Justifying EDI Costs

  February 06, 2013       By Ray Atia
When a major client is requiring that your business be EDI-compatible, it is easy to begin justifying EDI costs; alternatively, one must sell it as a cost effective solution. In order to calculate the amount of savings of a normal EDI transaction, you must adhere to a few quick steps. Initially, calculate all of the costs of paper and mail postage in the present system. Find out the cost of labor for mailing, data entry, organizing and filing. Make sure you add how much time it takes for an individual to submit data for a specific trading affiliate and how long it take to organize and file it. Next, multiply the hourly rating of the workers wages by the final number of hours. Conclusively, add the paper and the mail postage expenses. Then, add the amount of time it takes to post a payment transaction if received from EDI. Now, include the cost of labor exceptions (approximate a specific percentage of error). Add EDI VAN or any expenses for communication. The final figures will give a great reading of the total costs involved. The calculations above are assuming EDI is already established. If it does not happen to be established, take the initial investment into consideration. The start up costs are simply identified, but will be contingent upon the decisions you make. Its important to measure hard facts and tangible advantages of EDI in order for it to be more simplistic to use once it is incorporated. It is therefore what is used to measure the decreased inventory turnarounds, the brand new business entity that you have secured because of a competitor who is not EDI compatible or the staff headcount is reduced. Although cost effective justification for EDI is not the easiest, it can be done. These costs will give you a good idea, but you shouldnt limit your efforts to persuade management of EDIs invaluable return by simply giving them costs. Specifically, you should not fail to see one very relevant measure it will assist: Find an EDI sponsor or representative who is either affiliated or is the executive of a company. This individual will be committed and will thus make the final decisions on proper staffing reassigning and the allocation of resources. This method will also assist with the constant cultural tension resulting from the changes EDI will yield for a business.