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Warehouse
April 28, 2023

The Evolving Benefits of EDI

The Evolving Benefits of EDI

EDI has been helping to run commerce for decades. EDI or electronic data interchange is a digital exchange of a diverse range of business documents such as price catalogs, POs, invoices and shipping notices in a standard format. For many, EDI or is considered a background utility of sorts as the digital exchange of business documents in a standard electronic format between trading partners. Without it, commerce wouldn’t run efficiently.

Manufacturers, suppliers of goods and services, distributors and retailers—from small organizations to Fortune 1000 companies—use EDI. In retail, its adoption is nearly universal. One survey by Deloitte to European retailers found that 100 percent of those surveyed use EDI messaging for POs, and 80 percent use EDI services for electronic invoices and inventory reports.

EDI capability is a backbone of many traditional enterprise and supply chain solutions such as ERP, WMS and even leading-edge solutions today—think data cloud platforms that incorporate advances like third-party data, AI and machine learning to help predict things like demand in a particular region.

With that, let’s take a step back and look at the key benefits of electronic data interchange in three major areas.

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EDI Speed and reliability

The benefits from the greater speed of commerce enabled by EDI and its reliability are obvious when both errors from manual data entry and disputes due to errors are reduced. EDI is known to significantly reduce order-to-cash cycles while accelerating business cycles.

Process controls also ensure supply chain efficiency and reliability when trading partners connect in a secure EDI-supported portal. Real-time traceability throughout the order-to-cash cycle can be supported by flow tracking, dashboards and KPI management. On the receiving end at a warehouse, for example, incident detection controls for theft prevention can be set up, such as coupling waybills with shared slot or loading bay reservation data to ensure merchandise traceability.

The Cost savings of EDI

Manual processes to capture commerce-related transactions once meant endless data entry, phone calls, emails, or even the mail and fax. Among the many efficiencies of EDI, the reduction of operational costs is one of its greatest benefits. These costs can touch upon everything from labor when full-time equivalents are reduced to using less office supplies and carbon resources. Time, labor and costs are also reduced with EDI versus manual methods given the lift of managing, archiving or digitizing paper records.

With B2B integration among trading partners, the use of EDI ensures a high level of reliability at a low cost, and brings to bear many indirect cost savings. EDI compliance aids the bottom line when you consider that shortening order processing and delivery times reduces inventory levels and increases inventory turns.

One of the nation’s largest retailers—an early adopter of EDI—estimated that EDI-based transactions cost only about one-tenth of a manual transaction when taking into account the broader costs associated with stock outs (lost sales), dispute resolution (time and labor, chargebacks), and lost customers (reduced revenue and tarnished brand reputation).

EDI Tracking exchanges

EDI intersects with all major aspects of the supply chain and commerce, including marketing, sales, procurement, finance, manufacturing, transportation as well as warehousing and fulfillment. Accurate data links into each major function is critical. As such, EDI gives a clear picture of all the exchanges or transactions that occur throughout the supply chain.

EDI also supports timely communications between trading partners which is critical to drive sales. For example, in the retail supply chain, brands need to know their retailer customers’ plans for orders and once product is shipped, everyone needs accurate pricing data and item updates, including promotions information.

The current business environment is more challenging than ever. To combat todays supply chain disruptions companies are moving from “just-in-time” to “just-in-case” strategies within their supply chain. To achieve this they use actionable intelligence and predictive analytics provided by robust EDI implementations.

The bottom line of EDI

In sum, when suppliers and their customers, or any trading partners, have access to transactional data with near real-time or real-time visibility, proactive management can further streamline the supply chain and true collaboration is possible. These are just a few of the main advantages of EDI services which continue to evolve with the standard moving to SaaS cloud-based models.

 

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