The supply chain has changed irrevocably, thanks to technological advances. Digital supply chains are more efficient, allowing companies to be more agile and profitable than ever before. An EDI system, especially a cloud-based one, plays a crucial role in making today’s supply chain more transparent and sustainable for tomorrow.
Watch Brad's introduction of this post...
How Are Technological Advances Shaping the Supply Chain of the Future?
In order to understand how technology changes the supply chain, it is important to understand the supply chain’s history.
For centuries, transporting goods was an expensive, difficult affair. Although traders developed shipping routes, they were reserved for luxury items, and it took quite a long time for the finished goods to reach their destination. The 18th century marked the dawn of the age of international shipping, with rum being the first product to attain a truly global supply network.
While developments such as steamships and metal containers have enabled businesses to ship their products further and faster, some of the most important advancements have been in the realm of communications.
The Industrial Revolution led to major breakthroughs in the international shipping industry, and the technological innovations stemming from that disruption meant that the supply chain became more efficient and faster. These innovations fall into two categories: transportation (such as steamships and shipping containers) and communications (such as fax machines and computers).
While developments such as steamships and metal containers enabled businesses to ship their products further and faster than ever before, some of the most important and exciting advancements have been in the realm of communications. EDI systems are a vital communication tool in the supply chain, and they have evolved over the years to make the supply chain more transparent and sustainable.
The Role of EDI Systems in the Modern Supply Chain
The purpose of EDI systems in the supply chain is to make communication between two partners seamless. An EDI system is supposed to eliminate the delays that are inherent in manual data entry as well as increase the accuracy of communication.
How does an EDI system accomplish those goals? It facilitates the exchange of data between computers, so humans do not have to be involved. To illustrate, consider this example. Oakwood Flooring buys its raw materials from Hewitt Forestry Products, and in order to make the purchasing process faster and simpler, Oakwood transmits its purchase orders through its EDI system. The purchase order information automatically appears in Hewitt’s order fulfillment system, which dramatically shortens the processing time. As a result, Oakwood receives its order much faster.
EDI systems seem to be an obvious choice for companies, so why doesn’t every business use one?
EDI systems would seem to be an obvious choice for companies seeking to manage their supply chain efficiently, so why doesn’t every business use one? While EDI systems offer enormous benefits, there oncce were drawbacks to implementing them at firms.
EDI Systems: Do They Live up to Their Promise?
Although EDI systems are designed to transform business processes from slow, inefficient, and expensive into speedy and affordable activities, there are legions of executives and decision makers that are hesitant to use them.
Why is that the case? For years, EDI systems required an enormous investment of time and money. Setting up an EDI system necessitated special hardware and software, and you would either need to hire an employee or train an existing one to establish and maintain connections with your supply chain partners. The IT staff needed to be involved in the process, too; those team members would need to integrate all of the data stored within your ERP, WMS, and CRM systems, as well as any other information silos your company possessed. Once the EDI system was implemented, someone needed to monitor it and ensure no glitches brought communication to a halt.
Although EDI systems are supposed to transform business processes, there are legions of executives and decision makers that are hesitant to use them.
EDI systems’ lingering reputation for complexity fails to acknowledge their cost savings benefits, though. Research has shown that the cost of not automating activities such as purchase order is as much as $78 per instance. That statistic creates a conundrum: how can you derive value from a complex, finicky system such as EDI?
The Rise of the Cloud
Let's shift gears for a moment and return to the topic of communication breakthroughs in the supply chain. One of the most important developments in the field of supply chain communication has been cloud computing.
Cloud computing, which relies upon distributed computing power, has been around since the 1960s. However, it took a few decades for this technology to come into its own. Thanks to the maturation of virtualization technology, the development of high speed bandwidth, and the rise of universal interoperability standards, cloud technology has become a fixture in modern life.
Almost anything you can imagine can be delivered from the cloud… including EDI systems.
In a 2009 interview with Computer Weekly, British cloud computing pioneer Jamie Turner remarked, “Pretty much anything can be delivered from the cloud.” Turner has been proven correct – almost anything that you can imagine can be delivered from the cloud… and that includes EDI systems.
Cloud-based EDI Systems: Transforming the Supply Chain
Cloud-based EDI systems truly deliver on the promise of supply chain transformation by making it transparent and sustainable. How does it do that?
Unlike EDI systems of decades past, cloud-based EDI systems do not require an investment in hardware. Rather, you subscribe to a service and purchase the number of licences you need. This makes EDI systems more affordable, adding to the long-term sustainability of your supply chain.
Another way in which cloud-based EDI systems make the supply chain more sustainable and transparent is by enablg connection with more suppliers than ever before. Before the advent of cloud technologies, it was simpler to utilize an EDI system between a few partners. Large and medium-sized companies were able to benefit from integrated solutions, but many smaller firms were left out in the cold. The cloud has changed that.
Cloud-based EDI systems deliver on the promise of supply chain transformation by making it transparent and sustainable.
Even if your supply chain partners do not have EDI systems of their own, they can still reap the advantages of integrated solutions. There are various EDI options that do not require integrating an entire system with your partner’s IT backend; they could use web-based forms or Excel-based platforms that enable them to seamlessly share information with you. The result is that everyone has greater insight into processes and activities and can better manage risks, obligations, and opportunities.
Accuracy is another benefit of cloud-based EDI systems, and one that has a positive effect on sustainability. Because EDI systems extract data from a firm’s digital information repository, there are not any more errors that are part and parcel with manual data entry. As mentioned earlier, making fewer mistakes saves money as well as boosting the levels of trust partners have with each other.
Moreover, EDI systems tend to decrease the amount of inventory companies need to stock. Orders are automatically accepted and processed, so products do not sit on shelves for weeks or months waiting to be shipped. This faster cycle makes businesses more sustainable; they are able to survive and thrive in a world full of risks and challenges.
Even placing special orders has become simple with cloud-based integrated solutions.
Even placing special orders has become simple with cloud-based integrated solutions. EDI systems can be customized to make it easy for partners to place special orders. Previously, this process was manual (and time consuming); automating it not only saves time but increases the likelihood of closing the sale quickly.
A Glimpse into the Digital Supply Chain
While all of the aforementioned benefits sound wonderful, are they actually too good to be true? Can cloud-based integrated solutions really inject some much-needed transparency and sustainability into your firm’s supply chain?
Go back to the example of Oakwood Furnishings. Thanks to Oakwood’s cloud-based EDI system, it can see if Hewitt Forestry (or any of its other suppliers) is running low on a critical raw material or if a supplier’s factory has shut down, which in turn affects its own production schedule. The EDI system does not have to just be a bearer of bad news; it could also provide insight into increased customer demand.
Greater amounts of information (in real time, no less) allow for companies to react faster as well as to anticipate issues that could affect the supply chain and make adjustments so they can weather the storm and thrive.
Can cloud-based integrated solutions really inject some much-needed transparency and sustainability into your firm’s supply chain?
Achieving a transparent supply chain that contributes to a company’s sustainability is not a pipe dream, nor is it something that should be deferred. Cloud-based EDI systems play a pivotal role in the modern supply chain, making it more efficient and enhancing a company’s profitability. To learn how cloud-based integrated solutions can transform your supply chain, contact us.
