How the Use of EDI can Improve Your Purchasing Processes

So, you're considering adopting Electronic Data Interchange (EDI) to streamline your purchasing processes?

You've made a smart decision. But wait a minute, you may ask, what exactly is EDI, and how can it benefit my business? Let's dive right in!

Understanding EDI

Firstly, let's get a grasp on What is EDI. EDI, or Electronic Data Interchange, is the computer-to-computer exchange of business documents between companies. It works based on a format that’s agreed upon between the involved parties. Sounds techy, right? Let's break it down.

Imagine sending a traditional paper document electronically. EDI does exactly that, but in a standardised format that a computer can process.

Commonly Used EDI Formats

These standardised formats come in various types. Some Examples of commonly used formats include Idoc (SAP), EDIFACT, (c)XML, and VDA. Now, why does the format matter? Well, different formats have different strengths, and depending on your business needs, one format might be more suitable than another.

Within these formats, customer or supplier-specific fields can be added, increasing the flexibility and adaptability of EDI for various business needs.

Types of Messages Exchanged via EDI

Various Types of messages can be exchanged via EDI such as order, order response, order change, shipping notification, delivery forecast, and invoice. The type of message exchanged depends on the agreement with a specific customer or supplier.

The Practical Application of EDI

Let's talk about the practical side of things. EDI can be used both on the customer and supplier side. This means you can receive orders from your customers via EDI, and you can also send orders to your suppliers via EDI. Pretty good, right?

The Importance of Masterdata in EDI

You've probably heard the term "garbage in, garbage out". This adage holds especially true for EDI. If the Masterdata (the key business information) is not correctly aligned, then the EDI process will stumble. Masterdata alignment includes matching correct sales organization(s), sold-to parties, bill-to parties/payers, ship-to parties, and article numbers.

Pros and Cons of Using EDI

Like any other technology, EDI has its Pros and Cons. On the plus side, EDI can automate the complete order-to-cash process, reducing workload Inside Sales and Credit Management/Outgoing Invoices. It also increases customer loyalty and provides flexibility to add customer-specific wishes.

However, the initial setup of an EDI connection can be complex and time-consuming, resulting in high internal costs. Additionally, maintaining existing EDI connections can be challenging, especially when changes occur on the customer side.

EDI Platforms

There are numerous EDI Platforms, such as SAP Ariba, SCSN, Coupa, SupplyOn, and more that can facilitate in EDI integrations. These platforms provide a data infrastructure, further standardizing message formats, reducing workload for the integration team, and potentially leading to faster, "cheaper" integration.

However, these platforms might not provide the same level of flexibility as direct EDI integration and may come with recurring costs such as fees, subscription costs, or activation costs.

Conclusion

In a nutshell, EDI has the potential to revolutionize your purchasing processes, driving efficiency, reducing costs, and enhancing customer loyalty. The key lies in choosing the right format, understanding the types of messages you wish to exchange, aligning your master data, and selecting the right platform that meets your business needs.

FAQs

What is EDI?

EDI, or Electronic Data Interchange, is the exchange of business documents between companies in a standardized digital format.

What are some commonly used EDI formats?

Commonly used EDI formats include Idoc (SAP), EDIFACT, (c)XML, and VDA.

What are the advantages of using EDI?

EDI automates the complete order-to-cash process, reducing workload, increasing customer loyalty, and adding flexibility to meet customer-specific wishes.

What are the challenges of using EDI?

The setup of an EDI connection can be complex and time-consuming. Additionally, maintaining existing connections can be challenging.

What are EDI platforms?

EDI platforms are tools that facilitate EDI integrations. Examples include SAP Ariba, SCSN, Coupa, and SupplyOn.