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Are you considering whether or not you need electronic data interchange (EDI)?
Maybe you’ve been told you have to use it by a trading partner?
Besides being a ‘need to have’ technology that enables B2B communication in a secure, mutually agreed format, the benefits to EDI are plentiful, from slashing costs to accelerating business cycles.
This article will explore the top 6 compelling advantages of EDI, and explain how the technology offers much more than complying with trading partners alone.
1. Enhanced Trading Efficiency and Speed
EDI satisfies the need for fast, efficient B2B transactions. In retail and logistics, buyers and end customers expect to receive products quicker than ever, with other sectors like insurance and healthcare also relying on speedy data transmission.
EDI technology replaces slow processes and enables fast, secure transaction-related communication. Automating complex data exchange between partners accelerates transaction cycles, from issuing purchase orders (POs) to shipping notices and invoices.
In one survey of enterprises that use EDI, increased productivity and accelerated business cycles were ranked as leading benefits by over 70% of participants.
Through this, EDI unlocks more time for business-critical strategies, such as growing your trading network, optimizing your inventory, or expanding your product selection.
Alleviating Slow Paper Processes
Exchanging paper transactions involves multiple steps: creating, printing, mailing, receiving, and manually entering data into systems. It’s slow and error-prone.
Conversely, EDI streamlines communication by electronically exchanging documents like POs and invoices.
For instance, when stock is low, an integrated ERP can automatically generate and transmit POs through your EDI software.
The supplier receives this order almost instantaneously, processes it, and ships the order, complete with electronic invoices, shipping information, and other information.
Minimal manual oversight is required, and most of the process is automated.
Quicker Decision-Making
Traditionally, decision-makers have to wait for the necessary paperwork to be processed and information to be manually compiled, but that’s not the case with EDI.
Real-time data exchange allows businesses to make informed trading decisions.
This is paramount in industries where trading partners expect swift, incisive decisions. If you’re dealing with major buyers like Walmart and Amazon, you don’t want to keep them waiting.
2. Improved Transaction Accuracy and Reduced Errors
EDI effectively eliminates costly manual data processing errors.
Studies indicate that even the most diligent manual data entry processes can expect an error rate of around 1%. This means that in every 1000 entries made, there could be approximately 10 errors.
The impacts of manual errors include anything from incorrect or missing transactions to fulfillment delays. In some cases, this can result in fines from trading partners for non-compliance or even having contracts terminated.
EDI Transforms Data Entry
Accurate transaction processing often ranks as the leading benefit of EDI in surveys.
EDI addresses errors through automation and by enforcing business rules on data entry. For example, you can stipulate that when a purchase order is raised, it’s automatically formatted and transmitted as an EDI document to the supplier.
EDI automation bypasses the traditional steps of printing, mailing, manual receipt, and re-entry of order information into another system. By doing so, EDI ensures that the data remains consistent and error-free from origin to destination.
3. Cutting Costs and Optimizing Supply Chains
The cost savings achieved through EDI are well-documented. The average cost of manually processing an invoice is about $15-$40 per invoice. Processing the same invoice using a fully automated, electronic method via EDI is a fraction of the cost. Top performers spend only about $1.42 per invoice.
Cutting Inventory Costs
In addition to reducing processing costs, EDI improves shipping and supply chain speed and responsiveness, cutting inventory and warehousing costs—two of your biggest overheads.
Further, one of the advantages of EDI in eCommerce and retail is that it reduces warehousing costs and supports Just-in-Time (JIT) fulfillment. Companies can produce goods on demand upon order instead of holding large inventories that take up space and cash.
4. Strengthening Business Relationships
Implementing EDI bolsters your business relationships by supporting faster and more accurate transactions.
In some cases, effective EDI is mandated by partners. They might even cut you off if you can’t become EDI-compliant in the expected timeframe.
Modern EDI solutions like 1 EDI Source simplify the task of meeting partner demands so you can sell more products without delay or fines for non-compliance with their trading rules.
5. Bolstering B2B Data Security
Paper processes and email are ridden with risks when it comes to exchanging B2B transaction data. Conversely, EDI uses direct, end-to-end encryption techniques to ensure safe and confidential data transfer.
Enhanced security is partly how the technology became so popular back in the 1990s and remains a key factor in why businesses still embrace it today.
EDI achieves security through value-added networks (VANs), a secure, private environment for EDI transactions, ensuring data integrity through authentication and encryption. Secure file transfer protocol (SFTP) is ideal for transferring large EDI files securely.
Meanwhile, AS2, a method of transporting data designed specifically for EDI, encrypts transmitted data and uses digital certificates for authentication, ensuring data reaches its destination without tampering.
Major retailers, like Walmart, require AS2 for EDI communications.
Protection From Cyber Attacks
EDI data exchange occurs in an encrypted ‘tunnel,’ which reduces the chance of tampering or interception.
With data breaches and cyber attacks often resulting from poor login security, phishing, and insecure file transfer, this is a huge benefit to EDI.
You can transfer critical data directly to partners without it sitting in someone’s email inbox or on an unencrypted server.
6. Environmental Benefits
Adopting EDI aligns with the growing corporate emphasis on eco-friendly business practices and environmental, social, and governance (ESG) goals.
About 50% of global business waste is estimated to be paper, with its usage directly resulting in deforestation and greater carbon emissions. Businesses can substantially reduce paper waste by transitioning from paper-based processes to digital ones with EDI.
Summing Up
As we can see, EDI isn’t just a tool for complying with trading partners. It also offers a wide range of benefits in its own right, from reducing error-prone and wasteful paperwork to cutting costs and unlocking new productivity levels.
So, if you’re interested in EDI or need it to comply with partners, take stock of what it can offer your business. To maximize the benefits, choose an established, modern solution like 1 EDI Source. Reach out for a demo today.
