EDI 101

Electronic Data Interchange (EDI) is the computer-to-computer exchange of business documents in a standard electronic format between business partners.

By moving from a paper-based exchange of business documents to one that is electronic, businesses enjoy major benefits such as reduced cost, streamlining processes, reduced errors, and improved relationships with business partners.

EDI can work hand in hand with API integration. API integration allows data to be pushed or pulled in or out of a system, which then using EDI can allow information to be sent or received to/from customers, suppliers, 3PL warehouses, or other internal systems. 

There are two main types of EDI:

 

1. Web-EDI

Web-EDI involves using a pre-built portal that is already integrated with a trading partner's (e.g. a retailer) back-end system. This allows them to send PO’s to their suppliers through the portal, and then receive shipments, Invoices, and other EDI messages in return from the supplier, when they are keyed into the portal. The winner here is the retailer, and the loser is the supplier, as the supplier will still need to key orders into their own system, as well as confirm orders in the portal. They will then need to manage shipments, invoices, product catalogues, and other messages through the portal, as well as through their system. Effectively doubling manual data entry.

The main benefit of web-EDI is quick compliance, but the downsides are non-streamlined processes, the potential for manual keying errors and a cost of time/wages of employees keying in information manually. 

 

2. Fully Managed EDI

Fully Managed EDI offers complete, end-to-end integration between a trading partner, such as a retailer, and a supplier's system. PO’s raised from a retailer should flow through to the suppliers' Inventory Management, ERP, or POS systems. Messages such as ASN’s and Invoices are sent back automatically to the retailer, based on triggers such as authorizing a PO or completing a Shipment.

A Fully Managed EDI solution should support the integration once it’s live, and have good message validation and error notifications set up to ensure a robust connection between the retailer and suppliers system.

What information is commonly exchanged via EDI?

In most cases, business documents are exchanged. Here are a few of the most common ones that are sent between trading partners.

  • Purchase orders
  • Invoices
  • Advance shipping notices
  • Inventory documents
  • Shipping status documents 
  • Payment documents 

EDI formats


Because EDI documents come in all types of formats, they need to be standardized into a format that any business system can understand.

A standard format describes what each piece of information is and where it is in the EDI message, as well as how it’s formatted (e.g. an integer, decimal, or mm/dd/yy format). 


When two businesses integrate using EDI, they agree on the specific EDI standard and version. Generally, one party will already have a standard format (e.g. a major retailer like Walmart).


To make sure all data is the same format, businesses typically use a tool or an EDI service to translate data between their own systems format, and those of their trading partners, 3PL warehouse, and/or another internal system.

 


The world before EDI

 

Typically, businesses interact with other businesses through manual processes -- paper and manual intervention is involved. The thing is, people and paper slow document processing and introduces inaccuracies and errors. Take Jim the grocer, for example...

Jim needs to order 500 apples for his store.

So he emails his supplier, Tom, to order some.

Tom’s a busy man and doesn’t pass Jim’s order to his warehousing team for 24 hours.

By the time the warehouse gets Jim’s order from Tom, they’re out of apples.

Jim’s order has to wait another 24 hours until more apples are picked.

Finally, Jim’s apples arrive.

But Tom missed a zero in his email to the warehouse team.

Only 50 apples turned up.

Jim is furious.

 


 

The world after EDI

 

Business documents flow straight from your applications to your trading partners and vice versa. Instead of waiting on someone to email or fax, order processing begins immediately. Here’s what Jim’s life is like with EDI...

Jim logs into his inventory management system.

He sees Tom has 500 apples available.

So he confirms an order in his system.

Tom receives a shipment notice back within a couple of hours.

The apples arrive.

Jim is happy.

By moving from a paper-based exchange of business document to one that’s electronic, businesses reduce costs, increase processing speeds, cut down errors and improve relationships with their business partners.

 

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