Made famous by Wal-Mart, an Electronic Data Interchange (EDI), uses proprietary or public channels among participating members, to exchange documentation and ultimately increase the speed of the supply chain process between participating members. An EDI uses electronic files, instead of printed documents to reduce the time it takes to move information from vendor to vendor or department to department.
Meeting the Need
An EDI is designed to reduce the constraints of your procurement process by automating the receipt and invoicing delivery, among other supporting administrative documentation. Participating companies must use a common EDI standard so that their systems are all speaking the same language.
Efficiency is the key to reducing operational costs, allowing a business to grow. Efficiency is sought in all aspects of a business, including the automation of documentation and workflow. Therefore an EDI system that generates the most work at the least cost in the least amount of time, is ideal for organizations looking to optimize operations.
Supply Chain was, until recently a hardcopy process, requiring a difficult-to-manage paper trail. Administrative tasks of documentation and accounting in the supply chain, especially procurement and distribution generate significant cost, and increase delivery times, thereby drumming up the cost. An effective EDI can greatly reduce these costs and improve times along all aspects of the supply chain by increasing the speed of interaction between various parties of a procurement transaction, the time it takes for completion is greatly reduced, reflecting in redemption of operational cost.
Beneficial as Well as Essential
EDI is not only fast; reducing operational cost, there is a high level of accuracy that is attained with its use. Computers don’t make mistakes, people do. If the correct information is entered into the EDI, the correct information will make it to all parties involved, say generating a receipt following the completion of a transaction. Not only that, it all happens at the blink of an eye.
These are standard templates that are designated towards a certain function in the procurement process, for instance:
1. 940 - Shipping Order
2. 945 - Shipping Confirmation
3. 943 - Stock Trans Shipping
4. 944 - Stock Trans Receipt
5. 947 - Inventory Adjustment
Integrating into Electronic Data Exchange
- Your IT department can help you integrate the EDI system, but in order for them to meet the requirements, they must understand what EDI is and what it entails in terms of infrastructure requirements, and how they interact with members of the procurement or logistics processing departments. Your IT team needs to also understand the important aspects of your Inventory control, along with bar-code scanning technologies, and networking protocols like File Transfer Protocol (FTP) and Virtual Private Networks (VPN). This can however limit the integration process because they may not have the experience it takes to implement EDI
- An EDI consultant refers to experts who are both trained, certified and experienced in Electronic Data Exchange. In making your choice as to which provider to choose, be sure to get previous customer reviews, an understanding of their track record, their client portfolio and how diversified their services are.
- A third party logistics (3PL) provider would not only provide you a hassle free service for distribution and product tracking, they might be EDI compatible, thereby meeting the constraint that your B2B relations need for you to participate in EDI. Not all 3PL providers can administer an EDI system. As with EDI consultants, you’ll want to check their track record and get some referrals.
If you’d like to learn more about an EDI system for your supply chain, give us a call. We’re happy to talk shop and let you know how we can help.