Electronic Data Interchange (EDI) is a collection of standards which describe how two computers can communicate in a “strictly formatted”, standardized way. This form of communication has been utilized for over 30 years and is a common method for governments and businesses to move information from one point to another.
For businesses, the goal of EDI is to transfer transactional data (Invoices, Purchase Orders, …) in a “hands-off/non-human” manner. EDI documents generally carry similar information to their hard copy “cousins”. EDI implies interchange of a sequence of structured information between parties, often referred to as “Trading Partners”, in a pre-approved format.
Today, EDI is a common form of data transfer in an increasingly digital landscape. Automatic transmission of structured data greatly increases efficiency of bulky processes, eliminates paperwork and drastically reduces human input, or error, less the initial set-up time investment. EDI can be utilized via a range of digital standards, from FTP and HTTP to email, and many more. As a result of the increased transmission of EDI documents, developing standards have arisen between partners in this space. Current standards include ANSI, ebXML, EDIFACT, and some 5000 more.
One business entity might have hundreds of “trading partners” within their yearly EDI resume. To make these communications more effective VANs (Value Added Networks) are often utilized. VANs effectively group a book of business, be it regional or niche, and essentially check the “to” and “from” on these transmissions & route the EDI’s to the appropriate “Trading Partner”. This allows businesses in a niche industry to utilize a trading network for Electronic Data Interchange.
Obstacles to implementing EDI
Process can often be the biggest hurdle to overcome when implementing a company EDI process. Companies tied to paper often struggle to overhaul their workflow and processes, hindering the ability to even create their digital data in a structured format. Cost is also an obstacle to implementation, with training and software improvements taking the bulk of the weight. Lastly, when using EDI it is critical to have a good understating of the “Trading Partner” you are interchanging data with, if they are allowed to send you structured data that is automatically updating inventory, adjusting accounts payable, etc., it is critical that they have their processes accurate at risk of the oversights, or sloppy practices throwing off your internal record keeping.
Advantages to EDI
One of the biggest advantages to implementing EDI for your business is cost savings. By drastically reducing human interaction with the data, strong savings are often seen when comparing the average transaction pre-EDI to post-EDI. Savings are commonly seen in the 25 – 35% range for EDI as opposed to paper/manual transactional exchanges. From a strategic perspective, you have real time visibility into business transactions, providing improved responsiveness and better decision making opportunities. Also, reducing reliance on paper is a green movement that will drastically decrease your companies carbon footprint. Currently the 3 most popular EDI’s used are:
- Purchase Order (EDI 850)
- Invoice (EDI 810)
- Advance Shipping Notice/ASN (EDI 856)
Conclusion
As you can see there are a lot of reasons that you might be interested in electronic transmission of data. Cost savings, accuracy and massive amounts of time can be saved when doing repetitive transactions from established “Trading Partners”. At the same time, implementing EDI is far from trivial and is associated with high upfront costs.
That being said, implementing EDI makes sense when your trading partners are also operating on EDI and when your business is dealing with high volumes of business transactions on a daily basis..
Docparser is offering an alternative to EDI, at a fraction of the “cost”, with the ability to deliver payloads from varying trading partners.
