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The Real Purpose of EDI in Supply Chain Management

It is easy when you are focused on implementing an IT project to forget the real purpose of your efforts. EDI / B2B departments are no different. EDI/B2B communications are simply enablers for business processes – like SAP’s Supplier Collaboration Network. They enable the business processes to be extended out to your supplier network. The implementation of the business process, in production, is the key to success, not the EDI capability.

Wikipedia defines supply chain management as follows: Supply chain management (SCM) is the management of a network of interconnected businesses involved in the ultimate provisioning of products and services required by end customer. The emphasis is on “management of a network.” The word “interconnected” refers to the ability to “communicate” between members of the supply chain (often via EDI/B2B messages). This is useful in the context of enabling the management of the network.

The ability to “interconnect” or “communicate” does not in-and-of-itself produce the products and services that the end customer desires and is willing to purchase. A manufacturer does not make money by sending EDI messages. They make money selling and delivering products and services. If they could manufacturer and sell products better and cheaper without EDI they would. EDI is simply a neccessary cost of goods to facilitate communications.

How much profit does a manufacturer receive by sending EDI messages in 6 different industry standard formats and 36 different customized configurations? The answer – NONE. The strategic value comes from the ability to communicate business data, accurately and quickly so it can be acted upon, not from the ability to support all of these costly file formats, standards and custom configurations. It is the business data, not the EDI message that is critical.

If there were an easier and less expensive method of communicating business information between companies in the supply chain network, then CFOs and CIOs would be eager to utilize it. SAP is working on this strategy now. EDI does not go away, but it can become an on-demand service in the Enterprise Services Repository tied into various pre-defined SAP business processes. These strategies are being implemented in production environments now.

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