The Benefits of EDI The advantage of EDI is only realized when business practices are restructured make full

use of the potential of EDI; when EDI is used as an enabling technology to change the way the business operates - just-in-time !IT" manufacture #uick response supply being prime e$amples of where EDI is used as an enabling technology to gain competitive advantage% The direct advantages of EDI include& ' (hortened )rdering Time& *aper orders have to be printed+ enveloped and sent out by the customer,s post room+ passed through the postal service+ received by the supplier,s post room and input to the supplier,s order processing system To achieve all this+ reliably+ in under three days would be to do very well EDI orders are sent straight into the network and the only delay is how often the supplier retrieves messages from the system% )rders can be in the supplier,s system within a day+ or if there is urgency the message can be retrieved more fre#uently+ for e$ample every hour% ' -ost -utting& The use of EDI can cut costs% These include the costs of stationery a postage but these will probably be fully matched by the costs of

running the EDI service% The principle saving from the use of EDI is the potential to save staff costs% The obvious e$ample of this is that if the orders directly input to the system there is no need for an order entry clerk% .ote also that seasonal peaks+ staff holidays+ etc% no longer create backlog in the order entry area% The cost savings need to be offset against the system development and network costs% ' Elimination of Errors& /eying any information into a computer system is a source of errors keying paper orders into the order processing system is no e$cel EDI eliminates this source of errors% )n the down side+ there is no entry clerk who might have spotted errors made by the customer will get what he has asked for% ' 0ast 1esponse& 2ith paper orders it would be several days before the customer informed of any supply difficulty+ such as the product is out of stock EDI the customer can be informed straightaway giving time alternative product to be ordered or an alternative supplier to be used ' 3ccurate Invoicing& !ust like orders+ invoices can be sent electronically% EDI invoices have

similar advantages to EDI orders in saved time and avoided errors% 4owever+ the major advantage in EDI invoices is that they can be automatically matched against the original order and cleared for payment without the sort of #ueries that arise when paper invoices are matched to orders% ' EDI *ayment& *ayment can also be made by EDI% The EDI payment system can also generate an EDI payment advice that can be electronically matched against the relevant invoices+ again avoiding #uery and delay% Indirect advantages of the use of EDI can be& ' 1educed (tock 4olding& The ability to order regularly and #uickly reduces the amount of goods that need to be kept in a store room or warehouse at the shop or the factory% 0or many !IT manufacture and #uick response supply systems stockholding is eliminated altogether with goods being delivered only as they are needed% 1educed stock holding cuts the cost of warehousing+ the double handling goods into store and then out again onto the factory or shop" and the capital re#uirement to pay for the goods that are just sitting in store%

' -ash 0low& (peeding up the trade cycle by getting invoices out #uickly+ and directly matched to the corresponding orders and deliveries+ can and should speed up payments and hence improve cash flow% Elimination of most invoice #ueries can be particularly significant in reducing delays in payments% ' 5usiness )pportunities& There is a steady increase in the number of customers+ particularly large+ powerful customers+ that will only trade with suppliers that do business via EDI% (upermarkets and vehicle assemblers are prime e$amples% 5eing ready and able to trade electronically can be an advantage when competing for new business% ' -ustomer 6ock-in& 3n established EDI system should be of considerable advantage to both customer and supplier% (witching to a new supplier re#uires that the electronic trading system and trading relationship be redeveloped+ a problem to be avoided if a switch of supplier is not essential%