Electronic Data Interchange (EDI) allows businesses to exchange structured data electronically without human intervention. EDI provides efficiency and cost savings by enabling quicker transactions with fewer errors compared to paper. However, EDI requires compatible file formats between businesses and costly integration software. It also necessitates system administrators to monitor for errors, increasing payroll expenses. Overall, EDI is a powerful tool that can help businesses operate more efficiently through reduced storage, postage, and transaction costs, outweighing the disadvantages of setup and maintenance costs.
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Electronic Data Interchange (EDI) allows businesses to exchange structured data electronically without human intervention. EDI provides efficiency and cost savings by enabling quicker transactions with fewer errors compared to paper. However, EDI requires compatible file formats between businesses and costly integration software. It also necessitates system administrators to monitor for errors, increasing payroll expenses. Overall, EDI is a powerful tool that can help businesses operate more efficiently through reduced storage, postage, and transaction costs, outweighing the disadvantages of setup and maintenance costs.
Electronic Data Interchange (EDI) allows businesses to exchange structured data electronically without human intervention. EDI provides efficiency and cost savings by enabling quicker transactions with fewer errors compared to paper. However, EDI requires compatible file formats between businesses and costly integration software. It also necessitates system administrators to monitor for errors, increasing payroll expenses. Overall, EDI is a powerful tool that can help businesses operate more efficiently through reduced storage, postage, and transaction costs, outweighing the disadvantages of setup and maintenance costs.
Copyright:
Attribution Non-Commercial (BY-NC)
Available Formats
Download as DOCX, PDF, TXT or read online from Scribd
Electronic Data Interchange (EDI) allows businesses to exchange structured data electronically without human intervention. EDI provides efficiency and cost savings by enabling quicker transactions with fewer errors compared to paper. However, EDI requires compatible file formats between businesses and costly integration software. It also necessitates system administrators to monitor for errors, increasing payroll expenses. Overall, EDI is a powerful tool that can help businesses operate more efficiently through reduced storage, postage, and transaction costs, outweighing the disadvantages of setup and maintenance costs.
Copyright:
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3/24/09
EDI – Pros/Cons
Electronic Data Interchange
Electronic Data Interchange (EDI) refers to the transmission of electronic data between
organizations. Although this sounds similar to e-mail EDI is more sophisticated and useful when
it comes to making payments, organizing invoices, or exchanging shipment forms. EDI can also
be used within businesses for cross departmental communication and documentation. EDI can
be defined as “The transfer of structured data, by agreed message standards, from one
computer system to another without human intervention.”1
PROS:
EDI has many advantages and although it has been in existence since 1960 it did not
gain large popularity until more recently namely the late 80’s and early 90’s. EDI’s two major
advantages are that of increased efficiency and cost savings. 2 EDI allows for quicker
transactions and fewer errors than traditional paper. EDI decreases a company’s cost of postage
and storage of company records, these costs can be quite substantial for companies with large
transaction volume. EDI can reduce the cost of storage of manufactured materials by closely
tying in actual demand with manufacturing production, allowing for a just-in-time delivery
method which can prove beneficial not only for the company but also the consumer. EDI can
eliminate much of the human error that occurs during the recording of all business transactions
1 http://en.wikipedia.org/wiki/Electronic_Data_InterchangeaZSBN M,. 2 http://ecommerce.hostip.info/pages/380/Electronic-Data-Interchange-EDI-ADVANTAGES-EDI.html which leads to further cost savings. Many companies such as Target and Proctor & Gamble use
EDI for their store inventory, ordering, and delivery.
CONS:
Although EDI has many advantages it also comes with a few disadvantages. EDI contains
a complex file format that is only able to communicate with other EDI formatted computers. If
two businesses are trying to transact an order and one does not have EDI they will either need
to find some other way to record transactions such as paper, or they will need to purchase EDI
interface software to facilitate communication with their current system. This can be very
costly, especially for small companies and businesses. The cost of integrating EDI may limit the
potential of some of these small companies to do business with large vendors or
manufacturers. Another disadvantage to EDI is that it must be monitored for errors by a system
administrator, who will inevitably require a salary therefore increasing payroll cost.
Overall, EDI is a powerful system management tool that can help a business function
more efficiently in any industry or field. It can be a powerful marketing tool used to attract the
business of other EDI formatted companies, manufactures, and distributors. EDI can
significantly reduce costs on storage and postage helping companies to realize greater profits.
Although it has added cost of managing and integrating, the benefits surely out way the
