Electronic data interchange, which enables real-time information exchange between trading partners, has become a critical part of modern supply-chain management. Yet not all companies use it. Below, we detail the top three benefits organizations will see when they make EDI part of their businesses: increased cybersecurity protections, improved operational efficiency and an enhanced customer experience.
Increased Cybersecurity Protections
In 2022 upgrading IT and data security was the top priority of chief executive officers, according to a survey by CIO magazine. There’s ample reason for this increased focus on cybersecurity, as we explain below.
Traditional business methods, which include paper-based processes and record keeping, present several cybersecurity risks. Chief among these is the potential for theft or loss of physical documents. Paper files are easily stolen or misplaced, jeopardizing confidential information such as customer data, financial records and intellectual property.
Traditional business methods also often require manual data entry, which can lead to mistakes and inconsistencies. What’s more, they lack security measures, which leaves them vulnerable to bad actors.
Explanation of how EDI can mitigate cybersecurity risks
EDI can reduce a company’s cybersecurity risks. First, by automating and digitizing business processes, EDI decreases the need for paper records, lowering the risk of theft and misplacement.
Next, EDI systems generally come equipped with strong security measures that protect information, stopping unauthorized access and preventing data breaches, fraud and other attacks.
Finally, EDI’s automation reduces the risk of mistakes because it removes error-prone human workers from many routine tasks.
And when it comes to increasing visibility in the supply chain, EDI helps there, too, by allowing companies to better identify potential vulnerabilities and quickly fix any problems.
Examples of EDI cybersecurity best practices
Businesses can follow a few best practices to ensure that their EDI systems are secured against cybersecurity threats:
- Implement secure file transfer protocols: Organizations should use secure file transfer protocols, such as Secure Shell or Secure File Transfer Protocol, to transfer documentation between themselves and their trading partners.
- Use strong encryption: Encryption, which helps protect sensitive data during file transmission and storage, is a key component of any EDI system. Companies should be sure the system they chose has strong encryption algorithms and securely managed encryption keys.
- Regularly monitor and audit EDI: Regular monitoring and auditing of EDI systems can help organizations locate and fix any vulnerabilities and potential threats. Sweeps could include monitoring for unusual activity or unauthorized access attempts, as well as regular reviews of audit logs.
- Employ access controls: Companies should implement access controls so that only authorized individuals are able to gain access to sensitive information. Controls might include user-authentication mechanisms such as usernames and passwords, as well as multi-factor authentication.
- Use EDI with strong security measures: If a business is outsourcing its EDI operations to a third party, it should make sure the provider has strong security measures in place, including access controls, encryption and frequent monitoring and auditing of systems.
- Provide employee training: Businesses should provide their employees with EDI best-practices training, including how to identify and report potential security threats and vulnerabilities.
Benefits of EDI cybersecurity protections
By implementing strong cybersecurity measures in their EDI systems, businesses will:
- Reduce risk and liability: Data breaches and cyber attacks can be followed by costly litigation, regulatory penalties and other liabilities.
- Protect sensitive data: EDI cybersecurity safeguards help keep sensitive information – such as customer data and financial records – safe.
- Boost efficiency: By reducing the instance of errors and lessening the likelihood of vulnerabilities and other cybersecurity issues, businesses can bolster their productivity and efficiency. This improves their bottom lines and gives them a competitive edge.
- Improve compliance: Numerous industries are required by the government to comply with various data protection and cybersecurity measures. Implementing EDI cybersecurity protections can help businesses comply with these regulations and avoid penalties.
- Bolster trust and confidence: Trading partners and customers are more likely to trust businesses with strong cybersecurity measures. Word-of-mouth recommendations based on confidence in a business’ abilities can boost revenue.
Increased Operational Efficiency
Many older business methods are inefficient and waste both time and money.
The primary inefficiency associated with traditional business methods is time consumption. Manual work that involves human-entered data can take up hours of employee time each week, slowing operations and resulting in lost productivity.
Manual work carries with it the high risk of error, as we’ve discussed previously. Data entry mistakes, misplaced files and the like can mean additional time and cost in corrective measures, and they can have a negative impact on reputation and customer retention.
Furthermore, physical documents, a mainstay of older business methods, are difficult to track. This makes consistent monitoring of orders nearly impossible, reducing both visibility and accountability, making it harder for companies to fix problems and make decisions.
Because paper documents cannot be accessed or shared easily, communication and decision making is delayed and costs are raised (thanks to printing and shipping).
The higher costs continue in the form of labor, too, when a company uses outdated business methods. This applies to the manual data entry done by paid employees and to the time and labor required to prepare, send and receive paper mailings.
Explanation of how EDI can increase operational efficiency
EDI shores up business’ operational efficiency in several ways. First, automating manual processes, such as document processing and data entry, saves time and reduces the risk of error, making an organization more efficient.
