Paper-based vs EDI Transaction Process

ControlHub

As a company director, you might be wondering what type of transaction process is more efficient; paper-based or EDI. 

While both processes will help you send and receive important documents between the customers and the suppliers, they each use different transaction methods.

The paper-based process utilizes traditional means like fax, mail, or a courier. On the other hand, EDI is a more technically advanced method that uses EDI software to transmit company information.

When deciding on the process to use, choose one that suits the efficiency your company aims to achieve.

If your company is working on a highly technical product, paper-based documents are not practical and would be difficult for your company to manage in the long run. In such a situation, electronic data exchange will be more efficient because of easier and faster communication. 

In this article, we will discuss the paper-based and EDI transaction process, listing the benefits and drawbacks of each, and a take on which process is best for you as a director:

Paper-Based Transaction Process

Paper-based transactions are considered to be the most widely used and prevalent method of purchasing in the engineering department. In this method, engineers are required to fill up a form and submit it with all relevant details to their purchasing manager. 

The purchasing manager then reviews the form, enters the data into his system, and sends it back to the engineer for a check. This process is time-consuming, expensive, and inefficient as it involves several manual steps along with paperwork. 

The information that is included in a paper-based transaction process includes:

  • Address of the consumer, including name, and phone number.
  • Date of transaction (when the purchase was made).
  • Amount of purchase (if any).
  • Type of payment method being used by the sender.
  • The time period for which money is being sent.
  • Terms and conditions of payment, including discounts and penalties, if applicable.

EDI Transaction Process

Successful implementation of EDI will require careful planning and attention to detail on the part of all involved parties – including customers, suppliers, banks, and other financial institutions. One of the most important aspects of an EDI implementation is ensuring that there is EDI compliance and clear lines of communication between all parties involved. A lack of clarity can lead to problems later down the line when one party wants access to another’s data and not everyone else does (or even knows it exists). 

The EDI compliance process begins with a company deciding whether or not it wants to automate its paper-based business processes. In an EDI transaction process, all the information related to the product is stored electronically in EDI software, including:

  • Product details like technical specifications list of components required for manufacturing a product.
  • Quantity required for manufacturing a product based on the customer’s order quantity requirement.
  • Financial information about payments made for products purchased from suppliers by customers (i.e., billing details).
  • Purchase Order Details with dates of purchase (i.e., date received or date shipped).

What is ERP?

ERP, or Enterprise Resource Planning, is asoftware system that integrates and managescore business processes such asfinance, HR, supply chain, manufacturing, andCRM. It provides a centralizedplatform for data flow and communication acrossdepartments, enabling efficientdecision-making and resource allocation. ERPstreamlines operations byautomating tasks, improving process visibility, andenforcing standardizedpractices. It offers benefits like real-time insights,improved efficiency, andcompliance with regulatory requirements. However,implementing ERP can becomplex and requires careful planning and investment.Overall, ERP serves as avital tool for businesses to optimize theiroperations, enhance collaboration,and stay competitive in today's fast-pacedenvironment.

What is the difference between ERP and SAP?

ERP (Enterprise Resource Planning) is a broadcategory of software systems designed to integrate and manage various businessprocesses within an organization. SAP (Systems, Applications, and Products inData Processing) is a specific ERP software developed by the company SAP SE.While ERP refers to the concept and class of software solutions, SAP is aleading provider of ERP software.

The key difference lies in specificity: ERP isa general term encompassing various vendors and solutions, while SAP is aspecific brand offering a comprehensive ERP system. SAP ERP provides modulesfor finance, HR, supply chain, manufacturing, CRM, and more, with extensivecustomization options. Other ERP systems, such as Oracle ERP, MicrosoftDynamics, or Infor ERP, offer similar functionalities but may differ infeatures, implementation processes, and target markets.

Benefits and Drawbacks of Using the Paper-Based Process

The process ensures lower costs of sending documents to suppliers since there are no postage costs involved with paper-based transactions and no additional administration costs such as printing or photocopying. There is also a lower risk involved in getting the information while the paper is still in transit to the supplier. 

The transactions are secure because they are not stored on computer systems that can be hacked into by criminals, but only on paper documents which are more difficult to access using electronic means. Higher speed in receiving documents from suppliers is also another advantage.

On the other hand, the paper-based process is a manual way of doing business, which involves a lot of time and effort. It is time-consuming, as it involves the manual handling of documents and data exchange. A large number of people are involved in the process, which increases the risk of errors or fraud. 

Paper-based systems are less secure than the EDI system since they require manual data entry, which can be subject to human error. If you use a paper-based system, make sure that your company is using an electronic document (ED) rather than a paper input/output (PIIO). This way, any errors will be caught by the system before they reach the customer. The paper-based system is also not secure, as it allows anyone to view and copy the documents that are being used in the process.

It's also difficult to track shipments with paper-based processes. It can be hard for manufacturers and exporters to track their data exchange and shipments when they use paper-based systems. There is no real way of knowing where products are at all times when using a manual process like this, so orders may be delayed or lost altogether if not processed correctly. 

It also requires more communication between parties involved in the transaction, which increases both cost and risk. In addition, since many paper-based orders are not fully processed until they are received at their destination, the buyer must wait for notification from the seller before paying for them. The seller may have already shipped the product by that time or may have simply forgotten about it.

The Benefits and Drawbacks of using EDI

The EDI transaction process is more cost-effective than the paper-based transaction process because it does not require multiple signatures, which means that you only need to deal with one person who can complete the entire transaction in less than five minutes. This makes the EDI process faster than the paper-based transaction process as you won't be wasting any more time waiting for other people to sign off on your purchase order or invoices

There is no need for manual data entry or documents, as all necessary information can be exchanged electronically via computers. The EDI system also allows companies to securely share information with each other without any risk of fraud or hacking attacks. This makes it easier for companies to share information about their products or services without having to worry about getting hacked by others.  

The EDI integration process has its own drawbacks, including system electronic protection; you need to make sure that all transactions are properly encrypted prior to entering them into your systems so that no one else can gain access to them unless they have been authorized by you or another trusted source. It is easy to lose your data. Therefore, it is important for your business to have proper backups of data.  

This way, you’ll easily recover in case something happens that causes a sudden loss that forces you to reinstall everything from scratch or restore an old copy of the data.

Key Takeaway

In a nutshell, the paper-based process is time-consuming and laborious. It involves multiple steps and human interaction which can take days to complete. The EDI integration process is much faster as it involves only a few steps and does not involve any human interaction. While EDI is a faster and less costly alternative to converting paper documents into electronic files, it still requires the use of EDI standard software. 

Paper-based transactions are often used in the manufacturing and distribution of goods. They are also used by companies that want to keep track of their products over time. The paper-based transactions may be more cost-effective for small businesses because there are no upfront costs associated with EDI standards.

Conclusion

The EDI transaction process is the best process for the director who is familiar with the inefficiencies and sense of urgency that comes with hardware procurement. This is because as a director, you are already accustomed to spending hours on end reviewing contracts and invoices, trying to make sense of what they are seeing on paper. 

As such, you need an easy way to manage your business without having to spend hours every day doing so. Given that EDI transactions do not require too much human intervention among other advantages, it is preferable to paper-based transactions.

Table of Contents