Is Cloud Computing Important to Your Small Business?

Cloud computing has become commonplace and is now employed by many small businesses. But what about using it for your company?

You have probably heard the term. The most widely viewed early advertisement for a cloud computing solution was in 2011 during the Super Bowl. It is likely we will see another one this coming weekend during Super Bowl XLVIII.

What Exactly Is It?

Cloud computing is the use of web-based servers from a third party to provide computing solutions instead of using local personal computers or servers. It is accessible from anywhere with an internet connection. Cloud computing solutions vary in scope from simple data back up and storage to complete applications with everything needed “behind the scenes” to support business processes.

What Is It Not?

Many vendors are now offering “cloud computing.” In my opinion, if the vendor requires you to install ANY hardware or software, then you are NOT getting a true cloud solution and its associated benefits.

How Wide-Spread Is Use?

Cloud computing has gone mainstream and is now used by hundreds of thousands of companies.

According to cloud-technology research firm Neovise as published in Business News Daily, 54% of businesses now use it. Of those 54%, 75% have multiple cloud solutions.

CIO magazine reports that 33% of IT budgets were to be spent on cloud computing in 2013 and 27% of state and local governments already use it.

Examples

Cloud computing offerings range from simple to complex. Simple examples include e-mail, hosting, and data storage.

Richer and more complex examples are Customer Relationship Management (CRM), Human Resources, Accounting, and Electronic Data Interchange (EDI). The most well-know example of a complete solution delivered from the cloud is probably Salesforce.com.

Benefits

Traditional non-cloud applications relying on in-house hardware and software are complicated and expensive. A variety of people and skilled experts are needed to operate them successfully.

Cloud computing makes running a small business far faster and easier. An experienced vendor manages the hardware and software, as well as the configuration and advanced support needed for a complete solution.

More powerful solutions are delivered at a much lower cost. Implementation, testing, upgrades, backups, and security management are done for you. There is no hardware to buy or manage. Labor costs are lower. Bundling of a complete solution in one place that solves a business problem eliminates many headaches. A huge benefit is that you only pay for what you use.

Contact us anytime to find out more about how a cloud computing EDI solution from CovalentWorks can benefit your small business.

Fulfilling Web Orders from Stores

According to eMarketer about one third of retailers use brick and mortar stores for fulfillment of online web orders. About 25% more plan to do so soon.

Retailers are competing with Amazon and other retailers by offering in-store pickup and fast delivery to consumer’s homes. UPS is working with over 40 retailers on delivery strategy. FedEx is also, although numbers on retailer participation in their program are not available.

Inventory Efficiency

The advantage to retailers of leveraging their stores to fill web orders is that they can move stock around the country to where it is needed. Fulfilling from stores allows retailers to show availability online and to display the exact same items to shoppers in stores. In addition to better customer service, increased inventory efficiency helps retailers avoid overstocks and associated markdowns as well as stock outs.

The result is they can sell more without having to buy additional inventory. This translates into faster inventory turns, always a good thing for retailers.

Of course the whole process hinges on the accuracy of in-store inventory. Receiving at the store dock, check out at the register, and picking of orders online orders must be all done correctly. See below for more about what this means to you.

Examples

According to a January 17th, 2014 Wall Street Journal article, Macy’s has about half of its 840 physical stores that can fill online orders. The advantage to Macy’s is that it can keep inventory in front of brick and mortar customers and still fulfill online orders. Macy’s started their enhanced fulfillment capability in 2012 with 292 stores of its stores.

Nordstrom started even earlier, in 2009, and is considered the first mover. Nordstrom ships from all of its 117 stores.

Toys R Us and Babies R Us ship from all of their combined 800 stores. Saks is shipping web orders from 43 of its 47 stores.

Best Buy can fill online orders from 400 of its stores and offers in-store pickup. Best Buy has 1,800 stores altogether.

Sears and Kmart have a combined 2,000 stores. However, they are focusing on doing fulfillment from just 27 of their stores which gives them coverage of 80% of the US.

Walmart, eager to compete with Amazon on price, availability and speed of delivery, is shipping from many of its 4,000 US stores. Specifics are not available.

What This Means to Your Small Business

In-store accuracy of inventory is key to every retailer’s strategy of fulfilling web orders from their stores.

Consequently, EDI ASN’s (Advance Ship Notices) from small business suppliers have to be correct.

ASN’s, which are essentially electronic packing slips, start the in-store inventory process . For example, product UPC numbers and quantities have to be correct so that the receiving dock at the store can import the ASN data correctly into their inventory system.
Check out the categories to the right for previous blog posts on EDI compliance and chargebacks related to ASN’s.

Contact us anytime to find out more about how we can assist your small business with accurate and reliable EDI capability.

