In this article, We discuss the advantages of electronic data interchange (EDI) technology in supply chain communications.
Advantages of Electronic Data Interchange (EDI) Technology in Supply Chain Communications
Electronic Data Interchange (EDI) is a digital system that facilitates the computer-to-computer exchange of common business documents such as purchase orders, receipts, inventory levels, and shipping notices. This technology is capable of transmitting business documents and data across a wide range of platforms and programs. EDI can now replace labor-intensive methods for supply chain communication with telephone calls, faxes, or paper mail. EDI brings manufacturers, suppliers, and vendors together through their data systems into a global trade-to-business setup.
All of your company’s information is usually stored in the Enterprise Resource Planning (ERP) system, such as sales details, inventory levels, invoices and billing, shipping, and more. When your EDI solution interacts with your ERP system, you gain access to the information and documents needed to do business with other companies.
There are also specific policies on how your suppliers and customers do business. Shipping addresses, prices, and other information must be considered when processing their orders. EDI Solutions shares this information to improve business coordination with the supply chain.
EDI uses shared information to ensure that it shares the data format of shared trading partners. This helps trading partners avoid confusion and errors during order processing, invoicing, and other transactions. If two trading partners use different information standards, an EDI system facilitates communication by translating data. When communication is initially established between two partners, the corresponding fields in each trading partner’s information system are mapped to each other so that data can be reliably shared. When information is sent, it is automatically translated to match the data format used by the recipient’s system.
The primary advantages of electronic data interchange (EDI) systems are highly efficient communication. Managing supply chain communications manually is too slow and flawed for modern businesses. EDI Solutions replaces many manual processes with faster, more accurate automated transactions. With the EDI solution, incoming orders are generated automatically, and no user input is required. There are no interruptions to working in the time zone or training new employees. Deleting fax and paper documents results in improved cash flow, faster buying-selling cycle times, lower lead times, and condensed inventories.
Like other business software, such as the ERP system, which was once used by large industries, EDI solutions have come down in price and entered small and medium-sized businesses. Unlike ERP software, however, the second business will set EDI as a precondition to large trading partners before joining its supply chain. Therefore, being able to trade with these large companies is a big-picture advantage of implementing EDI.
EDI solutions increase the reliability and accuracy of shared information between businesses. Companies see a reduction in errors and duplicate records when the manual communication process is reduced by applying EDI. The direct transfer of information between your own ERP system and your spouse ensures that it is accurate and tailored to your spouse’s needs. This leads to richer relationships with trading partners and fewer late transfers or expensive chargebacks.
Automatically generating sales orders, invoices, and shipment reports will make the task easier and easier for sales and warehouse staff. EDI Solutions only approves authorized users and creates audit trails for the use of safety and information security enforcement. Integrating an EDI solution with your ERP system can bring other benefits, as integration enables additional business process automation.