Small Business EDI Integration
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This document discusses the challenges small businesses face when integrating electronic data interchange (EDI) with their accounting and ERP systems. It notes that while EDI integration promises financial benefits, the cost has traditionally been prohibitive for small businesses. However, it argues that even modest businesses can see significant savings from EDI integration by avoiding human errors and the labor costs of manual data entry. The document outlines the typical phases of EDI adoption and argues that integration is a key goal once a business reaches a certain transaction volume.
Small Business EDI Integration
- 1. Small Business EDI Integration Integrating EDI for users of small business accounting and ERP software The promise of EDI integration has always been alluring, but financially out of reach for the small business owner. With over 80% of data integration projects failing, small businesses have had reason to shy away - until now. 119 9 N A S A P a r k w a y < H o u s t o n , Tex a s 7 7 0 5 8 < t e l : 2 8 1. 4 8 0 .1121 < f a x : 2 8 1. 218 . 4 8 10 < s a l e s @ d i c e n t r a l . c o m < w w w. d i c e n t r a l . c o m
- 2. Introduction The need for EDI to ERP integra- integration EDI adoption often happens in stages. The vast majority of small businesses are forced into adopting EDI by a large tion is vital As a small business, retailer. This “mandate” brings the small business into an Over 50% of medium-sized understanding why inte- often confusing and technically difficult world where the businesses will have ERP gration makes sense promised financial benefits of “paper-less” transactions systems in-house by the is the first step. EDI can be difficult to quantify and even more difficult to real- end of this year. With key- integration has been ize. This is phase one of EDI adoption and is often char- ing errors responsible for successfully implement- acterized by manual processes. As the business grows, it thousands of dollars in costs, ed in large, Fortune 500 invariably enters Phase 2 of EDI adoption. In this “growth integrating ERP and EDI is organizations for many phase” the small business begins to process more and mission critical. years with concrete, more EDI transactions and begins to realize that a critical measurable returns on deficiency exists in the receiving of EDI data from custom- investment. The surpris- ers, printing that EDI data in the form of reports and re- ing part for most small keying that EDI data into the in-house accounting or ERP businesses is that EDI integration can make a significant system by employees dedicated to this task. positive impact even at low revenue numbers. This is due to two key factors that every small business that does not use integration must deal with every day. SCM ENTERPRISE 1. Human beings Expanded make mistakes Can your software Integration scale? One of the biggest chal- lenges associated with Expansion SMB Any EDI integration solution doing business with must give you the flexibility a large retailer is the Mandated EDI to grow from the afford- concept of chargebacks. able requirements you have Large retailers will today to the high transac- charge their vendors for Figure 1: The 5 Phases of EDI Adoption tion requirements you will mistakes in shipments have in the future. received by the retailer. At Phase 3 of EDI adoption the question of data integra- These mistakes are most tion, specifically EDI integration, becomes a key goal of the often a direct result of small business. Data integration is a brave new world of poor data entry and can run into the tens of thousands ultimate efficiency: increased inventory turns and reduced of dollars per year for a business with an even modest labor costs that every business aspires to achieve. The amount of transaction volume. In addition, there are usually cost savings can be dramatic even for a modest operation financial penalties imposed on small businesses by their that would ordinarily never consider a data integration solu- larger trading partners – these can run into thousands of tion. Realizing this utopia of paperless transaction process- dollars each year. ing, however, is fraught with dangers and has traditionally been costly and reserved for the financially wealthy busi- nesses of the world. What’s a small business to do? 119 9 N A S A P a r k w a y < H o u s t o n , Tex a s 7 7 0 5 8 < t e l : 2 8 1. 4 8 0 .1121 < f a x : 2 8 1. 218 . 4 8 10 < s a l e s @ d i c e n t r a l . c o m < w w w. d i c e n t r a l . c o m
