Many retailers have suffered from COVID-19 restrictions resulting in staff shortages, supply chain delays, and for many, a different way of conducting business. Some businesses have had to pivot to predominantly online sales, whether it be through click and collect or home delivery. For many, this period has exposed the need for sound digital technologies.
Digital technology for the business-to-consumer relationship is extremely important. However, it’s just as important for the business-to-business supply chain. Electronic data interchange (EDI) can play a significant role in retailers’ emergence from COVID-19 and their ability to compete effectively into the future, according to MessageXchange.
EDI streamlines the process of exchanging information and goods, reducing costly errors and minimising the time and cost of a transaction. Research shows EDI can reduce the cost of a financial transaction by up to 90%. To maximise the value of EDI, it’s important to understand how it works and where it can deliver improvements.
Retailers spend time and money on daily activities such as submitting purchase orders, tracking the supply chain, monitoring stock levels, and managing invoicing and payments. This can be time-consuming if it’s done without automation, which holds up, and adds cost to, the procurement process. Manual processing can introduce errors on purchase orders and payments, which leads to delays in receiving stock and can even incur penalties such as late payment fees. It can also mean retailers and suppliers pay more in processing costs and administration time.
EDI can overcome these challenges to help both retailers and suppliers streamline the procure-to-pay process. Through EDI, files such as purchase orders, advanced shipping notices, and invoices are exchanged directly between the retailer’s and supplier’s software, facilitating near-real-time interactions.
John Delaney, managing director, MessageXchange, said, “Many of the most successful retailers look at EDI as a strategic operation making it a critical part of the business. However, it’s something often overlooked by smaller retailers when it shouldn’t be. EDI can have a huge positive impact on business’ bottom line and this can be a real advantage in the post-COVID emergence.
“Companies usually look to EDI to reduce errors from manually entering PDFs or using OCR scanning, to speed up procurement processes and reduce costs. EDI also provides visibility into the supply chain and frees up employee time and resources for other important tasks.”
For those starting out on their EDI journey, the change can seem daunting. MessageXchange has outlined three things to businesses should consider to set themselves up for success:
1. Understand the business outcome
Having a clearly defined outcome and understanding of what the business is trying to achieve from EDI will help ensure it stays on the right track. The outcome might be to remove manual processes, get better visibility of procurement or better manage inventory. Whatever the intended outcome, understanding what that is will ensure EDI is leveraged in the right way once implemented.
2. Understand where the business is at
The main areas that EDI will impact are software, processes, and suppliers.
- Software. Businesses need to be aware of what the current software used for procurement is capable of including whether it supports the message types the business wants to use such as advanced shipping notices and whether the business has the technical resources required in-house.
- Processes. EDI will streamline a lot of the procurement processes in the business, from ordering, receiving stock, and updating inventory to receiving and paying invoices. With any new technology, employees will need training on how to use it properly for the solution to be truly effective.
- Suppliers. EDI only works if suppliers are on board too. Retailers must consider each supplier they work with, paying special attention to their limitations. Knowing a supplier’s capability is a crucial step to consider early on so shortfalls, such as knowledge, technology or funding, can be addressed and the rollout can cater to the supplier’s capabilities and needs.
Thoroughly understanding where the business is at and where it needs to be, will ensure a smoother transition by minimising unexpected issues, which can drain budgets and team morale.
3. Find a partner, not just an EDI provider
Naturally, many questions will arise throughout the EDI implementation process. Having a trusted partner that the business can approach with even the smallest of questions can help shorten the roadmap from starting out to realising the outcome. The information the partner provides can be leveraged during the implementation stage, and beyond.
John Delaney said, “EDI can offer both retailers and suppliers an easier, automated procurement process, which can save money, reduce errors and improve efficiency. However, when starting out with EDI, it’s important that businesses put in the groundwork to make it as successful as possible.”