E-Commerce is an important industry and it backs up the development of the nation. Hence, we need to understand what EDI is and why it is important for eCommerce.
Process & Importance Of EDI In Ecommerce
Electronic Data Interchange, primarily known as EDI, has helped streamline the functioning of eCommerce. Following a standardized format, it allows companies to send information from one company to another. This is transferred electronically and the companies that are part of this are called trading partners. It is a paperless exchange that aims at minimizing all the possible manual steps.
In comparison to traditional ways, EDI only takes a few hours and the turnaround time is very quick.
The EDI process order contains the following steps:
- The buying decision is made by the buyer who then creates the purchase order.
- Using EDI, an electronic version of the purchase order is created and transferred to the supplier.
- Thirdly, once the supplier receives the purchase order, they have to update the receipt on their end.
- The acknowledgement created by the supplier is transferred electronically to the buyer.
Now that we have understood what EDI is, let us understand how important it is for an eCommerce:
- Saves Time And Money: EDI helps save time and money. It is estimated that the speed of business cycles goes up by 61% using EDI. Time delay due to manual management is absolutely excluded from EDI setup. Where traditional setup earlier took 3-5 days for a purchase order to complete, EDI purchase exchange takes mostly less than an hour and can happen overnight. It is estimated to remove around 35% of operating expenses. It also helps save a lot of money as there is no printing and transferring cost applicable. Hence, it reduces cost associated with invoices and purchasing orders as well as on transportation, order supply and inventory management. Additionally, it also helps minimize the costs of maintenance, resources and administration.
- High Coordination And Control: EDI helps ensure there is a high level of coordination and control. One can control product delivery and shipment. We are in the days of paperless exchange which helps coordinate better. Using EDI, a steady flow of product is created and is delivered using the electronic transmission system.
- Improved Efficiency: EDI helps improve efficiency in the distribution system. Companies help streamline business strategy, increase order frequency and improve customer service. Businesses have a greater success following the EDI model. Once resources and time is saved, the manpower can focus their attention on other important company projects. Faster delivery of goods and services helps improve relations with the consumers and trading company.
- Reduce Human Error: Using the EDI model for distribution systems helps reduce human error and improve accuracy of the record. Prior to EDI, the traditional system was prone to error as it was manual. These errors in manual systems happen due to human error, illegible handwriting, incorrect documentation and keying errors. It has been estimated that at least 35-40% of errors are reduced when we switch to EDI. Hence, EDI helps to remove data quality and manage work effectively and efficiently.
- Environment Friendly: The EDI software is an electronic transmission system that has eliminated the entire need of paperwork and manual filings and postages. Today, companies are able to transfer documentation electronically. Hence, making the process paperless. This helps reduce carbon dioxide emission and conserve the environment. It helps organizations fulfil social responsibility and instill a sense of accountability and social welfare in individuals.
- Transaction Security: EDI software is an electronic transmission distribution system. It helps ensure security of transactions. With the elimination of manual work and manpower involved, transaction of the security increases manifold. The electronic transmission of transactions helps make the process extremely secure. Data is shared securely across various communication protocols and security standards.
Hence, EDI helps to streamline eCommerce working and make the process easier, efficient and resource-saving.
