What is EDI?
Electronic Data Interchange (EDI) directly exchanging business documents between two business entities (or systems) using a standardized format. Business documents can include invoices or purchase orders. EDI is a globally recognized, mature technology that’s been around for over 30 years.
What is a trading partner?
A trading partner, sometimes referred to as a business partner, is another entity that your business trades documents with. Trading partners can be a business down the street or in another country. Keep in mind that EDI processes can also help streamline international operations by coordinating with border control as well.
Which industries use EDI?
Almost every major industry uses EDI in some capacity. Major industries that heavily rely on EDI are retail, finance, automotive, and aerospace. Regardless of the industry in which it’s being used, EDI is seen as a standard for the electronic exchange of documents.
What are the benefits of EDI?
There are many benefits to EDI. The most popular benefits for businesses include cost savings, data accuracy, and speed.
The cost savings come from completely eliminating the need for paper, including printing, reproduction, filing, postage, and retrieval. While there are some material savings, most of the cost savings come from the time that is eliminated by doing EDI.
Having accurate data quickly and securely certainly provides countless business benefits.Considering the old methods of exchange data between two companies, it’s easy to see why EDI has been the standard for decades.
What are the different types of EDI solutions?
There are three different types of EDI solutions available:
- EDI software:This type of solution is installed on a computer or server and receives documents directly. EDI software solutions are often integrated with order management systems and other types of software that make use of the documents directly.
- Web-based EDI: These EDI solutions often make use of cloud computing to provide access to documents wherever you need them.
- EDI service bureaus: These EDI contractors manage your entire EDI operation and typically charge a pay-as-you-go payment.
Each of these solutions caters to different business needs. Businesses with complex document handling processes may benefit from a software solution, while other businesses will benefit from the ease of use of cloud solutions. You’ll need to consider your business needs along with your industry standards for method transmission (VAN vs. Internet) before purchasing a solution.
An EDI trading partner asked me to use a specific EDI solution. Do I have to use it?
EDI solutions are typically regarded as entirely universal. There are several standards in existence that dictate how companies should transmit EDI documents to each other, but these standards are typically independent of the platform. The EDI solution that you select should align with your business needs and requirements and does not need to be the exact solution that an EDI trading partner requested.
Is it difficult to implement EDI?
The difficulty of implementing EDI will depend on which type of solution was selected. Web-based cloud solutions will deploy immediately after you set them up, allowing for easy and instant access to documents.
Some businesses will have more complex requirements that call for installing the software on your network and integrating them with back-office systems. These solutions will be more difficult, but the time savings of having a fully integrated EDI solution will more than make up for it.
Can I outsource EDI?
Yes. You may outsource EDI to a company that manages the setup, integration, and ongoing maintenance of the system. The right partner will work with you to develop systems that empower employees to access necessary documents wherever they need them.
Can I customize EDI documents?
Yes. EDI documents can be customized to suit a business’ needs. Sometimes, a business needs to include a specific code or other forms of data that is specific to the trading partnership. In these scenarios, businesses can customize their mappings to cater to these situations between trading partnerships.
How secure is EDI?
EDI is as secure as the protocol that is transmitting the document. There are three protocols that are commonly used with EDI:
- File Transfer Protocol (FTP): This network protocol has been used as the standard method of transferring files between computers for decades.
- Hypertext Transfer Protocol Secure (HTTPS): Seen throughout the Internet, this protocol encrypts and decrypts data at each endpoint.
- Applicability Statement 2 (AS2): This is a specific protocol for transporting data securely and reliably. It achieves security by making use of encryption and digital certificates.
Take note that EDI does not exclusively use the above protocols. Several other communication protocols are capable of securely transmitting documents.
Is EDI regulated?
EDI is regulated in several different ways that are dependent on the industry. As an example, HIPPA regulations place strict requirements on the guidelines for electronically transmitting a patient’s information. Additionally, various government entities may have unique rules and standards. Of course, any given organization will also regulate its own EDI policies.
Is there a difference between an EDI delivered with a VAN compared to one delivered over the Internet?
An EDI that’s delivered via the Internet and one that is delivered by a value-added network (VAN) accomplish the same goal. Although, an EDI delivered via a VAN offers unique benefits:
- Increased security
- Integration with workflows
- Auditing tools
- Visibility tools
- Pre-built solutions that are specific to your industry
- Enhanced data integrity
Which method should your business use? It will depend on the method that your trading partners use. If your industry tends to use Internet delivery, then you should stick with that method.
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