Benefits, features of EDI,Advantages of EDI

 Benefits of EDI

• EDI offers many significant benefits to those who fully implement and integrate it into other applications.

• EDI reduces reliance on paper, reducing company costs for purchasing and then storing paper.

• It moves products to market more quickly by accelerating the purchase order-invoice-payment order cycle from days or weeks to hours, even minutes.

• EDI offers process improvement and quality assurance benefits by improving how companies handle information.

• EDI enables you to expand businesses with trading partners.

• As your use of EDI increases, and you establish EDI relationships with more clients, you may take advantage of EDI's true power: its ability to integrate information throughout a business.

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 Benefits of EDI

• Generation of a paper document on a form by the software application. 

• Delivery of a few copies of the document to the internal dept to be filed and others to the trade partners via postal service. 

• Retyping the document received by the trading partner on the form into their computers may offer to introduce errors.

• Generation of a paper acknowledgment and sending it to the originating company. 

• Generation of a file containing the processed document by the application program. 

• Conversion of the document into an agreed standard format. 

• Electronic transmission of the file containing the document over the network, which may link the originating company and its trading partner. 

• Automatic generation of the receipt and its delivery over the network to the originating company. 

                    

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Benefits of EDI 

1) Reduces Lead Time

In the EDI environment, the exchange of documents among trading partners happens electronically through interconnected computers. The process of transferring the documents is instantaneous, offering weeks of time savings compared to the traditional environment that used postal / courier-based exchange of printed documents. Also, the direct electronic transfer of documents between inter-organizational systems eliminates the chance of error due to the re-entry of data printed on paper from one system to another system. As it streamlines the information flow, the cycle time is reduced drastically. In the environment, order-processing, shipping of goods, and invoice preparation and transmission can all be done within a matter of a few hours compared to the days/ weeks it takes in a non-EDI environment.

2) Improves Coordination with Supplies

Traditional trading environments are often burdened with the problem of mismatched invoices, un-matching terms in quotations and purchase orders, missing invoices even after the bill for payment is received and many similar inter-business problems. On careful examination, it will be evident that many of these problems are caused either by delays in the transmission of printed documents, loss of documents in transition, or errors in the transcription of the printed information into the electronic form. The instantaneous transfer of business documents over the network in electronic form and confirmation of the same addresses the first problem, thereby making it nearly impossible for documents to arrive in the wrong sequence. Also, since the documents are received in electronic form, the need to re-enter the same data is not there and, as a result, transcription errors are totally eliminated.

3)  Reduces Redundancy

As all the documents exchanged between trading partners are stores in an electronic mailbox, documents can be accessed, retrieved, and examined at any point in time. Either trading partner can access, examine, and make a copy of the document from the electronic box instantly. Contrast it with the non-EDI system; it may take hours, or even days, to locate and retrieve a printed business document from the past. Many a time, trading partners file copies of the same document at multiple places. The EDI environment eliminates the need for multiple copies and reduces redundancy without compromising the accessibility and retrieval of old documents.

4)  Expands the Market Reach

Most large manufacturers like General Motors deal with EDI-enabled suppliers only. In the process of streamlining the purchase process, they often institute a value-added network. By being a part of their value-added network, many opportunities open up for supplying the material to some other larger supplies who are also a part of the network. Also, with the growth of electronic commerce and further integration of EDI with electronic commerce, the creation of an electronic marketplace by large manufacturers who buy supplies from many large and small suppliers, has become a reality. By participating in this large market place you are likely to pick many orders from other suppliers who are a part of the market/place/network. The General Electric initiated Trade Process Network (tpn.com) is a prime example of such a marketplace.

5) Increases Revenue and Sales

Many large organizations use EDI and trade with other EDI-enabled suppliers. The efficiency brought about by EDI reduces the total transaction friction by eliminating paperwork and related errors that ensure. It also leads to the quicker settlement of accounts. The reduced transaction friction saves money and the supplier is in a better position to offer the items at cheaper costs, leading to improve revenue realizations and sales.

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Benefits of EDI

1)bLower operating costs

• EDI lowers your operating expenditure by at least 35% by eliminating the costs of paper, printing, reproduction, storage, filing, postage, and document retrieval. 

• It drastically reduces administrative, resource, and maintenance costs.

•  EDI support can lower other costs as well, such as Matson Logistics who reduced their ASN fines by 12% by switching to a more efficient EDI solution.

2) Improve business cycle speeds

• Time is of the essence when it comes to ordering processing. 

• EDI speeds up business cycles by 61% because it allows for process automation that significantly reduces, if not eliminates, time delays associated with manual processing that requires you to enter, file, and compare data. 

• Inventories management is streamlined and made more efficient with real-time data updates.

3)Reduce human error and improve record accuracy

• Aside from their inefficiency, manual processes are also highly prone to error, often resulting from illegible handwriting, keying and re-keying errors, and incorrect document handling. 

• EDI drastically improves an organization’s data quality and eliminates the need to re-work orders by delivering at least a 30% to 40% reduction in transactions with errors.

4) Increase business efficiency

• Because human error is minimized, organizations can benefit from increased levels of efficiency. Rather than focusing on menial and tedious activities, employees can devote their attention to more important value-adding tasks. 

• EDI can also improve an organization’s customer and trading partner relationship management because of faster delivery of goods and services, as well as

5) Enhance transaction security

• EDI enhances the security of transactions by securely sharing data across a wide variety of communications protocols and security standards.

