EDI Outsourcing
EDI Outsourcing is increasingly being chosen by companies of all sizes who engage in EDI. In these economic times companies have found it to be more cost effective to outsource their EDI via a managed service agreement.
As more and more suppliers try to optimize supply chains they’re putting more and more pressure on vendors and customers to adopt EDI. But many find that they are investing resources and money into, which may for the organization a non-value-adding activity, while negatively impacting the core business. Even companies who come willingly to EDI are often put off by the extra resources and technical expertise it demands.
Implementing an in-house EDI system can be a daunting challenge. There are EDI Standards that have to be learned like ANSIX12, EDIFACT or XML and knowledge has to be maintained, since structure of these EDI standards change all the time. Customers often change their internal standards and it’s your responsibility to stay up-to-date on these changes. In addition EDI translation maps for your various trading partners (TP) need to be developed and maintained.
Learning and maintaining those standards, developing and maintaining TP maps on an ongoing bases, plus the acquisition of an internal EDI Solution (Translator, Hardware) can be expensive. That’s why many choose to use an outsourced managed service to gain the advantage of in-house EDI at cost that doesn’t break the bank.
To setup an in-house EDI System you need:
- EDI Translation Software – The low end packages are a few thousand dollars and they go up from there. for.
- EDI VAN Services – A few hundred dollars to set up and monthly charges based on volume–which may increase quickly when trading partners not only sends you an order (ANSIX12 – 850), but wants in return a “Functional Acknowledgement (ANSIX12 – 997). These are already two transactions for one order. The next thing a TP usually will require from you to be send is an EDI Invoice (ANSIX12 – 810) and you will in return receive a Functional Acknowledgement back. Transactions that may follow down the road are Advanced Ship Notices (ANSIX12 – 856) , which are by the way one of the most difficult transactions to setup and to satisfy, Change Order Request (ANSIX12 – 860), etc.. And anytime you are not able to trade these documents in a timely and for your customer satisfactory condition you get hit with charge-backs.
- EDI Integration with your Business Software (Your ERP Solution or accounting package). This can be expensive. Even though most EDI Packages today claim to seamlessly integrate with the major back-end systems, some customization is usually required, depending on your needs and your customer requirements.
- EDI Technical Staff – You will need at least one technical person to set up the EDI Translation Software and integrate with your back-end system. This person will need to understand the technical challenges your business has on top of all the EDI requirements from your trading partners and of course the systems and software involved.
- EDI Coordinator – At least one person, which will oversee the day to day operations of your EDI system to insure all your documents are flowing in and out of your systems correctly and in a timely manner. This person is usually also the direct contact for your trading partners in case anything goes wrong on your end or your trading partners end and coordinates the resolution.
As you can see, There can be some significant upfront cost sand investments, as well as some ongoing investments in staff and operations to maintain an In-house EDI System. That’s why a managed service makes sense. You can have your EDI completely managed for you, eliminating the need for technical staff, day-to-day coordination and technical knowledge of mapping and trading partner requirements. This is the way many large companies operate today and they’ve found that the cost savings is great.
Enterprise Services Management (ESM) offers EDI solutions, EDI Services and EDI Outsourcing for companies large and small. To find out if a managed EDI service is right for you visit our website at http://www.esm-co.com
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8 Reasons To Invest in Your EDI Services
A good EDI system flows seamlessly, working in the background to keep your business moving forward. Is your EDI system a boon to your business, or a headache? If you are experiencing problems with your current system, these 8 questions can help you determine if investing in your EDI system is a smart choice.
Are you still verbally communicating information to the warehouse?
In today’s business climate, a clear distinction is made between business goals of the past, and the goals facing today’s companies. For your business, conquering the information war may define the difference between success and failure. Information technology provides a perfect opportunity to capitalize on obtaining accurate and timely information in order to make informed business decisions on a daily basis- but it only works if you take advantage of the technology available.
