Implementation, Limitation & Benefits of EDI – A Simplistic Guide

Since 1960 interest into the nature and value of Electronic Data Interchange (EDI) within organizations continues to grow, it becomes increasingly desirable to establish a tactical linkage between the strategic benefits of EDI and observed operational value.

Electronic Data Interchange or EDI is the electronic exchange of business data through the use of a standardized format. Simplistically put the EDI process lets a company transfer data to another company electronically without the use of paper. EDI has continually shown it has significant business value by reducing costs, increasing speed, accuracy and business productivity. The most significant EDI advantages often come at the tactical business stage.

According to the latest research study, Electronic Data Interchange continues to prove its worth as a leading electronic message data setup. The research also points out the yearly volume of total EDI transactions surpasses 20 billion per year and is still on the rise. With EDI, businesses can save millions of dollars of annually due to new reimbursement rebates. From a financial viewpoint alone, there are remarkable benefits from applying EDI. But saving cost is not the only benefit attached to EDI.

What is Electronic Data Interchange (EDI)?

 EDI is the virtual exchange of business data or documents between trading partners through the use of the electronic format. Document exchange is usually between buyer and supplier. The process comprises of transferring invoices, payments, purchase orders, shipping notices, and other needed documents electronically thus eliminating any paper trails. EDI seeks to enhance virtual exchanges and improve operational efficiency with your trading associates. With EDI, any business can effectively communicate with another business globally void of the issue of times wasting and estimating future actions.

EDI allows for better and efficient collaboration with your suppliers. It also pushes costs out of the supply chain by removing any wastefulness and manual involvements. EDI solutions are perfect for seamless integration into large and small networks of suppliers. No matter who you are trading with, large or small number of SME suppliers located locally or internationally, EDI can assist with any form of business and technical necessities, while providing support and resources to manage.

Whether your business requires an EDI Entry to exchange forecasts, invoices, orders, or other related business documents with your partners and suppliers, 100% integration can be achieved without much stress.

According to Massetti, and Zmud (1996), there are four distinct facets of EDI: volume, diversity, breadth, and depth that, when aggregated, allow for a robust assessment of EDI usage. Brief definitions are presented in below table.

11 Benefits of EDI

 By applying EDI to your business setup, you can add extra value to your company’s process with automatic information processing, reduce clerical responsibilities, and remove data entry errors. The benefits of EDI for the end-to-end transactions use throughout the business cycle results in better use of time and resources. Below are 11 known Benefits of EDI:

1.     Better Speed:

 EDI decreases the time it takes for an employee to make invoices and handle purchase orders manually. Timing is crucial when it comes to processing of an order. With EDI, businesses can speed up their cycles by 61% creating an allowance for more automation process that significantly reduces, if not eliminated, time delays related to manual processes that entail you to compare, enter, and file data. Records management is reorganized and made more effective with simultaneous data updates. Transferring documents electronically improves transaction speed and perceptibility while reducing the cost involved in manual approach. Stock levels are also kept regularly updated and visible.

2.     Business Efficiency.

 For the reason that human error is lessened, businesses can profit from improved levels of proficiency. Rather than place attention on common and tedious activities, staffs can dedicate their attention to more significant value-adding tasks. EDI transfer guarantees immediate processing and eradicates time wasting related with manual entering, receiving, and sending orders. Improved quality of data provided by EDI lessens data entry errors, improves accounts activity times as procedures become efficient and can be made available for forecasting.

3.     Collective Productivity.

 The EDI technology permits more business to take on more operations with less human resources. Business teams can handle tasks with advanced additional worth. With EDI, the whole process is completed in a matter of seconds. This is due to the reason that automated process allows for instant completion of tasks like registering and balancing validation.

4.     Cost Savings

 This is amongst the most popular benefits of EDI. With EDI, the costs for processing business documents get at least 35% cut, but it can be much more remarkable in case of electronic invoices, with 90% savings a possibility. Then again, this extreme economic saving is due to transactions automation, and, also the less involvement of paper usage. EDI reduces your operating outlay by removing the costs of document retrieval, filing, mailing, paper, postage, printing, recycling, reproduction, and storage. EDI significantly reduces administrative, maintenance, and resource costs.

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