ELECTRONIC DATA INTERCHANGE

Assalammualaikum, it seems as clear as daylight that EDI play a vital role in purchasing as it will relate between the time and cost. So today we will discuss about the advantages and disadvantages of Electronic Data Interchange. Before we start any further, do you have any idea what is Electronic Data Interchange? 

What is EDI?

EDI (Electronic Data Interchange) refers to electronic communications of business transactions between organizations.

EDI implies computer to computer transactions directly into vendor databases and ordering systems. In 1996 the National Institute of Standards and Technology defined electronic data interchange as the computer-to-computer interchange of strictly formatted messages that represent documents other than monetary instruments.

EDI implies a sequence of messages between two parties, either of whom may serve as originator or recipient. The formatted data representing the documents may be transmitted from originator to recipient via telecommunications or physically transported on electronic storage media.

The main elements of EDI system are computer hardware, software, computer compatibility between the sender and receiver.

For example, one of the largest users of Electronic Data Interchange for purchasing purposes is Wal-Mart. By using this system Wal-Mart can predict what product should be stocked and inventory in each store. The saving in paperwork and hours will lead to gain competitive advantage and market share.

ADVANTAGES OF ELECTRONIC DATA INTERCHANGE

 The first advantages of using EDI system is EDI provides cost savings by reducing paper and eliminating paper processing. It seems that by using this system it will reduce the number of using paper and shorter the lead time either in order processing or stock in or stock out. Payment also made electronically via bank account.

Second advantages of using EDI system is time savings and eliminating repetition are other benefits from the reduction in paper processing.

The third advantages of using EDI system is documents can be transferred more quickly and processing errors can be decreased allowing business to be done more efficiently. The document in softcopy so it is easily to handle and to transfer the document through the system the seller or vendors.  If the document in hardcopy so it need time to reach to the seller or vendors as will incurred a lot of cost and time needed.