A common business process is the exchange of purchase orders and invoices. So, let’s compare how this is done using paper or EDI.
In the paper-based method, the following process typically occurs:
- The inventory system automatically notifies the buyer to place an order, or, after querying the inventory system, the buyer determines that an order needs to be created
- The buyer enters data onto the screen of a purchasing system to create the PO, prints and mails it
- After several days, the vendor receives the PO and manually enters it into the sales order system
- The vendor prints an invoice and encloses it with the shipment and/or sends it separately by mail
- The buyer manually enters the invoice into the Accounts Payable system
The exchange of paper documents can add a week to the process. If there are errors caused by manual data entry, the time can be greatly increased.
Now compare that with the EDI process:
- The buyer’s procurement system, which utilises EDI software, automatically generates and sends an EDI-formatted PO when inventory reaches the critical level
- Within minutes the vendor’s sales order system, utilising EDI software, receives the EDI PO, notifies the shipping department to ship the goods and generates an EDI invoice to be transmitted directly to the buyer’s accounts payable system
The EDI process can be completed within hours.
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