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Advantages of EDI

1) Shortened Ordering Time: Paper orders have to be printed, enveloped and sent out by the customer's post room, passed through the postal service, received by the supplier's post room and input to the supplier's order pocessing system. To achieve all this, reliably, in under three days would be
to do very well. EDI orders are sent straight into the network and the only delay is how often the supplier retrieves messages from the system. Orders can be in the supplier's system within a day, or if there is urgency, the messages can be retrieved more frequently, for example every hour. 

2) Cost Cutting: The use of EDI can cut costs. These include the costs of stationery and postage but these will probably be fully matched by the costs of running the EDI service. The principle saving from the use of the EDI is the potential to save staff costs. For example, if the orders are directly input to the system there is no need for an order entry clerk. 

3) Elimination of Errors: Keying any information into a computer system is a source of errors and keying paper orders into the order processing system is no exception. EDI eliminates this source of errors. On the down side, there is no order entry clerk who might have spotted errors made by the customer - the customer will get what the customer asked for.

4) Fast Response: With paper orders it would be several days before the customer was informed of any supply difficulty, such as the product is out of stock. With EDI the customer can be informed straightaway giving time for an alternative product to be ordered or an alternative supplier to be used. 

5) Accurate Invoicing: Just like orders, invoices can be sent electronically. EDI invoices have similar advantages to EDI orders in saved time and avoided errors. However, the major advantage in EDI invoices is that they can be automatically matched against the original order and cleared for payment without the sort of queries that arise when paper invoices are matched to orders. 

6) EDI Payment: Payment can also be made by EDI. The EDI payment system can also generate and EDI payment advised that can be electronically matched against the relevant invoices, again avoiding query and delay. 

7) Reduced Stock Holding: The ability to order regularly and quickly reduces the amount of goods that need to be kept in a storeroom or warehouse at the shop or the factory.

8) Cash Flow: Speeding up the trade cycle by getting invoices out quickly, and directly matched to the corresponding orders and deliveries, can and should speed up payments and hence improve cash flow. Elimination of most invoice queries can be particularly significant in reducing delays in payments. 

9) Business Opportunities: There is a steady increase in the number of customers, particularly large, powerful customers that will only trade with suppliers that do business via EDI. For example, Supermarkets and vehicle assemblers. Being ready and able to trade electronically can be an advantage when competing for new business. 

10) Customer Lock-In: An established EDI system should be of considerable advantage to both customer and supplier. Switching to a new supplier requires that the electronic trading system and trading relationship be redeveloped, a problem to be avoided if a switch of supplier is not essential.

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