Background

The purpose of this document developed jointly by J-COM Europe Kft and Koru Solutions Limited is to give more detailed working examples of how you can "show your suppliers the money" in order to provide a better negotiation platform for "win-win" deals, and to work out what changes need to be made so that businesses can realize greater efficiencies.

EDI used as a tool can enable process change and help achieve business goals for significant benefits to be realized. EDI can potentially enhance all parts of the business process, and the impact can be far reaching:

Traditional (non-Internet) EDI is a set of specifications for formatting documents that is designed to automate business flow among businesses by replacing paper documents with paperless ones. By employing EDI, an application program-generated document (such as a purchase order) can be transmitted over the network and automatically entered into and processed by an application program at a trading partner. In return, the application program at the trading partner can generate and send back a reply EDI document (such as an invoice) that can be incorporated electronically by the application program in the sender company.

In the above scenario, the whole process is paperless, requires no human intervention, and is quick. EDI documents, unlike paper documents, are processed electronically by application programs with no human intervention. This process saves time and costs by eliminating or reducing paper transactions, phone calls, and faxes, compressing document turnaround times, and improving data accuracy by reducing (or eliminating) errors introduced while entering data manually.

The most pronounced benefit of EDI is that it can streamline companies' interactions with trading partners. This can increase inventory turns, decrease inventory, speed flow of information between businesses, improve product and sales forecasting, improve time-to-market, increase customer satisfaction, decrease shipping costs, reduce product returns, improve cash flow, integrate supply chain, and result in improved relationships with trading partners.

EDI, like many technical terms in use today, has multiple meanings:

	Some users employ EDI in its generic sense to mean any exchange of data between two computer systems. Under this definition, a file copied to diskette and loaded into another computer would qualify as EDI.
	A more precise definition implies direct computer-to-computer communication of business transactions in a standard context-sensitive format (i.e. each computer understands the "meaning" of each field without requiring additional human interpretation).
	EDI is most commonly used to mean the exchange of information according to the standards defined by the ANSI ASC X12 committee via a commercial Value Added Network (VAN).

Common Statement on the Benefits of "EDI"

When looking at EDI and looking for benefits, the following list is what one normally finds:

	Speeds the transfer of business documents.
	No mail delays.
	No busy Fax signals.
	No misplaced paperwork.
	No lengthy phone conversations.

Improves Data Integrity

	Reduces manual data entry errors (1 in every 300 manual keystrokes is an error!).
	Eliminates re-keying data (70% of one computer's output is another computer's input!).
	Highlights discrepancies (automatically identifies discrepancies to allow proactive resolution!)
	Allows systems to validate more information without additional keying.
	Eliminates the need to manually translate one system's language to another.
	Rapid and automated confirmation of document receipt (you no longer need to wonder whether your document reached its destination.

Reduces Operational Costs

	No redundant keying of data.
	Less paper, less filing.
	Automated document editing and checking.
	Automated document matching.
	Minimizes charge backs (by systematic flagging of discrepancies on receipt of data).
	Reduced document processing time.
	Reduced proof of delivery problems.
	Less time spent reconciling differences.
	Improved planning for shipping and receiving.
	More efficient use of personnel.

Improves Customer/Vendor Relations

Builds relationships - enhances inter-company information sharing & cross functional teams.

Setting up EDI requires both trading partners to gain a better understanding of each other's business processes. Implementation involves the entire organization--sales, marketing, manufacturing, logistics, information systems, finance, and customer service. It typically brings the people within these functions into contact with their counterparts in other organizations. EDI expands channels of communication and leads to better working relationships between business partners.

	Brings benefits to both partners.
	Provides better order status information.
	Increases opportunities for alternative buying.
	Reduces cycle time, which reduces lead times and lowers inventory carrying costs.
	Provides easily accessible, timely, and accurate data for customer service.
	Increases the chance of Preferred Vendor Status.

What Do Your Suppliers Want?

In essence they want to make more money! How can they make more money, well, there are the more obvious opportunities such as increase the volume of sales for them to pay them more, pay them more for the product by changing margins, or providing the opportunity for them to improve their businesses costs. It is the last item, providing opportunities to improve their business costs we will concentrate on.