Electronic Data Interchange (EDI) also penetrates construction market, saving companies enormous amount of time and money5. March 2021
The biggest players in the construction market cooperate with thousands of suppliers and handle a million orders and invoices per year. If they would do all the work by hand, they'd burn through a huge amount of time and money. Therefore, DEK, PRO-DOMA building construction and other leading players in the field are slowly switching to Electronic Data Interchange such as EDI. They follow other fields where EDI already works normally.
The construction market and its supply chain management challenges
A huge number of goods flow through the construction market, such as FMCG (fast-moving goods), in a short period of time. In addition to normal building materials (bricks, insulation, windows, etc.), there are small items such as construction chemistry, tools or fasteners. This means that as a seller
- you sell thousands of products from different brands and manufacturers
- you take goods from hundreds of suppliers
- you process hundreds of orders and invoices every day
- or you are constantly dealing with up-to-date product data from the supplier.
Moreover, building materials differ from conventional retail in that companies often do not deliver material for stock, but directly for construction (transit orders, tracksides deliveries). It must therefore be clear from the documents where and when the goods are to be delivered. Any mistake causes unnecessary downtime.
Another specificity is retainage, where some invoices (or parts thereof) have an extended maturity. Retainage protects customers in cases where there are defects in the provided building material and it is necessary to claim them. Omission of the retainage in the invoice can compromise cash flow.
Companies often also list services on invoices, especially assembly or handling. Furthermore, there is a lot of accounting for packaging (boxes, pallets, wire baskets, etc.), which companies usually invoice as ordinary goods.
All these specifics make it difficult to issue documents if everything is done manually.
How will EDI help a typical customer in construction?
Companies in the field of building materials most often exchange three basic documents via EDI – orders, delivery advice and invoices.
The way it works is that the customer prepares an order in their information system and sends it via EDI. The EDI provider converts the order into an ORDERS message and forwards it to the supplier, to whom the order is immediately loaded into the information system and can receive it in one click.
The customer does not have to print or send anything manually, in addition, he knows that the supplier has confirmed and accepted the order.
Once the supplier ships the order, it again announces the delivery of the goods (EDI DESADV message) via EDI, which will allow the customer to prepare in advance for receipt.
When the order is finished, the supplier sends an invoice (INVOIC) via EDI, which loads itself into the information system. If the prices match and the performance corresponds to the receipt, the invoice is automatically paired with the corresponding documents and posted. EDI saves additional minutes, eliminates routine work and the risk of error.
Other useful EDI messages include advice such as AUTACK (Confirmation of decryption and verification of electronic signature), APERAK (Confirmation of message receipt by application) or COMDIS (Commercial Dispute) in case of incorrect invoice. Thanks to these "service" messages, the trade counterparty still knows what is happening to the document and can react immediately if necessary.
The introduction of EDI into the business relationship is initiated by customers, but electronization and automation of document flow also benefit suppliers. They accept an order faster or issue an invoice, plus they have the option to finance invoices with a long maturity. Larger suppliers will then appreciate the relief from manual labor or reduced error rate, and often it is they who require EDI for their customers.
EDI is already used by the biggest players
The involvement of the biggest players on the market proves that EDI pays off in the construction industry. Among other things, these include, for example,
- DEK building materials,
- PRO-DOMA building materials,
- or GARBIAR building materials (Slovakia)
A special segment is hobby markets (Bauhaus, Hornbach, OBI or UNI Hobby), which have been using EDI for several years and have taught some of their suppliers to use it. For emerging players in the construction industry, entering the world of structured documents is all the easier.
"For our suppliers, order confirmation is now a matter of minutes and we process most of the received invoices without human intervention. Their manual processing would be time-consuming and costly, not to mention a higher error rate," praises the benefits of documents in structured formats Petra Kutnarová, co-owner of The DEK Building, in an interview with EDIZone (full interview here).
Petr Heidrich, business manager of PRO-DOMA building materials, speaks similarly. "Thanks to the electronization of documents, we eliminate some of the possible human errors caused by manual interventions."
In the future, the construction segment is facing a crisis
The field of building materials grew rapidly in 2020 despite the coronavirus pandemic. People locked up at home reconstructed their homes, cottages and cabins, and the crisis (at least for now) did not affect the construction industry as such.
In the future, however, many experts expect a crisis and, above all, a decline in investment construction. It is therefore important that firms cut unnecessary administrative costs and prepare for a possible crisis. EDI is an appropriate tool for this.
If you're considering EDI, try GRiT's flexible ORiON EDI solution, for example. It has gone through decades of development and is used by companies such as OBI, Diton, Juta and others. In addition, you can easily connect it with your ERP system and other useful tool iNVOiCE FLOW. This will help the customer to digitize received invoices even from those suppliers who either do not use EDI or are not suitable for it (e.g. service providers). As a result, they automate the receipt of all tax documents.