Last-Mile Integration and Switching Costs

This blog post is the fifth part of a series highlighting the best practices for EDI-as-a-Service in planning and evaluation.

EDI-as-a-Service providers offer unique advantages to your business that may not have been previously attainable. Before making the final decision on engaging in an EDI-as-a-service solution, it may be critical to quantify the value of last-mile integration to your business. You’ll also want to develop strategies to reduce or eliminate switching costs.

The Business Value of Last-Mile Integration

Without end-to-end automation, many companies with close-to-cost business models would be unprofitable. Because of this, it’s important to realize that with EDI-as-a-Service, end-to-end automation requires last-mile integration between the EDI service and operational applications and data.

Supply Chain Insights recently conducted a benchmark survey that indicated EDI processes that are not automated added an average of $78 per order, yet only 34 percent of sales orders and 36 percent of purchase orders moved through IT systems hands-free.

Keeping this in mind, hands-free systems aren’t always the right choice. Manual processing can be policy-driven and can be cost-prohibitive to automate low-value or rarely used processes. Some businesses, however, have rapid and substantial payback on last-mile integration.

Every business has different needs, and it pays to compare what the manual processing costs and risks of last-mile integration are before finalizing your EDI-as-a-Service plan.

Strategies to Reduce or Eliminate Switching Costs

Customizing the way EDI-as-a-Service works for your business will allow you to engage with providers who configure trading partner connections, EDI transactions, last-mile integrations and other solution elements to deliver a solution right for you.

Investing in these deliverables is both substantial and valuable, and switching EDI solutions could mean needing to recreate what has already been spent. Including time spent planning, acquiring, migrating partners, and retraining, EDI solution configuration is an important switching cost to consider when moving from one solution to another.

In order to mitigate or eliminate switching costs, there are a few strategies to consider:

  • Build a solution-independent interface layer for last-mile integration: Defining a mediating layer of files, services or database tables can reduce the time and cost required to replace application and EDI service endpoints, though this may be an expensive option
  • Choose a provider with an implementation speed advantage: Some providers can configure and integrate EDI transactions faster and less expensively by exploiting large-grained reuse, along with tools that automate low-level implementation activities
  • Choose a provider-managed/self-managed hybrid solution: If you have a solution with a common EDI platform, you can decouple the EDI platform and service provider decisions by choosing a solution that offers both provider-managed and self-managed options. You will have flexibility to move between self-managed, provider-managed and third party-managed EDI without partner migration costs or losing investments with EDI configurations, training or last-mile integration.

Choosing an EDI solution for your business to ensure success can be time consuming and costly if not correctly researched. Be sure to evaluate your options – along with possible future issues that may arise – so you can best plan ahead for your business needs.

For more information about EDI-as-a-Service, download our “Best Practices for EDI-as-a-Service Planning and Evaluation” whitepaper.

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