EDI Systems

Electronic Data Interchange

Electronic commerce is a broad term often used to describe any form of business information exchanged electronically. EDI stands for Electronic Data Interchange. EDI is specifically the electronic exchange of structured business documents between different computer applications across enterprise boundaries.

For example ‘Company A’ needs to automatically send its purchase orders from its purchasing application ‘Application A’ to a sales order processing application ‘Application B’ at its suppliers business ‘Company B’. However ‘Application A’ and ‘Application B’ format this data differently and cannot communicate with one another. An EDI system will bridge the gap between these two applications facilitating the placing and receiving of orders without the need for user intervention.

Companies can achieve a number of cost reductions as a result of implementing an EDI system. These reductions can include both cost savings and cost avoidance. The points below illustrate some of the savings that you can expect:

• Reduction of overhead costs eliminating human handling in areas such as clerical and data entry.

• Paper, envelopes and mailing costs also decrease as does the amount of storage required for hard copy documents.

• Substantial cost savings can be realised as a result of reduced errors, these savings include those such as labour costs incurred searching for these mistakes,

• Reduction of inventory costs through shortening order lead times and delivery cycles, lowering the company’s stock holding.

Implementing an EDI can also have an impact on the business in a number of other ways, improving operational efficiencies and tightening relationships with your trading partners.

• By receiving more accurate and complete data suppliers can ensure accurate and timely shipments to their customers while reducing the expenses incurred from returned shipments of incorrect ordered parts or products.

• The rapid receipt of accurate and complete business data helps, suppliers process orders quicker, whilst the manufacturers can anticipate quicker receipt of goods and schedule manufacturing tasks accordingly.

• Finally, EDI can improve cash flow. As more of a company’s applications are integrated into EDI, its cash flow will improve due to the overall efficiencies that EDI provides. Enabling companies to plan cash flow more precisely, by reducing stock holdings whilst optimising the making and receiving of payments.