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The other option businesses have is to use an EDI service provider. If this is the option, data is sent to the provider who then translates it.
Transmission of documents occurs by connecting to a secure internet protocol, connecting to an EDI Network provider who then sends it based on the Internet protocol the business partners have established.
Benefits of EDI transmission
Cost and efficiency are obviously the big benefits of using EDI.
There are any number of expenses associated with traditional documents, as companies conduct business with one another – paper, printing, and staff costs – even if those documents are generated through computer systems and then emailed or faxed to another company.
There are also the costs of correcting the human error, when changes must be made, when orders/invoices are lost, when phone orders are misunderstood, etc. EDI eliminates all of these indirect costs of doing business.
2. Accuracy and speed
Transmissions can be completed in minutes. Further, the quality of the data – eliminating poor handwriting and poor print quality – is clear. As well, there are no lost faxes or emails landing in a spam folder or incorrectly addressed.
3. Business efficiency
Overall, transmissions can be tracked in real-time, there will be improved cash flow, and ordering and delivery times are shortened. This can impact everything from inventory management to transparency to response rates. And the benefits for establishing and maintaining a more global presence are certainly enhanced.
Challenges of EDI
With all of these benefits, it may be difficult to understand that there are challenges inherent in this efficient and cost-effective method of supply chain management. But there are, especially for businesses that grow. Here are some that will have to be addressed.
1. Scaling the EDI program Itself
Adding customers (partners) means that there may be different EDI protocols, with unique requirements, software, and “rules.” Accommodating these differences will mean multiple EDI protocols may have to be used. One solution is to outsource EDI to an outside provider.
2. The issue of bad data
EDI does not eliminate errors of pricing, duplicate orders, or other data. These are still human-related issues. To reduce these issues, businesses will need to set up some type of “exception management tool” that will provide alerts when data appears to be bad. This will allow human review before a document is transmitted or acted upon when received.
Many businesses set up their EDI systems to process transmissions every 24 hours While this is certainly better than traditional speeds, it is not ideal. There is an increased demand from customers for immediate response. And the solution lies in having the real-time flow of documents, with alerts built into the software or a regular schedule of pulling these throughout the day.
Both partners in an EDI protocol need to have full transparency in the process. There are new EDI transaction sets that can support such things as the availability of inventory, shipments, etc. Adding blockchain technology in the future may also assist with the transparency issue.
5. Being proactive
While EDI is an amazing solution, there are still many businesses that have not adopted this solution. Businesses that understand the value of this technology will have to be assertive and proactive in convincing their partners to adopt EDI for transaction transmissions.