Cheat Sheet: Electronic Data Interchange

Wave bye-bye to piles of paper documents and hello to piles of savings

...$42.90 to $34.05, from $37.45 to $23.83 in the US and from $23.90 to $14.78 in Asia Pacific.

Despite the advantages of electronic document transfer, a relatively small number of businesses worldwide exchange purchase orders electronically, the report found.

The report said that 34 per cent of purchase orders are transmitted electronically by US companies, 36 per cent of orders are transmitted electronically in Europe and 41 per cent in Asia Pacific.

If it's so good why isn't everyone doing it?
It doesn't make sense for everybody: for example, if you are a small or medium sized business, the cost of implementing EDI might outweigh its benefit.

Overhauling your company's systems to work with a common data standard and persuading the companies you trade with to do the same takes a lot of time, money and effort. SMEs may find they don't exchange enough documents with outside organisations to justify the expense.

Larger businesses can also be put off going down the EDI route because not enough of their suppliers can afford to implement EDI, such as fashion retailer New Look in 2007.

Businesses may also need to reorganise the way that they are run after implementing an EDI-compliant system. For example, a company may be used to dealing with invoices for goods that it has ordered after the products have arrived. However, when the same company switches to EDI information transfer it may find it now has to handle invoices before its goods arrive because invoices can be transmitted and processed so much more quickly than before.

Before switching to EDI, organisations need to identify which parts of the business deal with external organisations most frequently and would therefore benefit most from using an EDI standard. The organisation can then start by implementing EDI standards and software in those parts of organisation.

What's next for EDI?
One of the latest development is web EDI, a web service model that is allowing smaller businesses to send and receive EDI documents without investing in setting up EDI processes.

Small businesses use a web browser to upload their documents to a web service that converts their information into a document conforming to an EDI data standard, which is then sent onto another organisation over the internet. Web EDI services also allows smaller organisations to receive EDI documents from other businesses.