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Electronic Data Interchange: A Better Way to Do Business

July 8, 2020

Electronic data interchange

How many times have you started a business call with the words, “did you get my email”?

Probably more times than you can count. No matter what sort of documents you’re sending to a business partner, waiting for confirmation can feel like an unnecessary bottleneck. Thankfully, this bottleneck can be solved with the implementation of electronic data interchange (EDI) software.

When businesses use EDI software, they’ll benefit from a fast transfer of documents, since it replaces the need for mail preparation and handling that comes with the traditional business communication we’re used to, like phone calls, faxes, or paper as communication for ordering or selling products.

Since all of this can be done using EDI, businesses can get more accomplished by speeding up logistic timelines and eliminating manual errors that sometimes occur during B2B communications.

If this sounds like something your business could benefit from, it’s in your best interest to know everything that EDI could bring to the table.

How does EDI work?

Your business data and information are stored with an ERP system, which could consist of anything from details related to shipping, inventory, purchasing, in

voicing, billing, and more. EDI software integrates with this ERP system and uses the information to create the documentation needed to do business with other companies.

There are three key components to how EDI works:

  • Prepare the documents into an electronic file.
  • Translate them to an EDI format using EDI software so that both business systems can understand the file.
  • Transmit documents to business partners.

EDI replaces manual B2B communications, like postal mail, email, and fax, because documents can flow directly from the sender’s computer application (like a logistics system) to the receiver's computer application (like an order management system).

Common examples of documents that can be sent using EDI are:

  • Purchase orders
  • Invoices
  • Shipping statuses
  • Customs information
  • Inventory documents
  • Payment confirmations

To get a clearer grasp of how EDI works, let’s compare how a traditional document exchange would take place, versus using an electronic data interchange to exchange documents.

Using a traditional document exchange

First, the buyer would make a buying decision, create the purchase order, and print it out. The buyer would then mail the purchase order to the supplier. Once the supplier receives the purchase order, they’d then record the information into their order entry system.

Finally, either the buyer would call the supplier to make sure they received the purchasing order, or the supplier would mail the buyer an acknowledgment of their order.

This entire process could take anywhere between five to seven days.

Using EDI for document exchange

Similarly to traditional document exchange, the buyer would make a buying decision, make the purchasing order, but would not print anything out. Instead, they’d utilize EDI software to create an electronic version of the purchase order, which would send it automatically to the supplier.

Once the supplier’s order entry system receives the order, the system would automatically update. Finally, their system would transmit a confirmation receipt back to the buyer.

This entire process could take less than an hour.

Types of EDI

When it comes to choosing the type of EDI to use, it’s going to depend on what you’ll need the EDI to do and how you’ll be using it.

Direct EDI

Direct EDI, sometimes referred to as point-to-point, establishes a single connection between two business partners. This method is most common between larger customers and supplies that work with many daily transactions and a high volume of documents, such as retailers, equipment manufacturers, or hospitals.

VAN

Value Added Networks (VAN) are private, third-party networks where electronic documents are exchanged between business partners. The provider of the VAN works to manage the network and works as an intermediary between the two partners. They’re responsible for storing, routing, and delivering EDI documents.

AS2

One of the most popular methods is AS2, which is an internet communications protocol that allows for data to be transmitted securely over the Internet. It essentially involves two computers – a client and a server – connecting in a point-to-point manner via the web. AS2 will then create an “envelope” for the EDI data, allowing it to be sent securely. This is done using digital certificates and encryption over the Internet.

Web EDI

Web EDI is when EDI is conducted through an internet browser, as it replicates paper documents in web format. The form provides users with certain fields where information needs to be entered. Once all relevant details have been included, it automatically converts the form into an EDI message.

Small and medium-sized businesses often go this route because EDI software isn’t needed, but they can still create, receive, and manage electronic documents through a browser.

Mobile EDI

The newest form of electronic data interchange is mobile EDI. Thanks to specific applications built to support EDI, mobile devices have the potential to change the way many organizations can accelerate their supply chains.

Having EDI applications on a mobile device means that it can be easier for a salesperson to see the status of a delivery to a supplier when traveling, or for a business manager to be able to see supplier performance when in a meeting.

EDI outsourcing

As the name suggests, there’s also the method of outsourcing an EDI program to a third-party provider. If your organization is on the smaller side, or you simply don’t have the resources to launch an EDI initiative, this could be a welcome alternative.

Another reason a company may choose to outsource is the reduction of cost of investing in your own infrastructure, while also needing to ensure that you have access to the right levels of skills needed to deliver the required service that EDI has to offer.

