Electronic data interchange (EDI) is the direct exchange of business information in a specific format between two companies via computers. This software solution facilitates the electronic transmission of documents the companies process when conducting their commercial operations. These include purchase orders, customer invoices, and advance shipping notifications, bills of lading, debit notes, and remittance advice. The companies implementing the system need to mutually agree on using a particular EDI messaging and exchange protocol. They can select any one of the following protocols depending on the industry within which they conduct their business:
- United Nations/ Electronic Data Interchange For Administration, Commerce, And Transport (UN/EDIFACT);
- American National Standards Institute X12 (ANSI X12),
- TRADACOMS, and
- The Organization for Data Exchange By Tele Transmission (ODETTE).
Why do companies need EDI supply chain management solutions?
Supply chain management refers to the process of sourcing raw materials, and components companies need to make the products their customer’s demand. They establish a network connecting suppliers procuring the raw materials and selling their final products to end-users. It allows the companies to satisfy their targeted audiences’ needs, curtail excess inventory and improve operational efficiency. This results in a significant increase in revenue and profits. However, the common challenges companies face when it comes to operate a separate EDI and supply chain management systems manually are:
- Increasing labor costs when processing customers’ orders and final shipping products to the end-users,
- The frequent occurrence of clerical errors when re-typing identical data from one business solution to another,
- Discrepancies in the customer order and shipment delivery details when scrutinizing documents,
- Delays and disruptions in receiving raw material from suppliers on time hamper the production, and
- Difficulties in maintaining business relations with customers placing large orders, and delivering their products on time.
Companies can overcome these issues by implementing a software solution integrating their EDI and supply chain management platforms.
Streamlining supply chain workflow
Operating a user-friendly EDI supply chain management solution in IT infrastructure allows companies to:
- Shorten supply cycle lead times resulting in faster remittance from customers,
- Ensure higher cash savings by minimizing documentation processing costs,
- Eliminate or significantly reduce procurement errors due to discrepancies in relevant business documents,
- Improve visibility and clarity of inventory status data when processing business documents, and
- Improve the strategic alliance they maintain with their trading partners and suppliers constituting the supply chain.
The benefits of implementing and operating an EDI supply chain management system for companies are as follows:
- Automates the internal processes generating, recording, processing, scanning, and transmitting business transactions,
- Minimizes clerical errors during the generation, recording, and transmission of commercial messages,
- Prevents unnecessary delays by providing real-time traceability of products from their procurement, dispatch, and final delivery, and
- Reduces the processing time of customer order-to-shipment cycles significantly.
The latest EDI supply chain management platform allows companies to improve the internal efficiency of their logistic networks. This allows these corporate enterprises to take their businesses to the next level. The companies are then in a position to provide better services to all their customers. They can even enter into new strategic alliances with their trading partners. The solution they operate should be cost-effective to be easily integrated into their IT infrastructure.