EDI helps ensure accurate information is entered the first time, minimizing the need to redo incorrectly done work. Because it processes transactions and documents much faster than manual methods, companies will see their processing and lead times plummet, helping them respond sooner to customers and trading partners. This improved communication means less need for manual communication methods (i.e., phone calls and emails) which can lead to misunderstandings.
Since it offers greater visibility into the supply chain, EDI lets businesses monitor and track their transactions in real time. This leads to faster problem solving (and fewer problems in the first place).
Automation, increased accuracy and shorter processing times all mean money saved. By reducing manual intervention, increasing accuracy and cutting processing times, EDI lets organizations spend less on labor, rework and more.
Examples of EDI improving operational efficiency in various industries
Since its introduction more than six decades ago, EDI has proven highly effective as a business tool in a wide range of industries. Below are some examples of EDI’s use in various sectors.
- Health care: In health care, EDI is used to automate billing and claims processing. This increases efficiency and accuracy, improving patient satisfaction.
- Retail: Retailers use EDI to automate ordering and invoicing, which reduces processing times, errors and order-to-cash cycle times.
- Manufacturing: Manufacturers employ EDI to automate procurement and supply-chain processes, which has let them increase efficiency and agility and reduce errors.
- Automotive: Automotive companies use EDI to manage the complex supply chain, automating logistics, order management and invoicing. It’s enabled manufacturers and suppliers to shorten their lead times and increase productivity, saving significant amounts of money.
- Banking and finance: The finance industry uses EDI to automate payment and settlement processes, which has let banks and other financial institutions become more efficient and reduce their costs and risks.
Benefits of increased operational efficiency through EDI
By streamlining business processes EDI helps organizations:
- Increase productivity: By automating processes, EDI can increase efficiency, freeing up employee time for higher-value work that drives revenue.
- Save time and money: Fewer mistakes and less need for human intervention save companies the costs frequently associated with manual processes.
- Improve customer satisfaction: By reducing lead times, increasing accuracy and improving responsiveness, EDI can help companies improve customer satisfaction and loyalty, getting them more sales.
- Enhance visibility: EDI gives greater visibility into supply-chain processes, so businesses can track and monitor transactions in real time. If anything goes awry, they can act before a real problem arises.
- Improve compliance: Greater accuracy and automatic requirement meeting help companies remain compliant with various regulations, reducing the risk of costly penalties.
Improved Customer Experience
Heavy reliance on human-done tasks, such as data entry, make traditional business methods mistake-prone. This can lengthen order-fulfillment times and get customers the wrong items. The costs from fixing these mistakes add up quickly.
Without EDI, lag time in communication between trading partners is almost a given because paper documents are difficult to share without physical mailing. Paper-based systems also have an inherent lack of transparency, so customers will find order tracking difficult. This is likely to make them leery of doing repeat business with a company.
EDI’s faster processing, greater accuracy and improved visibility can make for a far better customer experience. Automation on the vendor side translates into less wait time for ordered goods on the customer side. More accurate data entry minimizes the need for supplier do-overs, also shortening the time that lapses between order placement and package delivery.
The increased transparency and consistent communication afforded to both buyer and seller by EDI mean customers can track their goods and get quick, helpful responses to their questions. This bolsters confidence in a company, ensuring repeat business and recommendations.
Examples of EDI improving customer experience in various industries
EDI helps make the customer experience a good one in a wide range of industries. These include:
- Retail: Automated ordering and invoicing reduce processing times and errors, giving retailers a better handle on their supply and speeding shipping time.
- Manufacturing: In manufacturing, EDI automates procurement and supply-chain processes, letting companies slash lead times and provide better service to customers.
- Health care: Automatic billing and claims processing allows healthcare providers to be more accurate and more efficient, giving patients a better overall experience.
- Automotive: The auto sector uses EDI to automate various processes, including order management and invoicing, which lets both manufacturers and suppliers deliver goods more accurately in less time.
- Finance: Banks and other financial organizations employ EDI to automate payment and settlement processes, letting them improve service to their customers.
Benefits of improved customer experience through EDI
A better customer experience will give a business:
- Competitive edge: By providing a better customer experience, businesses can gain an advantage over market rivals.
- Increased customer loyalty: A faster, easier, more accurate experience ordering products is likely to lead to a strong customer base.
- Improved reputation: Positive customer experiences will enhance a company's brand reputation, attracting new customers and keeping existing ones.
- Better compliance: Through increased efficiency and greater accuracy, businesses can more easily comply with regulatory requirements.
EDI should be a top business initiative for all companies looking to streamline their processes, boost efficiency and improve customer satisfaction. Automating manual processes reduces errors and gives greater visibility into and control over supply-chain operations, so organizations can reduce their costs and become more competitive.