It’s no secret that EDI represents a huge competitive advantage for businesses. Regardless of industry, size, or technical capabilities, the benefits of EDI are countless.
Although the choice to implement an EDI solution comes down to cost savings for many companies, electronic processing has additional advantages that are important to consider.
To provide some insight, we’ve put together our own list of the top 5 EDI benefits. Not surprisingly, cost reduction ranks #1.
Before we dive into the benefits of EDI, if you’re looking for an introduction to Electronic Data Interchange, please read our EDI 101 blog post.
1. Cost Reduction
Manual processes are expensive. The cost of processing an incoming order manually typically ranges between $30 to $35 per document. Just think about the cost of paper, printing, postage, and storage, let alone the expenses associated with the administrative work required for data entry, filing, copying, reviewing, and retrieving documents.
As opposed to manual handling, the cost goes down to approximately $0.25 to $0.75 per document with EDI, for an average of 30% to 60% savings.
With that in mind, it becomes clear that the higher the volume, the higher the savings. For businesses that exchange a massive amount of documents each month, EDI is a great opportunity to significantly lower operational costs.
EDI not only enables cost savings on materials, resources, administrative, and maintenance expenses, but also on manual-entry errors and, ultimately, chargebacks.
And this brings us to benefit #2 on our top five.
2. Increased Speed & Accuracy
Aside from being expensive, manual processes are time consuming and error prone. When transactions are handled manually, it can take days, or even weeks, to complete them, and mistakes are inevitably going to be made. Hand keying, re-keying, illegible handwriting, and even lost orders can all lead to errors and longer wait times.
And when an error occurs, besides causing delays, it can cost you a lot of time, money, and resources to fix. The higher the number of lines in a purchase order (PO), for example, the longer it will take your staff to re-work the document and correct the error(s).
EDI takes the human factor out of the equation, reducing errors by at least 40% and accelerating business cycles to just minutes, if not seconds. With advancements in EDI technology that allow for data validation and resolution of exceptions, businesses can now achieve up to 100% accuracy and, therefore, significantly speed up operations.
Reduced processing times means faster business transactions and healthy inventory levels. With EDI, getting paid faster is just the tip of the iceberg. You also shorten your lead times and increase supply chain visibility.
3. Increased Efficiency
Lowered costs, reduced human errors, and faster processing make a business more efficient.
Because document exchange is automated with EDI, businesses don’t have to spend time and resources on repetitive, manual tasks. Valuable, expert employees can be freed up to focus on critical tasks, enhancing overall business productivity.
With workflows running smoothly and orders fulfilled on time, customers and suppliers will be more than happy to do business with you. Which brings us to another key EDI benefit…
4. Enhanced Trading Partner Collaboration
It’s often underestimated how important it is for a business to maintain good relationships with all their trading partners. Who wants to do business with a supplier that never processes orders on time?
From customers complaining about a late payment to those charging for a delayed Advance Shipping Notice (ASN), maintaining solid relationships with business partners can be a nightmare without the right tools.
EDI ensures that all documents—namely orders, invoices, and ASN—are processed quickly and accurately, consolidating collaboration with suppliers and customers.
Furthermore, as a business grows and continues to take on more and more trading partners, EDI becomes critical in managing all supplier and customer relationships because EDI operations are scalable. EDI ensures full compliance with partner-specific requirements and, thus, helps to prevent penalties and chargebacks. It also enables organizations with an extensive partner network to quickly onboard their suppliers and customers (automatically in some cases).
In fact, EDI is a requirement for many companies, as they seek to avoid all the hiccups they typically run into when the document exchange is not automated.
5. Improved Security
As security increasingly becomes a top priority for businesses, EDI becomes a necessity. Paper mail, email, and other rudimental paper-based communication tools lack the level of security that EDI provides.
With advanced protocols and standards, as well as sophisticated authentication and encryption systems, EDI ensures data privacy and security. When selecting an EDI provider, it’s crucial to investigate the security procedures and solutions they offer to determine if the platform is certified in data protection and secure.
6. Bonus: EDI is Green
Today, “going green” isn’t just a buzzword. It’s becoming the norm for many businesses that strive to implement eco-friendly solutions and help to protect the environment. And EDI can do just that. Besides reducing costs, paperless solutions help to reduce CO2 emissions, promoting corporate social responsibility.
This post was written by Chiara Carnevali, Marketing Manager, North America
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