Benefits of EDI
Implementing E-Commerce is a significant undertaking for any business. It affects relationships between customers and suppliers. It has an impact on how your internal processes work and impacts your IT applications. In Ireland, E-Commerce has been implemented on a community basis where organisations come together and decide that best options for the community. GS1 has forested and facilitated these communities. As a community, the following tasks are addressed
- Business Process - selecting the process to be addressed Invoicing or Order Processing
- Standards Selections –selecting the best options and preparing requirements specifications for the selected business processes
- Communications – analysis of the communications options and selection of service providers
- Software –you have to consider how the E-Commerce will be managed and integrated with your existing IT applications
- Development and Testing – there will be some development and certainly some testing to be carried out. Testing should focus not only at validating the process but gaining organisational support among the process owners.
EDI provides trading partners with an efficient business tool for the automatic transmission of commercial data from one computer application directly to another. Companies do not need to worry about different incompatible computer systems. Through the use of GS1 EDI message standards, data may be communicated quickly, efficiently and accurately irrespective of users internal hardware and software types.
The successful implementation of EDI provides major benefits for a company and its trading partners including;
1. Cost efficiency: Significantly reducing the volume of paper to be handled and re keyed results in immediate savings in administrative and personnel costs. Staff can be redeployed to other more value-add functions within the organization.
2. Increased speed: Large volumes of commercial data can be communicated from one computer to another in a matter of minutes, enabling faster response and greater customer satisfaction.
3. Improved accuracy: EDI eliminates the inevitable errors resulting from manual data input.
4. Better logistics management and increased productivity: EDI enables companies to better manage and control production, purchasing and delivery requirements. EDI is a key component of justintime manufacturing and quick response customersupplier links, resulting in significant reductions in inventory levels.
5. Improved Customer Relations: EDI eliminates delays in invoice processing & postage, thus resulting in a faster order to cash cycle.
The benefits of EDI are:
- Reduced operational costs
- Faster receiving and storing of goods
- More accurate data; fewer order, delivery and invoice queries
- Improved stock accuracy and availability
- Shorter lead time from order to payment
- Better trading relationships
Cost Benefit Study
The Irish Hardware & Buildings Materials Association (IHBMA) and GSI Ireland have, been working with a representative group to oversee the industry-wide agreement, adoption and rollout of a standard EDI message. The group, comprised of 5 suppliers and 5 retailers from the sector, has recently completed the successful pilot implementation of a standard EDI invoice message based on the latest EANCOM 2002 -specification and is currently working on purchase order message. The group aims develop messages as required by the sector and plan a roll out to more suppliers and retailers in the coming months.
For a Supplier, switching to EDI means that less time is spent printing and posting invoices. Instead, invoices can be prepared on-line and despatched using Global Location Numbers (GLNs) to Retailers. When EDI is implemented the projected average monthly cost reduces to €400 – a saving of €1,300 or over 75%.
For a Retailer, the potential savings are even greater. With less time spent receiving, scanning, verifying, checking, etc. invoices arrive via EDI directly to the Retailer where they can be processed on-line and payments made. In this case the projected average monthly cost reduces to €500 - a saving of €4,000 or about 90%.
The Payback from EDI
Probably the biggest consideration involving a move to EDI relates to the Return on Investment (ROI) and payback. As has been already shown, there are significant savings to be made to the monthly costs once EDI has been implemented. The ROI for any company will be determined by the actual cost of setting up and implementing an EDI system. In a recent GS1 Ireland survey, payback on set-up cost was attained in ten months for Suppliers and only six weeks for Retailers.