What Are the Benefits of EDI?

Your new retail or wholesale client is probably putting pressure on you to swap your accounting and ordering system to an EDI process, but it goes against the grain for you because you’ve grown your business with a very tight process that you’ve developed over the years.  You service your clients very well taking into account their preferences so no software could replace that, or could it?  What are the benefits of EDI?

The Benefits of EDI

EDI, or Electronic Data Interchange is a digital replacement for what was once a major back office function.  When we all used paper systems, which some still do, a purchase order was sent by mail or fax to a supplier, the sales order was then sent back confirming the prices and a delivery date.  An invoice and shipping note were then produced, to accompany the delivery and for payment to be made on completion.  Due to the nature of this paperwork having to be produced each time there was always a significant time lag between stages and a business did well to confirm an order the same day, deliver within the week and get paid within 28 days.

Now with EDI this whole process sis replaced.  The people you employed to handle all of this paperwork are no longer required so can be used elsewhere or made redundant.  Costs are now lower, and the process much faster.  So let’s look at these benefits in a bit more detail.

EDI Results in Significant Cost Savings

There is no doubt that adoption of EDI saves money, because although hardware and software has to be paid for to carry out the transactions, clerical tasks and data entry are reduced along with the accompanying personnel costs.  Because of the reduction in actual printed paperwork as well major savings are made in printing, storage, filing, postage, and stock paper costs.  It is estimated that most companies switching to EDI make a saving of around 35% on a transaction cost.

Reduction in errors and customer complaints also saves money and makes more money through customer loyalty.  With legacy systems often resulting in over ordering, incorrect quantities, error chargebacks and late fees for payments, EDI saves money through cutting down on these errors.

EDI Increases Business Efficiency

An increase in transaction time can be improved dramatically through EDI, and the result being more loyal customers and attraction of new customers who want faster delivery times.  Order to cash time is also reduced aiding cash flow for the supplier, and for the retailer it helps to sell more goods, as the goods are more readily available for customers to buy.

EDI Reduces Carbon Footprint

By reducing paperwork produced, in fact often eliminating it carbon footprint is greatly reduced after implementing an EDI system.  Add to this, grouped delivers managed by the system and transportation costs and number of journeys can be reduced as well adding to this positive environmental impact.

The benefits of EDI are massive to any product based company.