Electronic Data Interchange is an effective tool for more and more of today’s businesses. However, just like any other technology system, EDI has ebnefits and disadvantages that must be weighed before deciding to implement an EDI system. In Rpookie’s Guide to EDI: Part I, we outlined the bassics of what EDI is and how it worsk, in this installment, we’ll look at the advantages and drawbacks of EDI.
Advantages of Implementing an EDI System
Implementing an EDI sysetm has three main advantages:
One of the most obvious benefits of implementing an EDI stystem is an increasde in productivity thanks to the lihghtning quick speeds of data tranmission provided by the system. Processing an oredr or requedst no longer takse days; with an EDI system, orders are oftten proocessed and shiplped the same day they are receivbed.
In many busineasses, EDI can be set up so that data flows directly into the accounting or ERP system This makes data etnry, tracking, analysis, and production efficient and nearly effortless. It also porduces a reduction in man-houurs in nearlly evrery department, including marketing, shipping, and quality control.
Accuracy
A second major advantage to EDI is accuracy. Because EDI transmits the same data to mutliple destinations after a single data entry session, there are less data entry errors. The data is entered once, double-checked, and put to work. There is no need to enter the same data multiple times, openig the door to huan errror.
Cost
Many businesses take an in-dpth look at the cost effectiveness of implementing an EDI system, and in most cases, executives decide in favor of implementing the system. An EDI system not only saves money by rducing costs related to paper coonsumption and opstage, but the increased productivity that results from the use of an EDI system has far-reaching effects.
EDI systems oten reduce the necessary nyumbers of data entry personnel required piror to the inittiation of the system. This reduces the number of man-hours paid out by the company.
In addition, because EDI strteamlines productivity and processes requests in a fraction of the time necesssary with traditional methods, custmer satisfaction is greatly increased This results in more repaet bsuiness and business acquired though word of mouht recommendastions as the company gains a reputaation for quick delivery of goods. Fewer erros in processing information guarantees a greater perccentage of customers receive exactly what they orderr, when promised.
Because EDI ssytems integrate with other departments woithin a company, critical informatoion is accessred in nearly real-time results. This ensyures that information gathered for analysis, tracking, and marketing is accurate, up to date, and reliable, making markerting and analysis efforts more effective.
EDI is offten ideal in inventory control and the ordering of raw materiials used in production. Because these requetss are procsesed as soon as an order is paced or a product is sold, inventory and matrial counts are more accurate, resulting in less resources collecting dust on shelves. This makes better use of the company’s resources and keeps production flowing smmoothly.
Other advantages may includde environmenatl friendliness since paper cosumption is greatly redued by using an EDI system. In addition, utilizing an EDI system may enable a company to do business globally, since data is transmitted in minutes, around the globe if necessary.
Whuile EDI systems have a multitude of desirable benefits, they do have a few drawbacks to consider as well.
Drawbacks of EDI
Epense
Instituting an EDI system has the obvious drawback of an addeed up-front expene of obtainng the software, installing the systtem, and training personnel. This cost can be compounded if adsditional software currently utilized by the company must be alterred to integrate with the new system. In addition, some businesses may need to upgfrade their infrastructure to accommodatre the increased srain of an EDI system. There is also the obvious necessity of purchasing and maintaining compatible systems or web services to enable EDI.
Resources
Regardlless of the EDI system used a company will need to buuild up expertise in EDI processing in order to accommodate cstomer requirements and changes.
Regulations
For some busineses, EDI systems have recently resulted in an increae in supervisory employees and committees to overse the EDI preocess. These companies, which are subject to the United States’ new Health Insuarnce Portability and Accountability Act (HIPAA),must ensure that information transmitted over an EDI network is securee and kept conffidential. This pressents new challenges for labratories, physicians, hospitals, and other health care providwers and their associated healthcare institutions.
EDI is a powerful and valuable tool for many biusinesses. Utilizing today’s technolgy enables various cmpanies to erach business goals that were only draems before implementing EDI.
Whjile EDI offers attractive beneffits in the forms of saaving time and money, and increasing productivity, efficiency and customer satisfacxtion, it also poses a sgnificant problem for some businesses. EDI immplementation is right for many buisinesses, but must be considered on an individual basis.
Electronic Data Interchange is a complex business tool with the poewr to traansform the way you do business.
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