SLAs in EDI is powerful. They can either help a partnership thrive and grow, or become extremely expensive to maintain.
What does SLA mean?
SLA stands for service-level agreement. An SLA is an agreement between two parties defining the service expected to be offered by the provider. It also covers other aspects regarding the service, including the standards, the metrics by which it is measured and the penalties should any of the standards are not met.
SLAs are important. It is considered to be one of the foundational documents when it comes to a relationship between a service provider and its customers. Not only is it used as a tool to monitor the provider’s performance, but SLAs also play a crucial role in communicating expectations. Communication is key to any relationship. Good communication makes sure that you and your partner are on the same page, ensuring certain commitments are met, and what next steps should be taken if expectations are not met.
All in all, SLAs are important. They should be regularly tracked and monitored to make sure that the compliances are met. Having the right tools does help a lot, especially if you risk facing chargebacks if the SLA is violated.
What is EDI?
EDI stands for electronic data interchange. It refers to the business document transmission between two or more parties. These documents are standardized, involving specific communication protocols and EDI transaction codes.
As EDI imposes a set of standards for the parties participating, those who are not compliant face chargebacks – financial penalties if they do not meet your partner’s requirements. Individually, these chargebacks might seem minor. However, as they accumulate over time, they become extremely expensive and may even hurt the business’ bottom line.
What is EDI SLA?
Simply put, EDI SLA is an agreement between two parties that specifies how EDI is used in the partnership. As with any EDI, it details the service expectations, standards, and fines (chargebacks) in cases where the service provider does not comply with the requirements.
Why are EDI SLAs important?
Setting clear expectations
Communication is key in any kind of relationship. Since both parties in the partnership have access to the EDI SLA, neither can claim that they were not aware of the terms agreed upon.
SLAs help businesses keep their honesty because once again, the expectations, responsibilities, and standards have all been laid out clearly. Additionally, the document being legally reviewed and approved ensures both parties are on the same page.
The SLA is beneficial for both parties, as it:
- Provides the customer with the assurance that the service they paid for is delivered per request
- Makes sure the providers have a contract to refer back to if customers demand anything outside the scope of services agreed upon beforehand.
Acting as a trusted source of information
An SLA helps manage expectations and the level of service. It looks after and takes care of both parties best interests. It is a source of reliable information to refer back to. Moreover, it provides the participants with specific guidelines should any KPI not be met.
Thanks to clear information and guidelines, employees also have a guiding star to measure their performance. As a result, overall efficiency is improved.
Providing clear metrics
Besides the objectives, services, responsibilities, obligations, and penalties; an SLA also lays out the measurements – the specific metrics by which the performance of the service is assessed. These metrics need to be as clear as possible so that there is no room for debate on whether the important SLAs are met.
These metrics act as a guideline to determine whether the terms in the contract are fulfilled and whether the operation has been effective or not. Additionally, SLAs help identifies the urgency of incoming requests, and avoid any time wasted on issues that do not matter as much.
Avoiding costly chargebacks and a bad reputation
It is no doubt that we are living in an ultra-competitive market today. Every business is fighting for customers’ attention. There are a variety of possible reasons for letting a customer slip away, and one of those reasons is an SLA violation.
SLA violation is especially harmful when it comes to EDI transactions. Once embarking on the EDI journey, companies need to manage a network of trading partners. Each trading partner might have different demands. Therefore, keeping up with them can become a challenge.
Moreover, each new partner onboarded has its own specific demands that need to be understood. Not being compliant with any of the expectations or demands puts your business at risk of facing chargebacks. These chargebacks might seem minor separately, but put together, they are extremely costly. They can potentially hurt your business’s bottom line – the profit.
Not only does violating SLAs lead to expensive penalties, but it also tarnishes your company’s reputation. Let’s say you are onboarding a new trading partner, but due to an outdated, traditional EDI system, you cannot meet your partner’s requirements. First impressions are everything in any partnership. If you leave a bad first impression on your new trading partner, they might hesitate to cooperate with you in future business deals.
Furthermore, you are now known as the business that is unable to comply with SLAs. Potential business partners now might think twice before they decide to move on in a business deal with you. Even worse, they might just go straight to your competitor and start working with them.
All in all, SLAs in EDI are vital. Violating them is expensive and extremely harmful to your reputation.
Why are EDI SLAs important in supply chain management?
SLAs are common across a number of different industries. It is no longer unique to retailers. You can find it in wholesale distributions, logistics, and manufacturing, too.
Regarding supply chain management, monitoring SLA is a continual process to ensure that every offered services and procedure mentioned in the contract are in compliance. Meeting your trading partners’ SLAs in EDI should be your aim in supply chain management.
Again, being non-compliant can hurt your business’s bottom line. You are also risking losing potential business deals.
Being SLA compliant; therefore, consolidates your reputation and allows for your relationship to truly thrive.
It is time for you to step up your game
In light of all the aforementioned information, it is clear that SLAs in EDI matter. The last thing any business can afford is to lose a business deal.
In order to meet your partner’s SLAs, it is best done by using an EDI platform. An EDI platform takes the complexity out of the process of managing SLAs. It also automates a number of manual data entry processes and flags any possible errors that puts you at risk of EDI SLA violation.