Today, most businesses rely on electronic data interchange (EDI) to exchange documents among trading partners. There is enough research to show that EDI costs just one-third of its paper-based equivalent. A prominent American company reported a reduction in its order processing costs from $38/order to $1.35/order with EDI.
Do you know that EDI we take for granted now was not available a few decades ago? Can you imagine how the world before EDI looked like?
Businesses relied on the manual exchange of paper-based documents, a method that was cumbersome and error-prone. Documents such as invoices, purchase orders, and receipts were exchanged through faxes or traditional mail. Human input was required not only in data entry but also in document transmission. This process took more time and could not keep up with the demands of modern business.
How Did the Introduction of EDI Help Organizations?
By introducing EDI, organizations were able to overcome all the limitations of the manual data interchange process. The EDI software solution facilitated the exchange of important documents, invoices, and other information across various platforms and systems.
EDI digitized the process of document exchange, removing most human intervention. It accelerated the process and increased document security. EDI software solutions helped:
- Streamline business processes
- Improve the quality of data
- Decrease errors
- Organizations gain a competitive advantage
To-Increase’s EDI Studio has helped many organizations simplify communication and collaboration with their trading partners. This solution has inbuilt features to track and monitor document processing and messaging.
Though EDI has many far-reaching advantages, one of the predominant benefits of EDI implementation is the cost and time savings it allows. You can save business costs that accrue in various ways with EDI implementation. It would be correct to say that EDI in many direct and indirect ways helps maximize your business profits.
7 Ways How EDI Saves Money
Curious to find out how EDI can help your business save money? Read on to find out.
1. Cuts Down on Paper Expenses
The usage of paper in manual data interchange is generally high. When you use paper-based documents instead of electronic ones, your costs include the expenses of paper and the cost of printing, storing, copying, and processing the documents. By implementing EDI, you can save a lot of money you would have otherwise spent on paper and other manual processing activities. Lower overhead costs also allow for a smoother accounting process. Apart from financial benefits, reduced use of paper would also benefit the environment. Helping reduce the carbon footprint can surely give your company’s brand image a boost.
2. Eliminates Errors
Manual processes are more error-prone than computers. Inaccurate orders can cause considerable damage to your business’ reputation. Missing purchase orders, duplicate orders, and data discrepancies can affect your business’ profits.
Furthermore, rectifying these errors may involve additional costs for your company. Also, errors due to illegible faxes and incorrectly taken phone orders are eliminated, saving your staff their precious time.
Implementation of EDI can help you minimize such costly mistakes and save a lot of time and money for your business.
3. Offers Opportunities to Explore New Markets
Businesses have been increasingly investing in technology and especially in process automation. As EDI implementation can make B2B data interchange seamless, companies prefer to do business with other enterprises that use EDI applications. The EDI solution makes new vendor onboarding very easy, which helps you explore more new business opportunities.
With Electronic Data Interchange, you do not have to restrict your business to a geographical location, as EDI software allows you to transact with companies in different geographical areas. With a standard business language, EDI facilitates business partner onboarding anywhere in the world.
4. Enhances Business Efficiency
One of the primary advantages of EDI is that it saves a lot of time. What would have taken you hours or days to process with manual processing is completed within minutes with the help of EDI software.
Faster order processing accelerates the supply chain processes and helps you employ more time on other productive business functions. When crucial business data is sent on time and can be tracked in real-time, your business benefits from improved cash flow and reduced order-to-cash cycles. Apart from reducing time in day-to-day processing, EDI software would also help you adapt to the industry and technological developments quickly.
5. Boosts Employee Productivity
EDI software would not only save your company’s time, but it would also save a lot of the time of your employees. Transactions that generally take five days by paper are completed in an hour. Automating paper-based tasks leaves your staff with more time to focus on their core tasks and enhances business productivity.
6. Improves Business Strategy
Real-time visibility into transactions enables faster decision-making. There is also improved responsiveness to the changing demands of the market and of the customers. Businesses are also able to shorten the lead time for new product delivery and product enhancements.
7. Optimizes the Supply Chain
EDI helps organizations improve their supply chain visibility, and they benefit from faster, more accurate transactions. Retailers get to know what is being delivered to a store or warehouse in advance through an Advances Shipping Notice (ASN) from the supplier. Suppliers are able to send out invoices quickly and the payment is processed faster as the amount of paperwork involved is lesser.
Next Steps
In the long term, all the above factors collectively would help you save a lot of money and, in turn, increase your company’s profitability. If you haven’t already done so, it would be a good idea to review your existing business processes and determine the areas where your EDI implementation can deliver higher cost savings and maximize efficiencies.
You can always work with an EDI service provider to ensure trading partners implement a standardized approach to EDI. Streamline your EDI process with business integration solutions such as the EDI Studio for Dynamics 365 FO.
Get started on improving your business efficiency by learning about the benefits of EDI. Download this free factsheet for more details!
Eric Van Hofwegen
Khalil Bouzidi
