Supply Chain Management's biggest contribution to the corporaton's bottom line is to improve the order to cash process. It is so important that order to cash improvement should be the first line in SCM's mission statement.

The amazing thing many organizations fail to realize is that the tools to improve order to cash are probably in place. No, you don't even need to build an SCM Control Tower. These tools: ERP and EDI. The catch is that EDI and ERP must be INTEGRATED!

In corporate histories, EDI and ERP were many times implemented separately by separate groups for different motives. Attempts to bring the two together were answered with “customization”.

ERP (Enterprise Resource Planning) software typically consists of multiple enterprise software modules that are individually purchased, based on what best meets the specific needs and technical capabilities of the organization. Let's assume they are linked together as necessary; and have the ability to create, receive and manage the supply chain business. A typical installation might include:

 

• Purchaser and Supplier module
• Inventory Management module
• Sampling module
• Production Management module
• Total Quality Management module
• Export Invoicing and Documentation module
• Accounts and Finance Management module
• Human Resource Management module

An EDI (Electronic Data Interchange) document is comprised of data elements, segments and envelopes that are formatted according to the rules of a particular EDI standard such as ANSI or EDIFACT. When you create an EDI document, such as a purchase order, you must adhere to the strict formatting rules of the standard you are using.

 

These rules define exactly where and how each piece of information in the document will be found. That way, when the EDI translator on the receiving computer reads an incoming EDI purchase order, it will immediately understand where to find the buyer’s company name, the purchase order number, the items being ordered, the price for each item, etc. Then, that data will be fed into the receiver’s order entry system in the proper internal format without requiring any manual order entry.

ERP and EDI must be connected to achieve the maximum efficiencies of each.

With a tightly integrated supply chain, integrated EDI will reduce labor costs and expensive errors.

Your choices of how to bring EDI and ERP together boil down to: (1) Modify your internal systems to integrate with all processes with suppliers, 3PLs, customers, etc. or (2) Engage a hosted EDI service provider.