Top 5 Reasons Retailers Require EDI
EDI (Electronic Data Interchange) allows for companies with different internal applications to electronically exchange business documents, such as purchase orders and invoices. For the longest time, EDI has been required by major retailers and other large companies. So what are the reasons for this requirement? Below is a summary of the top 5 reasons retailers require EDI.
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Cost: One of the most important factors for any business is keeping costs under control. EDI allows retailers to cut cost in the procurement side of the business by establishing an infrastructure that electronically sends and receives purchase orders, invoices and other documents. This replaces the labor involved in faxing or e-mailing these documents. When you multiply the labor savings out amoung the thousands or millions of documents exchanged each month, the savings become significant.
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Efficiency: Quicker processing of business documents through automation allows for a more efficiently run business and a more competitive organization. EDI's automated exchange eliminates the inefficient manual processes that typically occur in exchanging information. Fully integrated EDI on both the Retailer and Supplier side actually eliminates all rekeying of data. Thus, the document exchange takes place in an completely automated manner with no human intervention.
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Reduction of Errors: Integrated EDI drastically reduces the chance of errors from transcribing or miskeying data, resulting in a more efficient, cost-effective and predictable business process. Costs associated with incorrect order fulfillment (typical in a manual process) are also reduced through the effective implementation of EDI.
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Consistency & Predictability: Rather than having different methods for communicating important business information to different companies, EDI allows for one consistent method of communications. Thus, the business process is simplified and becomes more predictable and manageable. The use of EDI acknowledgements (X12 997 functional acknowledgements acknowledge the receipt of an EDI message) practically guarantees that the communication is successful. If it is not, the sender is alerted. In addition, the use of Advance Ship Notices (X12 856) gives the retailer advance notice of shipments so that they can plan accordingly.
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Performance reporting: Finally, EDI allows for the Retailer to establish metrics for measuring the performance of its partners. This allows them to make certain decisions about business relationships and analyze the procurement process.
