Digital transformation is a hot topic in every part of business, especially the supply chain. Recent research from IDC and OpenText™ found that over 40% of supply chain organizations are either advanced or very advanced in their digital transformation initiatives. Electronic Data Interchange (EDI) can be considered the supply chain’s first great disruptive digital technology. For over 50 years, EDI software and services have been replacing paper-based documents with digital processes. The quick and accurate exchange of EDI documents has accelerated business and improved customer experience. So, what should you look for when selecting the best EDI system for your supply chain?
To start, what is EDI? One possible definition would be the automatic transfer of digital data from one computer system to another using standardized messaging formats to enable multiple companies to conduct EDI transactions together. That’s accurate, but a little technical. Another EDI definition could be a robust technology to allow everyone involved in the supply chain—customers, suppliers, logistics companies—to work together effectively.
EDI technology is incredibly mature. The major EDI standards and document formats have been around for many years—in some cases decades. The result is that EDI is a highly efficient process that is entirely paperless and requires little to no human participation. Deploying EDI systems not only saves time and money across the supply chain, it facilitates close collaboration between trading partners and helps build customer satisfaction and loyalty.
The development of EDI solutions in the supply chain
The first processes that EDI solutions addressed were the order-to-cash and the procure-to-pay cycles. EDI payment documents and EDI invoices help remove human intervention, thereby reducing the errors in these key business documents. EDI transactions now happen automatically—flowing from the accounts receivable systems of the supplier to the accounts payable systems of the buyer in a matter of moments. Where there were errors, these could be quickly identified and addressed. The entire process of an EDI transaction can take minutes or maybe hours compared with days or weeks for the paper-based equivalent.
It’s little surprise that organizations started creating EDI documents to address other areas of the supply chain. EDI shipping and warehousing documents have been developed to include bills of lading, customs documents, inventory lists, shipping status records, shipment authorizations and acknowledgements, and advanced shipment notices and payment information documents. Companies have also established EDI transactions with their banks and financial services partners based around EDI documents such as letters of credit, funds transfer and remittance advice.
Today, EDI software and services are at the core of efficient supply chain operations delivering the fast and secure file transfer that drives collaboration and increases sales amongst trading partners. The EDI tools available now also means that it is not just large organizations that benefit from EDI solutions. Small companies can also use web-based EDI software to trade digitally with their partners.
Benefits of EDI solutions
There are many benefits from using Electronic Data Interchange technology. The best EDI solutions should:
- Improve customer experience
Customers want good products at a fair price delivered where and when they need them. EDI solutions become the foundation for giving your customers what they want. EDI allows you to ensure order accuracy, increase communication with your customers and increase customer experience and loyalty. Some estimates suggest that the use of EDI systems can result in 30% faster delivery time to customers.
- Speed processing
Introducing the best EDI software or best EDI provider to the supply chain means transactions between trading partners can be completed faster and at greater volume if required. EDI transactions are completed in minutes, which speeds payments, improves cashflow and can introduce opportunities for buyer discounts and innovative finance options of the supplier. One American automotive corporation reduced a key cycle time by 97% —EDI transactions reduced a 30-day process to 24 hours.
- Reduce errors
Research has shown that with paper-based processes often as much as 5% of the data on an invoice is inaccurate. With automated processes and an increased ability to cross-reference and check details, EDI tools dramatically reduce the capacity, leading to a greater volume of accurate EDI transactions without the need for delayed corrections and their associated costs. Retailers, especially larger ones who work with a vast number of suppliers, often rely on EDI technology because it standardizes the transactions with their many partners, reducing the risk of miscommunication, human error, incorrect shipments and other mistakes.
- Save time and money
Switching to EDI software and services in the supply chain means that a mountain of paperwork can be eradicated at a stroke. Processes are sped up, but related costs such as storage, communications and manual checks are all reduced. Reports suggest that EDI transactions can cost 70% less than their paper-based equivalents. The EU has reported that by taking 10 minutes less to process electronic invoices—saving 120 euro per invoice—and GS1 found that UK grocers saved £14 on every electronic order.
- Improve inventory management
Inventory management is a top priority for every supply chain. EDI software will help you maintain optimal inventory levels. By exchanging EDI documents with all your trading partners, you can achieve high levels of supply chain visibility where EDI tracking lets you know what inventory you have and where it is. Using the latest EDI technology you can gain real-time updates to enable effective resource allocation and prevent shortages and virtually eliminate excess inventory.
Choosing the right EDI solution for your supply chain
Choosing the right EDI solution is as much about finding the right EDI provider to supply it. While some companies will manage their own internal EDI capabilities, many look to outsource to an EDI provider. Whichever route you choose, here are a few points to consider:
- Comprehensive EDI support
The best EDI solutions offer broad support for both EDI document types and EDI standards. While you’re likely to begin by exchanging EDI payments and EDI invoices, your EDI system should accommodate other EDI documents to support other supply chain processes such as shipping or warehouse management. In addition, the EDI solution must be able to handle all common EDI standards including ANSI, EDIFACT and AS2 so that you can trade seamlessly with the widest number of customers. You need to check if there are industry-specific EDI standards—such as ODETTE in automotive—that your company may need to comply with.
If implemented properly, the best EDI solution helps your business to grow while remaining lean. As your business grows and you connect to more customers, your EDI solution should meet your needs. For some organizations with ambitious growth plans, it may be worth considering Cloud-based EDI services to ensure almost limitless scalability allied to flexible and manageable pricing structures.
- EDI integration
Integrating EDI into your business can often reveal opportunities to streamline your business process and reap further benefits. The key to EDI technology is the automated, end-to-end flow of key supply chain data between the systems of trading partners. This requires close EDI integration with your ERP, accounting and other enterprise applications. In addition, the best EDI solutions will offer seamless integration into other key supply chain systems such as your Warehouse Management System (WMS), Product Lifecycle Management (PLM) systems or your Transport Management System (TMS).
- EDI mapping and translation
The EDI system you select must include EDI tools for effective document mapping and translation. EDI mapping and translation tools will take EDI data from one format and place it into another to enable the end-to-end automated flow of EDI data from the enterprise applications. These EDI mapping tools should minimize barriers and complexities, while speeding the integration process and reducing the cost of custom development.
- Types of EDI
There are many different types of EDI including direct EDI—sometimes called point-to-point EDI—an EDI network, Web EDI, Mobile EDI and full B2B integration. Each type of EDI has its advantages and disadvantages depending on your business size and need. Many large organizations take a hybrid approach combining different types of EDI to ensure they are able to work with all their trading partners. Increasingly, organizations are looking to work with trusted EDI providers that can handle the day-to-day management of their EDI capabilities.
Why choose OpenText for EDI?
OpenText is at the forefront of the development of EDI technology and is recognized as a leading global EDI provider. Our OpenText™ B2B Integration services products allow you to create, send, receive, print and manage EDI documents, as well as integrate to accounting and other back-office systems. Whatever the size of your operation, we can help you to improve your existing processes and adopt new ones. With our EDI software and services you can exchange a wide variety of EDI transactions and collaborate with your trading partners.
Our flexible EDI solutions incorporate a range of key components that can be adapted according to your organization’s requirements.