B2B or B2C, companies of all sizes are looking for options to build their businesses. EDI (Electronic Data Interchange) is a well-known electronic communication system often used for ordering/invoicing. An EDI document is an electronic equivalent of a paper document such as a purchase order or invoice. Standards govern how EDI documents are structured and define the rules for their use. North American companies follow the X.12 standard, while other parts of the world follow the EDIFACT standard.
EDI’s widespread use means that implementation and integration of the standard is a viable option for many businesses for years to come. Like any other counterparts, EDI also has its benefits and challenges. In our first blog of this two-part series, we will touch upon the benefits of EDI and its capacity to minimize the complexity of business processes.
Free up valuable human capital:
Investing in tools that automatically schedule and process without human intervention helps businesses streamline operations. Integration with EDI allows managers to transfer resources from tedious data entry to other high-priority jobs, thereby giving businesses an edge to capitalize in the main line of business.
Speed of service is desirable for any business. Most companies would rather encourage their purchase orders to reach their suppliers in minutes, rather than days. Integration with EDI has changed the preconceived notions of business processes. Sending an electronic document across the country or around the world now takes seconds or minutes with the help of EDI, greatly reducing turnaround time. Once data is received, it is immediately ready for use with other internal applications such as a customer relationship management (CRM) systems or accounting software.
Each time data is manually entered into a system, there is a chance for human error. With EDI, all data moved electronically passes through a validation layer; thus data is clean, resulting in fewer errors and lower associated costs. Regardless of how many additional parties may be adding information to the document, the data’s accuracy remains intact.
Increases operational efficiency:
By the very standardized nature of EDI documents, trading partners are literally working from the same page and understanding of the data. This strengthens customer satisfaction and potentially lays the groundwork for future increases in mutually beneficial business with improved efficiencies in supply chain management.
Improves planning and processing:
EDI has improved planning and processing at different stages of business. Processing documents electronically allows suppliers to process orders more quickly and schedule shipments accordingly, allowing the manufacturer to anticipate and schedule tasks in advance.
Reduces Labor costs:
For the most part, labor-oriented processes are much more expensive than non-labor intensive operations involving computers and telecommunications. With EDI, many steps involving manual processing are automated, thereby saving labor costs.
Uncertainty exists in two areas. First, paper transportation and other manual processing delays mean that the time the document will be received is uncertain. Once a transaction is sent, the sender does not know when the transaction will be received or when it will be processed. Second, the sender does not know whether the transaction has been received at all or whether the receiver agrees with what was sent in the transaction. EDI integration removes these uncertainties by automating the entire process.