Holiday Online Sales Update

The blog post a few weeks ago on December 13th reviewed the large increase in online sales around Thanksgiving, including the spikes on Black Friday and Cyber Monday. The conclusion was that tipping points for shopping trends had been crossed that will affect small businesses from now on.

Growth Increases Throughout the Holidays

The sea change of online and mobile retail orders continued in December. According to an IBM Digital Analytic’s Benchmark report, online sales increased by 37% in 2013 over 2012 sales. This is an even larger increase than was reported for the 2013 five day Thanksgiving day shopping period when online sales increased year-over-year by 21%.

A surge of orders close to Christmas caught retailers and shippers by surprise. Although UPS increased the size of its fleet by 5% by chartering extra planes, it still was not able to meet promised delivery of many orders by Christmas.

Amazon added 70,000 seasonal workers to cope with record demand. UPS and Amazon are still sorting out which company caused most of their late deliveries, but a 5% increase in planes versus a 37% increase in online orders for the industry seems to point to UPS not anticipating the fast growth in demand.

What Does This Mean to Your Small Business?

December online shopping trends reinforce the message delivered in my earlier post. Drop shipping direct to consumers will increase. Some of that demand will be pushed to small businesses that supply retailers in the form of:

  • Shorter lead times for shipments to retailer distribution centers
  • Responsibility for shipping straight to the consumer on behalf of the retailer.

CovalentWorks provides web-based / cloud EDI solutions that grow with your business and the evolving demands of your customers. Contact us anytime to find out more.

Same Day Delivery of Retail Products

Same day delivery of retail goods is an emerging trend. Although the growth of same day delivery is not at near the level of the growth of online retail sales and mobile devices, it bears watching. It deserves attention because delivery cost and speed are closely associated with online sales, which are booming.

Consumer Preferences

If costs are equal, consumers prefer faster delivery as long as they do not want to experience the product before purchase. Many still want lower cost over speed of delivery as discussed in last week’s post.

Free delivery seems to have the edge over same day delivery for many consumers. However, the retail industry is aggressively experimenting with serving the segment of consumers who want their product as close to “now” as possible without leaving the comfort of their home or office.

Millennials, shoppers aged 18 to 34, are the most likely group to use same day delivery according to the National Retail Federation. Already 12% of Millennials have used it compared with about 4% of the general population.

Early Retail Adopters

Several large-scale retailers are investing in same day delivery. None of them have rolled it out nation-wide.

Amazon serves about 15% of Americans with same day delivery. An additional 5 warehouses under construction (in addition to its current 90) could up that to 50%. The cost is $8.99 per shipment plus $.99 per item for express same day delivery in supported cities. The recent news coverage about drone delivery is one of the better publicity stunts of the year.

Home Depot has determined it has reached market saturation with it brick and mortar stores so it is investing in growing online retail sales. The company is investing $300 million in online improvements and to provide same day delivery.

Three new fulfillment centers will be operating in 2014 and Home Depot plans on using existing stores as warehouses to source same day delivery as well as more of its online orders.

This is not just for a few select items. Over 100,000 products will be available for same day delivery. Competitor Lowes has not yet made any announcements.

Walmart has same day delivery in 5 markets. The charge is a $10 delivery fee no matter how many items are in the order. Same day delivery is provided for grocery items in San Jose and San Francisco. Philadelphia, Minneapolis and Denver are test markets for the service. Walmart is starting to use third party delivery or personnel to fulfill orders from its stores.

Third Party Expansion

Third party service providers are investing heavily in test markets. The most aggressive of the group is eBay.

eBay already has same day delivery service in San Francisco, Chicago, Dallas and New York. The service dispatches a courier to the appropriate retailer such as Bed Bath & Beyond, Best Buy, Home Depot, JC Penney, Macy’s/Bloomingdales, or Target. eBay Now will be offered in 25 cities in 2014. The cost is about $5 per item.

Google is experimenting with same day delivery with its Google Shopping Express service in the San Francisco Bay area. The service sends a courier to retailers such as Costco, Office Depot, Staples, Target, Toys R Us, Walgreens, Walmart, or Whole Foods.

The Postal Service is testing same day delivery with 1-800 Flowers. Once again, the test market is the San Francisco Bay area. It calls the service Metro Post.

What This Means to Your Small Business

Same day delivery is a trend to watch. However, so far the trend is not changing the supply chain of retailers in a way that affects suppliers. Whether the retailer provides delivery from its distribution center or local stores is not yet changing where suppliers ship their products.

The growth in drop shipping directly to the consumer that was discussed in several previous posts is not relevant to same day delivery because the goods need to be stored in the same geographic area as the consumer’s location.

Over time, we may see a shift in more direct-to-store shipments as retailers move goods closer to the consumer. However, there is a limit to that demand right now based on the amount of in-store storage space and how fast inventory turns over.