5 Benefits of Electronic Data Interchange

The world of corporations can be difficult if you are not moving with the pace of the industry. Having a solid communication channel while aligning with other organizations is one of the crucial aspects of the business today. While there was a time when maintaining accurate records and keeping the communication fast was a challenge for many organizations, today, EDI solutions have made it super easy for them.

Electronic data interchange has been one of the most required technologies that have simplified the basic data transfer and communication among two partnered organizations. You see, companies can't handle everything on their own. There are operations that companies prefer to keep in-house, while there are tasks that need to be outsourced. Partnering with other niche organizations is a great way to maintain quality in the operations. However, the basics of such collaborations depend majorly on the quality of communication that these two have. 

Electronic data interchange is a popular way to strengthen the relationship between two organizations working parallel to each other. As mentioned earlier, some operations are internal, such as client handling, delivering projects, and fulfilling the requirements of others. Then there are external requirements of an organization that often relate to buying and selling of services/goods, maintaining employee benefits, keeping track of purchase orders, etc. Every company manages its internal communication at its discretion or as they see fit; however, as per every professional electronic data interchange consultant, it has become the ultimate standard for maintaining external communication channels.

But why? Do you wonder why EDI has taken over and changed the way companies communicate with each other? What are the advantages that attract even the smallest businesses to invest in establishing an electronic data interchange channel? Are you also looking to implement EDI but don’t know whether it is worth the investment or not?  If yes, then answers to all the questions will play an important role in your decision making, and today, hopefully, you will get all your answers through this post.

Without further ado, let us start by understanding what is EDI and how it works?

Electronic Data Interchange: An Overview of the Fundamentals

EDI is the electronic way of exchanging data between two companies in a standardized manner. Standardizing communication refers to creating a format that is used universally to exchange data. Some formats are used, and signals are interpreted, and the best part is that there is hardly any human interaction involved in the process. Why is that the best part? Well, for starters, the process becomes automated and has zero chances of skipping the schedule. Secondly, since the process is electronic, it keeps the shared information unaltered.

The EDI standards have set codes and formats to transfer crucial information among the trading partners. To understand the entire process closely, let us take a quick example of EDI 850. The EDI 850 refers to the transaction of purchase orders among two companies that work together. Usually, a purchase order is considered to be the basic requirement to initiate a transaction through which the buyer conveys its requirements to the seller. If you were to do something like that, you might prepare a list first and then give it to the seller directly; however, that may fail to mention a few key factors or skip a few items on the list.

With the help of EDI 850, you can eliminate such issues and simply use the EDI transaction to convey your requirements. 850 is a set code for purchase orders, which unifies the functioning of all the companies. This ideally means that if you are a service provider, you will receive EDI 850 from your trade partner regardless of the partner who has ordered. In simple words, if you are working with two similar organizations, you need not worry about multiple formats of purchase orders as both of these will share their requests in the same format, creating a universal pattern that is easier to understand and manage for you.

Enough of how it works; let us jump straight to the benefits that electronic data interchange providers bring to the table and try to understand why even the small benefits should consider taking up EDI services from the professionals.

Benefits of EDI: It's More Than What You Think

A lot of businesses have the basic idea of EDI, but they avoid its implementation as it takes a bit of an investment to establish the channels along with the EDI network to enable the smooth interchange. There are separate EDI network carriers that are meant specifically for the functioning of electronic data interchange and it requires you to dedicate a few resources to set up for your organization. 

While these small businesses believe that sending and receiving data manually is cheaper than using electronic methods, they often find themselves in the middle of a situation where the data is either missing or misinterpreted. The human factor is always something that needs accountability, and hence EDI is a better way to move forward. If you are also one of those who are still operating on manual data sharing and communication for the exchange of information, check out the following benefits to understand what you are missing out on - 

5 Key Benefits of EDI to Change Your Perspective 

Benefit 1 - Enhanced Security 

One of the biggest threats that manual data sharing brings is the idea of leaking the information or data in the process. When you have a paper trail that can be followed to the core, the chances of data leaks increase exponentially. Not to mention, there are times when a few reports have confidential and sensitive data within them, which should not be tampered with. 