EDI systems not only eliminate the need to reproduce information, they transmit that information to those who need to know. With an adequate EDI system in place, your employees can stop playing phone tag with the warehouse, and can get back to focusing on important tasks like improving production or enhancing customer satisfaction. In today’s digital age, there’s no need to waste time with verbally communicating information to the warehouse.
Is your current EDI system flexible enough to handle changes that occur during product fulfillment- without massive manual intervention?
Seamless, automated order processing does not have to be an unattainable goal for your business. EDI has the capability to catch errors before they reach the production phase, and adapt to any changes without requiring employee intervention.
Change happens. When it does, your system should not require a halt in the order fulfillment process. Work should proceed as normal while adjustments are made to the order- without the assistance of a problem-solving employee.
Are you reprinting more packing ships than you would like?
If you are still using paper packing slips, you know how frustrating it can be to reproduce missing slips. With an EDI system, your packing slips are generated automatically and delivered to the proper destination- all without human intervention.
If your current system is failing to produce packing slips in a reliable manner, it may be time for a change in the system.
Do your Advance Ship Notices arrive after the product ships?
Advance Ship Notices must consistently arrive before the product is delivered. This allows your customer to efficiently operate their warehouse. Advance Ship Notices also improve order delivery accuracy and help production and shipping run smoothly. Managers can accurately schedule production if the company utilizes Advanced Ship Notices. In fact, some companies require their use.
When a customer calls to check on an order, do your employees play phone tag for 20 minutes trying to track down the current information?
Utilizing the self-service features of ERP and EDI systems allows you to place the customer in control of tracking order progress. If a problem arises, and a customer needs to speak with a CSR directly, the system delivers the most current information in a matter of seconds, eliminating the need for multiple phone transfers and placing the customer on hold.
This enhanced customer service makes your company look good and frees up employees from the tedious task of tracking down someone who can provide the answers they need.
Would speeding up your order processing significantly increase your cash flow?
A positive cash flow is always good for business. EDI can help streamline order processing to the point that your cash flow is affected. Customers that receive EDI invoices pay much quicker which improves your cashflow.
Is your business growing enough to take on well-known large clients that require EDI?
Large corporations like Target, Costco, and Wal-Mart each impose their own set of strict EDI guidelines that must be followed by all suppliers. This specificity has the potential to create inefficiencies, increased manual effort, and errors if you are using an outdated or inadequate EDI system.
Are you paying Too Much for an EDI consultant?
Technical consultants and after-hours repairs can be costly for any business. For a small business, these costs can be fatal. Fortunately, a managed services agreement with a fairly priced company can save you thousands of dollars in overtime and eliminate the need for high-end consultants. Sometimes the solution to high costs is to invest in a system that better serves your current and future needs and then have the right team managing it. If you are using the right solution, changes are not only seamless, but they are anticipated in many cases.
Investing in your EDI system is often an investment in productivity, customer satisfaction, and business growth. These 8 reasons for investing in your business’ EDI system are only a few examples of how EDI can help your business be more productive.
If you’re looking for EDI Solutions, have questions about EDI Services or you’re thinking about EDI Outsourcing, Enterprise Services Management (ESM) can help. Our experienced team will help you develop a solution at a cost far lower than others. We can be found at http://www.esm.com
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EDI Solutions-Are They Right For You?
Should I Invest in EDI? It’s a question more and more people are asking themselves in these harsh economic times. How can you find out if your EDI Investment will produce a positive ROI?
EDI can benefit your organization by having stronger and better relationships with suppliers, customers and vendors and can bring you a greater advantage against the competition.
EDI also benefits by reducing time and human resources needed in order to complete order entry, and reducing strain on other resources.
Calculating ROI
Before implementing an EDI Solution, a company should answer the following questions in order to decide whether to implement EDI Solution or not:
- Is the ability to meet suppliers, customer and vendor requirements an important factor in your company–perhaps even more important than pricing?
