EDI for ROI

The Market for Integrated Electronic Document Exchange

We attended and sponsored the 7th Finance and Accounting Shared Services and Transformation conference this week. Our intention was to both present our message about electronic document exchange to a wider audience and to learn more about the market for Electronic Document Exchange, companies experience of it and what successes companies had observed.

This was an eye opening experience. I guess I believe too much of the marketing hype. The messages we received were that, whilst some companies are dipping their toe in to receiving electronic invoices, very few are actually using electronic document exchange to drive through long term improvement to business process. One reason for this is the EIPP (Electronic Invoice Presentation and Payment) movements focus on invoice only. The only driver for this appears to be reducing headcount in accounts payable rather than looking at the entire procure to pay process. This is a huge opportunity missed.

For example we have been the technology partner for COINS etc, the largest electronic trading exchange for the construction industry in the UK, for 6 years. Whilst we have some very good technology and services, equally important has been the drive of COINS, in their ERP system, to look at the entire business process and help construction companies not just reduce the cost of typing in an invoice but also to show how changes to business processes can greatly improve procure to pay for all parties in the transaction  for the long term.

Likewise outside of construction we have worked with organisations in Logistics, such as GM², that have changed their business processes to offer a greater level of service to their customers. The NAAFI in the uk have evolved new business processes using electronic document exchange that greatly improves there purchasing and streamlines the process for their suppliers.

One of the messages from the conference is that EIPP, because of its limited focus, has done few favours for long term benefits for its customers. Such a limited focus will lead to short term cost reductions but for the long term you need to look to the full process.

 

Real Return on Investment from IT projects

In my previous post I mentioned that I had been working on literature identifying the benefits gained from Outsourced EDI, EIPP, SaaS EDI, Shared Service EDI or whatever the current buzz phrase is. We wanted some facts we could use to both understand how companies benefit from the use of EDI and to be able to clearley show how other companies could gain from their experience.

One thing that came out of the investigation was a clear Return on Investment (ROI) from fully integrated electronic exchange of documents. I had read a Stanford University study some time earlier that said ROI of 250% was not impossible from the use of outsourced EDI but I wanted to find out for myself.

In particular I wanted to make sure that we were achieving that sort of ROI for our customers, and if so how were they identifying the value, was it based on measurable facts or a feeling.

We asked our customers to identify what savings they had made using activity based costing, then to do the reverse and estimate the cost of replacing EDI with manual effort, and finally we asked them to estimate the costs of implementing there existing EDI connections internally. These are all measurable items. We also asked them what kind of business process improvements they had found, over and above the savings on manual data entry.

Some of the case studies can be found at www.firstb2b.net

The outcome; well not surprisingly for such an august body Stanford University were correct. We have seen customers quoting ROI of over 200%, of service level improvements for their customers and of substantial cost savings.

Our target now is to add even more benefits for our clients, based on what they think they can gain further from Shared Service EDI.