Increasingly distribution companies are using EDI to improve efficiency and streamline operations.
EDI, or Electronic Digital Integration, refers to the process of electronically exchanging standard business documents between companies. These business documents could be purchase orders, invoices, inventory counts, or advance shipping notices, for example.
EDI provides a universal language for one company’s database to communicate with another’s. This helps to facilitate speedy, accurate and secure trade communication among distributors, vendors and customers.
An EDI is more than just a data format as it can also integrate with internal systems such as your ERP, to allow easy exchange of key data between systems.
How does EDI Work?
With all of your company’s information stored in your current ERP or WMS, an EDI solution will integrate and access the information required whenever a transaction is made.
It can also check for errors when sending and receiving transactions, verify that all transactions were sent and received successfully, provide critical process controls for all parties involved.
Documents like invoices, advance ship notices, functional acknowledgments are used by EDI solutions to expedite trading between businesses.
Traditionally processing these transactions would involve paper versions of these documents, their printing, postage, and a lot of human intervention. This makes them prone to mistakes and human errors. However, using EDI eliminates paper documents and minimizes human intervention.
Benefits of EDI
- Time Savings: Transferring documents electronically takes minutes and can be automated using workflows. The time saved allows employees to work on other tasks. It also has the knock-on effect of speeding up ordering and reducing payment times. It’s estimated that the faster processing can speed up business cycles and improve delivery time by up to 30%.
- Cutting Costs: Automation of manual processes using EDI, leads to reduced processing costs for business documents, by between 35% and 90%. Using EDI reduces admin time and the number of disputes due to inaccurate data.
- Improved Data Accuracy: The reliability of the information exchanged between businesses skyrockets when you implement an EDI solution. It is estimated that EDI solutions cut down document errors by 30 to 40%. Without the need to manually transcribe business documents, EDI eliminates manual errors and data accuracy is maintained.
- Greater Efficiency: Because EDI is an automatic process, it removes the inefficiency associated with human processing. Many businesses can recall an instance where an employee forgot to transfer a purchase order or send an invoice out. With speedy processing and accurate inventory info, distributors find they have fewer out of stock situations or canceled orders.
- Improved Response Times: With EDI, the administrative and operational processes can be attended to swiftly and accurately. By integrating an EDI with your ERP, you can standardize common processes and cut response time by up to 60%.
- Enable Growth: Larger companies like Bed, Bath & Beyond or Home Depot require their distributors to utilize EDI. If you want to sell at scale, you will need to comply with their EDI standards.
- Outsource Fulfillment: If your inventory management needs are outpacing your physical capacity, you may decide to work with a 3PL or third-party logistics provider. 3PLs utilize EDI to streamline the fulfillment process and maintain data accuracy across systems.
These are some direct benefits for distributors implementing EDI; but it also has a major indirect benefit. By replacing paper-based processes with electronic alternatives, you’ll reduce your CO2 emissions and promote corporate social responsibility.
Setting up an EDI solution may appear daunting, but if you already use an ERP solution, or even an accounting package, you’re already part-way there. By integrating your existing system with an EDI software, your electronic documents and other data can be automatically interpreted and transmitted.
There are many ways to implement EDI in a company but the approach you choose should be driven by your distribution company’s business needs. Whether you are a large distributor looking to save costs in your supply chain, or a SMB looking to improve efficiency, an EDI solution can help you.
To learn more about how to improve your distribution business with an EDI solution, contact an Admiral representative today!