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Without doubt EDI can create a significant impact to organizations. These can generally be classified into strategic, operational and opportunity benefits and will vary in emphasis across different organisations, depending on why and how EDI has been implemented. Initial EDI applications have concentrated on corporate efficiency by improving data flow and error reduction. In these instances the business case for EDI was based primarily on direct cost savings.
With EDI, businesses can eliminate the need to re-enter data from paper documents and thus prevent clerical errors. equivalent. In addition, EDI can reduce the need for personnel involved in orders and accounts processing. EDI systems can also shorten the lead time between receipt and fulfillment of orders. When scheduling information is transmitted with ordering data, companies can plan production more accurately and thus reduce stock inventories resulting in major savings. Use of EDI to transmit invoice data and payments can improve a companys cash flow and may increase the amount of working capital as accounts can be dealt with more efficiently.
Trading information obtained from historical data built up from EDI transactions is an invaluable source of market research and strategic planning information. The process of working with trading partners to implement EDI can also result in the benefit of closer working relationships with trading partners. It has now become apparent that the greatest value of EDI will emerge in strategic areas such as the provision of better levels of customer service and improved marketing competitiveness. EDI Capabilities (continued) Strategic benefits include: + Faster trading cycle + Ability to adopt new business processes such as Just-in-Time manufacturing techniques. + Ability to win new business or retain existing customers leading to improvements in business efficiency. + Ability to respond to highly competitive new market entrants. Operational benefits include: + Reduced costs paper and postage bills cut reduction in money tied up in stock manual processing costs (e. g.
associated with verification, keying and re-keying of documents and the cost of manual filing systems). + Improved cash flow + Security and error reduction + Acknowledged receipt Opportunity benefits include: + Enhanced image + Competitive edge + Improved corporate trading relationships EDI Current Limitations The traditional way of doing EDI is limited to an extent. The reason is because each business organization tends to establish its own rules and administrative policies, leading to rising costs of dealing with multiple trading partners, each in turn with its own requirements and procedures. There are less than 100, 000 organizations presently using EDI, though there are over 6 million entities with employees and about 14 million other business entities. A business that wants to sell furniture would have to check with many different customers to see if they had any requirements.
By making it possible for a business to use a common method to look for customers, the barriers entering to the electronic marketplace are greatly eased. This does not mean that there is only one source that everyone goes to for a list of current business opportunities. Rather, a prospective supplier only needs to go to a single electronic marketplace. Beyond the Horizons 1. 1 Industry Usage With the spread of computer and Internet use throughout the U. S. , many people are buying and selling on the Internet. EDI is used heavily in manufacturing, distribution, warehousing, utilities, construction, pharmaceuticals, petroleum, banking, insurance, health care, and textiles to name a few. 1. 2 EDI and Out-Sourcing Today, the solution for more and more companies is to selectively outsource strategic elements of EDI or choose a total EDI outsourcing solution.
Either way, outsourcing can help these organizations focus scarce IT resources and talents on core business requirements and strategic, new projects rather than on day-to-day EDI operation. How does outsourcing EDI affect businesses operationally and financially? Here are three things that it does: Lowers the controlling expense Takes assets off the books and frees that capital to be used in other places Allows company to obtain the technical skills crucial to complete the job A growing trend is for companies of all sizes to outsource a fraction or all of their EDI processes because of the asset that it will ultimately bring to them. Executive Summary As far as any particular industries are concerned EDI is being viewed increasingly as a business enabling technology facilitating any activities.
In the IT industry the take up of EDI has been primarily because of Just-in-Time (JIT). With JIT, a manufacturer orders and receives parts from suppliers just before it needs those parts on the assembly line. For example, DELL Computers implemented JIT which enables them to provide an online order system. EDI provides the transaction link that JIT requires.
Where a transaction involves import or export, customs declaration documents can now be submitted using EDI messages which greatly expedites the whole process. For example, Singapore harbour implemented EDI techniques in the 80 s. Now renowned for its competitiveness, customs transactions which previously took a day to complete can now be done in minutes. Banks and other financial institutions are supporting usage of EDI in the area of Electronic Funds Transfer (EFT). For example, DBS Singapore, incorporated Internet Banking which enables its customers to be able to view their account balances, make bills payments and do fund-transfers. In short, EDI enables these organisations to operate much more efficiently by eliminating significant amounts of paperwork.
This of course results in a beneficial 'knock-on effect on their customers...
Free research essays on topics related to: trading, cash flow, trading partners, jit, strategic
Research essay sample on Trading Partners Cash Flow
