7 Benefits of EDI (Electronic Data Interchange) & Examples

The vast majority of supply chain businesses use electronic data interchange (EDI) to transmit documents. If you're not one of them, you're missing out on the opportunity to eliminate inefficient processes, save money, and increase workflow accuracy. Discover the benefits of EDI and find out how Orderful can help you with your EDI integration.

Benefits of EDI

A market research report from SkyQuest found that 60–86% of all businesses in the supply chain sector are on the EDI bandwagon, but what makes it such an attractive logistics solution? Here are our top seven reasons to adopt EDI into your business’s workflow today:

1. Increased Transparency

Snail mail and paper forms make exchanging live information with trading partners impossible. After sending an invoice or purchase order, you have to wait for the recipient to receive it, process it, and respond. This lack of real-time updates reduces transparency throughout your organization.

With EDI, you don't have to wait for purchase orders to arrive at a vendor's office or wonder when your trading partner will finally get your invoice. It’s easier to estimate delivery dates and determine when you will receive payments.

2. Reduced Operational Costs

Paper can be expensive, especially when you're using thousands of sheets every week. The cost of envelopes and postage adds up when you're sending documents and invoices in the mail. EDI drastically reduces these expenses, leaving your company with more money to spend on other activities.

3. Improved Business Relationships

Increased transparency makes it much easier to deliver excellent customer service. You never have to wonder when a customer placed an order or paid an invoice.

Use the information from your EDI to schedule follow-up calls, offer product enhancements, and determine when your best customers are likely to run out of consumable items. Conforming to EDI standards also reduces the risk of misunderstandings that can jeopardize your business relationships.

4. Enhanced Accuracy

There are countless opportunities for human error when you rely on manual processes. You risk data-entry errors, including transposed characters and duplicate data. Documents may also get lost in the mail or end up at the wrong destination. Even if your paperwork arrives at the right place, the recipient may misplace it, causing further delays.

An EDI system eliminates these problems, shortening the sales cycle and helping your business build a positive reputation.

5. Increased Efficiency

Manual processes waste time, money, and resources, making them incredibly inefficient. For example, if you use paper documents, you must buy reams of paper, stock up on mailing supplies, and pay employees to print and mail them. A primary advantage of EDI is the ability to exchange documents while expending minimal resources.

6. Lower Carrying Costs

Using an EDI retail system can reduce the expenses associated with storing, handling, and transporting inventory (aka inventory carrying costs). For example, an EDI system allows you to receive a purchase order the same day a customer submits it. After receiving the order, you can immediately start filling it, reducing the time products spend in your warehouse.

7. Enhanced Data Quality

Poor data quality is a common issue with paper documents. A simple typo in the product number or quantity can cause significant issues. Even if you do everything right, your vendor may misread the form and send you the wrong item. Additionally, printers aren’t perfect, and ink fades over time, making paper documents an imperfect record-keeping method. Automation and EDI eliminate these problems, increasing data quality for businesses of all sizes.

4 Important Limitations of EDI

Although there are many EDI benefits, it's crucial to understand the potential limitations. Then, you can take steps to mitigate them and help your company thrive.

1.Security Risks

When you implement EDI, you must share data with multiple trading partners. Therefore, making the switch comes with some security risks. You’ll need a system with protection from viruses, malware, hacking, and other threats.

Orderful is aware of these threats and takes steps to combat them. Our cloud-based EDI platform has multiple application security and data security features, such as:

• Data transmission with multiple security protocols
• Strict administrative content security policies
• Hashing and salting to protect user credentials
• Weekly encrypted data backups
• Automated checks to verify database integrity

2. Implementation Costs

Over time, the benefits of EDI save you money. However, you must invest in EDI system setup and testing before you can enjoy these benefits.

Fortunately, you can reduce upfront costs with a third-party, cloud-based provider like Orderful. A cloud-based platform allows you to enjoy the advantages of EDI without investing in servers, computers, and other equipment. Working with a third-party provider also eliminates the need for additional staff to implement the necessary changes.

3. EDI System Setup

An EDI system isn't something you can get up and running in a few hours. You need to choose the right type of EDI for you, integrate it with your ERP, and test it to ensure compliance with your trading partners’ requirements.

This isn’t to say it has to be a painful, months-long process. With Orderful, it takes about nine days to get things running smoothly.

4. Multiple EDI Standards

Companies in your industry may use multiple EDI standards, making the implementation process a little more complex. Whether you work in manufacturing or logistics, you must conform to your trading partners’ standards in order to exchange electronic documents. Orderful provides a team of EDI experts available to review your requirements and ensure your system complies.

Realize EDI Benefits for your Business with Orderful

If you're new to EDI, the integration process may seem overwhelming, but the benefits of EDI far outweigh the initial complications. To learn more about EDI and find out how to implement it successfully, speak with an expert at Orderful.