One of the questions asked in Supply Chain Insights’ recent study “EDI: Workhorse of the Value Chain” was: “How has your EDI/XML technology made each of the following components of your supply chain better or worse?” For 85% of the respondents, the top improvement from EDI was better/ much better business partner relationships.
Here are some reasons why I think the exchange of EDI documents improves relationships:
Better Relationships with Customers
For many companies today, EDI is a prerequisite for doing business. So, when you can answer “yes” to your customers’ EDI requests you have a greater likelihood of starting and maintaining a positive business relationship:
- “Yes, of course we can receive your Purchases Orders (PO) via EDI.”
- “Yes, we will send you Advance Ship Notices (ASNs) so you will know exactly when your orders will arrive and what is included in our shipments.”
- “Yes, we will use barcode labels on our shipments so you can scan our shipments upon arrival and achieve greater productivity in your warehouses and distribution centers.
Answering positively to such requests means your company is seen to be easy to do business with. That frequently results in receiving more orders from the same customers. That in turn translates into higher revenues. Furthermore, once you have developed your EDI capabilities you then have a competitive edge that you can proactively use as a differentiating service feature during the sales process with new prospects and other customers, both locally and internationally. This means that your sales team will be happy because they don’t have to worry about whether they can accept a new customer order or not. (Watch this video case study to hear Harper Collins describe how EDI has enabled them to accept new customer orders without fear.)
Better Relationships with Suppliers
EDI helps you to improve relationships with your suppliers in many ways. Here are a few examples:
- By exchanging business documents electronically, you have the opportunity to gain visibility into the entire ordering process. That visibility enables you to track supplier performance across your key metrics (such as complete shipments, timeliness of advance ship notices, and frequency of back-orders). That visibility in turn enables you to identify trouble spots. Armed with that information, you can either remove poor-performing suppliers from your supplier community, or, for strategic suppliers, work with them to improve their performance.
- One of the first questions suppliers want to have answered once they’ve sent you an invoice is: “Have you paid my invoice”? Armed with an EDI Purchase Order and Invoice, you can virtually eliminate those calls into your accounting department by posting the latest payment status on a supplier portal, enabling suppliers to access the information directly. That’s a win-win for all involved as it improves productivity and saves time for both the buying and the supplier companies.
- Companies can adopt the Evaluated Receipt Settlement (ERS) process with their high-volume, trusted suppliers. With this process the customer pays for a shipment of goods based on goods received and the pricing in the original purchase order – no invoice is needed at all! ERS results in more timely communication of data between trading partners and often generates other economic values for both partners. But, it can only be done if the Purchase Order (PO) and Advance Ship Notice (ASN) documents are exchanged via EDI!
In my next blog, I will continue to share statistics from Supply Chain Insights’ report with you. In the meantime, if you would like to read the entire report, you can get your copy here.