Significant cost reductions can be achieved with the implementation of EDI, due partly to reduced and partly to avoided expenses. In the following, we list some forms of cost reduction that can be achieved with the implementation of EDI:
Elimination of unnecessary expenses, which can be achieved by eliminating unnecessary human activities related to administration. These include manual activities connected to handling mail, manual control of documents, and data entry. Naturally, with the implementation of EDI expenses related to paper, envelopes, and postage decrease. Call charges connected to data tracking - and naturally the costs of data transmission - likewise decrease. Major cost reduction can also be achieved through decreased storage needs for paper-based documents (e.g. for invoices).
Significant cost-saving can be expected due to the lower rates of errors that result from avoiding the costs of manually searching for and investigating errors.
The storage costs of goods can also decrease significantly due to shorter ordering and delivery processes. Accurate and brief ordering and delivery processes enable a reduction of safety reserves of the goods stored. Decreased storage requirements also reduce associated sorting and handling costs. Storage costs for certain companies can amount to as much as 90% of the total manufacturing cost of products, which means that dramatic cost savings can be achieved in this area. This is the main reason why auto plants introduced Just in Time (JIT) production systems.