EDI Integration Platforms: Benefits and Limitations
Find out how companies can leverage EDI integration solutions to drive their business forward. Also, explore the potential limitations posed by EDI.
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While Electronic Data Interchange (EDI) has been extensively used since the late 1960s, there are many companies that rely on legacy systems for streamlining B2B transactions. Legacy B2B transactions, such as Purchase Orders, Invoices, Advance Ship notices, Sales Orders, and Functional Acknowledgement receipts, encompass a set of steps to process. In order to process these business transactions, companies need access to multiple paper documents and a lot of human intervention, which makes them prone to mistakes and risky errors. However, with the support of EDI, the use of paper documents is almost eliminated.
EDI empowers companies to automate data exchange between different applications across supply chain ecosystems. This particular process ensures that complex, bi-directional data is transferred and exchanged on time. According to a market report, the market size was expected to reach $2.1 billion by 2018 and $2.1 billion by 2020. But what are the benefits of EDI over legacy solutions of business communication and data exchange?
In order to comprehend these advantages, let’s know about some of them:
Benefits of EDI
1. Lower Operating Costs: EDI solutions lower companies’ operating expenditures by at least 35 percent by getting rid of costs of printing, paper documents, storage, filing, and data retrieval. It reduces costs related to administration, resources, and maintenance. In addition, EDI solutions can also reduce other costs, such as ASN fines.
2. Increase Speed of Business Cycle: Time is of the essence when it comes to facilitating faster order processing. The truth is EDI accelerates business cycles by 61 percent because it enables process automation that significantly reduces the occurrence of delays through manual processing. Inventory management is streamlined and turned more effective and efficient using real-time updates.
3. Get Rid of Human Intervention and Improve Accuracy: Along with inefficacy, manual processes are also highly prone to manual error, often resulting from discrepancies, duplicities, keying and re-keying errors, and incorrect document handling. EDI drastically increases the quality of data and removes the need to streamline orders by delivering at least a 30 percent to 40 percent reduction of errors in business transactions.
4. Improve Business Efficiency: When human error is minimized, companies can greatly benefit from the highest levels of efficiency. Instead of focusing on complex activities, employees can bring their attention to more high-value tasks. EDI can also improve a company’s trading partner relationship management and customer relationship management because of faster delivery of goods and services.
5. Increase Transaction Security: EDI integration solutions improve the security of business transactions by enabling secured data exchange across a wide variety of communications protocols and security standards.
6. Become Environment-Friendly: When a company migrates from paper-based to electronic transactions, it reduces CO2 emissions and ultimately promotes corporate social responsibility.
While a plethora of businesses savors the benefits of EDI, some are hesitant to leverage it because of a few limitations.
Limitations of EDI
1. High Upfront Costs: EDI solutions need substantial upfront investment. It has been a big roadblock in the past. This is true, especially for smaller businesses. However, similar to most technologies, EDI integration platforms have turned out to be less expensive over time. EDI systems have become more mature through features that automate and accelerate internal business processes that can quickly cover more than the investment with time and money saved.
2. Initial Setup Takes Time: EDI has become less costly and faster to deploy and integrate into existing business applications and is easy to use, one that even non-technical users can leverage.
3. Multiple Standards: Multiple companies rely on EDI to have multiple standards and versions. This could be a limitation for smaller businesses when trading with larger companies that leverage an updated version of a document standard. As far as the standards are concerned, here are some: UN/EDIFACT, ANSI ASC X12, GS1 EDI, TRADACOMS, and HL7. So, it is imperative that a provider is selected to provide support to a wide range of standards and who commit to abiding by new protocols in the future.
Although it’s an age-old technology, EDI continues to be the most essential protocol in the world of B2B. EDI hasn’t changed a lot over the years, but the systems that share and exchange EDI documents between multiple ecosystems have moved to the cloud and become less expensive; they are easy to use and more feature-rich.
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