This blog was written by our friends over at SPS Commerce, experts in EDI solutions.
When businesses first start out, processing documentation isn’t a large, time-consuming task. But as a business grows, the transactions and payments start to multiply. Once businesses begin processing more than 200 documents a month, even simply entering them and receiving them through a web portal uses up vital time and staffing resources that could be better directed towards growth-oriented tasks.
Worse yet, web portals still require lots of manual data entry and review by humans. That leads to greater potential for errors and mistakes. Something as simple as a miskeyed quantity or decimal point in the wrong place could cause a lot of headaches and problems. When your transactions are still all processed by hand, what happens when the person carrying out those tasks gets sick or goes on vacation? If a document pile up occurs, vital transactions can be missed and trading partnerships may sour.
There comes a point in the growth of a business where automation of recurring tasks becomes necessary. Instead of spending many hours dedicated to the Sisyphean task of reconciling invoices, purchase orders (PO’s) and shipping documents, integrating EDI with your enterprise resource planning (ERP), accounting and other systems is a way to automatically process everyday business documents more quickly and accurately than when these tasks are performed by hand.
EDI integration will automatically transmit, receive and match every document in a transaction. All documentation that reconciles accurately goes through processing and payment without need for human intervention. The only time a person must review a transaction is if something doesn’t match, such as differing quantities between an invoice and a purchase order.
Such transactions are flagged for review so the issue can be tracked down and corrected. As a result, the time and resources dedicated to processing documentation can go from being a task that takes hours and hours every week by several people, to just a few hours or less weekly by a single person.
Proceeding with an EDI integration breaks down data silos, eliminates bottlenecks and reduces communication errors that bog down your business and hold it back from achieving its full potential. With EDI, you can better connect not only to your trading partners, but also connect your accounting software, ERP, shipping software and more. With EDI integration into all of your essential systems, all of your vital business documents are organized, processed and streamlined, making it much easier to track data and make better forecasting decisions.
There are two primary methods for implementing integrated EDI systems, depending on the needs of businesses large and small.
In-House EDI – An in-house EDI system involves investment in software, hardware, space allocation and sufficient staff training. When EDI requirements change, either for your company or for one of your trading partners, it’s up to your staff to apply the updates to the system. Though in-house EDI requires greater investment costs at the outset, sometimes this EDI solution is best. The cost could possibly decrease over time, but if the company grows, more investment in upgrades and updates will be needed, which could make costs creep up again.
Outsourced EDI – With outsourced EDI, all of the software, hardware and staffing is up to your EDI service provider. Your EDI service provider is also responsible for updating software and hardware to keep your business running, as well as making modifications when trading partner EDI requirements change. With outsourced EDI, you pay a monthly subscription fee, the costs of which are typically between 30 to 70 percent less than the cost of maintaining an in-house EDI system. When you want to add capabilities, you simply contact your EDI provider to re-evaluate and recalibrate your subscription needs to accommodate your goals and growth.
Some businesses may choose to design a hybrid of these two EDI systems, with responsibilities distributed between in-house teams and outsourced EDI service providers.
After a company grows to the point of processing a couple hundred documents and transactions every month, integrated EDI and the automation it enables makes business sense. EDI allows you to allocate more time and resources toward more productive efforts in your business, such as crafting new strategies to improve sales, dedicating more time to product innovation and cultivating new trading partner relationships.
Furthermore, as the business grows, much larger trading partners than you’ve worked with in the past may come into play. The larger the retailer or brand, the more likely it is that they require all of their trading partners to have an integrated EDI solution before consideration for an agreement. Having an EDI system in place can ensure that when the time comes, you’ll be able to work with those dream trading partners you want to attract.
Essentially, integrated EDI automation allows you to get your work done faster and more accurately. It supports order process management and fast fulfillment. EDI greatly reduces staff overhead, saves you a lot of time, decreases errors and helps your organization operate at peak efficiency. Ultimately, it may even open up your business to better opportunities in the future.