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Measuring_EDIthumbIn early August we discussed the topic of return on investment (ROI) for the EDI program which was enough to pique my focus back on the subject. Admittedly over many years I was caught up in the day to day operations of an EDI program and focused heavily on the transactional requirements without much outside the box thought on true KPI’s. Sure I could rehash the some old ambiguous benefits of cost savings, efficiencies, and the like to anyone that asked, but just stating that didn’t seem to hold water anymore. After letting the topic simmer in my head in August, I came to a full realization that somehow I was not considering every angle of the true benefits of an EDI program.

The first question that came to mind was after the initial expenditure on establishing an EDI program or relationship was made, how is the best way to monitor progress of that relationship and to what extent is it proving beneficial to the organization.  By merely focusing on only purchase order processing times, we only get a view to a small piece of the pie. While it is an important piece, we also need add the other documents to the equation to get the complete picture.  An example would be the impact of cash flow that the 810 coupled with 820 has versus a traditional mailed invoice.  How these two EDI transactions are affecting the order to cash cycle is just as important a metric to monitor as the cost reduction savings realized in the order entry department.

Along with cash flow, revisiting the topic started my thought process on measuring efficiency an EDI program brings and somehow quantifying that into a metric that can be easily reported and understood, while also providing actionable information to management.  My academic tendencies lead me to search for published studies on said efficiencies, but after reading several publications I was still not satisfied that their proposals would be beneficial in real world applications. In my experience, executives want a measurement that summarizes the details quickly and is understood without needing knowledge of the technical underpinnings. Instead of reporting metrics such as Coefficient of Performance (COP) or using the Nash Sutcliffe model, I have found that a more straight forward metric is more effective.Measuring_EDI

The efficiency metric that I have discovered that gets the most attention is showing the incremental reduction of man hours needed to support inbound documents by an increase in some form of e-commerce adoption.  For instance, if we take the number of manual orders that the company receives per month and divide that by the number of man hours needed to support it, we get a man hour per order metric that we can compare to the value derived from the same calculation using the EDI orders.  The efficiency can then be calculated by taking the percent growth in electronic documents and multiplying by the difference in man hours needed to support the order process. Showing this value allows management to see real benefits in the support staff required  to manage that piece of the business.

One thing I have re-learned over the last two months is that we can easily fall into a routine in our jobs where we don’t question actions or thought processes, but rather focus on transactional day to day operations. Periodically taking a step back and looking at EDI with a fresh set of eyes without preconceived “truths” and questioning the status quo will allow for new revelations. Case in point is not leaving the benefits with the ROI, but rather set up an actionable metric system to continually monitor progress allowing for new ideas and strategies to move the program forward.

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Last modified on Monday, 10 October 2011
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