EDI: What It Is & How It Can Help You
A Special Series from North American Wholesale Lumber Association: Published in the August 2015 issues of BPD and Merchant Magazine
Electronic Data Interchange (EDI) is the transfer of data from one computer system to another by standardized message formatting, without the need for human intervention, according to Tech Target. Simply put, it’s a way for businesses to exchange information such as invoices, purchase orders, etc., electronically.
While this may seem like a complicated process—and, to an extent, it can be—implementing an EDI solution can increase a company’s efficiency and profitability, as well as create more consistency and streamline administration processes in document communication and management.
One of the biggest advantages of EDI is the efficiency it allows. Because transactions can be processed immediately, staff members save time on entering data manually. This also reduces the chance for human error and the cost to send paper materials such as invoices, shipping orders, etc., via postal mail.
In addition, EDI can enable more accurate accounting and inventory management, as well as help increase team productivity without increasing staff.
EDI also allows for the successful transfer of knowledge, providing consistency throughout the documents shared between trading partners. If an employee is out of the office or leaves the company, the knowledge stays automatic and operations can proceed as usual.
If you’re interested in working with a big box retailer, using EDI is basically a mandate. Through this technology, big boxes are able to control their costs and their pricing at a much higher level. And since the turnover within retail can be high, EDI ensures that the orders you’re receiving are accurate.
When deciding to implement EDI software, it is important to decide what exactly you want to do with it. How do you want to use it?
Do you want a custom solution? Will you use an outside vendor? How complex in your tracking do you need to you get?
No matter the specifics in how you’ll use it, there are two main things you need to consider: implementation time and your troubleshooting network. If you’re planning to do a major EDI implementation with a customer or supplier, it could take between nine to 12 months. Yet don’t let the timeframe scare you away. If EDI is something you need to do in the next two years, start planning now.
The more you are ahead of the game, the better off you’ll be.
It’s also important to make sure you have people in your distribution network who have gone through the implementation process.
Though EDI is beneficial to an organization in many ways, it does come with its challenges. There are some complexities when implementing a solution and though the technology is simple, in theory—it’s taking data from one system and putting it into another—the templates, forms and testing process can get pretty complicated.
Having people you can troubleshoot with—people who have possibly experienced the same issues—can make a difference in easing the overall process. Capital Lumber uses a third-party company for its EDI solution for this reason—it’s helpful to have EDI specialists to reach out to as a resource when something goes wrong.
For us, using EDI has given us access to new opportunities with big box retailers. In the past, you’d have to call on someone and remind them that you have a particular item. Now, since your whole price book is available electronically, it’s easy for them to see, and if they want to find something, they can. We’ve started to sell different products and different opportunities to customers that had never been considered before.
EDI is giving companies the chance to not only increase efficiency and save money, but to differentiate themselves in order to gain more opportunities and improve relationships with partners.
– Bethany Doss is business manager for Capital Lumber, Healdsburg, Ca., and a member of the North American Wholesale Lumber Association’s board of directors. Anthony Luongo is a business systems analyst at Capital’s headquarters in Phoenix, Az.