The benefits of EDI – Electronic Data Interchange
According to GS1 studies conducted in Great Britain, the food industry saves up to £ 650 million by using EDI. The study also suggests that the food industry could save another £ 200 million each year by automating a single document – the advance ship notice. The financial cutbacks alone are a huge benefit of implementing EDI with your trading partners and each new implemented document increases these savings. But saving money is only one of the many benefits that implementing EDI comes with.
Let us begin with the financial cutbacks – a tremendous benefit:
- Studies have shown that EDI is worth only a 1/3 of its paper equivalent;
- A report assesses the prices at being 70 times lower. An important American company reported a reduction in order processing costs from $38 to $1.35/order when implementing EDI;
- The European Union reported that by using 10 minutes less on the electronic processing of orders you can save approximately 120 euro/invoice/year;
- GS1 UK discovered that British food manufacturers use £ 14 per electronic invoice.
Among other EDI major benefits are speed and accuracy:
Transactions that needed 5 days to complete when using paper can now be used in less than an hour. An American auto parts company reduced its cycle time by 97% – a 30-day process was reduced to 24 hours. Another large retailer reduced its order cycle by 75% from 24 days to 6 days.
- Studies have shown that in paper-based processes approximately 5% of an invoice’s data is incorrect;
- Error-free data means that the entire distribution chain is a lot more efficient. Some estimates show that EDI can lead to a reduction in client delivery time of up to 30%.
Another crucial benefit is the increase of business efficiency:
- Automating paper-based tasks leads to freeing up personnel who can focus on high-value tasks. They are given all the tools they need to be more productive. Studies are reporting savings in terms of personnel of up to 50% when using EDI;
- The brief document processing leads to less re-keying of information, less zero-stock situations and less canceled orders;
- Buyers can benefit from better pay-to dates and discounts;
- Buyers benefit from a better cashflow and from diminished order-payment cycles;
- By reducing the time needed to process orders and delivery times means that organizations can reduce their stock levels – studies suggest an average of 10%, a major benefit if you consider that stock usually is 90% of the product costs.
Last, but not least, many benefits can be felt at a strategic level of the business:
- You will gain real-time view on the status of the transaction. This enables making faster decision-making processes and enables the business to become a demand-driven one, rather than a delivery-driven one;
- EDI shortens the time needed to diversify the products and to deliver new products;
- It will help you penetrate new markets and territories. EDI provides a common business language that facilitates on-boarding partners from anywhere in the world;
- Promotes social responsibility and sustainability by replacing paper-based processes with electronic alternatives. This will save money and will reduce carbon emissions.