Electronic Data Interchange (EDI) is the computer-to-computer exchange of business documents in a standard electronic format, according to EDI Basics. Moving to a completely automated electronic format reduces costs, increases processing speed, reduce errors, and improve relationships with business partners. EDI replaces all postal mail, email and fax, and transfers and delivers information in universal formats. While email seems efficient, it must still be handled by people rather than computers, something that slows the process and has a higher potential for errors.
Some of the most common documents transmitted via EDI include invoices, purchase orders, advance ship notices, bills of laden, inventory documents, and customs documents. There are a number of standards used today, including ANSI, EDIFACT and TRADACOMS, all of which can have different versions. Businesses typically decide which version they will communicate with, then use an EDI translator to move information to and from their internal applications.
Deepak Singh, founder and CTO of software company Adeptia, told Manufacturing Business Technology that organizations of all sizes are contending with more information and data sources on a daily basis. He said that as the first step in a data integration upgrade should be moving to EDI. Singh says that bringing EDI into the fold allows companies to realize efficiencies and reveal actionable business insight. This is especially important for manufacturers who can make supplier relationships more seamless, likely resulting in faster deliveries, reduced material and shipping costs and more.
“When data can be seamlessly integrated across the supply chain, between manufacturers, OEMs, Tier 1 and other suppliers, business processes across the board become more efficient and yield more revenue,” said Singh.
Kevin Beasley, CIO at software developer VAI, told Business2Community that EDI requires minimal investments in technology with little upfront costs. He said smaller companies and startups use EDI because it enables them to sign larger deals and achieve rapid growth. Meanwhile, larger companies use EDI because it allows them to standardize the hundreds of business relationships they negotiate on a daily basis. Yet he says mid-market companies tend to be “the most hesitant” to adopt EDI because they often have tight margins and can’t find the budget to invest in new technologies, which they may not deem necessary.
“For some, the status quo has worked for years; they are still generating revenue on a consistent basis, so why invest time and resources adopting a new communications method?,” says Beasley.
Mid-market CEOs should realize that the loss of potential revenue by not implementing EDI is substantial, says Beasley. He recommends that mid-market companies do their research to determine exactly how much money is being left on the table by not making the shift to EDI.