- 3. 2. Data entry is expensive transactions per day (2,600 per year) manual data entry can quickly add up to large costs in time of people being Manual data entry of orders received by EDI has a direct used for manual tasks that could just as easily be handled impact on the bottom line in the form of hourly wages by an effective data integration system. At this point the spent on data entry that could otherwise be re-purposed. small business begins to enter the perilous Phase 3 of EDI At what level does a data entry clerk become unproduc- adoption: data integration. Done properly this stage can CATEGORY COST help the small business grow and achieve incredible effi- Annual Labor Cost $55,000 ciencies, reductions in costs, and improvements in revenue and inventory turns; done badly it can lead to disaster. Daily Labor Cost $211.53 Percentage of day 12.5% (assuming 5 minutes per transaction Integrating EDI can lead to disaster required to process 10 in an 8 hour day) transactions You’ve been sold on the concept of integrating your EDI Figure 2 data into your in-house accounting system. You’ve asked your IT staff to research available solutions, and then tive due to the volume of orders being received? Figure comes the shock: the realization that even if you can mus- 2 above shows a typical example of the costs associated ter the exorbitant fees to purchase the necessary software with manual data entry. Calculating the baseline cost per to realize your integration needs, your lack of in-house transaction is relatively straightforward, assuming a data expertise might cause the entire project to fail from the entry clerk requires 5 minutes to process each transaction very beginning. In fact you are not alone: a 2003 report by and that their annual “burdened” labor cost is $55,000. the Standish Group found that over 88% of data integra- Using the above data we can then calculate the annual tion projects fail, with over half of those being completed cost of manually processing EDI based on the number of a full 170% over the original budgeted time. These dismal transactions per year as seen in the graph below. Looking performance figures for data integration are attributable at the associated costs of just entering EDI data manu- to key deficiencies from which all business suffer. Small ally it becomes obvious that even with as few as ten Despite clear cost benefits to integrating EDI, most small business don't integrate 70,000 $68,750 EDI Transactions per year 52,500 Manual Data Entry Costs per year $34,375 35,000 26,000 $20,625 17,500 13,000 $6,875 7,800 2,600 0 2004 2005 2006 2007 119 9 N A S A P a r k w a y < H o u s t o n , Tex a s 7 7 0 5 8 < t e l : 2 8 1. 4 8 0 .1121 < f a x : 2 8 1. 218 . 4 8 10 < s a l e s @ d i c e n t r a l . c o m < w w w. d i c e n t r a l . c o m
- 4. organizations often find that data integration projects fail Making EDI integration easy and due to three primary reasons: affordable 1. Poor understanding of the business processes With more than a dozen years of experience successfully completing data integration projects for both small and Small businesses are well known for lack of planning and large organizations, DiCentral has carefully considered this for working in ad-hoc methods. It’s the nature of a small challenge to determine how best to solve it for our custom- business to be reactive instead of proactive. This busi- ers. We have come to understand that data integration ness philosophy, unfortunately, runs completely counter requirements tend to fall into one of three areas: to what is required for proper data integration planning. Before even commencing a data integration project, a 1. Large scale data integration business must understand the processes behind the sys- tems being integrated. How many transactions will need This is the most obvious area where in-house data inte- to be sustained? What type of growth will the system gration skill is required and must be performed using need to absorb over the next three, five, or ten years? traditional tools and processes. Large-scale data integra- What systems and procedures inside the company will be tion typically involves multiple systems (ERP, EDI, CRM, affected? How will the company need to change over time SCM, etc.) and is typically performed by larger companies to account for integration requirements? that can measure return on investment in years instead of weeks or months. These projects are fraught with the 2. Lack of technical skills and knowledge most danger and require the largest amount of planning and expense. These types of integrations can easily costs The second challenge is one of lack of domain expertise. millions of dollars. Small businesses are experts at their business, not data integration. Often small business owners fail to realize the 2. Continous data integration needs technical complexities involved in data integration: What transaction sets will need to be integrated? Where does The second type of project that requires in-house data that data live, inside the ERP or accounting system? What integration expertise as a pre-requisite is when the data file format will be used to transfer the data? How difficult being integrated will be changing on a frequent or regular is the data integration software to use? What will our learn- basis. A typical example might be a supplier whose trad- ing curve be? ing partners change their EDI specifications on a regular basis or one that expects to make frequent changes to the 3. Lack of time and resources in-house systems to which the EDI data is being mapped. These data integration projects are significantly more lim- As a small business having enough people to do the work ited in scope but require dedicated personnel who will take required to run the business is difficult enough - after all the time to plan the integration, learn to use the mapping that’s why you decided to integrate in the first place, to tools, and make changes over time as required. free up resources - but who will lead the data integration? Is IT properly staffed? How