier to entry to get into EDI. 

 

3) So then we've got the challenge of that middle ground. And the middle ground is all of those customers that you're dealing with that are pretty sophisticated themselves. They've got their own ERP systems and they want to buy off you. 

But when they buy off you, the way they'll work out their inventory requirements, what they want to raise on a purchase order, isn't by browsing through your website. It'll be by reorder and replenishment logic that exists in their ERP system. 

So, their ERP system is going to say, in a store (maybe it's a store that's selling tools and they're buying off a tool supplier) they're going to have a whole lot of minimum stock for each product. And because the ERP system is actively tracking what they've got on hand, they'll run a reorder report or process maybe once a week or even once a day and work out to say that I need to buy all of these tools of this tool supplier. 

And what they'll do is it will just convert that into a purchase order. And typically, what they'll do is they'll email that purchase order to you via PDF. 

The challenge is that your end, they're not going to go and email that off to you and then jump on your website and key it in. There's just nothing in it for them to do that; they see that as your job. They don't want to be doing that for you. 

So, you're stuck entering that order. And you think, “Well, why can't I get this through my eCommerce site?” And that's really where sales order automation comes in. 

And sales or automation is a tool out there that can automatically take that PDF purchase order, recognise who it's from, and then bring that order into your ERP system and do all the validations necessary to do that.

 

So, today, I'm lucky enough to have our Aaron Rasmussen from a company called Lucy, who have developed a really cool product that specialises in sales or automation. Aaron, welcome along. 

Aaron: No worries. Thanks for inviting me. 

Andrew: So, just first of all, tell me about the name - Lucy. How did that come about?

Aaron: Yeah. So, I guess one of the things about the name was really, even before we decided the name of Lucy, was really about personifying the software, I suppose. I mean, we sat down and we spoke about different ideas for names and Automator and Autotasker and all of these different sorts of software-sounding names. 

And the catch with those is, I guess, the market is filled with those things. But we knew we had a little bit of a fight on our hands when it came to getting Lucy or getting the software into businesses, because we really wanted her to seem like more of a colleague than an enemy. 

And when you're implementing automation tools, people can be a little bit fearful, especially when it comes to their jobs, their livelihood. So, putting a bit of a friendly face and feel to the application was definitely high on our list. The actual name, Lucy, passed well. You know, Lucy is just a nice friendly name; I know Lucy and she's lovely. And I'm sure you do, too.

Andrew: Yeah, pretty cool. All right. So, maybe can you explain to me; in my intro, I talked about how this automation technology (and a lot of people don't even know it exists) can sit in the middle of your supply chain, in terms of you've got all of your smaller customers ordering online, all of your bigger customers’ EDI. Just explained to me the process of how a sales order automation tool works.

Aaron: Yeah, sure. So, I guess, as far as the types of things that that Lucy can handle, I mean, that's sort of how it all came about or that that gap between eCommerce and EDI. I mean, really, most of our customers already have a current process in place. So, their customers are doing the replenishments. They're getting PDF purchase orders via email. The problem is already there; the process already exists. 

So, really, Lucy just takes the current process that's happening manually, where you have people taking the PDF from an email and essentially, doing data entry to get that information into a system. She's repeating that same process, but doing it with AI. 

So, she picks up the order from the email, takes the attachment; still a bit of a process there for her getting that information, and then she uses some smarts and follows business logic to get it into the system. 

So, it's nothing new. It's a digitisation of an existing process. And that's why it works so well, is you don't really have to teach people about a change in process. It's just, “Well, it is what we've always done, except for your colleague, Lucy, is just going to take care of that data entry piece now.”

Andrew: So, I guess that's key from a change management type of environment. You know, I've worked over the years with many EDI implementations, and I know there's a lot of work from both sides to get that EDI implementation. This sounds to me like the customer has no change, maybe than other than changing where they're sending their purchase order to or maybe that doesn't even change. 

Aaron: Very, very minimal. Yeah. And most people don't actually change where the orders get sent. There's just some smarts in there to decide whether or not orders get sent to Lucy. 

But I suppose as far as change management goes, it's really dependent on how good customer data is. So, that's, I guess, one of the benefits of Lucy is that she's pretty good at taking bad data. So, an example would be a product code. So, your customer orders something, their product code doesn't match what's in your system. So, Lucy will come up with a list of what she thinks and she attempts to fix those problems. 

