So, your customer has informed you that you need to start using ‘EDI’ to continue doing business with them. If your first response to this involves searching “What is EDI?” on Google—you’re in luck. We’ve compiled everything you need to know about EDI; it’s benefits, it’s processes, and how it can help your wholesale business run smoothly, save money, and keep your customers happy.
What is EDI?
Electronic Data Interchange (EDI) is the computer-to-computer exchange of documents between trading partners. It uses software that translates, sends, and receives data automatically and with little to no human intervention.
Businesses use EDI to share various document types—from purchase orders and invoices to requests for quotations and loan applications.
Those in the B2B industry benefit from EDI because it automates a number of highly repetitive tasks in the trading process. Since transactions are now paperless, companies who use EDI enjoy reduced transaction costs, increased processing speed in receiving orders, decreased data errors in inventory, and improved client relationships.
Is EDI the Way to Go?
Many of your customers are already ahead of you in terms of utilizing EDI. They want to continue trading with you, but you'll need to pick up the pace and start using EDI within your business. Otherwise, they wouldn’t have recommended EDI in the first place. What your customers want your trade relationship to become more efficient and convenient.
When using EDI, you can automate tasks such as accepting purchase orders and sending out invoices. This frees up your time to focus on more strategic activities like growing your business, engaging your existing customers, and attracting new prospects.
According to IBM, the core business benefits that EDI delivers to its users include:
- Cost-Efficiency. EDI automates a process that was previously manually executed with paper documents. The amount of time in printing, transferring, and analyzing documents is cut in half. Plus, you no longer need to buy paper and ink!
- Productivity. More business documents are shared and processed in less time and effort. Your personnel can focus more on their actual tasks and not on mundane tasks like manually accepting orders and sending invoices.
- Quality Assurance. EDI’s standardization helps guarantees that documents and information are correctly formatted before it transfers data to your business partners.
- Accurate Reporting. Electronic documents can be integrated with a range of IT systems to support data collection, visibility, and analysis. The data can then be viewed in a summarized, more digestible information to help you improve your transactions in the future
- Excellent Service. In today’s market, speed is key! EDI enables efficient transaction execution and prompt, reliable product and service delivery. Your customers can receive invoices in a matter of minutes after sending their purchase orders.
In B2B, EDI has made the exchange of transaction information significantly faster and more efficient. And regardless of the size and nature of your business, the benefits of using EDI are notable. Overall, you can expect that by implementing EDI you improve your throughput and ultimately, your sales.
Here are some of the EDI features that you should consider so your business would be more cost-efficient according to Adeptia:
- Ability to add missing required data using rules (cross-border information, country codes, carrier-specific elements)
- Ability to create rules for inserting missing information provided by the customer
- Ability to use destination fields to identify shipments crossing international borders (in case of EDI 204 load tender, CLM, etc.),
- Ability to query/view records added to the EDI database by searching or filtering various fields
- Ability to perform lookups into the referential database and pull in the valid codes
- Ability to drill down into each record to see the logs or codes for all that has happened to the record (translations, updates, etc.)
- Ability to create a base EDI map, make necessary changes to it, and make a copy for a new customer
- Ability to quickly acquire new trading partners
However, not every trade partner will usethe same EDI system—there are plenty out there. You need a software that can accommodate and translate data from all of them.
Managing Orders via EDI
Here are 3 ways you can manage your orders using an EDI system:
I. Integrate EDI with your order management system
Buying and using EDI software is a cost-efficient way to improve the management of your orders. In wholesale, if you already have an existing enterprise resource planning (ERP) software, you can easily integrate this with an EDI.
Doing this allows you to connect to your trading partners and electronically exchange business documents including, but not limited to: purchase orders, invoices, and shipment notices. And once you have successfully integrated EDI with your order management system, this eliminates processes that require manual labor—giving you a seamless and error-free process.
Here’s how it works:
- Document Preparation
First, the buyer/seller collects and organizes the data so it works with EDI. This process includes:
- Exporting computer-based data from spreadsheets or databases
- Reformatting electronic reports into data files
- Enhancing apps to create output files ready for EDI standard translation
- Purchasing EDI software that can turn documents from your systems into EDI files
- EDI Document Translation
Next, the buyer/seller feeds the document through EDI translation software to convert it into an EDI standard format.
- Document Transmission
Lastly, once the data is successfully translated, it’s now ready for transmission. Here are the most common steps for transmitting these documents according to rssbus:
- Direct, point-to-point EDI connection via a secure Internet protocol
- Connecting to an EDI network provider, also referred to as a Value Added Network (VAN) provider
- A combination of both Direct EDI and VAN, depending on the partners involved and the transaction volume
II. Acquire EDI services from a provider
You can also find an EDI service provider that provides web access for viewing so you can view reports from your device.
Let’s go back to IBM as an example. Their EDI services provide visibility into invoices, orders, messages, inventory, and onboarding facilities. This streamlines business processes and takes out any manual tasks involved—no more paper documents, faxes, and phone calls with customers and suppliers. The plus side of the IBM EDI is it’s cloud-based, which means you can access the data any time, anywhere.
IBM’s EDI can handle most data formats (including EDIFACT, XML, iDOC, UBL, and more) and translates this data so business partners can use their language when trading with no issues when doing so. Their EDI works regardless of the size and nature of their customers’ business and is flexible to their needs.
From a pricing standpoint, it’s more cost-efficient to hire a solution provider than it is to purchase your own software and manage this by yourself.
III. Create your own solution
Creating your solution is probably the most challenging and costly of the three options. It requires you to invest not only on the EDI software itself, but you would also need to do the following:
- Install your own communications software
- Come up with various EDI transmission methods
- Develop or purchase a mapping and translation software, and;
- Hire EDI and mapping specialists for ongoing upgrades, support, and maintenance.
The upside to creating your own solution is that it allows you to export data and select your preferred format. A custom solution lets you choose where documents land on your computer, making it easier for you to find the data when you need to review it.
Since EDI lets you customize its system protocols and commands, you can even filter and manage specific data elements.
Is it Time to Invest in EDI?
If you want to apply automation to your processes so you can better manage your orders, then the answer is yes. Investing in EDI is a wise decision, one that can improve your trading process as soon as it starts running.
Since EDI is one of the technologies keeping today’s market running smoothly, companies, regardless of their size, are utilizing it more and more to favorable results.
Overall, it’s good to remember that today’s market asks that you are more customer-centric if you want to succeed. EDI helps you guarantee that you provide quality service with speed and efficiency.
Read more about our insights on how you can sustainably grow your business by clicking here.