Over the last 40 years, electronic data interchange (EDI) has become known as a business standard format for relaying documents electronically between trading partners in a network. While EDI comes with great benefits, it is not without its challenges. Fortunately, for the vast majority of businesses, the benefits of EDI far outweigh the drawbacks. Modern methods and technology have only served to provide more potent EDI benefits for small and medium businesses.
Financial Benefits Of EDI
Because EDI is a digital means of communicating for businesses, it comes with many advantages over paper-based systems. Not only this, but it saves on costly errors, wait time, and a host of other factors that businesses not utilizing EDI will suffer from.
Take for instance paper and postage, the most obvious difference between EDI and other communication systems. Because all EDI transactions are completed electronically and instantaneously, the expense for paper, postage, envelopes, forms, ink, and transit costs are cut out of the equation. EDI not only saves on waste and materials within a business, but also resources beyond the walls of the business, such as fuel and labor associated with shipping and transit activities. Administrative and maintenance costs are also impacted by EDI, due to storage, filing, and retrieval costs no longer being part of the equation.
Labor costs are reduced, as well. This is due to the fact that data entry, manual review of documents, and other administrative tasks, like sorting, copying, and filing, are no longer necessary with EDI. The automation provided by EDI frees time to take on and complete constructive tasks for teams while cutting down on costly errors significantly. The work hours involved are reduced significantly and order processing can essentially be put on autopilot, save for the instances and conditions a business has built into their EDI processes.
Operational Benefits of EDI
We touched on the automation EDI provides in the section above, but those improvements go beyond cost-savings and financial benefits of EDI. When your business runs more efficiently, trading partners and customers are more inclined to return to you with their business.
Maintaining accuracy in a paper-based trading network is a full-time job. Even with expert administrators and financial professionals, these tasks are wrought with problematic processes. There are many opportunities for human errors when it comes to re-keying data from orders, processing returns, and carrying out payment processing. EDI is an as-in, as-out technology. This means that the data received is the exact same as the data transmitted from trading partners. There is no need to re-enter data manually. The result is fewer erroneous entries, product returns, and lost orders.
On the topic of order fulfilment, EDI provides businesses with better visibility into their supply chain and inventory. The lead-time necessary to process an order is reduced and a business can move closer to a Just-in-time (JIT) system.
Order accuracy is maintained at the highest level via digital records. When tied into a business’ ERP system, order, supply chain, and inventory data are ready and accessible for better and more informed decision making. When a business is more able to adapt to market conditions and respond to supply chain issues, they are better positioned to outperform their competitors.
EDI has a tremendous impact on operations, from speed and accuracy to automation and efficiency. However, security is a topic increasingly at the forefront of conversations between trading partners and businesses with their customers. EDI delivers enhanced security protocols that place several layers of protection between transactional data between businesses and their networks, as well as their customers.
Trading Partner and Customer Benefits of EDI
Beyond all the internal business benefits of EDI, there are many external trading partner and customer benefits of EDI.
One example emerges in a businesses ability to respond to changes in market conditions more quickly and effectively. Response time to environmental factors can be shaved down to seconds with EDI, resulting in fewer order disruptions and streamlined processes between sales and trading partner activities. The precision that this facilitates ensures that production planning, order fulfilment, delivery, and response time are much more precise and in alignment with a trading network or customers’ best interests.
The internet has connected the world on a scale never seen before in history. As a result, those we communicate with expect updates to be quick, accurate, and on-demand. EDI facilitates all three of these demands by providing information on process statuses, such as acknowledging receipt of orders, invoices, changes to purchase orders, pending payment status and more.
Delivering on customer expectations is the key to securing their business long-term. EDI ensures that businesses are equipped to do so while also making accurate and timely updates available. In a competitive marketplace, where the buyer has the power, businesses need to leverage every advantage available. A high-level of customer service is essential to thrive and EDI can help provide customer benefits their competitors may lack.
Trading partners and trading networks are often the driving force behind EDI implementation. EDI compliance can open the doors to more fruitful and expansive trading networks for businesses. Once the standards are put into place, EDI trading partner benefits are numerous and serve to grow a business’ trading network.
About Encompass Solutions
Encompass Solutions, Inc. is an ERP consulting firm, NetSuite Solution Provider and Epicor Gold Partner that offers professional services in business consulting, project management, and software implementation. Whether undertaking full-scale implementation, integration, and renovation of existing systems or addressing the emerging challenges in corporate and operational growth, Encompass provides a specialized approach to every client’s needs. As experts in identifying customer requirements and addressing them with the right solutions, we ensure our clients are equipped to match the pace of Industry.
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