But if the stuff that they're sending you is so bad, then that's really where the change management comes into play of trying to get customers to at least slightly come to the party. 

But it's not a big problem. We find that our customers start with the low hanging fruit. The guys that have data that's pretty good. And Lucy is really, really great at that. And if you really want to go the whole way and get everybody on board to automation, then there might be a small piece of change management there. But we try to do everything we can to avoid change management. People don't like change.

Andrew: Yeah, on both ends too. But people certainly like the change of the cost to serve changes, I'm sure.

Aaron: Absolutely. And I guess, cost to serve, you could talk about it in a whole bunch of different ways. And that's one thing that we see with our customers is they might not necessarily reduce headcount. You know, when you think about cost to serve you're spending money on someone sitting there and punching those orders in. But you may be able to repurpose them. And that's probably something that we've seen more of across our customer base is having those resources. 

And these are these are real knowledge workers. They know a lot about your business. They know a lot about your customers. And putting them in more outward facing roles has reaped significant benefit.

Andrew: Right. Okay. And I guess there's a time to, you know, sometimes somebody might email an order off to James, who's their normal contact, but they don't know that James is off sick today or is in training or something like that. 

It's that what's generally the time between a buyer sending a purchase order, and that being in the system that Lucy is integrating to in their ERP system. Typically, how long does that take?

Aaron: I guess we've done some studies on this sort of pre-Lucy, post-Lucy. If Lucy takes more than 60 seconds to get an order in, there's something catastrophically wrong. 

Andrew: That’s pretty impressive. Yeah. 

Aaron: The process is very, very quick. The key point that you're generally waiting is where a decision needs to be made that sits outside Lucy's, I guess, authority to make. So, she's got some smarts in there. So, she can make decisions on pricing, if you teach your business logic. But if she has to wait for a person, then it's just as long as that person takes. 

But one of the things we noticed and talking to customers before they got Lucy on board was that time period, and you mentioned someone being away. But we saw that up to 40 percent of a customer service reps, daily order intake (So that they've going to sit down and punches orders in) was there waiting for them before they even started their working day.

Andrew: Oh, okay. So, before they get in, these orders are coming in overnight from restaurants and big, big delis and stuff like that after the shops are closed. 

Aaron: Yeah, absolutely. You know, people are sitting there doing their ordering for the next day or systems run overnight to do those automatic replenishments. So, they're having to devote their morning and disregard other tasks to get these things in. 

And that was a major change we saw with one of our customers in the food industry where they no longer had to have people come in at 4:00 AM to punch orders to get on the first truck because Lucy just took care of it. 

Andrew: And they're just ready to pick with their RF terminals or on picking slips at 6:00 AM in the morning or whenever those pickers come in.

Aaron: That’s it. 

Andrew: So, that to me would see an increase in previously, and it sounds crazy that you have people coming in at 3:00 AM. in the morning to do these sorts of things. If you don't have that, really what's going to happen is those orders won't dispatch until the next day, which, of course, is all, depending on how much a shipping a month, in terms of velocity of cash, that's going to -- I know a day's not a lot, but it's bringing that forward. But it's also increasing customer service, isn't it?

Aaron: Well, it is, yeah. I mean, you would know. Now, even just being a consumer, when you buy something, if it comes a little bit earlier, you're surprised, you're happy and you go back because you appreciate it. 

You know what? Everyone's so impatient now. So, imagine things happen overnight; you place an order and you go to bed, you run a small to medium business. And before you even start work the next day, you've got an email back from that company saying, “Hey, we've got you rolled out, it’s going to the warehouse.” 

Andrew: It could be there at 10:30 in the morning. 

Aaron: It doesn't happen often enough. 

Andrew: Yeah. 

Aaron: Exactly. 

Andrew: Yeah. 

Aaron: So, trying to increase that velocity is paramount, especially with people like Amazon starting to slowly push into all of the industries. 

Andrew: Yeah, yeah. Yeah. So, because I think that in terms of the future, I don't know if that gap's ever going to be( or not for a long time anyway) be filled. You know, it's always going to be EDI or order online or -- people sending PDF, I don't see that going away any time soon.