- Is the timing and accuracy for delivery of goods and services crucial to your suppliers, customers and vendors?Could a 30% faster delivery time to your customers and vendors be turned into a competitive advantage?
- Will being “EDI enabled” allow your firm to penetrate new markets or find new suppliers?
- Is customer loyalty and long term alliances a high priority for your firm?
- Would an EDI-enabled A/P and A/R system favorably affect your payment terms and agreements with customers and suppliers?
All these areas can directly affect the perceived value of your firm, resulting in a positive ROI for your business. One report shows that gross sales for a supplier firm to a major retailer increased 18% after the company started to use an EDI system.
If your company increased its sales and number of customers and vendors by 5% after becoming “EDI compatible,” generating 30% increase to the company annual gross sales, you can see a strong positive ROI
After implementing EDI systems, most companies find a substantial amount of time and cost saving in processing and executing customer orders.
Research show that it takes up to five times longer to process a purchase order manually as it does electronically with EDI, due to the fact that specific working requirements and terms have been agreed upon between each partner, documents such as Purchase Orders (850 document) and Invoices (810 documents)are no longer manually created, mailed, entered, and then processed. Instead, they are processed electronically without errors, saving processing time and human resources.
Reduction in EDI Administration cost:
Research shows that it costs an average of $0.30 to manually process a customer order, whereas implementing an EDI order entry program would reduce that cost to $0.10 per customer order.
Sum up the number of purchase orders your firm processes annually, then multiply that figure by 0.20 each to estimate cost savings by using EDI.
Reduction in Human Resource
Standard EDI software will significantly reduce processing time and cost in the following administrative task areas:
- document preparation
- error detection and correction
- reconciliation
- mail preparation
- telephone calling
- data entry
- overtime
- supervision expenses
Research has shown as much as a 50% saving in required human resources can result from a fully functional EDI Solution.
If your company reduced the staff responsible for processing purchase orders and invoices by an average of 30%, Sum the annual dollar value of those human resources cost savings to get the saving you will get by using an EDI Solution.
Reduction in Round Trip time
Round Trip time refers to the amount of time necessary for a customer to receive an purchase order after it is placed. Companies reduce order round trip time to increase competitive advantage, decrease carrying costs, decrease shrinkage costs, and improve cash flow. Research involving a supplier and a retailer shows a 50% reduction in order round trip time was achieved by using EDI Software.
Reduction in Inventory
EDI solutions can reduce expenses that are related to storing inventory.
EDI customer supplier relationships can provide your company with more accurate demand forecasts, reduced round trip time, and other dependable supplier schedules.
For example, a company might have an eight week supply of products. If the company started to use EDI with its customers and subsequently reduced round trip time by 25% from 30 days to 22 days, could the company reduce inventory accordingly?
Because the company could more accurately predict short term demand with EDI, it may only be necessary to hold a six week supply of products. This would result in reduced costs including cost of products, storage space, service, and risk (insurance).
If your company reduced inventory by 10% because they have more accurate forecasting, how much money would your company save annually on inventory carrying costs?
Cash Flow Increase
Lower operating expenses and increase accuracy in procurement areas are directly beneficial to a company financial cash flow. EDI orders, processed quickly and received on time by your customers, will also allow your company to negotiate incentives such as better payment terms, discounts, and long term contracts.
Better Order Fulfillment
EDI reporting provides managers access to data and status information, which allow them to make accurate and informed business decisions. EDI reporting can also improve analysis of pricing changes and promotions. Most importantly, it can improve product availability despite shifting demand by enabling faster reaction and recognition of demand trends. Companies report an average inventory reduction of 10% by using EDI Software.
Conclusion
Enterprise Services Management (ESM) can help you in the process of selecting an EDI system that’s right for you, setting it up and managing the entire process for you.Using EDI Software/EDI Solution can and will save you money, directly or indirectly!
Our expert team can help you find EDI Solutions , figure out which EDI Services you need and determine whether it might make sense to go with an EDI Outsourcing service all together.
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