In any period of economic challenges it is vital to enhance every dollar and minute mean something. Time is money. Waste within a company’s supply chain, either internal or external, are a huge expense of time and money that can drastically decreased through more efficient supply chain processes.
Most companies in order to be successful must find methods which decrease waste and activities that do not add value.
One method is to implement the use of Electronic Data Interchange (EDI). EDI is used to standardize work such as accounts payables and receivables, order processing, warehousing and logistics, and inventory management. EDI can be integrated with existing in-house systems such as WMS or ERP to augment their current functionality.
Following are the four areas where most of the inefficiency lies – many consider these the core of supply chain:
Order Processing – The typical internal procedure for EDI is: order comes in via fax or e-mail, order is manually entered and inventory management is alerted to the order.:
The process is wasteful and inefficient as it is not paperless. EDI is designed to centralize the data in processing an order, including customer information, forms, computerized next step processes. In addition, Warehouse Management Systems can aid in the procurement and monitoring of inventory. At the same time it will also decrease man-hours needed to physically check inventory levels.
Inventory and Raw Materials – Implementation of just-in-time practices will permit a company to increase their cost savings. JIT will decrease the cost of inventory, increase inventory turns and assist in reaching a near perfect order measurement timeframe. The cost of warehousing inventory is avoidable as electronic communications makes procurement of raw materials a simple process. The supply fulfillment process will show exactly what is required without the additional costs. With the carrying out of this process the cost of obsolescence is lessened as well as the cost of warehousing, insurance and taxes.
Material Acquisition – In procuring raw materials for order fulfillment several wasteful processes are taking place; proper quantity, placing orders via phone or fax, writing purchase orders and sending those purchase orders to suppliers. Implementing electronic data interchange and integrating it with the warehouse management system the ordering steps are reduced from four to two. Another method to reduce purchasing costs is to find vendors where are located in close proximity to one another and willing to share transportation costs.
Compensation and Reimbursement – The actions in sending and receiving payments squanders valuable resources. Electronic payments will dramatically decrease costs such as paper checks, printer paper, toner, stamps, etc,. EDI systems can create invoices from purchase orders and payment actions from invoices.
Electronic Data Interchange is a central process for any firm to reduce the cost of business and save money. It will replace many wasteful processes within the supply chain including order processing, logistics and compensation.
In today’s challenged economic environment it is important that every process is as proficient as humanly possible so that money is not hemorrhaged through inefficiencies.