Four Benefits of EDI
EDI stands for Electronic Data Interchange. This computer-to-computer exchange of information helps manage standard business documents such as purchase orders, invoices, inventory levels and shipping notices.
EDI software solutions help to coordinate the exchange of business documents and data across a variety of platforms and programs. Businesses can use EDI for things like maintaining vendor-managed inventory (VMI) in relation to technical publications, final assembly needs, business printing and more.
The evolution began with a manual processes that used phone calls, faxes, or hard-copy paper as communication between companies ordering or selling goods. Now it’s all done through EDI, joining together manufacturers, distributors, and retailers, through their information systems, in a worldwide business-to-business network.
How Does EDI Work?
Your company stores its information within an enterprise resource planning (ERP) system. One key component to this world is manufacturing information like build projections, inventory levels, invoicing and billing, shipping and more. An EDI solution will integrate with your ERP system, accessing and using the information needed to create the documents you need to do business with other companies.
You, your suppliers and your clients all have specific requirements when conducting business. Things like shipping addresses, unique pricing, warehouse inventory and so on are determined when a deal is made and have to be taken into account when transactions take place. This is the data that an EDI solution will use to facilitate trading between businesses.
An EDI system (or vendor who offers an EDI solution) should use a standard of data (ANSI or EDIFACT) to ensure requests from one party are compatible with the supplier’s information system. This ensures the supplier can fulfill orders placed. It helps companies doing businesses with each other, particularly suppliers that can consistently meet the requirements and terms of their clients, like retailers and distributors.
During the implementation of EDI software, fields are mapped to each other so that the relevant data is used. When a request is received, the data is converted to fit the system of the recipient and crucial information for the transaction is used to generate all incoming and outgoing documents.
Business Benefits of EDI
Cumbersome and error-prone. That’s the typical environment when relying on manual processes to ensure conditions of a deal are met. An EDI solution replaces many manual processes with automated transactions, by setting up a communication network between systems in a supply chain. Automation leads to many benefits when used correctly and strategically.
Once a tool relegated to large enterprises, EDI has made its way into the hands of small and medium businesses. In today’s modern business world, it’s even become a necessity depending on your clients and vendors. A large trading partner, retailer, vendor or distributor can impose EDI as a requirement on members of its supply chain. This means an ability to trade information with large companies who require partners to have an EDI solution for transactions is the big picture benefit of implementing the software. You’ll find other benefits as well.
1. Speed Improvements and Time Savings
Some of the benefits of EDI solutions are quite straightforward. The speed in which information flows with EDI systems is a clear example of that. With an EDI solution, incoming orders are created automatically, not needing user input or taking up employee time.
There are no delays due to different time zones, or having to get a person familiar with the term on the phone. No faxes, or paper trails, leading to better cash flow, faster buy-sell cycle time, shorter lead times, and reduced inventories.
2. Greater Accuracy and Fewer Manual Errors
The reliability of the information being exchanged between businesses improves with an EDI solution. Companies see a reduction of errors by eliminating manual and duplicate data entry. With access to the data of ERP systems, EDI solutions serve as not only the medium in which the information travels, but also ensures that information accessed and received is not only accurate but that conditions for the transactions are met.
This leads to improved relationship with trading partners, minimizing costly charge backs, late deliveries, or incorrect product prices.
3. Increased Simplicity and Security
The standardization of data within your systems will help your IT staff and employees know where to find it. The automatic generation of sales orders, invoices, shipment reports and so on will also make the work simpler for sales and warehouse staff.
EDI solutions are set up to be only accessible to pre-defined authorized users, equipped with audit trails and archives to track use and ensure security. With electronic confirmations to ensure receipt of documents between parties, it brings transparency to business relationships.
Integrating EDI with your ERP system can bring other benefits, as further business processes can be mapped and automated. A company looking for EDI is a company that is on the right path of growth and may find further benefits investing in business software solutions.
4. Increased Efficiency, Decreased Costs
With EDI, you can lower administrative costs by reducing the need for menial, repetitive tasks. Make the machines do that work!
Also, real-time data interchange coupled with JIT shipping leads to lower obsolescence cost, as printing needs are managed at a micro-level. From business printing to folding cartons to light kitting, your assembly needs can be solved with a third party vendor using EDI to increase efficiency, decrease costs and bring about business success.
