Cutting costs

Cutting costs and paper with electronic transactions in the supply chain

In today’s challenging and competitive economy, many companies struggle to survive and grow using paper-based and manual processes such as phones, faxes, emails and post to do business. These methods affect the efficiency of the business, not to mention the challenges they pose for record keeping and reconciliation. Supply chains also rely on a large number of documents being exchanged when goods are manufactured, ordered, delivered, received and sold.

Millions of trading documents such as purchase orders, invoices and despatch advices, also known as Advanced Shipping Notices (ASNs), are exchanged daily between trading partners. In the UK alone, about 27 million orders are made every year in the grocery retail sector, according to GS1 research. As such, it is no wonder that the UK’s grocery sector has been at the forefront of automating their processes using Electronic Data Interchange (EDI) technology. More than 30 years ago, the sector started replacing its manual, paper-based processes with standardized electronic business messages to benefit from a more efficient and cost-effective supply chain.

The sector has significantly benefited from adopting EDI – speeding up transactions, delivery, invoicing and payment as well as improving the visibility of goods within the supply chain. It has managed to speed up stock replenishment cycles, enhance data accuracy, improve operational efficiencies, lower costs and reduce paper consumption. This ultimately improves the customer’s shopping experience through improved on-shelf availability and lower prices.

Realizing the extent to which the UK grocery sector has adopted EDI technology ahead of other sectors such as apparel, utility, public administration (government) and healthcare, GS1 UK set out to quantify the scale of implementation and the cost benefits of using the technology over manual, paper-based methods.

GS1 UK’s research of the UK’s top 15 grocery retailers covering 90% of the sector has found that the sector saves £650 million per year in costs by using EDI instead of manual, paper-based processes for its
orders, invoices and despatch advices. EDI implementation by UK grocery retailers is high for purchase orders and invoices, reporting at 87% and 84% respectively. This is reflected in GS1 UK’s 2009 Annual Survey, which identified that 69% of the grocery supplier community use EDI to some degree. This is in stark contrast to the far lower adoption rate of 27% outside the grocery sector.

However, only 38% of the orders made by UK’s grocery retailers use despatch advices. The report identifies an opportunity for the sector to save a further £200 million a year through full EDI implementation. EDI can help businesses save significant costs by providing a replacement to manual information processes that require a great deal of human interaction and materials such as paper documents, meetings and faxes. By cutting the use of paper, businesses can significantly reduce or
eliminate expenditure on forms, postage, reproduction, storage and administrative overhead such as filing and retrieval.

Replacing paper-based exchanges with EDI offers cost savings and business value and supports sustainability. Despite these benefits, 81% of companies still use some form of manual, paper-based process for their orders, invoices and despatch advices according to GS1 UK’s 2009 Annual Survey. There are many opportunities for businesses to improve efficiency and support sustainability initiatives through the adoption of EDI. The report identifies four main areas where these benefits can be gained:

  • Full implementation of EDI in the UK grocery sector
  • Automating the order-to-cash process
  • Cutting paper usage
  • Implementing EDI in all sectors.

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