5 Signs You Should Invest in EDI

This is a guest blog written by SPS Commerce. SPS specializes in EDI services and software. Learn more about our partnership here.

For every business that has started the search for an electronic data interchange (EDI) solution, there’s another business that doesn’t even realize that they should be investing in EDI, too.

5 Signs You Should Invest in EDI SalesPad and SPS Commerce

Who wouldn’t want improved turnaround times, better inventory forecasts, reduced administrative costs, greater accuracy, fewer mistakes, enhanced processes, competitive advantages and more?

With so many benefits, EDI might sound like a snake oil elixir — too good to be true. Simply put, EDI is a combination of document standardization, automation and electronic transmission. Instead of having to send, receive, reconcile and approve physical business documents, EDI allows you to accomplish all of that digitally. It’s like the difference between snail mail and email (and then some).

One rule of thumb is that if you’re processing 200 documents per month or more, you should invest in EDI. However, if you’re not sure if EDI is right for your company, take a look at this list of five signs that you should acquire it. EDI could be the solution to some of your most vexing business problems, while opening up a world of opportunities.

1. Your processes take too long to accurately complete.

Consumers are driving change in the retail and supply chain industry. They want their orders delivered faster, and retailers are feeling the pinch trying to keep up with the two-day shipping bar that Amazon has set. As a result, retailers are asking more of their suppliers and vendors — to ship to distribution centers, brick-and-mortar stores and individual consumers at a much more rapid pace than in the past.

If a valued client needs a delivery in two days, but your processes require a minimum of three days, that puts your business at a disadvantage. EDI automation of documents enables you to accurately and efficiently streamline your processes to meet the speedy demands of modern retail, supply chain and consumer expectations.

2. Costs of inaccuracies are starting to add up.

If you don’t have EDI, it’s very likely that your business relies on manual data entry at multiple points throughout the organization. Every one of those points is a chance for keystroke errors, which can be compounded if the errors are carried over into other parts of the business. You’ve probably experienced the financial sting of paying inaccurate invoices and shipping incorrect orders. You might not know for sure, but you’ve probably made forecasts for inventory, growth and budgets based on faulty data.

EDI takes human error out of the process. In addition to eliminating manual data entry needs, EDI can automatically compare and reconcile purchase orders to warehouse receiving receipts, to invoices, and then pay when everything matches. The only time a human must review and investigate an invoice or a PO is if something doesn’t match.

3. You experience inventory surpluses and stockouts.

If you have a lot of manual data entry needs, you probably have something else that is holding your company back: information and data silos. When physical points of sale, ecommerce order submission, online order fulfillment processes, shipment tracking and other systems don’t communicate with each other, it improves the chances of miscommunication and inventory issues. Forecasts for needs become extremely labor intensive and prone to miscalculation for supply and demand.

With EDI integration of your ecommerce platform, accounting, ERP and other business solutions, all of your systems can communicate with each other. This enables the most accurate transmission and collection of data. EDI’s comprehensive view of full ordering history can be a vital tool for better future forecasting.

4. Your trading partners are becoming impatient.

As mentioned previously, consumers demand everything easy and fast, and retailers want to give that to them. Retailers can’t do it on their own — they need distributors, vendors, suppliers, 3PLs (third-party logistics) and other organizations in their trading partner community on the same page. Depending on which link in the supply chain is relying on legacy systems and outdated processes, the whole network can slow down. Some retailers and brands won’t even consider working with a vendor or supplier if they don’t have EDI.

Improved efficiency, accuracy and automation are great for your company internally, but also for your trading partner network and community. Not only can it help secure and retain current trading partners, but also open the door to countless opportunities to seek out and work with new ones. As an added bonus, EDI can streamline the onboarding processes, speeding up time to value with new business partners.

5. Resource limitations are in sight or have been reached.

Growth is a tricky thing. As a business matures, resources such as staff, inventory, space allocation and other needs change. Often organizations run into barriers that can hinder the pace of development required to address those needs. For example, unexpected sales spikes can overwhelm a business, causing inventory stockouts, fulfillment delays and late shipments, which in turn stresses trading partner relationships and disappoints consumers. More sales also means potential for mounting manual data entry errors, insufficient warehouse space and an ever-expanding workforce.

EDI can add an element of elasticity to existing assets. It enables tighter management of inventory and supply chain to better allocate space in warehouses, distribution centers and stores, such as with just-in-time inventory practices. With manual data entry needs reduced or eliminated, employees that carried out these tasks can be retrained and redeployed elsewhere within the business. You may even find you have the human and technical capital to not only fulfill all orders timely, but drive more innovation within your business.

These signs look familiar?

If your business is experiencing any of these problems, EDI could go a long way toward helping you solve them. The benefits discussed here are just some of the advantages offered by EDI. Purchase orders, invoices and warehouse receipts are just the beginning — the more documents you integrate and automate, the greater potential for inventory visibility, sales forecasting, fast fulfillment and more.

As a final note, the pace of change in the retail and supply chain industry will likely continue as it has been for years. As shopping habits evolve, more businesses in the market will invest in EDI to speed up their processes — including your competitors. Acquiring an EDI solution could be a tool to help you maintain and advance your portion of market share by enabling your business to satisfy consumers’ need for speedy transactions.

Learn more about EDI with EDI 101. You can also check out SPS Commerce's longer, more inclusive list of EDI documents and transactions.

7 signs it's time to upgrade your inventory management software.

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