EDI as a Supplier: Brownie Points or Valuable Benefits?

A customer of ours just happens to be the largest privately owned company in the world. Naturally there is a superb information services arm to this global giant. The skills available have allowed the company to determine, in meticulous detail, some of the things that make up operational costs. One such item is… a keystroke!

A simple sum, taking the numbers of keystrokes saved through integrated EDI and multiplying them by the keystroke cost quickly determines the viability of each electronic trading relationship.

This has proven to be very useful. It makes assessing whether eBusiness is actually saving the company any money as well as showing up any benefits and what those benefits are worth.

All well and good for a giant, but how is a smaller company able to know things are moving in the right direction, if there are simply insufficient resources to measure these things for you?

What are the opportunities for improvements if you are a supplier to a customer requiring EDI?

Here are a few:

Integrated EDI improves the certainty of delivery for your invoices. You can avoid the “Haven’t received the invoice. Send a copy!” conversation when you enquire what the Devil has happened to your money!

It also improves the timing of invoice delivery, which is very helpful as:

(i) closer invoice timing to goods delivery improves the likelihood of trouble free delivery (GRN) approval

(ii) the earlier invoices are produced & delivered the earlier the “payment due date” clock starts ticking

You are doing the invoice input for the customer, which leads to better information quality going into your customer’s ERP and ensures 100% data integrity across the supply chain!

Your integrated EDI will reduce the likelihood of delayed payments because errors are flagged up earlier, on processing the invoice, rather than as a result of chasing non-payment. A faulty invoice sent via EDI is rejected by the system and you can know in seconds. A faulty paper invoice might remain undetected by you until well after the end of your agreed payment terms with the customer!

You may not have the resources for obtaining detailed measurements of the effect of EDI on your business but you can still determine if things are going in the right direction for you. All you need do is watch one or more of some easily ascertained Key Performance Indicators (KPIs)…

• Improved Process Effectiveness – watch to see if the numbers of Day Sales Outstanding are reducing.
• Improved Productivity – is the number of invoices (or detail lines) processed per fiscal period increasing?
• More Automation – is the proportion of transactions that are processed automatically increasing?
• Improved Quality 1 – check that the ratio of credit notes raised to invoices produced is decreasing!
• Improved Quality 2 – is the number of rejected invoices decreasing?
• Improved Quality 3 – is the number of queries raised also decreasing?
• Cost – is the average cost of processing a transaction decreasing?

So, even with limited time and resources available to you, a glance at any one of these can reassure you that you, as well as your customers, can benefit from integrated electronic trading.

Next time we can look at the same subject from the customer's perspective