Tuesday, October 6, 2009

EDI Audits and ROIs for Supply Chain Management

EDI and B2B systems are expensive and time consuming to setup. A positive ROI (Return on Investment) is realized only after economies of scale are reached. This may come after the successful implementation of 10 high volume trading partners or 1000 low volume. The exact ROI figure depends on the initial investment and the expected returns from each successful implementation. What is known is that the faster, and simpler the implementation the less expensive it will be. Also, the more that the initial implementation work can be reused and leveraged, the more cost effective it will be and the sooner the ROI will be recognized.

In order to maximize the ROI, it is necessary that we prioritize our tasks and efforts. Which trading partners do we implement with first, high volume or high value? Where is the greatest potential savings or returns? One of the first steps to implementing our strategy is to audit our internal business processes, and then to audit our external business processes that touch our trading partners.

The following list contains questions that should be resolved before and during EDI and B2B system implementations:
  1. What information is exchanged between business partners? This includes formal documents such as purchase orders, invoices, etc., as well as informal documents and communications such as messages, memos, phone calls and faxes. All methods of communication have costs associated with them.
  2. How and where is the information initiated; manual input, screen entry, or computer generated?
  3. Where can time be saved?
  4. How much labor savings could be recognized?
  5. What is the internal flow of information?
  6. Currently - How many copies are produced, and in what format?
  7. Who receives copies and why?
  8. Are these copies stored and for how long?
  9. What control and reporting measures are used—status reporting, audit trails, security safeguards?
  10. Who needs to be involved in the work flow? Who approves the business documents or transactions and how?
  11. What specific information is needed for current application programs—form of data, data flow between applications, entry of data?
  12. What information is available from application programs?
  13. What results are produced?
  14. What is the format and structure of the data output?
  15. How does the speed of processing documents effect the business? Some are time sensitive, others not so much.
Once internal and external business processes have been documented, it is necessary to evaluate the changes required to your internal systems to accommodate the EDI / B2B standards that both you and your partners require.

Additional Issues:

1. The addition of new data to the database to meet standards requirements.
2. The use of tables to cross-reference part numbers with trading partners.
3. A change in review or approval processes.
4. The development of a data link between the application program and the translation package.
5. Electronic linkages to the database for departments that formerly received manual reports.
6. The need to bridge between applications if multiple departments use the same information.

If you would like to discuss this topic in more detail please contact me.

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