How could EDI benefit our company?
EDI uses computer processing and communications (where costs are declining)
to reduce labor expense (where costs are increasing) and errors associated
with rekeying data from one system into another. Proven benefits of EDI
include:
Maintaining customer/vendor relations through improved cycle times
EDI allows your company to provide time-sensitive quality service that
today's customers demand and suppliers need. By completing business transactions
in minutes EDI can also help reduce order lead times.
Controlling time/value costs
EDI reduces the information float which is the costly delay in time between
then the document is created and then the trading partner acts on this
document. EDI can also help reduce the labor and costs associated with
special forms, mailing, couriers, and file storage.
Improving accuracy
One-time data entry reduces the errors that arise in a paper-based system
when information is keyed into computer multiple times.
Improving productivity
With fewer documents to handle, staff is available to perform more value-added
tasks, including customer service and sales support. EDI helps reduce
low-value communications and support win-winî activities with customers
and suppliers.
Improving cash flow and inventory control
Rapid exchange of business data via EDI shortens the turnaround on purchase
orders and invoices, helping to speed up the production cycle. In this
manner, EDI also helps companies to reduce inventories of safety stock
and support customer Just-In-Time initiatives.
Improving financial management
EDI provides faster and more accurate management reporting, automatic
reconciliation, and better auditing controls.
Specifics published in the Graphic Communications Association's (GCA)
EDI User Statement of Need reported: Arthur D. Little was hired in 1980
by the grocery industry to research potential benefits of EDI for that
industry as a whole. This study indicated a possible benefit of $300 million
in about 0.15% (.0015) of the total transaction value. . . . Since 1980
the grocery industry . . . rates savings as a possible 0.2%.î In
this document GCA also documented the study undertaken by Ned Hill of
Indiana University and Daniel Ferguson of First National Bank of Chicago.
Their data indicated the savings associated with specific transactions:
Transaction/Document TypeWeighted Average Savings Using EDIPurchase
Order$6.42Invoice$5.77Payment Advice$5.23Materials Release$4.12Shipping
Document$3.78
The data suggest that savings on paper transactions average approximately
$5.00 per transaction. In fact, results of a 1994 survey* included in
the NAGASA Electronic Commerce Implementation Guidelines indicated that
EDI can:
Eliminate 90% of the paper-based systems and telephone follow-up on order
status in customer service and purchasing process
Reduce processing time for receipts by 50% in the receiving process
Eliminate 90% of the paper invoices in the accounts payable process
Reengineer the purchase orderñto-payment cycle to eliminate $1.30
to $5.50 per document
Decrease error rates from 10.1% to 4.4%
The Real Facts About EDI in 1994 by Daniel Ferguson, President, EDI Group,
Inc., EDI Forum, 1994 (a survey of 1,560 EDI users)
For more information about EDI or to get a copy of the complete NAGASA Electronic Commerce Implementation Guideline, contact NAGASA:
Phone: 202-328-8441 Fax: 202-328-8513 e-mail: information@nagasa.org Mail: 1604 New Hampshire Avenue, NW , Washington, DC 20009
Back to FAQ