Aaron: No. Well, I mean, the Holy Grail would be to have completely connected systems and automation and to end --

Andrew: We've been talking about that for 30 years. 

Aaron: They've been trying to solve that problem for 30 years. Exactly. 

Andrew: Everybody's got different standards. 

Aaron: That's it. And, you know, it's our way or the highway. You need a system to be able to do those translations; to take what some system thinks it is and be able to talk to the other system and allow them to talk to each other. 

That's why something like Lucy is important over a tool like EDI. EDI is very, I know it communicates in both directions, but it's very one-sided in its communication. It sort of says, “Here's the information. That's the end of the story."

Andrew: Yeah, that’s right; it's black or white. So, I say I'm buying a product at $5. I send it to the supplier. The supplier says, “No, it's $6.” It just bounces that back to my system and my system bounces it back to them. And there's no room for human intervention, which when two systems disagree, a human is going to get involved, if you don't have business rules around the variances and the tolerances and stuff like that. 

So, sounds like Lucy allows that really good combination of the digitisation of that, but still having that human element in it where decisions can be made, where tolerances are broken.

Aaron: Yeah, yeah. Well, it's really up to you, where you want that line to sit. She'll make decisions that you want her to make and then she'll defer to humans where necessary. 

And I think one of the things that's important about that, especially touching on EDI, is the kinds of people that interact with the system. So, if you're running EDI and something hits the brakes because of that order, you're generally deferring to technical teams. 

Andrew: Yeah, that's true. 

Aaron: You may not necessarily understand what should be happening in these cases. But with Lucy, you give you give the power to the people who know the product and the customers and the business and the logic. They know that Gary, the rep, is rogue and gave them the price, 10 percent on margin. They know how to deal with that.

Andrew: And I guess I'm really starting to see that personification of Lucy now, in that really Lucy's just this extra person that's sitting at the end of the table, doing all the hard work, and when she needs to ask a question that's outside the rules that have been set for her, she just puts a hand up and says, “Can you help me out here?” And that that allows those other people to get on with other work while Lucy's doing the hackwork, you might say. 

Aaron: Yeah. That that's actually the best way to put it. I mean, we sort of tell a similar story, with our customers that when they come on board, is that you try and think of Lucy as a new hire that doesn't really know much about your business. She may have a bit of an understanding of your industry, and she definitely understands the purchase order to sort of process. But you need to teach her about your products. You need to teach her about your customers. And as she learns those things, she then starts to make those decisions herself.

Andrew: So, obviously, you've got some sort of integration to ERP system. So, how are you how are you going about doing that sort of thing?

Aaron: Interesting journey, actually. I guess like most of the integrates, you start with one and you expand from there. The one of the things that's important to us is integration. And I think actually, I read a blog of yours a few years ago, Andrew, where you spoke about integration versus interfacing and the difference between those two. 

And for us, day 1 has always been really important to have that deep integration because we don't want to do the EDI thing, but we bundle up the order and throw it at the system and say, “Job done.” 

It's important to get the information back from the system about what's actually wrong, because it may not be small, it might not be the product code is wrong, it might actually be something more severe, like that particular customer needs to be licensed for these sets of products or they're not permitted to buy that, or they have to buy in pack quantities of six. 

And all those rules that are already baked into the ERP need to be exposed to Lucy and need to be exposed to any tool that you're using to automate. So, integration is very important.

Andrew: Yeah, I always talk about integration and I always give the example of a sales rep where you start a new sales rep and you say to that sales rep, “Welcome aboard, Aaron. Here is the book of rules, here is all the product codes, the price you must sell them at, the pack quantity you must sell them at. You can't sell these products to these customers. But Aaron, don't worry about any of that. You can just do whatever you like.” 

And having an eCommerce system that doesn't follow those business rules or having a product like Lucy that doesn't follow those business rules really can cause you more problems than it's solving, really, because you just get all these variances and you have those business rules in for a reason. If you're selling boxes of 12 glasses, you don't want somebody ordering 11 of them, because it means that you've now got one of them sitting on the shelf that's probably just going to get broken. 

That's how I talk about the difference between an interface to an ERP system, which is really just getting data in and out and integration, which is getting data in and out and then interpreting those business rules, which I think, is super important, especially in the B2B world. 

