Electronic Data Interchange (EDI) refers to the exchange of information between businesses. Using EDI software or an EDI alternative, a company can immediately create and transmit, purchase orders, RFQs, advanced shipment notifications, invoices, and other vital business documents to and from partner companies.
While acquiring an in-house EDI system may seem like a no-brainer, it’s important to consider the cost and overall investment a business will have to commit to when implementing and maintaining EDI.
Here are some benefits and drawbacks of integrating EDI into your business workflow.
The benefits of EDI include:
- Speed. Information is transferred in near real-time, with little human intervention. Using EDI systems, data flows can be integrated with accounting and/or ERP systems, which can help to speed up POs, RFQs, order processing, shipping and invoicing functions. EDI can speed business cycles by an estimated 61%, and reduce the order-to-cash cycle time by more than 20%.
- Accuracy. A manual data management system has a high potential for human error, while an automated EDI system can improve the quality of data by reducing errors by 30-40%. Improving the speed and accuracy of data transmission helps organizations to improve relationships with business partners at all levels and protects against mishandling or manipulation of important inventory and pricing data within the supply chain.
- Cost savings. Expenses associated with manual processing and transmission of information don’t end at employee time and effort, they also include the cost of physical resources such as paper, printing, copies, document storage and more. One electronics manufacturer calculated that processing an order manually can cost up to $38, while an automated order processed through EDI only costs $1.35, a cost savings of 96.45%.
- Efficiency. Automating data exchange means that information can be sent and tracked in real time, giving companies the best information possible required to make critical business decisions. Consider the number of hours diverted from high level strategy to administrative tasks. With time saved from automated EDI, staff can redirect efforts to business-critical functions. Improved efficiency means better client services, better inventory controls, and improved business opportunities.
- Strategic opportunities. With improved data gathering, an organization can be more flexible when it comes to decision-making. Lead times for products and services can be shortened, and entry to new markets can be easier with an efficient EDI system.
While EDI has many benefits, adopting this solution also has some disadvantages, especially for small to mid-sized companies (SMEs).
Some drawbacks of EDI to consider:
- Expense. An in-house EDI solution requires a firm to invest in software and hardware, along with employees to install, maintain, and support EDI systems. This not only includes EDI and communications software, but also transmission and telecommunications systems, mapping and translation software, and continued support, upgrades and maintenance.
- Complexity. Internally, EDI must be integrated to existing business applications while externally, the company must develop and maintain connections and system compatibility between each business partner.
Implementing an EDI system can be expensive and complicated, both for installation and ongoing requirements. However, EDI software benefits can be achieved without the high costs of deployment and maintenance by exploring a managed service approach.
Considering EDI options
Partnering with an EDI provider allows a company to reap the benefits of automatic data transmission, while bypassing many of the drawbacks. With a third-party EDI provider, an organization can quickly and easily implement an EDI system, without requiring a large capital investment in hardware or software.
Every industry has different requirements for transferring data to and from business partners. By utilizing an EDI vendor, upgrades are generally included, and if a business partner changes the system on their end, the EDI provider will generally manage the change for you, eliminating the disruption in business that occurs from changing system requirements. Organizations benefit from access to the latest technology, as well as increased productivity from automated electronic component purchasing, improved efficiency, and better business agility to enter new markets with new business partners.
Orbweaver Connect is the only EDI alternative solution created by electronic parts industry experts, providing a secure, reliable data transfer platform to improve the speed, accuracy and efficiency among business partners. With Orbweaver Connect, organizations can communicate via API or any other protocal to exchange quotes, pricing information and invoices, POs and forecasts with partners all along the supply chain, without the headaches associated with implementing an in-house EDI solution.
To learn more about Orbweaver Connect, request a free consultation today.