As a concept, EDI (Electronic Data Interchange) is not new. In fact, it can be traced all the way back to the berlin airlift in 1948. Simply put, EDI systems automate and simplify the process of exchanging key business documents, such as invoices, purchase orders, and shipping notices, primarily with partners, suppliers, and customers. EDI documents provide a formal structure for the delivery of information to allow data to be exchanged effectively.
So what is EDI? The more precise EDI definition is the computer-to-computer exchange of business documents in a standard EDI document format between trading partners. By moving from an exchange of paper business documents to EDI documents, companies enjoy significant benefits such as reduced costs, faster processing speeds, fewer errors, and better relationships with trading partners. EDI transactions are processed much faster and with less human intervention. Additionally, the best EDI software and services can be integrated into back-end systems like ERP and accounting platforms to enable end-to-end processing of key business documents.
Since its widespread business adoption in the 1980s, EDI has become a central part of the IT infrastructure for businesses in a wide range of industry sectors. It continues to grow today. In the healthcare industry alone, the most recent estimates suggest that the The EDI market will be worth $9.18 billion by 2030 – an annual growth rate of 9.6%.
One of the reasons for the continued prominence of EDI technology is its ability to encompass business documents from several key business processes. For example, EDI payments and EDI invoices, rather than the paper variety, allow companies to process order information more quickly and accurately. And it’s within EDI payments and EDI billing that technology was developed to include EDI shipping documents, for example, and help give insight into global shipping transactions, warehouses, and distribution centers.
Additionally, EDI goes beyond structured data exchange to enable organizations to benefit from EDI transactions throughout their supply chain. EDI technology also enables secure file sharing, including managed file transfer, which can help departments like engineering exchange large CAD or product lifecycle management (PLM) files.
What are the benefits of EDI?
Electronic data interchange software and services have many benefits for those organizations that get it right. The best EDI solutions can deliver dramatic increases in performance while providing greater accuracy in the transfer of business-critical information. Automated processes, optimized for full effect, directly from computer to computer, can work much faster than manual processes, and with a considerably higher degree of precision.
With paper documents replaced by EDI transactions, process-integrated electronic records facilitate quick and easy EDI tracking and auditing activity management. This increased data transparency helps companies increase their ability to measure performance and instigate improvements throughout their supply chain. Benefits included:
- cost reduction
Expenses associated with paper, printing, reproduction, storage, archiving, postage, and document retrieval are reduced or eliminated when you switch to EDI transactions. reducing your transaction costs by at least 35%. A major electronics manufacturer estimates the cost to manually process an order at $38 compared to just $1.35 for an EDI order.
- time saved
EDI document transfer and processing can take seconds or minutes instead of days, freeing executives to focus on more pressing tasks. Estimates suggest that EDI can speed up your business cycles by 61%.
- improved accuracy
EDI invoices can be issued and processed without the need to transcribe the invoice when it is received, resulting in a significant reduction in the potential for data entry error. Research shows a 30-40% reduction in failed transactions, eliminating illegible handwriting errors, lost faxes/mail, and typos. Similarly, EDI payments that are transferred from the buyer’s computer over a secure network to the supplier’s computer require no human contact during the entire transaction process.
By relying on electronic transmission, the EDI document does not have to pass through any insecure channels, such as postal or third-party delivery services. It will be passed directly to the intended recipient quickly and safely. These secure file sharing capabilities build trust and cooperation throughout your community of trading partners.
- improved efficiency
The buyer gets quick confirmation that their EDI payment documents have been received, further helping to speed up the ongoing process. Fast processing of accurate EDI documents leads to fewer reorders, fewer stockouts, and fewer canceled orders. Additionally, shortening order processing and delivery times means organizations can reduce their inventory levels.
- The complexity of EDI solutions
The best EDI tools can directly lead to reduced cycle times, reduced overhead, improved accuracy, and improved efficiency. In an era of digital transformation, EDI solutions have pioneered the use of digital technologies to dramatically improve the performance of paper-based business processes. So why isn’t EDI a part of every business? The short answer is that EDI can be complex. Any definition of electronic data interchange must take note of the number of EDI standards and communication protocols that exist. Common EDI standards include EDIFACT and ANSI X.12, but there are a wide variety of flavors within a standard. For example, in the late 1990s, there were 100 different standards just for X12. Additionally, many different industries have developed their own type of EDI to meet their specific needs, such as ODETTE in automotive, RosettaNet in high technology and Tradacoms in retail.
What types of EDI communication models exist?
All EDI systems vary, as do the individual requirements of each organization, but it is worth taking the time to determine the best EDI communications model for your business that will help you offer an effective EDI program.
- Direct connection
Connecting directly with each trading partner works well if your community size remains small and everyone agrees to a single connectivity protocol. Your organization is responsible for all mapping, translation, technical support, and reporting.
- Local B2B software
In an on-premises deployment, EDI software applications are securely stored at your offices and behind your firewall. You have full control over all aspects of your EDI system, including security, access, and data integrity. However, your IT staff will require the skills and experience to maintain and manage the system.
- Value Added Network (VAN)
The EDI network provider facilitates the exchange of electronic documents through its « document dropbox » service to which all parties connect. This approach relieves all community members of the responsibility to support all communication issues, ensures data security and non-repudiation. In addition, the « added value » capabilities in the best VAN solutionsIt can and should include increased visibility, enhanced alerts, and custom analytics to help you streamline your business processes and enable you to make better business decisions.
- Managed services
TO B2B managed services The provider receives their business documents directly from their ERP system (SAP, Oracle, etc.) and takes responsibility for all mapping, translation, technical support, data center operations, and ultimately delivery and report generation.
Work with an EDI provider
Over the years, various types of EDI solutions have been developed. These include a web portal and online forms that allow small businesses to exchange key business documents with their large clients. However, the cost and complexity of EDI for larger organizations means that more and more companies are looking to work with EDI vendors. An EDI provider can take care of all the technical aspects of EDI, including EDI mapping and compliance, which means that the organization can quickly benefit from EDI transactions without the need for specialized EDI skills and resources in-house.
Why choose OpenText for EDI?
open text™ operates the world’s largest EDI network with a suite of B2B/EDI integration solutions, tools and services to help organizations improve their existing processes and adopt new ones.
There are dedicated solutions designed to create, send, receive, print and manage EDI documents, as well as to integrate with accounting and other administrative systems. OpenText also offers a range of EDI translators and EDI mapping tools to convert messages from business application data structures to Tradacoms, ANSI X.12 or EDIFACT standards.
With Business Network Cloud Company Organizations can outsource their EDI program with confidence and gain the ability to exchange a wide variety of EDI transactions with trading partners, from purchase orders and ASNs to EDI invoices and EDI payments. Or take advantage of B2B integration that doesn’t put a strain on internal resources or budgets, whether you’re a growing midsize company or a larger established company, with Enterprise Network Cloud Foundation and the right mix of outsourced EDI integration and self-service tools.
Connect once and communicate with anything, including all your partners, with B2B enablers that include everything from fax to full enterprise resource integration. OpenText offers a full spectrum of solutions depending on the size of your company.