How EDI Works

How EDI Works: Discovering The Advantages

How EDI Works is a popular question usually asked by business owners, company managers, operational staff at EDI Academy trainings. Although EDI is quite widespread technology, there still remain some points to be discussed. Those who are not connected to electronic data interchange not always understand the difference between EDI and Internet communication technologies. So how EDI works in supply chain? Find one more answer below.

If we have a look at the traditional way of documents circulation in the purchasing operations, we will notice that paper operations and mailing takes a lot of time. Although the business operation can be made quickly (the purchase order is sent to a supplier, supplier confirms the purchase and sends the shipment, the shipment arrives to the buyer etc.), documents echange may take much more time. At the same time lots of effrots are spent for manual entering information about merchandise into business partner companies’ systems (and excluding mistakes if there are any).

EDI represents us a new approach – the purchase orders are still created and sent, but now it is done in few minutes instead of one week. Printing them out and mailing is replaced by direct documents transmission to business partner’s operation system. The supplier automatically receives the purchase order, checks stock and sends confirmation or rejection. If everything is OK, the seller sends the invoice directly to partner’s accounts payable system and confirms shipping of the merchandise – all of these procedures can be done on the same day. Before merchandise arrives the receiver already has all the information about the shipment because the shipping documentation is already in his system.

We can speak about more advantages that electronic data interchange can bring to your business, but today let us figure out the main ones:

Speeding up the supply process. Electronic data interchange represents a good perspective for those involved in the merchandise operations. Automatic creating/sending purchase orders, advanced shipment notifications or automatic invoicing and more other immediate options. The documents move betweent computers rapidly and the human intervention is reduced. In general, all the merchandise processes in a company become faster.

Accuracy and error elimination. The way EDI documents are send by one party to another lowers the chances for manual entry mistakes to appear. Documents are sent in not human-readable special format that eliminates mistakes.

Economy and efficiency. It may seem that EDI implementation is quite expensive. It may be so but it may cost you less as well. The cost for EDI depends on the quantity and types of documents you use. You can establish the needed limits yourself if you represent a small business. However, if you have implemented EDI in full you can already see the results after a month of EDI operation.

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