• Paperless and environmentally friendly

• The migration from paper-based to electronic transactions reduces CO2 emissions, promoting corporate social responsibility.

• While many businesses are enjoying the advantages of EDI, some companies are still hesitant to try it because of a few limitations.

Limitations of EDI

1) Perceived high upfront costs

• EDI indeed used to require substantial upfront investment has been a barrier in the past, especially for smaller businesses. However, like most technologies, EDI has become less expensive over time. 

• EDI systems have also become more mature with features that automate and accelerate internal business processes that can quickly cover more than the investment with time and money saved.

2) Initial setup is time-consuming

• Not only has EDI become less expensive, but it has also become faster to deploy and integrate into existing applications and easier to use with WebEDI options that even non-technical users can operate.

3) Too many standards

• Many organizations also consider EDI to have too many standards and versions. This could limit smaller businesses from trading with larger organizations that use an updated version of a document standard. 

• Here are some of the standards: UN/EDIFACT, ANSI ASC X12, GS1 EDI, TRADACOMS, and HL7. 

• Therefore, a provider must be chosen that supports a wide range of standards and commits to keeping up with new protocols in the future. All-in-one solutions like OpenText Freeway Cloud eliminate the need to know all the standards by having EDI standards built-in to the solution.

4) Investing in system protection

• EDI may also require a heavy investment in computer networks. It will need protection from viruses, hacking, malware, and other cybersecurity threats if an on-premises system is chosen.

•  However, many providers offer a cloud solution that includes system protection.

5) Robust data backups of systems

• EDI needs constant maintenance since the business depends on it. Robust data backups must be in place in the event of a system crash. But again, if a cloud solution is chosen then this responsibility lies mostly with the provider.

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Benefits of EDI

EDI helps businesses improve supply chain speed, accuracy, efficiency, and costs, and some of the greatest EDI benefits come at the strategic business level. Here, we cover what EDI means, practically, for business.

Faster Processing

• EDI can speed up business cycles by 61 percent

• EDI enables transactions in minutes instead of days or weeks spent on postal mail or back-and-forth email communications

• Automating paper-based tasks frees up your staff for higher-value tasks and provides them the tools to be more productive

• Quick processing of accurate business documents leads to fewer re-worked orders, stock-outs, and cancellations

• Automating application data exchange across a supply chain ensures critical data is sent on time and tracked in real-time

• Shortening order processing and delivery helps organizations reduce inventory

Lower Costs

• EDI reduces the transaction costs of paper, printing, reproduction, storage, filing, postage, and document retrieval, saving businesses more than 35 percent on transaction costs

• For buyers that handle numerous transactions, using EDI can also result in millions of dollars of annual savings due to early payment discounts

• In some cases, EDI is just 1/20th the cost of manual order processing, slashing costs by a factor of 20

• EDI also eliminates costly errors due to illegible faxes, lost orders, or incorrectly taken phone orders

More Accuracy, Fewer Errors

• EDI reduces error transactions by 30-40 percent

• EDI eliminates human errors from illegible handwriting, lost mail, and keying errors

Better Relationships

• 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

• Reducing errors also saves partners valuable time and frustration handling data disputes

Strategic Benefits

• EDI provides real-time visibility into transaction status, enabling faster decision-making and better responsiveness to customer and market demands, helping businesses adopt a demand-driven approach

• Product enhancements and delivery enjoy shorter lead times

• Streamlines the process of entering new territories, as EDI provides a common worldwide business language

Environmental Benefits

• EDI promotes sustainability and reduces CO2 emissions by replacing paper-based processes with electronic alternatives

• EDI increases operational efficiencies, leading to fewer errors and less energy waste

key features 

• The electronic exchange of information

The electronic exchange of information requires the presence of direct or indirect interconnection between the involved partners. 

• Standard formats or business forms. 

The typical business forms used in the EDI include Schedules, Purchase Orders, Acknowledgements, Delivery related documentations, Receipt notes, Invoices, Remittance requests, payments through Electronic Fund Transfers, Bills of Lading, Manifests and Reconciliations, and many others depending upon the application area. Among the trading partners, the above-mentioned documents have to follow some standard format. The standardization of the format helps in exchanging these documents with trading partners that may have heterogeneous computing environments. 

 Features of EDI

• Exchange of structured business information in standard formats between computers. 

• It has reduced data entry links, eliminates the need for a paper bases system, and improved the business cycle.

• EDI transfers structured business documents internally among groups of departments or externally with its suppliers, customers, and subsidiaries.

• In EDI, information transferred over a network will not have to be read, retyped, or printed but must have a predefined structure agreed between the two company's which send and receive data.

• The two companies or groups which exchanged information through EDI are called the Trading Partners.

Advantages of EDI

Save Money

The cost of paper and paper processing is incredibly high compared to a properly implemented EDI program. RJR Nabisco estimates that processing a paper purchase order costs the company $70. Processing an EDI purchase order reduces the cost to a mere 93 cents.

End Repetition

If your trading partner wants a copy of a document, instead of calling you they simply check their mailbox. This results in great time savings from not having to copy and fax/mail copies of business documents.

Save Time

EDI also saves time over paper processing since the transfer of information from computer to computer is automatic. There is no need to rekey information with EDI. And the chance for error drops to near zero, with no data entry.