EDI enhances the security by a huge difference as now the receiver and senders are both computing devices which means there is no chance of leakage in the transfer process. Securing employee data is one of the key aspects of any organization, and with the help of EDI, you can remove all the security concerns that come along with papers, emails, or any other sort of data transfer mechanisms.

Benefit 2 - Reduced Cost of Implementation

While it may seem easier to dedicate a team for communication rather than setting up an EDI, statistics show that the cost of implementing an EDI is lower than what companies end up spending on dedicated resources. Think about it, the cost of everything, from paper, printing, postage, and storage, to the expenses and resources that you have to dedicate for data entry, filing, copying, reviewing, and retrieving documents, can be easily minimized. 

There is no denying that setting up EDI can take a bit of extra investment in the beginning as you have to set up the entire platform, from the machines to the network; however, you should never forget that it is a one-time investment and can be easily recovered over time with the savings that it brings along. Not to forget the basic rule of business, manual processes always cost more than something that can be automated. 

Do not think of money as the only cost that you are paying; think about the pool of resources that you need to dedicate for a manual process and compare it with an automated system to see the difference!

Benefit 3 - Increased Accuracy & Efficiency 

Now here is something that a lot of businesses look for in their ideal communication and data interchange channel. Accuracy in the data is crucial as things should be conveyed as they are expected to be, and efficiency is something no company should compromise on. When a process is dependent on human interaction, it is open to errors as the chances of misinterpretation, mistyping, or missing information are high. The system-based communication that EDI solution provides is always reliable as the issues are traceable.

As far as the efficiency is concerned, when you are not dependent on someone to finish the process for you, and the process is automated where the system receives and interprets the data for your understanding, the efficiency is already higher than what you could get from your manual methods. Also, when you have reduced the cost, inputs, and efforts, the results that you get are much more efficient than what you can think of.

Benefit 4  - Speeds Up The Process

Creating documents such as invoices, purchase orders, or something as comprehensive as an employee data sheet to maintain benefits and insurance can become a tedious task. Curating the required details manually often takes a lot of time and effort as it requires manual formatting. With the help of EDI services, the process can be speeded up for better efficiency. The idea is simple, you set a format for the document, and each time you require it, you generate the document with minimal effort.

This makes the process super smooth and fast as you are no longer dependent on someone to manually create a document for you to send. Not to mention, the speed with which EDI can deliver documents seems like it lives on the system forever. The receiving and sending process is much faster with EDI service providers in the USA.

Benefit 5 - Easily Traceable Results 

When something is electronically recorded, the process is easily traceable. You can simply input the id and track the status of the interchange without any hassle. Usually, with physical copies and mails, the flexibility to check the status is missing, as once you have shared it from your end, it becomes difficult to track its exact status. Well, EDI ensures that you are aware of it as it is transferred through a path that is dedicated solely to such communications. There are no other things done on the channel as it has set standards for the same. 

Traceability is important to maintain transparency in the process. The more transparent a communication is, the better the strength; hence, you no longer have to feel stressed about the same. It's something that you can understand only when you experience it!

Other than the above-mentioned benefits, multiple factors go in the favor of choosing EDI solutions for small businesses and internal communication. You can always stay relaxed about the quality of data exchange along with the effectiveness of formatting and meeting professional standards. Since ASC has standardized the entire process, this one-time investment can bring you a lot of success in the long run. No matter who is your trade partner, if they have an EDI channel, you can benefit from it. 

This brings us to the end of this post. Implementation of EDI brings a lot more to the table. Just to give you a perspective, one of the core benefits other than the benefits mentioned above is the fact that it can manage communication pretty well. Since everything is electronic, there is a complete record of the communication without you burying yourself into a pile of paper trails. Hope you get a perspective of how beneficial EDI implementation can be for your organization. Good luck. Catch you at the next one!