E-Business

EDI – Electronic Date Interchange Benefits

In the paper-based business environment, companies conduct their business activities by exchanging paper documents. This is usually time-consuming and costly when the volumes are large. The whole process of document exchanges in a paper-based business environment invites extensive manual processes (data entry and re-entry), manual intervention, interpretation, and manipulation, resulting in time delay, labor costs, and errors.

Traditional (non-Internet) EDI is a set of specifications for formatting documents that is designed to automate business flow among businesses by replacing paper documents with paperless ones. By employing EDI, an application program-generated document (such as a purchase order) can be transmitted over the network and automatically entered into and processed by an application program at a trading partner; in return, the application program at the trading partner can generate and send back a reply EDI document (such as an invoice) which can be incorporated electronically by the application program in the sender company. In the above scenario, the whole process is paperless, requires no human intervention, and is quick. EDI documents, unlike paper documents, are processed electronically by application programs with no human intervention, saving time and costs by eliminating or reducing paper transactions, phone calls, and faxes, compressing document turnaround times, and improving data accuracy by reducing (or eliminating) errors introduced while entering data manually.

The most pronounced benefit of EDI is that it can streamline companies' interactions with trading partners. This can increase inventory turns, decrease inventory, speed flow of information between businesses, improve product and sales forecasting, improve time-to-market, increase customer satisfaction, decrease shipping costs, reduce product returns, improve cash flow, integrate supply chain, and result in improved relationships with trading partners. Automobile manufactures, for example, use EDI to implement just-in-time (JIT) processing, where they exchange EDI transactions with their suppliers to plan and ensure the arrival of specific parts at the product line within 30 minutes of their installation. JIT processing can reduce the inventory and improve time-to-market.

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