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What is EDI & Why Does It Matter?

Information is everything in the world of logistics and 3PL, so it’s no surprise that electronic data interchange (EDI) is gaining ground at every step along the supply chain. Global fulfillment services share information every day using some type of EDI, but there’s even more potential to unlock within these protocols.

How Logistics Companies Use EDI

No matter where you are in the supply chain, you’ve probably participated in an EDI transaction. Simple tasks like notifying suppliers of a need for more inventory in your warehouse, accepting new deliveries and passing shipments between shippers used to require a lot of tedious paperwork that was written out by hand. Today, many companies instead utilize EDI to pass the same data to other companies using a previously agreed-upon protocol.

Moving from tedious paperwork in triplicate to EDI has been costly for many companies, but it offers distinct advantages, including:

Fewer Errors. Retyping, rekeying or rewriting ship manifests and other documentation over and over can create a great deal of error in translation. Instead of being forced to redo the same work again and again, a simple push of a button or click of the mouse sends identical data on to the next step of the logistics chain.

Shorter Cycle Times. How long it takes for your product to move from the manufacturer to retail warehouses matters. In fact, speeding up this process not only keeps your customers happy and your products relevant, it can save you money. By transmitting data about an incoming shipment to the next step in the logistics chain, you can already have a ship, train or truck waiting to take your packages.

Overall Cost Reduction. Handling documents electronically can save a bundle, regardless of whether you manage your logistics chain in house or use a 3rd party logistics (3PL) company. Reduced paperwork means fewer people required to maintain it and less labor costs spent on correcting errors in the manual paperwork process. In fact, according to a 2008 Aberdeen report “A Comparison of Supplier Enablement Around the World,” North American paper requisition to orders costs are 37 percent more than when using EDI.

Faster deliveries and quicker order turnarounds are the stuff that happy customers and increased business are made of, so every tool that increases that happiness matters for logistics companies and 3PLs competing in the Age of Amazon.

 

May 14, 2015
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