Within various industries, EDI has been used to great advantages, and many benefits have been expounded in its regard. EDI´s benefits relate to environmental impact, improved time efficiency, improved accuracy and increased flexibility, enhanced partnership, labor costs, shipping. EDI creates a system whereby documents and data can easily be transported from one source to another, and is able to overcome incompatibility issues.
EDI is a set of standards which govern data formats and thereby allows disparate computer systems to be able to “read” the data which is sent. EDI documents are also able to be stored at a Value Added Network (VAN), which is like a virtual storage house, and is able to transmit the message to the receiver when they are available. The advantage of a VAN is that they are able to re-transmit the message to the receiver if it does not go through. The EDI provides advantages to both small and large businesses and creates an efficient business environment with little to no human intervention, which makes it perfect for automated services. Therefore EDI is used highly within departments such as invoicing and ordering.
EDI will reduce and improve various elements of any business or corporations expenditures. It allows some processes to become fully automated, thus reducing the amount of human time required on them. It can fully take over in data entry, manual reviews and reconciliations, sorting, copying and filing documents. However, importantly, the number of errors is heavily reduced due to the minimization of human input. Therefore the number of hours required for a person to process an order from bid request to invoicing is greatly reduced. In this way, labor costs are reduced, and time efficiency improved. Transactions are faster, more efficient and accurate.
EDI enables the processing of business data up to the last second of deadlines as it is an automated electronic transmission. As EDI compliance is somewhat of a must in this business climate, once the business is in line, it will reap benefits from this efficient system. Businesses will be able to promote mutual profitability by employing EDI, and thus create enhanced partnership situations. EDI allows for a reduction in deductions and credits for mistakes; an improvement in the number of quality purchase orders; hours saved in paper administration; increased speed to retail of new items; major improvements in retail scanning accuracy.
Due to this increased efficiency of non-paper accounts, cash flow will improve as electric fund transmission is able to begin much earlier than previously. Shipping is also improved as EDI provides quick and efficient information as it relies on barcode information to communicate. It is able to track inventory and eliminates the incidence of lost packages due to their isolation from the larger shipping order. EDI greatly improves accuracy of data as it is all automated. There is a reduction of re-keying errors, as there are none required. Therefore fewer items will be lost, returned or required from back order. EDI simplifies the manufacturing process as it is able to provide one time data entry; reduced errors; on line data storage; faster management reporting and automatic reconciliation.
Industry Applications of EDI
The benefits of EDI can be seen across various industries which have embraced the data interchange system. It is widely used within the health industry, government agencies, and the automotive industry and general businesses. It is used widely is automated document services which can include: export/import information for international shipments carrier-to-carrier way bill exchange; reservation or pickup requires; shipment information from shipper to carrier; freight bill data, carrier to payer; shipment tracing information; payment data, payer to bank, bank to bank, bank to payee. All of these various industries which utilize EDI have standards of their own, but these can be minimized when using the standardized EDI document formatting.
EDI provides a varied number of documents which are standardized across industries. Within these industries, there are benefits to the buyer such as lower inventory levels, quick order acknowledgment and efficient invoicing processing. The benefits for the supplier have been previously listed. Within the automotive industry, EDI helped to improve inventory costs, as they were able to apply EDI in order to establish the single day inventory lists. While this helped the buyer, it put pressure on the supplier to absorb the costs. Although the industry was improved, it led to some confusion, as each major automotive maker used its own standards. However, these were made clear through the Automotive Industry Action Group which worked with automakers and suppliers to develop an EDI standard for the entire industry.
As such, the industry was able to create a standard which was related just to the automotive industry. Government entities are also benefiting from EDI – such as the Minnesota Department of Labor and Industry, which utilizes EDI in its injury claim reports. They claim that EDI increases the level of reportage of injuries, and improves on reporting times. They are also able to automatically send out report maintenance documents, reducing the level of human interference, and thereby reducing labor costs. The medical health industry also utilizes EDI in order to process claims more swiftly for medical providers. Within the health industry, the benefits include those of time effectiveness and reduced paper load.
However, it also allows consumers – from insurance company, hospital, physician or supplier to enjoy these benefits. Current EDI standards are able to support all the support for health care industry standard documentation. This includes government regulations which provide for the privacy and security of electronic transactions. EDI is able to comply with the standards, as it is completely secure. EDI is also able to integrate with other systems such as the clinical and accounting systems of hospitals and private clinics. The financial sector is also well entrenched with EDI as it is used to establish credit checks, statement orders, lockbox data and debit advices.
Internet EDI Benefits
Although EDI can be run over a variety of electronic communication systems, currently many industries are looking at internet EDI, due to its ability to reduce costs. Using other forms of electronic mediums, companies may be required to use VANs which store the electronic information until the receiving partner is ready to accept. When this is eliminated, it could reduce the cost to companies considerably. Therefore internet EDI is being explored by many. It allows the partnering businesses to use secured lines of communication to transmit information.
Internet EDI provides the benefits of EDI in that is almost instantaneous transmission, and therefore will cut down on time which would normally be eaten up by postal delays. It is currently used by the automotive, health and the financial sector. These businesses are able to further reduce their transmission costs through the use of internet EDI. By utilizing the Internet, EDI is able to access an increased variety of businesses that may not be able to afford the setup of other media transmissions. It can allow for reduced costs through the process of either request or delivery or of error produced through rekeying. Overall, Internet benefits are open to all businesses that require EDI services.
By the end of the 1990´s many industries were being impacted by the use of EDI in everyday practices. Currently, the EDI is no longer a trend but an integral part of many businesses and their management. While EDI has existed since the 1960´s it has kept up to date and can now provide electronic transmissions in various electronic means such as modem, HTTP and the internet. With these options available, and with many industries on board, the future of EDI looks strong.
However, there may be some traps EDI could fall into. Software must be accessible and easy to use. Users should be aware of the varied options EDI can provide for businesses. Proponents of EDI should be clear in their advertising, and explain the system thoroughly and clearly. Currently EDI is being connected with other systems such as XML, which can only be of benefit. These systems together create an efficient and fast delivery of data transmission.
There are a varied amount of services which offer companies and businesses the opportunity to increase their profit margins as well as their ability to contact trade partners more efficiently. They are able to extend the use of EDI through the many modes of transmission is can go through. Also EDI is able to evolve with new systems and therefore supply an up to date system that is well established within many businesses and company systems. It is this kind of flexibility which will allow EDI to continue into the future as it has since its inception.