We run into many companies who are interested in implementing an EDI tool or are already using EDI and “don’t have supplier pain”. Although there are valid reasons to adopt an EDI solution, before you take the plunge there are a few things you ought to know. EDI, at its core, is data transformation between trading partners.
When you start digging deeper into the capabilities there are no built-in analytics, collaboration, or scoring of buyers or suppliers and ultimately no strategic value to drive supplier performance to meet your business requirements. One of the number one issues with EDI is the total cost of ownership. EDI is expensive to implement for both the customer and supplier. The tool itself is normally expensive but maintaining it can be costly to customize and use countless man hours for upkeep. If there is a change in the ERP system, typically a change is needed in the EDI tool as well. Changes in documents, i.e. invoices (EDI 810) and purchase orders (EDI 850) or purchase order Acknowledgements (EDI 855) can break EDI transmissions causing downtime and expense to all parties.
Another challenge can be supplier adoption. The main reason you invest in a tool like EDI is closer buyer and supplier relationships and visibility. When you ask a supplier to adopt a heavy tool like EDI and possibly make them pay for the opportunity to do so, you can create friction as opposed to bringing them closer together. Also, few organizations have successfully implemented EDI with 100% of their supplier chain. Which means your organization will have to manage two procurement processes. A special one for your EDI suppliers, and a separate one for your non-EDI suppliers, i.e. ‘supplier collaboration’ via manual email communication.
Regarding communication, EDI system transmissions are limited to an authorized set of documents, rules and transactions. Other communications have to be handled by traditional siloes systems like emails, spreadsheets, and phone calls. If you need to pull in, push out, or expedite a purchase order, then you’ll need email, not EDI. Plus, when EDI processes break, all order processing completely STOPS and requires IT involvement to resolve, which can be costly and time consuming. The last thing to keep in mind when considering an EDI tool is even a 1-cent part by a nonEDI supplier can completely stop production.
Your supply chain is only as strong as your weakest link (or weakest vendor), so suppliers not using EDI can cripple production. Even though you may be using or considering EDI, your supply chain deserves 100% coverage with a process that is driving your suppliers to operate at the highest level as it relates to your changing demand.
About the Author
Tom Kieley, is a CEO and Co-founder of SourceDay. As a veteran business owner, Tom knows how to recruit top talent and build a lean team to manage growth. He is also good at conveying company vision and goals to employees, partners and anyone else interested in PO management. But it’s the execution of that vision that makes him such an asset for SourceDay.
Tom wears many hats, but his priority is maintaining key relationships and providing oversight across SourceDay. His decade plus of experience in product management and operations, hardware and software sales, and supply chain management fosters his creative ideas around how best to achieve the goals that lead to company success.
