Electronic Data Interchange (EDI) is regarded as a powerhouse in B2B sales. According to a study by Forrester, EDI transactions are at more than 20 billion annually and growing. In 2019, EDI accounted for 78.9% – $7 trillion – of all B2B electronic sales, according to a data analysis report in the 2020 B2B E-commerce Market. Businesses today cannot afford to miss out on the opportunities offered by EDI. But what is it?
EDI enables the transfer of electronic documents between customers and suppliers across the whole supply chain. EDI has standardised digital processes, is transparent and enables data exchange between different systems of record. That standardisation means that until a document meets the requirements, it cannot be processed through EDI until it conforms.
There are several standards and protocols in use. The choice of software is often limited by what a business partner already uses. Along with these standards, different EDI systems vary and are not always compatible with one another. At its foundation, EDI can be broken down into two main approaches.
The first is a Direct EDI method, which includes an unhindered single connection between a sender and a receiver, free from any intermediaries. The second is a Value-Added Network (VAN) EDI, in which a third-party service provider handles data transmission through secure channels to one or multiple recipients. These recipients can choose to follow the same communication protocol or a different one. It is then up to the service provider to arbitrate the data in the right format to match the recipient’s and sender’s requirements.
6 reasons to adopt EDI in your business
Why use EDI? Below are six of the most obvious reasons.
EDI minimises documentation expenses:
Unnecessary expenses associated with paper, (such as printing, postage, filing, scanning, and document retrieval) are all reduced with EDI, if not completely eliminated. This lowers transactional costs and can free up resources for other projects. Companies have claimed that manually processing a purchase order is 35% more expensive than processing it through an EDI.
Quicker turnaround and process facilitation:
With EDI, data transactions can be done in minutes instead of hours. As a result, business cycles like supply chains, P2P, and O2C are sped up to improve business efficiency.
Data accuracy and standardisation:
As a standard-specific process, EDI demands that data is systematically arranged in an acceptable file format. This feature directly implies accuracy and .
Information accessibility and transparency:
Since all information and data are electronically transmitted, everything is made available for easy access and analysis on the company network.
Reduced manual dependency:
Documents are processed most commonly between B2B channels directly from the ERP. As a result, the need to provide manual input in any process is reduced or eliminated.
Data is exchanged through secure portals and platforms, ensuring that it remains protected from tampering and corruption.
Making the transition to EDI
The decision to shift towards EDI is easy; completing the transition is often hard. Despite the operational advantages, many systems need to be put into place before an EDI process is successfully implemented. However, not making the change can rule out certain business relationships. Larger businesses often demand the use of EDI with suppliers. The pressure from competitors and large buyers to adapt to EDI functionality can become a deal-maker in your decision-making while considering EDI integration.
The Supply chain function and the network it interacts with is increasingly data-driven. As organisations seek to remain competitive and increase flexibility, the supply chain needs to increase efficiency. Most manufacturing and logistics industries are constantly looking to improve their supply chain processes. Integrating resource planning platforms with electronic document exchange technology can help streamline workflows and improve performance.
It all adds to a new and improved B2B connectivity, and connectivity is everything. Trading partners realise this as the fundamental aspect of effective B2B sales and process completion. Let’s take sales order processing and procurement cycles as our examples.
What difference EDI can make
According to a study, when orders are processed through EDI without manual intervention, the time from order to shipment is cut by half. An order that takes up to seven days to be processed manually now takes only three days or less if done through an EDI communication channel. Regardless of how orders are processed, almost 40% of the customers’ orders reportedly change at least once after getting placed. Once again, we see that EDI can reduce data reconciliation errors, quicken order processing, and reduce fulfilment errors compared to other methods.
When it comes to effective procurement, Advanced Shipping Notices (ASNs) and Purchase Orders (POs) are essential documents that help supply chains run smoothly. Lacking these documents can lead to longer wait times, shipment mismanagement, and lower efficiency for the overall transaction. According to the same study referenced earlier, 30% of orders are still received without the issuance of ASNs or other necessary B2B documents. EDI potentially eliminates this issue and its associated costs.
The estimated cost of processing a procurement order without an ASN or dispatch notice is $78 per order. This is unimaginably high when compared to the same process using an EDI, during which the cost is identified as anywhere between $0.01 – $0.02 per order.
Are you ready for a decision on EDI?
All statistics aside, establishing an EDI channel can clearly invite complications and irregularities. However, even if you’re required to implement EDI due to partnering corporations, healthy EDI communications can lead to positive, long-lasting working relationships. The payoff can be tremendous regardless of why you choose to utilise EDI in the first place.
Moving forward, the implementation of EDI begs a series of questions that need to be answered before anything contrives. In fact, the decision of shifting towards EDI in itself is a reflective, immersive, and complex process. Let’s see which EDI method is best suited for your business.
Symtrax is a document management software provider with more than 3,000 installations worldwide. Our solution, Compleo Hybrid, handles the entire business document life cycle from creation to signature to distribution. With our specialists located in seven offices around the world, we directly address cross-industry needs and craft customer-specific service.
We create and implement digital document solutions to turn enterprise processes fully digital and EDI-ready.
We craft, tailor, and seamlessly integrate customer-specific software solutions along with cloud-based document interchanges.
We have brought our proven expertise in digital transformation to more than 3,000 companies worldwide with our average customer relationship lasting 12+ years.