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How Electronic Data Interchange (EDI) Helps Businesses Scale

Oct 03, 2018
Manufacturing and Distribution

By Nate Kaney

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When your company first started out, manually tracking orders, invoices and customer communications seemed manageable. With more success came bigger customers, bigger orders and, thankfully, bigger profits.

Unfortunately, manual entry and tracking important customer details as your business scales has inherent risks and drawbacks. Many corporations now insist on placing orders and tracking them electronically using an electronic data interchange (EDI) system, which automates and expedites the ordering process. If your organization doesn't have the capability to accept EDI orders, you're likely missing out and limiting your ability to gain more market share.

Implementing an EDI system will take some work, but the potential ROI is significant. Let's take a look at how this technology works, its benefits and considerations.

How an Electronic Data Interchange (EDI) System Works

Perhaps you remember the days of answering phone calls from customers and writing down their orders on a notepad, then transferring that information to purchase orders and routing them through the proper channels. An EDI system allows that information to be exchanged electronically rather than via the traditional methods of phone, email, fax or paper.

When a customer places an order with your company using an EDI, data is automatically captured and, when connected to your enterprise resource planning (ERP) system, can inform purchasing, track and adjust inventory, generate invoices and issue bills of lading and packing lists (we well as any other transactional documentation).

To get to that point, you must properly map out product details and relevant data during the EDI implementation. This helps ensure that it contains all the important details for a smooth transaction from the moment a customer places their order until it ends up in their hands.

Benefits of an EDI System

One of the greatest advantages of an EDI system is the inherent reduction in manual data entry. In addition to streamlining processes and improving efficiencies, you can expect the following:

Increased time savings: Manual input of orders into a system could take an individual several hours each day. An EDI system allows employees to focus more of their time on enhancing the customer experience rather than just taking orders.

Reduced human error: When manually inputting information, it's way too easy to miss an important detail, key in incorrect product numbers or forget to select the desired shipping dates. When the customer places an EDI order, all their information is automatically entered.

Validated pricing: Did you have a recent price change? If a customer places an order with a designated EDI price that differs from the updated pricing listed in your ERP, you'll be notified of the discrepancy. EDI helps ensure that the price your customer is quoted is what they'll pay.

Reduced chargebacks: Manufacturers know that if they process an order incorrectly, they can be issued a chargeback as compensation for the error. These chargebacks can run in the thousands of dollars depending on the size of the order. When data is generated directly from the customer and automated within your system, there's much less room for error.

Improved transaction speed: With EDI capabilities, a company can increase its speed for delivery and meet more deadlines.

Reduced redundancy: Users won't need to update multiple systems and can have all customer and order information in one place.

Increased sales: EDI allows you to scale your business by adding more partners and increasing order volumes without increasing overhead.

Increased visibility: Each department can see various data during the entire order process. This enables faster decision-making and less time spent trying to figure out the specifics of any given transaction. Was the invoice sent? Shipment received? Payment submitted? Everything is directly connected for optimal transparency.

EDI Implementation Considerations

Selecting and implementing an EDI solution requires knowing which EDI is best for your industry and will seamlessly integrate with your existing ERP software. Perhaps just as important as the system itself is the accurate mapping and configuration of that system, which requires support and training from an EDI specialist.

When looking to implement EDI, it's important to consider that it's not a plug-and-go system. The time it takes from start to finish will vary depending on the size of your customer base and complexity of your order requirements. Consider that customers will need to be configured separately based on information they each provide, which can take some time. Then, that information is sent to the EDI provider, whose specialists will map out all the fields, validate the data and run multiple tests to help ensure everything is working properly.

This process can seem arduous, yet it is critical to success. It emphasizes the importance of engaging a trusted advisor who can work directly with the EDI provider on your behalf to set up status meetings and timelines, assist in the implementation process and hold the EDI provider accountable.

At Wipfli, our goal is to remove the strain by helping you through each phase of the process and providing in-depth project management — including EDI selection, ERP integration and training, e-commerce protocols, warehousing requirements and implementation. If you're a NetSuite ERP user, it's important to know that not all EDIs are compatible, so working with an advisor can help you narrow down your field of choices more quickly. Additionally, some EDI providers have confusing pricing structures that make it difficult to compare apples-to-apples, leading some businesses to end up paying way more than they should.

If you're considering implementing an EDI system, be sure to enlist the help of an experienced consultant who will guide you each step of the way, is passionate about helping you succeed and will help ensure you get the most out of your investment. Reach out to Wipfli today.

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