Ewan Friend, Managing Director of EDI company, Data Interchange, explores the contribution that EDI plays in supplier relationship management.
Efficiency is often thwarted at the touch point between companies. Not so with EDI (electronic data interchange). It offers the technology and processes to unlock benefits to organisations and beyond by cascading accurate, timely information across the supply chain.
Suppliers are facing increasingly complex demands to comply with different electronic trading requirements, which can create large costs. However, some SMEs have never used EDI technology and have instead relied on the labour-intensive and error-prone processes of faxing or emailing documents and re-keying orders into their systems. They fear the complexity involved in grappling with the various protocols and technologies used by their key customers may present large costs in fulfilling their differing needs.
A key concern from suppliers across sectors is visibility of the demand forecast. Often, suppliers do not receive a forecast beyond the day's firm orders, or the information that is received is not granular enough to be useful. EDI allows demand data to be shared, streamlining business processes and cascading visibility down the supply chain tiers. There are tangible benefits to be realised, which include greater assurance of inventory and improved track and trace, leading to greater end-to-end efficiency and an overall reduction in working capital.
One of the functions of supplier relationship management (SRM) should be improving cash flow for the supplier. Automation and checks across the purchase-to-pay process supports better flow by eliminating errors and inconsistencies between purchase orders, advanced shipment notices (ASNs) and invoices/credit notes. Barriers to fast reconciliation of invoices are reduced and assurances of on-time payments can be made.
Technology for effective SRM
Using EDI to transmit critical documents accurately contributes to a complete, cohesive and accurate view of activity within the supply chain, which is a key benefit of an SRM approach.
The deployment model you use, whether it is in-house or outsourced, is a key decision point. By outsourcing your EDI systems, you will benefit from a leading-edge IT solution, backed up by a level of support and expertise that often cannot be matched by in-house technical teams. With this ability in place, you can collaborate more efficiently with your suppliers and push costs out of the supply chain by eliminating inefficiencies and manual interventions.
The benefits of SRM are measured by looking at overall business performance improvement. Measures may include: reduction in factory line stops or customer outages, reduction in premium freight, reduction in crisis management meetings or events, more supply chain throughput at a lower overall cost, improvements in the performance measures of all supply chain partners and assurance of supply for future generations. The EDI element enables and supports the operational improvements, allowing for a leaner business and a more agile operating model.