2014 - June - Alphabet Soup

For suppliers, a decision to participate in EDI with a customer comes down to ROI – Return on Investment. Most retailers and e-tailers, and an increasing number of other businesses, will only do business with suppliers who will trade via EDI or some other electronic transaction method.  

Not to worry:  this mandate can have tangible benefits for your company too. These benefits are both strategic and operational.  EDI can strategically give you an advantage by strengthening your relationships with customers and vendors, improving loyalty and long-term alliances. Your “EDI-enabled” business opens the door to increased sales – improving your bottom line.  In the process you become more competitive and able to find new markets, directly affecting the value of your company.

Operationally EDI reduces both the time and personnel required to complete data entry and order processing.  Your EDI capabilities deliver faster order processing with fewer manual errors and faster delivery times (which may favorably affect your payment terms and agreements.) Decreased operating expenses and improved accuracy in fulfillment and procurement can deliver profits and improved cash flow.

We can even calculate the operational financial benefits. Let’s look at this example.  If a company processes 425 orders per month for four customers, the estimated cost of processing those orders manually is $50 per order (from receipt to entry to acknowledgement to shipping notice to invoice) or $21,250 total monthly, $255,000 yearly.  The EDI initial investment amount we will estimate at $38,860 for software, configuration, managed services and maintenance fees. 

A recent Aberdeen study has estimated typical savings with end-to-end electronic processing of an order in the 60-75% range.   If we conservatively use 50% savings, then the cost per document reduces to $25 and the 3-year return looks like this:

 

EDI EXPENSES

ANNUAL SAVINGS ($25 instead of $50)

ANNUAL SAVINGS AFTER EXPENSES

ROI

YEAR ONE

$38,860

$127,500

$88,640

228%

YEAR TWO

$11,960

$127,500

$115,540

966%

YEAR THREE

$11,960

$127,500

$115,540

966%

TOTAL

$62,780

$382,500

$319,720

509%

3 YEAR BREAK EVEN:  5.91 MONTHS

 

Adding additional partners – a wise step to take after initial EDI investments – adds even more to your bottom line. Contact GraceBlood at This e-mail address is being protected from spambots. You need JavaScript enabled to view it to get a personalized evaluation of your own company’s opportunity for ROI with electronic document trading.

 



What GRACEBLOOD Clients are saying...

" By moving to GraceBlood hosted EDI, we have freed up 4 man hours per day."

Atam - Westar - Columbia, MD