Applying the 80/20 rule to electronic data exchange is all very well, but why not aim higher?
In 1896, Italian economist Vilfredo Pareto noted that around 80 per cent of the land in Italy was owned by 20 per cent of the population. He also noted that 20 per cent of the peapods in his garden contained 80 per cent of the peas. Thus, the Pareto Principle was born.
This idea, also known as the 80/20 rule, has been shown to be true in many areas of life. Indeed, I can even apply it to my family life (20 per cent of my household does 80 per cent of the chores). But where this idea has really taken off is in business. Time-management experts use the principle to help businesses to run more efficiently.
In a supermarket, for example, 20 per cent of its suppliers may produce 80 per cent of its products. In other businesses, perhaps 20 per cent of their customers bring in 80 percent of the profits. So, when companies are setting up EDI (electronic data interchange) those big firms that bring in the most are the ones many businesses focus on. EDI means that purchase orders, invoices and other transactions that were previously all manually sent via email or fax, can now automatically be sent from computer to computer, saving time and money.
These big firms probably have EDI systems or have the ability to set them up. Once EDI is up and running, many companies are happy just to have it working in the background to deal with those firms.
But what about that other 80 per cent? Although they bring in only 20 per cent of the profits or provide only 20 per cent of the products, they still need to be invoiced, or be sent purchase orders and so on. Why would you not want this 80 per cent to have EDI too?
Perhaps these small firms find the cost of installing EDI and training up their staff too prohibitive. But it does not have to be this way. If these SMEs have access to a computer and the internet, then Cloud-based, web-hosted EDI hubs can make connectivity much easier. And firms such as Kewill offer an on-boarding service. It will take a list of all your suppliers, for example, or maybe all those small firms that do business with you and do not have EDI. Then it will contact the organisations and offer the support and training to get them using the EDI technology that is right for them.
Imagine not having to worry about manually dealing with the data from any of the firms you do businesses with? Imagine EDI running in the background communicating with all the businesses, big or small, freeing up staff to work in other areas of your business. There would be no more human inputting errors and far fewer disputes over deliveries or orders as you would have full visibility of all of your supply chain for all of your suppliers.
Imagine 100 per cent of your family pulling their weight with the chores. Ok, I know Kewill can’t help me with that one, but if your business does want to get all the firms you do business with on board with EDI, then it may be worth giving them a call.
To learn more about EDI, download our whitepaper EDI – The invisible revolution