How does EDI work?
You know EDI is essential to your business, but you’re not exactly sure how it works. You would like to know more about commonly transmitted EDI documents, the difference between raw EDI vs. human-readable formats and the components of a successful EDI implementation. Find these answers and more, in this short video.
When sending EDI documents, there are 3 critical steps to follow:
Step 1: Prepare the documents
Collect and organize data. Use an electronic file rather than a printout of the Purchase Order. In order to generate the electronic document, there are some options available:
- Purchase application software that has interfaces for EDI files built-in
- Enhance any existing applications to create output files automatically ready for EDI translation
- Reformat electronic reports into data files
- Export data from spreadsheets and/or databases
- Human data entry
Step 2: Translate documents to EDI format
Feed your electronic data through translator software to convert into the EDI standard format with the correct segments and data elements. Translation software can be purchased. However, this requires mapping expertise to define how the data will be mapped. Another option is using the translation services of an EDI service provider. In this case, you send the provider your data and they handle the translation to and from the EDI format.
Step 3: Connect and Transmit your EDI documents to your business/trading partner
After the documents are translated appropriately, they’re ready to be transmitted/sent to your partner. In order to transmit, you must agree on how you will connect with each partner. There are 3 common ways:
- Connect directly using AS2
- Connect to an EDI Network provider (VAN)
- Use a combination of both
EDI Solutions
Electronic Data Interchange (EDI) is the exchange of standardized business documents between companies using electronic formats. It automates manual processes, improving supply chain efficiency by reducing errors. At Effective Data, we offer comprehensive EDI solutions that streamline workflows, enhance collaboration, and allow businesses to run with greater speed and accuracy. Whether you are new to EDI or looking to enhance existing systems, our solutions are designed to provide seamless integration and long-term reliability.
Types of EDI
If you need help selecting the best solution for your company's needs, contact our edi specialists today to learn more!
Direct EDI/Point-to-Point
Establishes a single connection between two business partners. Each business partner is connected to individually. This approach can offer control for the partners and is often used between large customers and suppliers with many daily transactions.
EDI via VAN or EDI Network Services Provider
Many businesses prefer this network model in order to protect them from the continued complexities that come with supporting the varying communication protocols that are required by different business partners.
EDI via AS2
This communication protocol enables data to be transmitted over the Internet in a secure manner.
EDI via FTP/VPN, SFTP, FTPS
These are communication protocols most commonly used for the exchange of EDI documents over the Internet. Any of the options can be used in order to connect directly to business partners or through an EDI Network Services Provider.
Web EDI
This protocol conducts EDI using a standard Internet browser. Web EDI makes EDI affordable and easy for small/medium-sized companies that do not need this service as much as others might.
Mobile EDI
The screen quality and the size of devices are not ideal but with the development of ‘apps’ continuing to grow, it will not be long before you are able to download supply chain and EDI related apps.
EDI Outsourcing
This can also be referred to as B2B Managed Services and B2B Outsourcing. This is a fast-growing option that allows companies to use external resources to manage their EDI.
EDI Software
This is sometimes the preferred option when working behind a company firewall. With this option, the company is assumed to have the correct resources in order to implement and maintain the software consistently.
How EDI Works: The Process
Prepare the Documents
EDI starts with preparing documents to ensure the data has the correct electronic file structure for the exchange. Businesses can achieve this through:
- Buying application software
- Enhancing existing systems
- Reformatting reports
- Manual data entry
- Exporting data
This step helps organize the information for seamless integration into EDI workflows. Proper document preparation ensures accuracy, reduces error risk, and improves communication with trading partners.
Translate Documents to EDI Format
The data then gets translated into standardized EDI formats using translation software, such as ANSI X12 or EDIFACT. Our mapping expertise helps ensure the data is compatible with the partner systems. Organizations rely on this to stay in compliance.
Connect and Transmit Your EDI Documents to Your Business/Trading Partner
Once translated, the data gets transmitted via secure channels. Direct connections, such as AS2, offer point-to-point security. Value-Added Networks (VANs) give reliable and managed transmissions. These methods are vital for ensuring data integrity and meeting the unique requirements of trading partners. It’s possible to combine these methods to be more efficient and flexible to get strong and secure communication with partners.
Key Considerations for EDI Implementation
Picking the right EDI solution starts with understanding the business’s technical requirements and needs. It has to seamlessly integrate with existing systems to keep the business running. This requires careful alignment with the existing workflows and software. Proper planning during this stage minimizes disruptions and helps ensure smooth adoption.
A thorough cost-benefit analysis helps companies weigh the upfront investment against long-term gains like quicker transactions and lower labor costs. Security and compliance are also important as they ensure data stays protected while adhering to industry regulations. Finally, scalability ensures the system can grow with the business. This helps prepare it for future technological advancements and higher transaction volumes.
How to Get Started with EDI
Businesses can start their EDI journey by considering their needs, evaluating existing systems, and finding key integration requirements. Once you get an idea of these factors, matching the right EDI solutions is straightforward. Cloud-based systems, outsourcing options, or on-premise setups are all viable. They have unique advantages, depending on the company’s complexity and size.
Effectively implementing these solutions involves setting them up, training staff, and configuring secure connections with trading partners. For businesses looking to enhance efficiency and stay competitive, Effective Data offers expert guidance and comprehensive solutions.
FAQs About EDI
There are many common questions about this solution, including:
1. What is EDI, and how does it work?
EDI is the electronic exchange of standardized business documents. It lets organizations automate processes and reduce manual errors. It works by preparing, translating, and securely transmitting data between systems.
2. How can EDI reduce costs?
By automating document exchanges, EDI gets rid of manual processes, reduces labor costs, and minimizes errors that lead to delays or corrections.
3. What challenges might arise during implementation?
Common challenges include system integration, data mapping, and ensuring compliance with partner requirements. Partnering with experienced providers can address these issues effectively. With proper planning and expert support, businesses can overcome these obstacles and get a seamless EDI adoption.
4. Is EDI secure?
Yes, EDI solutions include robust security measures like encryption, secure protocols, and compliance with data protection regulations to safeguard sensitive information.
5. What should businesses consider when choosing an EDI solution?
Factors like business size, transaction volume, integration needs, and scalability are critical to selecting the right EDI approach. Evaluating these aspects helps ensure the selected solution aligns with both current and future business goals.
Effective Data is a professional, knowledgeable and dependable EDI support company that has the client's best interest at hand. B.B., Director of IT, High Sierra