Over the years much has been written about the potential cost savings of implementing EDI. Many businesshave been forced into doing EDI by trading partners in order to retain business and many as a result have taken the easy route and opted for a web based solution. Why? The web portal solution is cheap, it is easy to become compliant and doesn’t require a buy-in from the internal IT people as the solution requires no infrastructure purchase or software setup. Usually a web browser is all that is required.
Unfortunately, many companies once they make this leap feel that they now do EDI. They are right and they wrong. They are right in the sense that yes they are compliant with their trading partner’s request to do EDI but they are wrong in that they derive no benefit from that EDI. What do I mean?
An EDI scenario that is not integrated provides no real discernable benefit to the company that adopts EDI. The wide proliferation of web-based portals that provide no integration means that most companies that have implemented this type of technology are wasting money being compliant. Integration is the only way to go.
Want the proof? A 2010 study by GS1 UK and Cranfield School of Management lays the numbers out for all to see. The only limiting factor with this study is that the authors have compared an EDI process to a manual paper-based process. The premise of what makes an EDI system is not defined but the line of argument is clear it’s an integrated EDI solution that is the only way to go.
So if you are using a non-integrated EDI solution these numbers should make you think and think seriously about integration.
- Order – 14 pounds per order – $21.50 USD
- Invoice – 8.50 pounds per invoice – $13 USD
- Advanced Shipment Notice – 12 pounds for an ASN – $18.50 USD
OK, so the total is 34.50 pounds or $53 USD if you do the full cycle.
So if you are running a non-integrated EDI system and your retail partner requires a full PO, invoice, ASN cycle it’s costing you $53 USD per order. Lets do some simple math. If you receive 150 orders per month it’s costing you a whopping $7950 per month or $95,400 per year, and that doesn’t even factor in the cost of your web portal. You got money to burn ?
I’m not a CFO or controller but these numbers surprised me. These numbers also do not take into account the cost of bad data entry and the down stream effects of that bad data. If you are using a web portal or two and don’t have integration you are either happy burning money or just don’t understand how much those manual processes actually cost.
Want to save some money? Don’t we all!