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Understanding Electronic Data Interchanges (EDI)

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Understanding Electronic Data Interchanges (EDI)

EDI offers speed, accuracy, and long-term cost savings. However, it's also time-consuming to set up and can be expensive in the short term.

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While Electronic Data Interchanges (EDI) have been in use since the late 1960s, there are still many organizations that use their existing legacy systems for processing B2B transactions. Traditional B2B transactions like Purchase Order, Sales Order, Invoice, Advance Ship Notice, and Functional Acknowledgement often involve a series of steps to process. And processing these transactions involves many paper documents and a great deal of human intervention, which makes them prone to mistakes and human errors. But with the use of EDI, paper documents are eliminated and human intervention is minimized.

EDI enables organizations to automate the exchange of data between applications across a supply chain. This process ensures that business-critical data is sent on time. According to a market report by Dart Consulting, the estimated market size of EDI is expected to reach $1.68 billion by 2018, with projections reaching as high as $2.1 billion by 2020. More and more companies across multiple industries are realizing the benefits of EDI. But what are the advantages of EDI over traditional forms of business communication and information exchange? This concise infographic created by Liaison shows the various EDI benefits.

Benefits of EDI

To better understand these benefits, let’s take a look at some of them.

Cost Savings

EDI lowers your operating expenditure by at least 35% by eliminating the costs of paper, printing, reproduction, storage, filing, postage, and document retrieval. It drastically reduces administrative, resource, and maintenance costs.

Speed

Time is of the essence when it comes to order processing. EDI speeds up business cycles by 61%because it allows for process automation that significantly reduce, if not eliminate, time delays associated with manual processing that requires you to enter, file, and compare data. Inventories management is streamlined and made more efficient with real-time data updates.

Accuracy

Aside from their inefficiency, manual processes are also highly prone to error, often resulting from illegible handwriting, keying and re-keying errors, and incorrect document handling. EDI drastically improves an organization’s data quality and eliminates the need to re-work orders by delivering at least a 30% to 40% reduction in transactions with errors.

Business Efficiency

Because human error is minimized, organizations can benefit from increased levels of efficiency. Rather than focusing on menial and tedious activities, employees can devote their attention to more important value-adding tasks. EDI can also improve an organization’s customer and trading partner relationship management because of faster delivery of goods and services.

Security

EDI enhances the security of transactions by securely sharing data across a wide variety of communications protocols and security standards.

Environment-Friendly

The migration from paper-based to electronic transactions reduces CO2 emissions, promoting corporate social responsibility.

Limitations of EDI

While many businesses are enjoying the advantages of EDI, some companies are still hesitant to try it because of a few limitations.

Expensive

It is true that EDI offers substantial cost savings, but for smaller businesses, redesigning and deploying software applications to integrate EDI to existing applications can be quite expensive.

Too Many Standards

Many organizations also consider EDI to have too many standards. This limits smaller businesses in trading with larger organizations that use an updated version of a document standardSome of the standards are UN/EDIFACT, ANSI ASC X12, GS1 EDI, TRADACOMS, and HL7.

Initial Setup Is Time-Consuming

Not only is it expensive to deploy an EDI system, but it also takes some time to set up the necessary components.

System Electronic Protection

EDI also requires a heavy investment in computer networks. It will need protection from viruses, hacking, malware, and other cyber security threats.

Proper Backup

EDI needs constant maintenance since the business depends on it. Robust data backups must be in place in the event of a system crash.

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Topics:
integration ,edi ,b2b ,enterprise

Published at DZone with permission of Bonnie Kucharski, DZone MVB. See the original article here.

Opinions expressed by DZone contributors are their own.

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