EDI (Electronic Data Interchange)
Enter all of your orders electronically to speed up dramatically order processing
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EDI (Electronic Data Interchange): Enter all of your orders electronically to speed up dramatically order processing
By Andrei Kossyrine
© Xpress Software Inc. - All Rights reserved
http://www.xssoftware.com
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Making manufacturing more profitable is not a "one size fits all" solution. This change in thinking and operations is also not accomplished in a single step or procedure change. The following is one of a series of topics designed to enhance the profitability of manufacturing in general.
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EDI represents a fundamental change in the way companies transact business. It replaces paper-intensive functions with efficient electronic transactions and eliminates the need for printing and mailing business information. By using standard formats and languages, the computerized data can be electronically transmitted between two companies and interpreted automatically.
The process of sending data via EDI requires a series of steps on the part of the sending and receiving partners (known as Trading Partners). Once the foundation of your EDI message is defined, most of these steps will be automated.
But once EDI is set up between a vendor and supplier, the benefits come quick. Among the advantages to companies that use EDI:
Increased opportunities for "just-in-time," or JIT, delivery.
Faster delivery of purchase orders means faster delivery of products.
Eliminate manual mistakes that crimp the supply chain.
Avoid last minute surprises in order fulfillment.
EDI has existed for more than two decades in Europe and North America. Early electronic interchanges used proprietary formats agreed upon between two trading partners requiring new programs each time a new partner was added to the existing system. Later on, some industry groups began a cooperative effort to develop industry EDI standards for purchasing, transportation, and financial applications. Many of these standards supported only intra-industry trading, which led to a large number of EDI formats.
Let's take a look at 3Com and see a great example how EDI not only helps many companies today, but is increasingly becoming a necessary standard to do business.
Mainly driven by the request of strong US business partners 3Com implemented an Electronic Data Interchange, or EDI, based in 1995, with additional EDI protocols added in 1998 as a result of increased globalization.
The result has been a more streamlined process between 3Com and its vendors, as well as fewer purchase order errors and increased efficiency.
There are, of course, costs to implementing EDI. At 3Com, the company reported:
The start up costs for the EDI solution were less than $25,000 since already existing technical and human resources were used.
With the growing data traffic new EDI project implementation took place. Establishing the EDI Operations department, new personnel was hired. Also, the technical infrastructure was upgraded, installing a new Unix translator for $100,000.
The setup of a new trading partner for EDI at 3Com takes about 2-3 days of a programmer's work.
A new transaction setup like adding a certain document to the existing set of an EDI partnership takes a programmer about 8 working days (which is rather low compared to an industry average of about 2 weeks), and the mapping takes about $1,140.
3Com already uses EDI with about 15% of its approximately 200 suppliers and distributors. Redesigning the distribution channel management the company has focused on larger distributors that are more likely to support EDI. This explains the facts that already about 50 percent of the company's suppliers are EDI capable. With EDI becoming more and more a significant strategic issue for enterprises, especially in the computer industry, 3Com tries to convince more of its business partners to use EDI; and for new suppliers and distributors it is a requirement of doing business with 3Com.
With more and more companies turning to EDI, including industry heavyweights like 3Com, EDI is quickly becoming the rule - not the exception - for business-to-business transactions.
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Since 1996 Xpress Software Inc. has provided
technical assistance in lean manufacturing methods,
computer systems and business process automation
to maximize manufacturing profits.
Visit its website www.xssoftware.com or contact
Andrei Kossyrine at andrei@xssoftware.com.
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