Most businesses are looking for ways to streamline their work processes to save time and costs. In addition to streamlining your internal processes, you should also consider streamlining your customer- or supplier- facing processes.
EDI (Electronic Data Interchange) is a powerful way to help your business achieve just that. In this blog post, we will introduce what EDI is and how you can get started. We will also provide examples of how EDI can help you streamline your work processes.
What is EDI?
EDI is the link between your company’s internal IT systems and the systems of your trading partners. When you send and receive documents electronically using EDI, you ensure that both you, your customers, and your suppliers can work more efficiently. EDI can be used in several customer- or supplier facing processes in your business, including purchasing, order processing and logistics, accounts payable, and accounts receivable.
The benefits of implementing EDI include better data quality, improved efficiency, enhanced security, reduced costs, and lower risks of misunderstandings. In addition, EDI significantly improves your control over your communication with your trading partners.
How to get started with EDI?
Once your company has decided to adopt EDI, it is important to get off to a good start.
As a starting point you should find an EDI provider with a good understanding of your industry and your business, and preferably has references from similar projects. It is also a bonus if the provider has previous experience with the internal IT system(s) that you use and plan to integrate through EDI.
The EDI provider you choose will help you set up your EDI communication with your trading partners. In the EDI-business, this is often referred to as “onboarding”. The activity involves establishing communication between you and your trading partners and ensuring that both parties can send and receive documents in the formats you want.
Once the electronic document flow is established, you can reap the rewards of your investment – and communicate efficiently with your customers and/or suppliers.
How to use EDI to streamline your work processes
EDI can be used to streamline several of your company’s customer- or supplier- facing processes.
The streamlining can be exemplified through four typical processes where EDI is well suited: Purchasing, accounts payable, order processing and logistics, and accounts receivable.
Purchasing
By establishing EDI within purchasing and order reception, your employees will be able to order goods directly from the company’s purchasing software solution.
Catalogues communicated through EDI by the suppliers will allow your employees to browse through the suppliers' products in the software solution.
Once an order is created, it will be sent directly to the supplier’s internal systems as an electronic message, and an order confirmation will be returned and visible in your purchasing software. Your employees will also be able to change or cancel an order from your software solution if necessary.
This process removes the need for manual follow-up and monitoring that would otherwise be necessary. Both the order and the confirmation, which could otherwise have ended up in the mailbox of one of your employees, are now directly accessible from your internal systems.
In several industries it is also common for the supplier to send an electronic message through EDI when the goods are loaded and ready for delivery to the buyer. This message (dispatch advice) allows you to prepare for the delivery and its contents and enables streamlining of the goods reception at your company. It will also give you an early warning if parts of the expected delivery are missing. This also opens up major opportunities for automation of the goods reception.
Accounts Payable
An EDI provider should be able to help you receive all your invoices electronically so that you receive them directly in your accounting- or workflow software without further manual handling. However, you should not expect that all your suppliers are able to send electronic invoices from day one. Therefore, an EDI provider should have support for scanning and interpretation of mail and e-mail to ensure that all invoices are received in one single electronic format on your side. This way, you will save time, experience consistent data quality, and reduce the risks of interpretation errors.
Some EDI providers also offer solutions for automated controls of the invoices you receive and correct potential errors before they reach you. These solutions are also able to notify suppliers who send invoices that do not match your requirements or lack information and enable them to resend the invoice with correct information.
Order processing and logistics
Within order processing and logistics, EDI is often first established due to customer requirements. However, adopting EDI in these processes will result in significant efficiency gains for your employees working with order processing as well. By receiving orders electronically, the information from your customers will flow directly into your order processing software for further handling.
This also leads to further automation opportunities, for instance through automated validation of stock status and estimation of delivery times. Your employees will no longer need to interpret orders in several different formats and manually enter order information into your systems. Furthermore, your employees will be able to instantly send order confirmations back to the customers, knowing that this information will be delivered correctly.
When you are packing and preparing the delivery, you will be able to send an electronic message (dispatch advice) to the customer with information about the content of the delivery and how it is packed. This in turn leads to fewer misunderstandings and ensures that correct information about the delivery and its content is received by the customer.
Accounts Receivable
When you send invoices, the most important thing is that the invoice reaches the customer – and preferably in the way that the customer prefers to receive the invoice. Most customers these days will prefer, and sometimes also require, to receive electronic invoices. However, some smaller customers may still only be reachable by e-mail or paper. Keeping track of how your customers should be reached in the most efficient way can be a comprehensive task for a business, but this is a task that EDI providers can solve efficiently for you.
EDI providers offering multichannel solutions will be able to receive invoices from you in a single electronic format and ensure that the recipient is reached regardless of whether this is through Peppol, interconnection networks, directly through EDI, or by e-mail or paper invoices. Such automation allows your company to focus on getting the right information into the invoice, while the EDI provider handles the distribution. In addition to invoices, EDI can also be used for payment reminders, credit notes, and other kinds of payment requests.
EDI is a part of the global digitalization of supply chains
While EDI has been around for decades, it has become increasingly relevant in recent years as supply chains have become more global. Further, the focus on automation and the improvements of IT systems and technology have pushed for better and more efficient ways of communicating with trading partners. By using EDI to streamline your company’s customer- and supplier- facing processes, you participate in the movement towards improved and more connected supply chains.
