Business Phases


The world of economics is dominated by two words: Supply and Demand.

In the practical world of business, things are a little more complicated. What really comes first in business is Demand, followed by Supply. And there's a critical third component - Settlement - that isn't mentioned at all in the economics textbooks. If you don't have Settlement - that is, a way to get paid for your goods and services - then you go out of business. Economists spend a lot of time on demand and supply curves. From a business perspective it's more valuable to look at the inter-relationships between demand, supply, and settlement.

Understanding the role of settlement is crucial to understanding how a product makes it's way through the production and distribution chain. For example, a simple box of cereal may be marked up in price four to five times on its way from production to purchase by a consumer. Each markup represents an instance of settlement.

In the real world, business starts with Demand; it creates a Supply of product to satisfy the demand; and manages the process of Settlement as the products make their way through the complex paths of production and distribution.

What many companies are doing are re-engineering their business processes to minimize the costs associated with Demand, Supply and Settlement. EDI is a central component in this ongoing process of business re-engineering.

The ultimate goal of an EDI system is to automate the routine flow of documents that support activities related to demand, supply, and settlement.