What is electronic data interchange (EDI)?

Electronic data interchange

From commercial electronic clients to the leaders of the automotive market, nearly all industries have a use for EDI software. Currently known as the standard for exchanging business documents, EDI is designed to bring any business’s communication capabilities to the future.

What is electronic data interchange (EDI)?

Electronic data interchange (EDI) is a software solution designed to improve business processes such as the exchange of business documents. This type of software technology allows business partners to transfer electronic documents seamlessly.

The benefits of EDI software include reducing costs and errors while also increasing the speed of data exchange. It is easier to establish solid relationships with trading partners and offer better customer service when you are electronically connected to all your supply chain. By removing paper from the equation, an EDI solution helps companies optimize their operations.

Different types of EDI

There are three main types of EDI: 

When the concept of EDI was first brought to the market, the most common solution was to adopt point-to-point EDI. This allowed for electronic communication and document exchanges between two specific locations.

However, we currently live in an age where companies  must communicate with hundreds of clients, suppliers, and partners at the same time. Due to this, modern EDI solutions offer document standards to avoid having to integrate several systems.

EDI via VAN

A value-added network (VAN) offers companies access to a private digital space. Therein, they can transfer data elements in a fast and secure manner. EDI via VAN solutions are hosted in the cloud to facilitate the exchange of electronic business documents.

This cloud architecture offers a distinct advantage: the system can be updated and maintained remotely. This saves a considerable amount of time and money that would otherwise go to maintenance services. 

Several EDI standards and protocols are supported by EDI via VAN systems. Not only does this mean that management tasks become easier, but it also helps simplify the integration of business partners into the could ecosystem.

Web EDI

This type of EDI format helps smaller businesses with no EDI software of their own to facilitate electronic exchange processes with larger ones, using their EDI standards. An HTTP page is used to enable this connection. A Web EDI solution works best when used in tandem with EDI via VAN. If you have doubts about what specific EDI solution is best for your business, don’t hesitate to contact our EDI experts.

Integrated EDI

This type of approach unlocks the full potential of EDI. By integrating EDI functionality into your core ERP or business system, you are able to go to visit one interface for managing all inbound and outbound EDI document management and can count on your data being ultra accurate since the data is coming from one centralized database.

Learn more about Vantree’s WEB EDI solution

Why EDI is important for business

EDI is important because it offers businesses a way to integrate several procedures without increasing IT costs. EDI can be used to satisfy supplier, vendor, and client requirements with documents that can be instantaneously accessed and transferred.

What are the benefits of EDI?

Advantages of EDI

  • Growth: An improvement in operational efficiency directly correlates to a business’s capacity to grow and expand operations.
  • Paperless documentation: From basement floods to coffee stains, there are many disadvantages when it comes to paper documentation. By implementing electronic documents, all of these can be simply dismissed. With an EDI solution, you will never misfile a document ever again and can feel good about making a positive impact on the environment.
  • Cost-effectiveness: Due to its capacity to enhance how traditional business procedures are handled, EDI can help reduce operational costs by saving departments time and increasing the speed of order to cash cycles.
  • Speed: EDI software offers much faster document exchanges thanks to interconnectivity, efficient data transfer rates and integration. The speed increase means businesses can process orders, invoices & other procedures rapidly compared to traditional methods.
  • Sharing data: Anyone with the right credentials is able to access the contents of the EDI system. Organizations can exchange crucial EDI documents, such as 850 Purchase Orders or 810 Invoices, with a few clicks with various trading partners. We speak about the importance of transparency in EDI in this blog.
  • Ease of use: A solid system infrastructure guarantees that the data in a modern EDI solution is simple to access, view, and handle. Data can be easily retrieved whenever a user requests or demands it.
  • Minimize errors: Errors and mistakes are common in traditional business environments, especially when using traditional faxing or outdated systems. EDI solutions eliminate human errors thanks to automation. In addition, electronic documents help reduce data redundancy and eliminate duplicate data, creating a more efficient ecosystem.
  • Accuracy: EDI software can produce accurate business documents for companies working at either a local or a global scale. When integrated EDI in your ERP, your data accuracy increases significantly.
  • Security: EDI software offers the best security for electronic documents in different ways. For instance, it makes all documents easy to audit, helping you run your operations by respecting various rules, regulations and levels of compliance. Moreover, the system stores data at a safe location, preventing it from being misplaced or compromised by hackers. EDI systems help to enhance transaction security substantially compared to old methods.
  • Staying technologically relevant: Staying ahead of the technological curve has become indispensable for success in today’s marke businesses of all types and sizes can benefit from the functionality of EDI software.

