The Agility Tax: The Hidden Price of EDI

The Agility Tax: The Hidden Price of EDI

If you’re a large manufacturer and need access to a rich Web of suppliers — or a supplier looking to sell to a major manufacturer — you know the critical importance of keeping your costs down.

But you also know that one cost that can damage your business the most is not being able to share databases quickly enough to take advantage of a new opportunity. This agility tax kicks in when, say, an auto parts manufacturer finds itself short of a specialty heat-treated connector due to a burst in sales or an earthquake near their overseas supplier. If its IT systems can’t easily share the databases of production forecasts and parts it needs with potential new suppliers, production will stop and it will lose sales to its competitors.

The same is obviously true for potential new suppliers, who may be able to beat the incumbent on price or quality, but can’t bid for the business because it would take too long to share the required databases.

EDI: Right Answer, Wrong Problem

Often, the legacy system standing in the way of new business opportunities like these is EDI (electronic data interchange.) Most major manufacturers, suppliers, shippers and retailers (not to mention government agencies) have used EDI for decades to eliminate the use of paper in common business transactions.

Despite its name, EDI was designed not to share data in the form of relational databases, but to share standard business forms such as purchase orders, invoices, shipping notices and carrier-to-carrier waybills. It does a good enough job of solving that problem, assuming you and your business partner have enough volume to justify its expense and complexity.

But if you need to add new business partners quickly – say, in the wake of a strike, natural or man-made disaster that takes a key supplier offline – EDI is not a good way to quickly share relational databases containing the production and order data you need to ramp up quickly.

To know why, it helps to understand what it takes to implement EDI.

EDI Under the Covers

EDI is a software interface that sits between the different computer systems, and the different data structures, used by the sender and receiver’s systems.

That means both parties must buy, configure and maintain EDI software to convert the sender’s form or data into a standard EDI transaction, and to convert the form into a format acceptable to the receiver’s systems (such as an order processing application.)  They also must agree on which network protocols and firewall ports they will use, as well as which security and encryption technologies.  Both parties must also to agree on a trading partner agreement (TPA) that governs the formats both parties must use, as well as on legal and other terms.

All this work, which can take weeks or even months for each of the five,  10 or 20 potential customer or suppliers you need to partner with, assumes you’re transferring standard business forms. If you’re instead using relational databases to share order information, EDI also requires agreeing on which databases you will share, in which formats, and paying developers to write scripts to convert your relational databases into a form shareable via EDI – and to then convert them back into relational form at the receiving end.

The bottom line: Using EDI, while useful for sharing standard forms with existing business partners, exacts too high a price in money and time when you need to quickly share databases to bring on new business partners.

Time is the Enemy

It’s easy to identify the dollar costs of EDI. They include licensing and maintenance costs for EDI software, the costs to modify your own systems or translate your databases, as well as any specialty hardware required. Then there are the costs of the programming, development, security, legal or consulting costs around implementing EDI or safeguarding yourself in the trading partner agreement.

The less visible, but even more important costs, are the time you lose implementing EDI when you could instead be updating your production plans to meet customer demand. In an age where manufacturers and retailers hold just enough inventory to meet demands for the latest hot product, the agility to quickly ramp production means more revenue and higher profit margins.

If you want to avoid the costs and, more importantly, the delays involved in using EDI for database sharing, we suggest our own DataPortal. This software is not only 10 to 100 times less expensive than EDI, but enables secure, instant and effortless sharing of relational databases from any supported database platform in their original, relational form across the Web. There’s no programming required because you can share any database, retaining the table structure that makes it usable, with any recipient simply by sending them a URL.  Unlike EDI, there’s no configuration, firewall modification, data conversion or even client software installation required.

It is available now as software for purchase or as a scalable SaaS solution. For a quick demo, click here.

*image courtesy of Tax Credits on Flickr.com

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