7 reasons to use EDI to control and connect your supply chain

Traditionally the supply chain has been viewed as the lifeblood of any business. If a supply chain doesn’t flow efficiently it has a negative impact on a wide range of key metrics including productivity, competitiveness and profitability. EDI connects your distributed networks and helps control the information flowing across your supply chain.

But in the 21st Century, organisations need to think wider than just their supply chains. They need a greater level of control over their businesses if they are to succeed. This means connecting supply chains, distribution networks and direct-to-consumer (D2C) sales to create a fully joined-up, data-driven trading network.

This may seem a challenge for some SMEs, but the rewards can be truly transformative. Here we outline seven reasons why SMEs should invest in taking closer control of their value chains and how electronic data interchange can help.

1. Transform your value chains into innovation drivers

EDI paper-to-digital solutions enable your computer systems to talk directly to your trading network’s computers. They automatically swap and process vital paperwork (such as orders, invoices and shipping notes) digitally.

They do the whole process faster, cheaper and more accurately than any human could ever hope to achieve. The result is a rich flow of highly accurate, real-time data, which gives you a golden opportunity to take greater control of your supply, distribution and D2C networks.

This rich EDI-powered data is a treasure trove of actionable insights for growth-hungry SMEs. For example, it can reveal previously invisible trends in customer buying habits, such as product demand spikes, much earlier in the cycle. When you can spot a new trend in real time you can gear-up your value chains and analyse your progress in real time. It’s this kind of agility that drives innovation and increases speed-to-market for new products.

2. Shockproof your business with cloud-based EDI

We live in uncertain times, so when a crisis strikes it pays to be prepared. Cloud-based EDI software can act as a real-time early warning system when your value chains are put under stress. For instance, you can immediately spot bottlenecks caused by suppliers who start to miss delivery deadlines or fail to deliver the agreed number of SKUs promised on advanced shipping notices (ASNs). EDI can also flag up instances in which trading partners fail to pay within an acceptable time frame or routinely return orders.

A joined-up approach to supply, distribution and D2C means you’ll be able to monitor how your business is being affected by a supply chain shortage, a distribution problem or a drop in D2C demand. This insight can then be used to swiftly make the right decisions and shock-proof your business.

3. EDI gives you greater control of your trading partnerships

EDI makes switching and onboarding trading partners easier, faster and much more efficient. This means you will enjoy greater agility and freedom to work with the best trading partners, safe in the knowledge that you will be able to switch quickly and easily when necessary.

EDI speeds up the switching process because both parties’ documents are digitised in the same way. This enables trading partner’s computer systems to talk to each other and exchange documents automatically.

When you switch to EDI you also join a global network of fellow vendors and buyers all using the same system. This opens up new and exciting partnership and business opportunities.

4. EDI can help to reduce the order-to-cash cycle

Although EDI can’t speed up order-to-cash by influencing the payment terms you’ve agreed with your trading network, what it can do is affect a wide range of factors including efficiency of order management, order fulfilment, shipping and payment collection, to name but a few.

Transactions that once took days or weeks to process can now be digitised, automated and completed in just hours. It also means the invoicing process is far more accurate, triggering fewer stock-outs and cancelled orders.

Research has found EDI solutions can speed up customer delivery time by almost a third. This increased agility ensures you can take greater advantage of trading partner discounts and improved payment terms.

5. EDI can help you get the most from lean supply chains

Thanks to cloud-based EDI solutions, shorter processing and delivery times can help you reduce your stock levels and even switch to more efficient ‘lean’ or ‘just-in-time’ (JIT) stock models.

For example, firms using EDI and JIT inventory management can generate daily or even hourly shipping schedules, giving them very close control of their supply chain and the confidence to greatly reduce the stock they hold. Firms using EDI can also send and speedily process purchase orders and ASNs, drastically reducing lead times.

When the exchange of information is electronic the transactions are instantaneous. Thus, the processing and handling of paper and input of data are eliminated with no re-keying of data. Therefore, the chances of errors, time spent on auditing, and tracing errors are all significantly decreased. Additionally, the use of electronic commerce was able to cut down the lead time of purchasing and speed up inventory turnover to achieve just-in-time inventory management. Therefore, the merging of JIT with EDI has brought unprecedented benefits to users, especially with the increase in the use of international sourcing. The use of information technology to control the value chain cycle is crucial in the electronic industry, since it requires effective and efficient inventory control to speed up production and cut down inventory cost

6. EDI helps you switch from a forecast-driven to a demand-driven business model

Processes reliant on paper, email and spreadsheets are notoriously slow and complicated. This means you’re constantly trying to piece together old data to get an idea of how your supply, distribution and D2C networks are performing.

Cloud-based EDI solutions, however, give you a highly accurate, real-time view of critical data. That’s because EDI constantly updates the status of invoices, credit notes, returns etc, and centralises all of this information to give you a full picture of what’s happening right now.

This real-time view enables EDI software users to spot opportunities and challenges faster, helping you to switch from a forecast business model to a one driven by data and real-time customer demand.

7. EDI can help you achieve a better understanding of “cost to serve”

Do you know who your most profitable trading partners are? You may know which clients place the most orders or drive the highest levels of revenue. But which generate the most profit for your company at any given time?

EDI, with its highly accurate, real-time invoicing data, can help you conduct an effective cost-to-serve analysis. This will enable you and your company to understand where the biggest influences on your profit margins lie. It can also serve as a basis for understanding which customers are more or less profitable and for identifying ways to do things differently and more efficiently.

The automation, speed and accuracy of EDI ensures that it can help SMEs take greater control of their supply, distribution and D2C networks. With greater control SMEs can finally, transform these channels from static pipelines into strategic data-rich assets driving growth and innovation.