What are the main functions of EDI?

The primary function of electronic data exchange is to allow businesses and organizations to share critical information remotely and seamlesslywithout needing paper documents. 

Customers looking forward to acquiring a modern EDI solution can expect the following benefits:

  • Efficient deployment of the software.
  • Access intuitive, cloud-based, self-service tools that accommodate various standards and protocols. Thanks to these, even trading partners with little-to-no EDI knowledge can easily learn the ropes.
  • EDI Managed Services permit companies to be able to support all aspects of the EDI implementation and support including the ability to use various document format types using the same service provider and applications.
  • Automation solutions that minimize the need for human intervention. This way, professionals can focus on more added value tasks and allow the software to handle the repetitive work.
  • Another advantage of modern EDI automation is the reduction of errors. To start with, manual data entry errors are considerably reduced by eliminating the need for human intervention. Moreover, the software runs routine monitoring tasks to spot errors and outages. This helps prevent and resolve issues rapidly.
  • EDI Manged Services costs remain stable, so businesses don’t have to think about allocating resources to EDI projects. This contrasts with other document retrieval methods, such as paper documents or in-house EDI support, which are bound to internal budgeting and resourcin. EDI Managed Services can effectively simplify expenses and protect a company against sudden changes in the supply chain.

Learn more about EDI automation

How does electronic data interchange work?

Electronic data interchange is made possible by software that converts digital information to an EDI format. EDI translation software can convert digital elements to EDI messages, which  can be easily transferred. 

For instance, an inventory report saved as an Excel file will be converted by the EDI software in a specific format when uploaded. Once it has reached its destination, the file can be converted back to its original format and inserted into the trading partners system.

EDI components

An EDI solution contains three main components:

  • Trading partners
  • Translation software
  • Communications

Trading partners

Any business or organization that works with EDI documents is known as a trading partner. Client requirements for document handling vary widely, so the system is designed to cater to all types of operations. Small, medium and large organizations can become trading partners and access several organizational benefits.

Translation software

The purpose of translation software is to convert and regulate EDI transactions. The software converts digital goods and electronic data to an EDI format, which can be easily transferred via the web. Likewise, the software can also take EDI format software and reinterpret it to other formats for retrieval.

The main features of translation software include:

  • The capacity to convert digital files to and from an EDI format.
  • The converted documents, known as EDI messages, provide valuable insights like specifics about the document’s content and the sequence of data to be included.
  • The software is functional regardless of the hardware platforms being employed by the trading partners. The independence from software and hardware is a major advantage of EDI software.

Communications

Communication refers to the exchange of documents between trading partners through the internet. Successful communications can be performed regardless of the different trading partners’ technology stack and environment as long as a method is agreed on by both parties and credentials are provided.

The future of EDI

Just as with many other innovative software solutions, the future of EDI lies in the Software as a Service (SaaS) model. Hybrid EDI system implementation can interconnect managed services with the cloud, providing software with unprecedented speed and efficiency. 

According to IBM, future trends are to develop EDI with application programming interface (API) abilities. Instead of a file transfer server, APIs smooth the connection to operation systems, connect straight to a transmissible setup, and require reduced resources to manage the data exchange. This expansion allows for a more resilient integration approach with trading partners and helps supply chains to be ahead of the game. 

EDI services

Talk to an expert to learn more about ou Web EDI based solution today. Send and receive EDI documents in the blink of an eye while working in a personalized workflow with 24/7 visibility on all transactional processes. Vantree’s Web EDI provides a dynamic, intuitive, and easy-to-use interface. 

Thanks to notifications and reporting tools, you can always stay updated on all critical business data, from electronic commercial client requirements to changes made to inventory documents. Vantree offers the perfect EDI software to increase profitability and efficiency while reducing labor and operational costs.

If you’re interested in learning about Vantree’s Web or EDI Automation solutions, which gives users 24/7 visibility and logs on all your B2B traffic, please reach out to our team by writing to sales@vantree.com. 

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