There are many advantages from deploying EDI solutions for your business. Let’s examine some of these benefits.
Lower Costs and Improved Operating Margins
Businesses can gain a variety of cost reduction benefits as a result of implementing EDI. EDI allows business to automate a process previously manually executed with paper documents.
Reductions in costs can include both cost savings and cost avoidance. By eliminating human handling, in areas such as mail-room sorting and circulation, clerical document preparation and data entry minimizes the cost of labor and materials.
In addition, human error is reduced so avoiding costly corrections in business documents. The following table sets out the cost savings for key supply chain documents when using a B2B integration solution.
Robust EDI and automation programs can have huge impacts on operating margins of a business which is why leading companies have robust strategies. Operating margin measures how much profit a company makes on a dollar of sales, after paying for variable costs of production, such as wages and raw materials, but before paying interest or tax. It is calculated by dividing a company’s operating profit by its net sales.
By taking cost out of a businesses, Enterprises can reinvest back into the core business.
By speeding the process time and reducing the amount of data errors through B2B integration, you can increase the efficiency and speed of your supply chain. This allows you to reduce the amount of inventory held in the chain through shortened order processing and delivery cycles. Lowered inventory levels also results in corresponding reductions in carrying costs. Inventory costs can, in some businesses, account for as much as 90 percent of total product cost, so even modest reductions in this area can result in dramatic savings.
Increased Efficiency
With EDI, more business documents are shared and processed in less time. Business cycles can speed up by over 60% and transaction exchange occurs in minutes instead of the days or weeks of wait time from the postal service.
Automating paper-based tasks allows your staff to concentrate on higher-value tasks and provides them with the tools to be more productive
Quick processing of accurate business documents leads to less re-working of orders, fewer stock outs and fewer cancelled orders
Automating the exchange of data between applications across a supply chain can ensure that business-critical data is sent on time and can be tracked in real time. Sellers benefit from improved cash flow and reduced order-to-cash cycles
Shortening the order processing and delivery times means that organizations can reduce their inventory levels
Increased Accuracy
Improves data quality, delivering at least a 30—40% reduction in transactions with errors, eliminating errors from illegible handwriting, lost faxes/mail and keying and re-keying errors. EDI’s rigid standardization helps ensure that information and data is correctly formatted before it enters business processes or applications.
EDI can eliminate the need for human error as data is manually entered from one system or application to another. The estimated error rate for human data entry is around 1 percent –although some studies have found it as high as 10 percent – which can be very damaging and costly for a business. For many business transactions, there is still a manual element. In the typical manual purchase order, a person enters or copies information from the paper form at least once.
Errors stop the smooth transaction of business. If an order is incorrect, it has to rectified. A new order has to issued slowing the entire process while increasing the cost involved for all partners.
However, manual data entries can be far more costly to a business than that. Approximately 20-40% of operating expense in almost every organization is wasted due to data quality issues. How does this happen? The 1-10-100 rule states it costs $1 to verify the accuracy of data at the point of entry, $10 to correct or clean up data in batch form, and $100 (or more) per record if nothing is done.
With robust EDI solutions, improved accuracy is obtained in several different ways. EDI tools improve data quality by not only reducing human input but by creating a ‘virtual quarantine’ that ensures the integrity and accuracy of data from your trading partners before it enters your enterprise applications. In this way, you significantly reduce the cost of detecting and dealing with bad data in your systems while having the confidence in data quality in your EDI integration solution to allow the end-to-end data exchange required to enable full automated business processes.
Improved Trading Relationships
EDI enables real-time visibility into transaction status. This in turn enables faster decision-making and improved responsiveness to changing customer and market demands, and allows businesses to adopt a demand-driven business model rather than a supply-driven one.
Shortens the lead times for product enhancements and new product delivery.
Reducing errors also saves partners valuable time and frustration handling data disputes
Streamlines your ability to enter new territories and markets. EDI provides a common business language that facilitates business partner onboarding anywhere in the world
Enables efficient transaction execution and prompt, reliable product and service delivery.
Sellers benefit from improved cash flow and reduced order-to-cash cycles. In fact, EDI can reduce the order-to-cash cycle time by more than 20%, improving business partner transactions and relationships.
Strategic Benefits
In addition to improving speed, cost and accuracy, EDI can impact the business in a number of other ways, improving operational efficiencies and tightening relationships with your trading community. By enabling the secure and effective transmission of data trading partners can communicate, cooperate and collaborate much more effectively. B2B collaboration reduces operating costs, and improves visibility of spending, inventory pipelines, and supplier and in-transit activity. Consequently, you will see a reduction in inventory holding costs and lower safety stock requirements
Perhaps the most visible example of this is through the improvement and acceleration of key business processes. Research has shown that companies using B2B integration more extensively to connect with their customers, suppliers, and other trading partners – such as logistics providers – realized 37 percent shorter cash-to-cash cycle times, 19 percent lower total supply chain costs, 13 percent shorter days sales outstanding, and 36 percent shorter order-to-delivery cycle times.
The result is not only improved efficiency and better productivity. B2B integration software can also improve cash flow. As more of your applications are integrated into B2B Integration, your cash flow will improve due to overall efficiencies that the B2B Integration tool provides. You are able to plan cash flow more precisely by receiving and making payments sooner–so, as a supplier, you can take advantage of the net discounts and financing terms available.
Promotes corporate social responsibility and sustainability by replacing paper-based processes with electronic alternatives. This will both save you money and reduce your CO2 emissions.
In Conclusion
EDI is important to both large and small businesses. For large organizations, EDI enables standards to be instituted across trading partners to consistently achieve benefits. For smaller organizations, adherence to EDI offers greater integration with larger firms that have big budgets and strong influence.
Metalanguages like Extensible Markup Language (XML) or JavaScript Object Notation (JSON), and application programming interface (API) integration complement, rather than replace EDI. Companies must be ready to handle an ever-increasing number of document formats and transmission options. Many global business routinely exchanges about dozens of different document types with thousands of trading partners. To optimize investments in integration technology, ensure your EDI solution can support the myriad of integration standards and not only via EDI technology, but via API and MFT technologies as well.
