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Electronic Data Interchange

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Fishbowl CMO explains how an Electronic Data Interchange (EDI) helps small businesses sell goods to much larger companies and standardize their billing practices.

Welcome to Whiteboard Wednesday. I’m Kirk Tanner, Chief Marketing Officer at Fishbowl. And today we’re gonna talk about EDI – Electronic Data Interchange. And as you look at this graphic here, the things that are in black are manual processes, and we’ve got our EDI in orange and blue and red here.

Let’s talk about this from the perspective of your business right here. If you need something, if you’re using a manual process you’re gonna issue a PO. You may choose to mail this. Now, in all these manual steps businesses have many different steps and we may not have given you all of them here, but this is kind of a general approach.

You may have mailed those, so you drop those in the mail, which is gonna take quite a bit of time. Eventually they’re gonna be received, they’re gonna open those POs. They’ll do whatever they need to do on their end to fulfill those purchase orders and then that has to be filed away.

Then your vendor is going to issue an invoice. They’ll do their filing on their side after they’ve faxed that to you. For this example we’re gonna say that they’re gonna fax it. You’ve received this fax now on your side, but you may have to make copies of that fax so that you can distribute those to the departments that need that information. It might be shipping, it might be manufacturing. Who knows?

And so those get distributed and so now you’ve completed this process on this side of the board. Over here with your customers, your customer wants to purchase something from you so they’re gonna order that from you, and again they could mail it like over here, but in this instance we’ll say that they’re gonna call it in.

Someone on your side is gonna have to write this down, capture this order that was called in by phone, and then they’re gonna enter it into some kind of a system for fulfillment. Maybe you don’t even have that. Maybe, you know, you have to do this all as a manual process, as well. But once that’s completed then you’re gonna send out an invoice to your customer. In this instance, we’ll use the example of email. You’ll email that to them, they get that email. The problem is, is that they’ve got a lot of email. So that email gets buried in this pile of emails and that causes some problems: errors and lost information and things like that. But eventually that process gets completed and everybody gets what they want.

With an EDI system in place, all of this becomes automated. Now, EDI is a feature and a function that you should find in an inventory management solution, and it will be integrated with that inventory management solution as well as your accounting package. So it’s not a standalone solution; it’s a part of a bigger solution. But you want to find a solution that has this EDI piece into it because what it means is that when you need something this is a standardized process, this EDI, and so it allows people to talk to each other in a standardized format and it reduces problems and makes things go faster.

So if you’ve got this EDI feature, you’re sending out your purchase order and they’re responding, and it’s all happening very quickly and very dynamically, and you’ve taken all the manual steps out. Same thing on this side over here. If your customer needs something, rather than do the manual process, they’re using this feature and this functionality so that they can communicate with you and order what they need and you’re invoicing, and everything is happening dynamically.

Now the beautiful thing here is this may be a very small business and this may be a very large business, like a Wal-Mart. Well, that’s the beauty of having a standardized process for communicating these things. That’s what EDI is all about. So when you do that, you’ve changed the way essentially you do business, the processes and all these manual steps.

Eighty-five percent of major businesses use EDI because there are huge benefits to this. First off is speed. When you use EDI you just have eliminated all these manual steps here and it’s just flying back and forth at the speed of light. Because it’s in this standardized format, data quality is improved. You don’t have as many errors and problems because there aren’t as many touch points in here to introduce errors.

The other thing is, is you lower costs. Now, you know, some people are saying, “Well, but I gotta go out and purchase the system that includes the EDI functionality.” Well, if you look at all the associated costs with all this manual process, that all adds a cost element to every single product that’s being shipped back and forth. As soon as you put this EDI system into place these costs are all reduced and therefore the actual cost of the actual items being shipped from your vendor to you and you to your customers actually comes down. So you actually lower your costs, save money, and have a much more efficient business if you’re using a system with EDI.

That’s it for this Whiteboard Wednesday. Join us again next week. Thanks.