Chances are that if your customer is a large company they will require you to receive electronic purchase orders (EDI 850 type transactions) and other electronic document types as a condition for doing business with them. Why is that? The short answer is speed, accuracy, confirmation and costs.
Our previous post on electronic invoices talked about the speed, accuracy and confirmation process. Electronic purchase orders work the same way, except of course the orders are being sent to you instead of you sending the invoices to your customer. The result is that your customer’s supply chain costs are reduced, speed of execution is increased, and accuracy is dramatically improved.
Supply Chain Costs
Sending purchase orders and related documents with EDI is much less expensive than exchanging traditional paper documents. “In fact, one study has shown that a purchase order using paper can cost $70 or more to process for a buyer doing business with a supplier. The same order costs less than a $1 for the buyer to process using EDI.” (Innovative Architects)
Speed and Accuracy
Obviously when you process a paper purchase order it will take awhile for the supplier to receive it either by fax or mail. Then there are delays and labor time as phone calls, faxes or emails are used to let you know that they have the order and understand it. There is a greater chance of having an error since the paper PO is written out and there may be incorrect interpretation of exactly what the buyer wants. On the other hand electronic purchase orders take only minutes to be received, confirmed, and for the supplier to know exactly what the buyer wants.
Because of the dramatic cost improvements, faster processing and accuracy, many customers require their suppliers to be EDI compliant, that is be capable of sending and receiving electronic business documents.
Benefits and Costs for Suppliers
All of the benefits discussed above help the supplier too. However, compared to paper purchase orders, implementing EDI can cost quite a bit of money and requires expert consultants or doing extensive research on your own to learn the technical details. Or you can outsource your EDI requirements to a company that specializes in the kind of EDI you need and spend your time focusing on what you do best.
If you are a small business that needs to be EDI compliant with your customers, CovalentWorks is able to do all of that at an affordable cost that is comparable to your typical cell phone bill!Why does my customer want to me to receive EDI Purchase Orders? by Steve Brewer