Aaron: Nailed it. We feel exactly the same way. 

Andrew: Yeah. Okay, cool. So, have you seen any other benefits that Lucy has brought to customers? Obviously, there's the obvious ones with the cost to serve and the better customer service. But is there anything else that you didn't expect to be a benefit to a customer that has come out?

Aaron: Yeah, quite a few things. I think when we started the journey with Lucy, we're really focused on what how do we make her usable and solve that process of PDF purchase order to the sales order. 

But as we start to get more customers on board, we were able to start to look at collective data and really sort of see what's happening. And when we started to zoom in on some of the, I guess, abnormalities, we started to find some interesting things. So, so we sort of put reporting high on our agenda and started to dig a bit deeper. 

And one of the things that that happened not too long ago was we noticed a discrepancy between what customers were ordering on their purchase order versus the amount of lines that actually got invoiced out. So, was very strange that a bunch of lines could just go walkabouts. 

So, after digging deeper with that particular customer, we noticed that it on it -- it actually ended up being that their customers were ordering obsolete stock. And because it wasn't available in the system, what the customer service rep was doing was deleting the line, pushing the order through and letting the customer know it wasn't available anymore, rather than trying to find a replacement product for that. So, they ended up going on a blitz. 

Now, if they understood the problem to rejig the process, to say, “If it is obsolete, we've now got a process in place to find the replacement product for that. So, we don't have revenue leakage.” 

And just that one thing alone, finding that one piece of data paid for Lucy four times over. So, while we do focus on that process of purchase order to sales order, there's a lot of other benefits that come with having that data and understanding what's happening in that process. 

Because if you know that there's a problem, you can improve it. If you've got people doing swivel chair integration, they're essentially masking those problems because they just kind of fix those one offs. But if you've got the data for the end to end, you can actually fix it.

Andrew: Interesting. Okay. So, I guess it would also have another benefit in that if your customers are always ordering products and they've got the wrong price, that's got to cause them a problem down the track as well. Because you're going to send them in. They've got a pricelist that is last year's pricelist. You've raised prices by five percent since then and you might have raised across the board. So, everything's out by five per cent. 

You're just going to change that to your ERP price because the price that, that's your business rules. And you're going to invoice that for an extra five percent, that would cause them a massive amount of extra work when they process their creditors invoice and do that three-way match, they'll have all their variances. 

So, I imagine you could look at that data and go to that customer and say, “Hey, here's the new price list. You need to update it” and really save that customer some downstream processing costs.

Aaron: Yeah, yeah. Invoice disputes. We could talk forever about that, but I guess, yeah, that sort of leads back to the reporting stuff we touched on. We actually provide our customers with the set of reports to help combat that exact problem. 

Because it's not always on the customer side. It can be on the product side too. So, we give people reports at whatever interval they would prefer; weekly, monthly, whatever it might be, that actually list in detail which customers got the price wrong, on which product codes and in what direction. So, they can see the delta. 

And they're using those to then feed back to their customers via usually the right channels, but then also to the product team, if they notice that it should have actually been that price and it wasn't set there in the system. 

And, I guess, it's like one of those swivel chair integration things where a customer service rep would just fix the price and mask the problem and carry on. Whereas having the data, having the proof, getting {indistinct 26:01} to force everybody to stop. 

Andrew: Yeah. 

Aaron: You know, you can actually fix it.

Andrew: Yeah. Okay, Aaron, that has been super interesting. And as I said earlier, I think there's a lot of companies out there that don't realize that that middle section of their customers that are ordering via PDF. 

There are solutions out there that they can implement and really digitized that part of the business and get their customer service people adding different types of value rather than, I like that term, the swivel chair integration staff. 

So, yeah. Thanks very much today for joining us, Aaron. 

Aaron: Thank you. 

Andrew: So, I hope you enjoyed that chat with Aaron from Lucy; pretty cool product. As I said, it goes to show that there are solutions out there for most problems that you can experience within a business. And that there are some pretty cool solutions out there as well. And as I said, integration is a must for all of them. 

Look, that's it for this month's eCommerce Experience Podcast. We wish you well, especially if you're in Victoria. Stay strong down there and we'll see you next month. Thanks. Bye.

 

 

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