long will it take? How expen- 3. Fixed-term, small data integration projects sive will it be? If the data integration company does it for me how much will that cost? This type of integration, once completed, changes at a very slow pace and will not need modification for a number of Navigating the maze of data integration is at best a risky years. Companies that need this type of EDI integration proposition. It’s for these reasons that a 2003 Standish can benefit from data integration but are often dissuaded Group study found that nearly 88% of data integration proj- from doing so because of the associated costs and risks ects fail with half of those being stopped before comple- of failure. Until today, this type of business had only two tion and the other half being completed late and at an choices: maintain the existing manual data entry processes average of 173% over the original time estimate. and all their associated inefficiencies, costs and risks, or venture into the equally daunting world of data integration So what’s a small business to do? and hope for the best. © 2010 DiCentral Corporation. All Rights Reserved. All other products, company names or logos are trademarks and/or service marks of their respective owners. v 1 -1/ 12 119 9 N A S A P a r k w a y < H o u s t o n , Tex a s 7 7 0 5 8 < t e l : 2 8 1. 4 8 0 .1121 < f a x : 2 8 1. 218 . 4 8 10 < s a l e s @ d i c e n t r a l . c o m < w w w. d i c e n t r a l . c o m
- 5. Data integration for the small business beginning. You eventually need to send the data to your trading partners. DiCentral DiTranslator comes with To resolve the challenge of data integration for the small software for FTP communications with an upgrade path business DiCentral set out to create a new product that to an AS2 compatible product. could provide data integration without the challenges typically associated with it. We understood that in order The peace of mind of knowing that DiCentral is for data integration to succeed for the small business there to support your system. As ERP providers DiCentral would need to take the place of the domain and trading partners change their requirements, our expert. Both the large scale and continuous change software will change with them, giving DiTranslator models of data integration have domain expertise, but customers the benefit of a fully supported system this is lacking in the typical small business. As the domain without the worries of in-house maintained data experts we set out to resolve a number of issues: integration projects. EDI data must be mapped from the EDI software to in- An upgrade path to an enterprise-class data house ERP and accounting systems. integration platform. Of course businesses grow. With DiTranslator your investment is safe. As your The customer should be provided with all of the business grows and your needs for data integration software needed to get operational quickly and at the grow we will be there by your side, ready to provide lowest possible cost. you with tools like DiCentral DiUnite - a powerful any- Because each data integration project has its own to-any data integration platform rated at over 17,000 nuances and unique needs, the customers would need transactions per minute. dedicated help in setting up and configuring the data About DiCentral integration project. Founded in 2000, today DiCentral is a leading global Any updates and changes must be made available to innovator in the EDI (Electronic Data Interchange) industry customers quickly and easily. segment. A broad range of Software plus Services solu- With the requirements listed above we offer DiTranslator, tions enables a seamless exchange of data throughout supply chain networks. DiCentral’s integration solutions the first EDI data integration package for small businesses are scalable to the size, growth, and unique requirements designed around the financial and technical needs of the of each business. In addition, DiCentral develops and mar- small business. DiCentral DiTranslator makes data integra- kets a complementary suite of supply chain applications tion easy with four key benefits: for retailers and suppliers, including EDI Testing, Global A strong, robust EDI package that can handle a Enablement, Web EDI, Managed Services, and more. Visit growing business and its EDI needs. DiTranslator http://www.dicentral.com to learn more. provides a reliable EDI platform that can scale from as few as one transaction per day to as many as thousands per day. An integration adaptor pre-crafted to map EDI transactional data from DiTranslator to popular ERP and accounting systems. With support for systems like QuickBooks Pro, Microsoft Dynamics, and many others, DiCentral DiTranslator provides the adaptor each business needs to bring EDI data into their in-house system quickly and efficiently. A communications package to help you get started with EDI transactions. Translating the data and bringing it into your in-house system is only the © 2010 DiCentral Corporation. All Rights Reserved. All other products, company names or logos are trademarks and/or service marks of their respective owners. v 1 -10 / 10 119 9 N A S A P a r k w a y H o u s t o n , Tex a s 7 7 0 5 8 t e l : 2 8 1. 4 8 0 .1121 f a x : 2 8 1. 218 . 4 8 10 s a l e s @ d i c e n t r a l . c o m w w w. d i c e n t r a l . c o m