In a bid to gain greater visibility and control across business processes, many organizations invest in an Enterprise Resource Planning (ERP) solution or comparable business system. Having this centralized platform allows companies to use the same system across multiple geographic locations, and provides a unified reporting and analytics tool for a number of workflows. But perhaps the greatest advantage of an ERP is the visibility it provides, from holistic snapshots of an organization’s operations down to the details of specific transactions. In order to protect and grow your ERP investment, and ensure that the highest level of visibility is maintained, additional technology upgrades may be necessary over time.
An organization’s ERP can become a powerful competitive advantage when optimized with efficiency in mind. Here are three ways to unlock the full potential of this powerful tool, and ensure you’re getting the highest ROI possible:
Manual Entry of EDI Data Increases Costs and Inhibits Scalability
Organizations run on data, so the speed and efficiency in which that data is processed is incredibly important. This is why so many manufacturers and retailers have adopted Electronic Data Interchange (EDI), a process by which business documents are exchanged electronically, rather than by mail, email or fax. When using a simple cloud-based EDI system, order documents are received and processed within the EDI platform. However, because the system is not connected to the ERP, manual entry is necessary to ensure that both systems have the same information. For organizations that begin to add more trading partners, experience a rapid increase in order volume, or need to cut costs associated with labor or supply chain errors, integrating EDI data directly into the ERP system is the only way to ensure scalability without disruption.
The exchange of EDI information is an extremely document-driven process, and the amount of manual effort necessary to send, receive, and record each document is extensive. For example, Company X receives approximately 800 Purchase Orders (POs) each month from its retail customers. In turn, they will create shipping notices and invoices using the information contained within the PO. While a simple web-based EDI solution can auto-populate some of the data points from the PO, and can store commonly repeated data fields (like the ship-from address), information such as tracking numbers, discounts, and taxes must be manually entered for every shipping notice and invoice.
This process will typically take a data entry clerk approximately ten minutes to fill the necessary data fields in outgoing documents, and then copy and paste that order information into the ERP or back-office accounting system. This roughly translates to approximately 133 hours per month, or 83% of a full-time employee’s time each month manually entering EDI data into the company ERP. If Company X experiences an increase in order volume they will require additional employees, putting an even bigger financial strain on their bottom line, and dramatically increasing the risk of manual data entry errors.
In order to avoid these problems, many growing organizations opt to integrate their EDI and ERP systems. ERP Integration essentially builds a bridge between the two systems, allowing for automated data exchange, trading partner communication, and exception monitoring. During integration implementation, the mapping process configures specific commands that tell the ERP how to respond to EDI order documents based on each trading partner’s guidelines. Without the need for manual entry, associated errors are eliminated, and data entry positions can be redistributed.
Get Real-Time Exception Management
Partnering with new retailers is a sure sign of growth, but it also increases the complexity of your operations, as each new partner represents unique business requirements. For example, Retailer X may mandate that the Advanced Shipping Notice (ASN) be sent before the invoice, while Retailer Z requires that the SKU on the ASN match the SKU on the Purchase Order (PO). For manufacturers with a growing number of trading partner relationships, these requirements can quickly become a challenge to manage. In such instances, order errors can result in chargebacks (financial penalties) that degrade already thin profit margins.
A business rules management tool detects and quarantines supply chain violations before they are transmitted to trading partners or your own ERP. Real-time alerts are sent directly to the appropriate individuals within your organization, along with customized recommendations to help you quickly remedy the situation. For example, in the event that an invoice is initiated for Retailer X before the ASN has been sent, the business rules management layer will halt the invoice and issue an alert notifying your organization that the ASN should be sent first.
Gain Real-Time Financial Visibility
In the current market, organizations must possess a real-time understanding of their financial position and have the ability to manage relationships with multiple financial institutions. Conducting business with an increasing number of banks and bank portals often requires manually checking bank accounts every day, then entering transactions into the ERP or accounting system. As organizations grow, this task quickly becomes tedious and error-prone, creating a blind spot in the holistic picture of the organization’s financial status.
An extremely helpful addition to ERP integration, corporate to bank integration centralizes cash management by electronically connecting an organization’s ERP to the banks they utilize, providing daily digital feeds without the need for manual effort or data entry. With holistic financial visibility, organizations are better positioned to deploy cash effectively, when and where it is needed. By automating electronic invoice delivery to trading partners, corporate to bank integration decreases the number of Days Sales Outstanding (DSO), while digitized remittance information eliminates the need to field calls to gain clarification on payments during reconciliation. Bank integration can easily be completed during the EDI to ERP integration, or can be done as a separate process, but it is recommended, particularly for manufacturers breaking into the global market.
Steps to Take Prior to Automating Data into your ERP or Accounting System
Before embarking on any project to integrate EDI data into your ERP, WMS or accounting system, it’s helpful to conduct an internal risk and needs assessment to determine the value of the integration, the business processes that will be affected during integration, and the overall ROI you expect. Factors that can add to the complexity of an integration project include the use of a 3PL (third-party logistics provider), dropship, and a lack of insight into what data fields are required and which are optional. Your integration provider should be able to provide clarity on how best to address such challenges.
When vetting potential integration providers, it’s important to ask the right questions to avoid any surprises during the process. Clarify what will be expected on your end, the turnaround time for support issues, and precisely what is included in a managed services (often called “full service”) contract. Keep in mind that your specific integration will depend on your existing business processes, your trading partners’ EDI requirements, and the type of ERP you use, so it’s helpful to partner with an integration team that has experience with your ERP.
To learn more about the ERP integration process, register for our upcoming webinar, Under Pressure: Is it Time To Integrate Your EDI Into Your ERP? Industry expert Chuck Adams will discuss the best practices for ERP integration, as well as considerations before, during, and after EDI to ERP integration, and will conclude with a live Q&A session to answer all of your burning questions!