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EDI allows electronic interchange of business information using standardized protocols and formats. These paperless business-to-business (B2B) transactions make EDI the standard of automating supply chain management (SCM) in many different industries.
B2B transactions using EDI have been around for such a long time that it has become an implicitness for many. At the same time companies are still using manual paper based processes today and are dealing with trading partners having a significant message counts and thus business volumes. Regardless if you are the customer or the supplier obvious EDI advantages for a digital supply chain should not remain cold-shouldered.
The advantages of using EDI start with the savings on expenses that are caused by paper:
All those physical costs are greatly reduced or eliminated with EDI processes. Predictable and controllable electronic workflows automate ordering, delivery and invoicing and thus reduce the number of people involved significantly. Plus they add fast searching and easy archiving.
Because these inevitable commercial processes can become paperless EDI is also environmentally friendly.
Automation through EDI SCM leads to hands-free order processing which cuts the order-to-shipment timely half. The paper-based manual entry of data takes valuable employee time. Together with real-time communication and global data sharing this results in a huge difference in transaction time being a matter of minutes with EDI rather than days or weeks with paper and postal service.
This way Order-to-Cash and Purchase-to-Pay cycles can be accelerated a lot. For suppliers this means a more stable business situation due to more timely cash flows and for customers getting more trade discounts.
The paper-based manual entry by rekeying data into the ERP and order systems is error-prone, however needed to bridge media discontinuity gap. Again the cut is by half again, but this time it is the reduction in errors. EDI solutions integrate with ERP systems precisely which minimizes chargebacks, delayed shipments, and incorrect product costs. An increased customer and employee satisfaction is the direct result.
For example exchanging Advanced Shipping Notices (ASNs) is crucial for a smooth supply chain. An ASN is a digital document that provides information about a pending delivery. ASNs need to be sent when the shipment is done by a supplier enabling proper planning by the customer. Delayed ASNs can result in fines and\or decrease supplier ratings.
Automated data exchanges among applications across the entire supply chain guarantee B2B-critical documents and shipments are delivered in a timely manner. Effective processes improve delivery of goods and services, which can be tracked in real-time. The visibility enables measurement and tight management of critical business KPIs. The evaluation of this data by appropriate business intelligence methods improves process control by data which is constantly available and up-to-date.
Inventories can be optimized by EDI SCM which shorten the order processing and delivery times so that inventory levels can be reduced. A higher percentage of accurate orders means there’s less need to carry excess stock in your supply chain. In addition, EDI records all transactions so you can analyze the performance of your supply chain and suppliers to better plan your optimum inventory levels.
Effectiveness through EDI is the prerequisite for optimal Supply Chain Management (SCM) and brings Vendor Managed Inventory (VMI) in the CPG/Retail Industry and Just-In-Time (JIT) as well as Just-In-Sequence (JIS) in the Automotive Industry to life.
EDI solutions enable compliance for the electronic exchange of validations and receipts between customers and suppliers. EDI SCM ensures security with strict access by authorized users, encrypted communication, archive tracking and audit trails.
Together with a streamlined documentation this helps to avoid fines or chargebacks due to SLA violations, payment delays, and performance gaps.
In many cases, the business development is the greatest EDI benefit of all. The EDI compliance with trading partner/buyer requirements brings the ability to connect with many retailers. In the logistics and automotive industries there is no real chance to be in a larger scale business today without EDI.
The ability to quickly connect with new trading partners who are demanding an EDI based supply chain can make a significant difference.
EDI solutions are not just for big box retailers and large companies. EDI helps small businesses seamlessly transact with large and small trading partners alike. Regardless if you are trading with a large number of suppliers located around the world or a small number of SME (Small and Medium Enterprises) suppliers, EDI solves technical and business connection requirements. The EDI Benefit to take the business to the next level means a focus shift from the processing of transactions to help grow the business.
In optimized supply chains time slack is reduced to the bare minimum. The risks of slow onboarding of new trading partners, of low EDI performance and unstable connections need to be minimized accordingly.
In case you only have a few major customers, you may be able to establish point-to-point connectivity with each individual customer. But if you have many customers or are looking to grow your business, it may be better to explore the services of an experienced EDI Cloud provider.
What is EDI?
EDI Message Standards – An Overview
What is EDIFACT
What is AS2?
What is AS4?
What is OFTP2?
EDI Operating Models: On Premises, iPaaS or Full Service EDI
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