The traditional method of exchanging information between supplier to warehouse used to involve an employee typing a purchase order and mailing it to the supplier. The supplier receives it and inputs the data into their system. Then the supplier sends an acknowledgement of the order. The process could take from a few days to a week or so.
Email sped up the process but could still take three or four days because the data still had to be typed into the system once it was received. Electronic data interchange reduces the time it takes to send information to your trading partner down to an hour or less.
What is Electronic Data Interchange? It is the exchange of information from your computer to your trading partner’s computer in a standard electronic format.
What are the advantages to EDI?
It significantly reduces the amount of paper documents. Most of your information can be received in electronic format and can be stored in an electronic format. No need for rooms full of filing cabinets and shredding machines or paying employees to file, cross reference, and look up endless documents.
Information at your finger tips. At any point in the process, you can look up a transaction, run reports, spot trends,and communicate with your employees. When problems arise, you can collect the data and solve problems in record time.
It replaces the old system of purchase orders and invoices. The purchase order is sent to the supplier and the supplier sends a confirmation of the order. Tracking each item and accounting is made simple and easy.Information about the orders can be pulled up on a screen and trends are easier to spot.
Carrier integration made simple. Coordinating deliveries is a complex process. EDI helps to ensure that deliveries are made in the most cost effective and time efficient way while enabling manufacturers, suppliers and delivery agents to communicate with one another.
EDI uses standardized formats to communicate. There are several standard formats for EDI and translation systems that can accommodate them so your computers can communicate effectively with almost any other computer system.
You’ll waste a lot less time. Electronic communication eliminates the time it takes to prepare purchase orders for each item, put it in the mail, wait for it to be delivered, then wait for the acknowledgement. Email communication is faster but not as fast as computer to computer communication. And email can’t prepare reports and spot trends.
It reduces errors. Every hand that touches the information has the potential of error. Most of the information transferred by EDI has to be entered only once. Then it can be used over and over again until it is replaced by something new.
Get stock updates quickly. There’s nothing worse than taking an order and not fulfilling it. It makes your customers unhappy and does nothing for your bottom line. Setting stock minimums and maximum along with daily stock updates, you will rarely disappoint your customers.
Communicate directly with your customers. Using personalized email, you can let your customers know when orders are being shipped, when items are on back order, and detailed information about returns. Communication can be triggered automatically, saving time and frustration.