Unlocking the Benefits of EDI Implementation – Electronic Data Interchange Advantages
Unlocking the Benefits of EDI Implementation - Electronic Data Interchange Advantages
According to studies by GS1 UK, the food sector in the UK annually saves £650 million as a result of using EDI (Electronic Data Interchange). The study also suggests that the food sector could potentially save another £200 million annually by automating a single document – the shipping note. From the outset, companies stand to gain significant financial benefits from implementing EDI with their trading partners, and each new document implemented increases the cost savings. However, the financial aspect is far from being the only advantage when using EDI.
Let’s start, however, with cost reduction:
- studies have shown that EDI costs only 1/3 of its paper equivalent.
- a report indicates a decrease in processing costs by up to 70 times less. A major American company reported a reduction in the cost of processing orders from $38 to $1.35 per order with EDI
- The European Union has reported that a 10-minute reduction in invoice processing time through automation can save up to €120 per invoice per year
- GS1 UK has discovered that British food manufacturers save £14 on every electronic order
The greatest benefits of EDI are often cited as speed and accuracy:
Transactions related to paper documents, which previously required 5 days for processing, can now be completed in less than an hour. An American auto parts manufacturer reduced the time of an essential cycle by 97% – a 30-day process was reduced to 24 hours. And another major retailer reduced the time related to order cycles by 75% from 24 days to 6 days.
- studies have shown that, in paper-based processes, approximately 5% of invoice data is incorrect
- data accuracy translates into greater efficiency in the distribution chain. Some estimates indicate that EDI can reduce delivery time by up to 30%.
However, increasing business efficiency is also a major factor:
- automating paper-based tasks frees up personnel, who can instead focus on more important tasks. This ensures that employees have the necessary tools to be more productive. Studies report personnel savings of up to 50% from using EDI;
- prompt processing of correct documents leads to a decrease in the number of orders being redone, situations where certain products are no longer in stock, and a reduction in canceled orders;
- buyers can benefit from discounts;
- sellers benefit from improved cash flow and reduced order-to-cash cycles;
- by shortening the time required for order processing and delivery, companies can reduce their inventory levels – studies indicate an average of 10% – a significant benefit considering that inventory typically represents approximately 90% of product costs.
In many cases, the benefits primarily come at a strategic level:
- it allows real-time visualization of transaction status. This enables quicker decision-making, and the business becomes demand-driven rather than delivery-driven;
- shortens the time for product diversification and the introduction of new products;
- provides an opportunity to penetrate new territories and markets. EDI provides a common business language that facilitates the inclusion of business partners from everywhere;
- promotes social responsibility and sustainability by replacing paper-based processes with electronic alternatives. This way, companies save money and contribute to reducing CO2 emissions.