Estimated reading time: 2 minutes, 19 seconds

How EDI Translates Into Supply Chain Precision

efficiencyBritish poet once said, “To err is human; to forgive, divine.” However, when a mistake is made involving a multi-million dollar transaction, even a slight error could transform the most forgiving boss into an angry ogre.

Whenever humans are involved, errors can occur, no matter the circumstances. That’s why experts such as Srini Raja, director deployment with TPSynergy, say companies should adapt electronic data interchange, or EDI.

According to Raja, “EDI plays an important role in supply chain precision,” in several ways, including:

• Improved efficiency
• Electronic order acknowledgments
• Advance shipment notifications (ASN)

EDI improves supply chain efficiency because it allows vendors and suppliers to precisely communicate with one another. That’s key because “it gets the supplier’s feedback in time in relation to when it is needed and when it is actionable,” says Raja. For example, if an order is going to be late, EDI allows a supplier to instantly communicate that to a vendor. By receiving the information quickly, the vendor can decide if they should cancel the order and seek the product elsewhere or make some other kind of accommodation.

Order acknowledgements are paramount to the success of the supply chain because it empowers a supplier to immediately inform the customer of their ability to fulfill an order.

The ASN is important because it notifies the order’s recipient that the requested items have been shipped. An ASN also provides an expected delivery date while also detailing the quantity and description of items shipped.

That information is especially important when materials are being delivered from countries far from the US Mainland, says Raja. The ASN, he says, gives a customer the opportunity to prepare for a delivery, whether it’s imminent or within a few weeks.

EDI can also spell cost savings
Vendors and suppliers alike can enjoy cost savings when they rely on EDI for their supply chain communications. Sure, there’s the initial cost of purchasing, installing and training to understand how to utilize the proper system, but after that, Raja says the average company will recoup its ROI within six to eight months.

EDI saves money because it reduces errors caused by the manual entry of data and employers don’t have to hire a human to enter the data by hand. Time, that ever-valuable commodity, is also saved. All those factors work to “expedite shipping,” says Raja.

Companies relying on EDI also save on shipping costs, he says. If, for example, a vendor sends a multi-national an incorrect product, or the correct item is sent but delivered late, many will impose a charge-back on that delivery. In other words, the recipient will levy a financial penalty on the supplier, causing the supplier to lose money on the transaction.

Tami Kamin Meyer is an Ohio attorney and writer.
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