In this article, we will go through what typical transactions look like when using both the paper-based method and the EDI services method. First, here is the paper-based method:
Once a reorder level is reached, the inventory system automatically notifies the buyer that an order should be placed for the specific item.
The buyer enters the data manually into a system, which then generates the necessary paperwork. The PO is mailed using the postal service to the supplier.
After several days, the supplier receives the PO. The order is entered into their order system.
The supplier generates and prints an invoice. The invoice is enclosed with the shipment or is sent separately by mail.
The buyer manually enters the shipment details and invoice into the payments system.
The above is just a part of a typical paper-based workflow. In addition to the above, there are shipping notifications, confirmations, and acknowledgments that need to go in and out. Now, look at the EDI-based process:
Once a reorder level is reached, the inventory system, which now uses EDI software automatically generates an EDI formatted PO and transmits it using Internet EDI to the supplier.
Almost immediately, the supplier’s system receives the EDI formatted PO. The system then informs the shipping department to ship the items, generates an invoice and submits it directly to the buyer’s accounts system.
From the above examples, it is easy to see why EDI is so much better, more efficient and cost effective.