Benefits of EDI

No matter the size of your company, or the industry in which it falls, there are many benefits of implementing EDI software into your tech stack.

  • Saves time: There’s no denying that utilizing EDI means that transmission of data goes from taking days to taking hours, or even minutes. This allows businesses on both ends of the transmission to get more done, quicker. Plus, teams will spend less time creating orders, since this is done automatically and without user input.
  • Budget-friendly: Processing orders can be costly, especially when sending physical documentation. Since EDI makes this process digital, businesses can reduce spend on generating and distributing data.
  • Increases efficiency: An EDI solution improves the reliability of the information being exchanged between businesses. Because of this, companies will see a decrease in errors by eliminating manual and duplicate data entry. This efficiency will also result in an improved relationship between business partners, while decreasing late deliveries and incorrect product prices.
  • Heightened security and simplicity: Thanks to the standardization of data within your systems, employees and IT team members always know where to find it, which will reduce the likelihood of data breaches. Since sales orders, invoices, and shipment records are automatically generated, the workday is simpler for sales and warehouse staff.
  • Improves reporting: When using EDI, electronic documents can be integrated with various IT systems to support data collection, analysis, and visibility for refined reporting.
  • Better for the environment: Since EDI is completely paperless, it promotes sustainability and reduces CO2 emissions by replacing paper-based processes with a fully electronic system.

Drawbacks of EDI

In addition to the many advantages to EDI, you may run into some drawbacks.

  • Lengthy setup time: Depending on the method of EDI you choose, using EDI can require extensive staff training to run, making setup time-consuming. It’s likely that you’ll need your company’s IT department to balance the setup of the EDI tool with other projects on their to-do list.
  • Complex technology: When you implement EDI technology, your business will also need to invest in an additional network for receiving and transmitting information. This could be a barrier if you have a small or medium-sized business.
  • Cost: Set up and training of EDI can sometimes result in expensive upfront costs, so be sure that it’s in your company’s budget beforehand.
  • Limits paper invoicing: Not every supplier you work with is going to have EDI software within their system. Because of this, certain teams may encounter bottlenecks when dealing with paper and EDI invoices.

EDI standards

There are specific EDI standards and rules for the creation of common business documents. The purpose of these standards is to help businesses avoid spending time, energy, and resources to define the layout of these documents. There are key certified agencies that govern these standards, which include:

  • American National Standards Institute (ANSI): Certifies the standards used in the United States and North America.
  • UN/CEFACT (United Nations Centre for Trade Facilitation and Electronic Business): Certifies international standards.
  • EDIFACT (Electronic Data Interchange for Administration, Commerce, and Transport): International standard developed under the United Nations that provides messages for multi-country and multi-industry exchanges of documents.
  • HIPAA (Health Insurance Portability and Accountability Act): Unifies all healthcare-specific requirements to establish secure and confidential exchanges of healthcare-related data.
  • GS1: Certifies industry-specific international EDI standards.
  • Drummond: Certified EDI software through testing to ensure that different EDI tools can successfully communicate with each other.

Who uses EDI

EDI is making its way into every industry, but some use it more commonly than others.

For instance, those who work in the aviation industry are going to use EDI for flight information exchanges, passenger name records, and international compliance. Healthcare workers will use EDI to exchange patient health information, process health insurance claims, and exchange prescription information.

Accountants and those on accounting teams use EDI to generate invoices and provide audit trails. There’s also a huge need for EDI in supply chain sectors of retail, manufacturing, and automotive industries. Members within those industries will use EDI for purchasing, fulfilling orders, maintaining international orders, shipping confirmations, and ordering parts.

EDI tools

Electronic data interchange software works by creating a secure data exchange between two or more computers. This type of software is typically used for the fast transfer of business documents within companies, as well as between business partners like suppliers or customers.

It’s common for businesses to implement EDI software to replace the need for email, fax, and postal mail.

* Below are the top five leading electronic data interchange software solutions from G2’s Summer 2020 Grid® Report. Some reviews may be edited for clarity.

1. MuleSoft Anypoint Platform

MuleSoft’s Anypoint Platform is a solution for API-led connectivity that creates an application network of apps, data, and devices, both on-premises and in the cloud. Users can design and build APIs and integrations, take advantage of real-time visibility from one interface, and enjoy a secure connection to protect sensitive data.

