Electronic Data Interchange (EDI) came onto the scene as an antidote to the traditional cumbersome and error-prone ways of manually moving business documents between partners. Before EDI, documents in the order purchasing process, such as invoices, purchase orders and receipts, were exchanged through emails, faxes or traditional mail. This required human effort on each end inputting the data and handling document transmission. As with most manual systems, order processing was slow, inefficient and costly. Errors in data entry were commonplace and the processing could not keep up with the increasingly fast pace of modern business.
EDI digitized the process, removing most human intervention and paper from the equation. It made the document exchange a computer-to-computer event that accelerated processes, improved accuracy, increased document security and reduced costs. However, while EDI has been a great start in improving order purchasing process, it isn’t a panacea. It comes with its own set of complexities and challenges that can slow the system down and introduce inefficiencies. Businesses can turn to automated order processing management solutions to help address the myriad EDI exceptions that can impact data accuracy, bottom-line costs and business cycles.
This technology has been around for about three decades, and there are multiple EDI formats and standards, including XML, EDIFACT, ANSI and UBL. In order processing, EDI essentially involves taking the data that’s been entered into the system by the buyer and putting it through a series of translation, mapping and processing steps before an invoice is sent to the supplier. Within that process, there are multiple points at which errors and exceptions can occur, affecting accuracy, adding costs and throwing speed bumps into the system. We have found that up to a third of EDI orders can contain exceptions. Errors can range from incorrect pricing or promotion codes to invalid material numbers to missing segments, and addressing them can be time-consuming and expensive. For example, about 30 percent of shipments are received with an advanced shipping notice (ASN), which can cost a company as much as $178 per purchase order to process.
The complexity of EDI means that when an exception occurs, customer service representatives (CSRs) often have to bring in the IT team to figure out the order and fix the problem. Essentially the company is paying two people to handle a single problem.
Those exceptions also have a ripple effect throughout the entire supply chain, where there are so many stakeholders involved — not only the CSR, IT team and management, but everyone from the supplier to the customer. Any slowdown caused by inaccuracies and inefficiencies in any part of the supply chain can have a domino effect throughout. It can damage business partner relationships and result in lost profits or lost business. EDI has helped digitize the entire order purchasing process, but complexity, challenges and exceptions remain.
Automated order processing solutions can help alleviate many of the problems caused by EDI exceptions. It can ensure the accuracy, efficiency and security of the system and remove the need for manual intervention. An order processing automation solution essentially becomes an overlay of the EDI system and the central place where every order is processed. That includes the orders received not only through the EDI system, but also via email, fax, paper or any other route, with the orders sent to the right CSR and all the purchase order data collected and used to create a sales order in the ERP system.
These automated solutions make every order readable to humans and provides full visibility and control over every order. Purchase orders can come to the trading partner through the EDI system, but, at the same time, they can come separately via other avenues. It’s often up to the CSR — and at times the IT staff — to remedy any discrepancies. With a best-of-breed automation solution, the software brings all of that together in one place, can quickly determine if there is a problem with the order and provide feedback to the business partner if the order needs to be reworked and the problem addressed.
The handling of exceptions is also automated, which puts control back into the hands of the CSR and eliminates the need for an expensive IT professional to help resolve the issue. Now, the data from an EDI file is used to create a PDF, where discrepancies are not only quickly and easily flagged, but the automated solution can learn from previous situations to automatically correct recurring issues and remember changes that users have made in the past. This accelerates the process, increases efficiency and reduces the number of exceptions that need to be addressed. An automation solution can reduce EDI processing time by an average of four days over EDI systems where manual intervention is still needed.
Companies also gain greater visibility into the order process through customizable dashboards that enable users to track all orders in real time. For CSRs, this means being able to better manage SLAs, ensure the integrity of priority orders and see what orders are awaiting approvals, rather than having to sort through layers of data or use guesswork. Managers can use the tool to view long-term performance forecasts and anticipate staffing needs.
Relationships with trading partners are further strengthened, in part by enabling CSRs to not only process orders through the automated solution, but also to track and address customer issues through the same interface. Problems are dealt with quickly, strengthening the relationship between the companies and freeing customer service representatives to spend more time working with customers. Automated solutions also include a self-service online portal to ensure instant communication between business partners and give customers an always-available online place to access order information and address issues as they arise.
Onboarding new customers is simplified through an intelligent and easy-to-use mapping tool, and automation solutions can easily be configured to work with existing EDI or ERP infrastructures. Businesses don’t need to rip out and replace any systems in which they’ve already invested. Instead they can bring in an automated solution to improve the overall process.
EDI was a great start to improving the overall order purchase process, which for a long time has been a heavily manual — and thus slow and error-prone — operation. However, as with any process or rule, with EDI there are exceptions that have to be dealt with. Until now, managing EDI exceptions has meant more human intervention, by a CSR with few IT capabilities and by an IT professional without deep experience in business process models. Essentially, two people were needed to fix one problem. An automated order purchasing solution can address exceptions quickly and easily by ensuring that all orders go through a single system regardless of where they originated, granting CSRs full autonomy to EDI exception handling and offering customer-friendly features to build and cement trust in business relationships.
Dan Reeve is the Director of Sales and Business Development for Esker Americas, a worldwide provider of cloud-based document process software. His specialties include: order-to-cash and procure-to-pay solutions; electronic invoice processing; improving cash collection in order to lower DSO; and accounts payable automation integration with ERP.