For decades, large companies have invested in the exchange of documents electronically. They have reaped the benefits of eliminating manual processing and handling of each and every Purchase Order, customer order, invoices, and many other document types. They’ve saved countless millions of dollars by reducing processing time and reducing errors that inevitably occur during manual processing. I’m sure we’re all happy that these large companies were able to improve their bottom lines (especially if you’re a shareholder) by using EDI to improve efficiencies.
However, with an EDI transaction there needs to be another party on the other end sending or receiving that transaction. That would be you. When a large company dictates that to do business with them, you must be “EDI-compliant”, the first time that happened it probably sent you scrambling for what that means, what it would cost, and how you were going to accomplish that.
So millions of suppliers of these large companies have been forced to scramble and comply. I have seen and worked with two types of EDI strategies employed by these suppliers:
Strategy 1 – EDI As a Burden
I hate to call this a strategy – it’s more of a reaction and it’s the one most companies employ the first time they have to become “EDI-compliant”. That means they go out, find the first, cheapest EDI method they can find and then deal with everything manually from that point forward. They print out incoming PO’s, manually enter them in their ERP. If required, they enter a manual PO acknowledgement on a web-site or in an EDI package; then a manual ship notice; then a manual invoice. Isn’t EDI great? Look how much time and money it saved…..(for them, not you).
Strategy 2 – EDI As a Strategy
Typically, this strategy evolves as a company has more and more customers pushing them into EDI compliance. The strategy starts with someone realizing “there has to be a better way”. The company then reaches out to their ERP partner and says “how do we integrate these EDI transactions – we’re sick of doing all this manual entry”. Most ERP companies will then refer the company to their EDI integration partner (like The Romans Group) who will perform a review of the EDI requirements, review how the company is using their ERP system for the required EDI transactions, and recommend the best course of EDI integration.
A well-designed and implemented EDI integration solution can save the company significant time and money by streamlining and automating the handling of required inbound and outbound transactions and by providing reporting and analysis of EDI data. In a later blog article, I’ll discuss the payback and ROI for integrated EDI.
A perfect example of the transition from “EDI As a Burden” to “EDI As a Strategy” occurred in one company that contacted us about 3 years ago. When I walked into their company, I could barely see the customer service reps sitting at their desks – there were walls of paper printouts on their desks waiting for review and entry into their ERP system. When I asked about it, they said their biggest customer sends EDI updates daily, but since they are handling all of it manually, they only update their ERP system once a week as it took so long to do. They were also spending hours per day manually entering EDI Ship Notices and EDI invoices. Today, the stacks of paper are gone, inbound EDI updates their ERP system each morning before customer service and material planners start working and all outbound transactions are “hands off” byproducts of their normal processes. They truly went from “EDI As a Burden” to “EDI As a Strategy” and have added a number of new customers leveraging their EDI capabilities. Their customer service people are performing far more valuable value-added functions instead of shoveling piles of “EDI coal”.
Beyond the elimination of error-prone manual handling of inbound and outbound EDI transactions, a good EDI integration system can provide you with value-added reporting, auditing and data analysis to help mine the millions of data elements you receive. As an example, the TRG EDI Connector (our EDI integration product for WorkWise ERP and other ERP systems) provides a “Net Change Analysis” for 830 forecasts to show the net differences between the last time an update was received for an item and the current EDI. We have actually had some customers request this report to be dollarized so they can see the actual dollar impact of the changes being made by their customer. A perfect example of using “EDI As a Strategy”.
More on this in later blog entries…..