What users like:

“The platform is very easy to get to grips with plenty of free training available for self-learning. On top of this, the developer forums are available should you need any help. Also, having the ability to design and implement API specs within the cloud hub means only one piece of software is needed for the complete life cycle. The graphical interface makes it easy to read the flow of the API, even if the API has been developed by another person.”

- MuleSoft AnyPoint Platform Review, Matt C.

What users dislike:

“The learning curve is a bit steep, especially for people new to this type of programming model. Some of the documentation is also outdated or poorly written and not very helpful, especially when comparing version 3.9 to version 4.x.”

- MuleSoft AnyPoint Platform Review, Kevin K.

2. SPS Commerce Fulfillment EDI

SPS Commerce Fulfillment is a full-service EDI solution that delivers proven technology and hundreds of EDI experts. Every day, these experts work hard to monitor and ensure that the EDI is flowing for tens of thousands of customers across the globe. They will monitor users' EDI for them so they can focus on other tasks on their plate.

What users like:

“The concise and clear dashboard gives me one glance at the data. It also offers quick export tools that offer easy information retrieval. All steps of the sales fulfillment process work every time. When I have a question, support is quick with a fast and clear answer.”

- SPS Commerce Fulfillment EDI Review, Chad B.

What users dislike:

“I wish SPS integrated with Shopify more so that we could automatically fulfill orders. It can still be a very manual process for us. I also wish that shipping documents, such as packing lists and shipping labels, could be automatically named with the PO number, as I currently rename them manually upon downloading them.”

- SPS Commerce Fulfillment EDI Review, Jake W.

3. TrueCommerce EDI

TrueCommerce EDI is a global provider of trading partner connectivity and integrated EDI solutions. This software works to revolutionize trading partner connectivity by linking suppliers, retail hubs, and end consumers in one global commerce network. It offers a flexible, integrated, and fully managed service solution, so that customers of any size can easily connect with any trading partner.

What users like:

“The support staff at TrueCommerce is easy to work with and answers any questions you may have. They have stayed on the phone with me for hours working through issues and mapping trading partners as needed. There was never a feeling of ‘email us your issue and we'll get back to you in a few days.’

Their product offerings are solid and new features are always being developed. When comparing a feature like their Pack and Ship add-on, it seemed like more of a complete shipping solution than what other competitors offer.”

- TrueCommerce EDI Review, Chris N.

What users dislike:

“Their transaction manager can be a bit finicky at times, but much easier than the standard EDI language.”

- TrueCommerce EDI Review, Michael B.

4. Cleo Integration Cloud

Cleo Integration Cloud (CIC) is a cloud-based integration platform that can design, build, operate, and optimize critical ecosystem integration processes. The CIC platform brings end-to-end integration visibility across EDI, non-EDI, and API integrations that gives technical and business users the confidence to rapidly onboard trading partners, enable integration between applications, and accelerate revenue-generating business processes.

What users like:

“It is great for managing the data of all the projects and the web in an easy manner. Their Harmony version provides a simple and effective way to move data across and for the best effective communication. It also offers seamless data transfer without any hassles.”

- Cleo Integration Cloud Review, Rajan A.

What users dislike:

“Employee authentication can sometimes delay customer or supplier contact. I wish this was easier and faster.”

- Cleo Integration Cloud Review, Andrea F.

5. Jitterbit

Jitterbit is dedicated to accelerating innovation for its customers by combining the power of APIs, integration, and artificial intelligence. Using the Jitterbit API integration platform companies can rapidly connect SaaS, on-premise, and cloud applications, while instantly infusing AI into any business process.

What users like:

“The Jitterbit premier support team is top-notch too. I have put (non-critical) support tickets in only to have them responded to in an hour or two. They will set up a Webex and look into your issue, and unlike most support services out there, I've never heard them say ‘that’s an (other platform) issue. Go contact their support’. They invest in actually solving the issue. Because of this, I have no interest in looking at other systems.”

- Jitterbit Review, Chris K.

What users dislike:

“The ability to fully audit changes in the platform is something that I would like to see in more depth, there is enough to understand the changes at a high level to medium level.”

- Jitterbit Review, Chris J.

Delivery received

When your company utilizes electronic data interchange, you can be sure that all of your important documents are sent to business partners fast and with a secure connection. There’s no more waiting for delivery and wondering if orders were received.

Everything is clearly displayed within EDI software, meaning you and your team can focus on more important tasks then checking on the delivery status of a paper order form.

To further enhance your supply chain and to gather more accurate information about transportation processes, discover more about the ins and outs of transportation visibility and the problems it can solve.

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