What is EDI?
Electronic Data Interchange (EDI) is a technology that enables business users to get more done, speed up logistics timelines, and eliminate manual errors by automating business-to-business (B2B) communications. It helps organizations streamline exchanges of documents such as purchase orders, invoices, inventory levels, and shipping notices.
Earlier business users used to rely on manual B2B communications, such as phone calls, postal mail, fax, and email to strengthen their relationships and serve their customers. These manual communications are being replaced by modern EDI. It connects distributors, manufacturers, and retailers, through their information systems, in a big business-to-business network.
How Does EDI Function?
Mostly, all the company’s information is stored within the ERP system, such as details related to inventory levels, purchasing, invoicing and billing, shipping, and so on. EDI software solutions integrate with the ERP system, allowing users to access and use the information to deliver value at the speed of business.
Both the suppliers and clients have specific requirements as to how they do business. Facets, such as ship-to addresses, pricing, etc., are primarily determined when a deal is made and must be taken into account when transactions and communications happen. This is the data that is used by EDI integration solutions to facilitate trading between multiple businesses.
EDI normally utilizes the standard of data (ANSI or EDIFACT) to ensure requests from one partner (compatible) with the supplier’s information system so that the supplier can fulfill orders placed. It enables companies to do business with partners and customers by transforming the way they transact and deliver.
This is all organized during the implementation of EDI software solutions when fields are mapped faster so that the relevant data is used. On receiving a request, the data is converted to fit the recipient’s needs, turning transactions smoother and faster.
How Can EDI Improve the Ease of Doing Business?
When a company rely on manual processes to exchange different types of data, their system is more likely to be cumbersome and obviously error-prone. An EDI integration solution actually replaces a lot of manual processes with automated transactions, by establishing a communication network between systems across supply chain systems.
Although EDI solutions are highly improved, like any other technology, it’s also open to improvements. Advancements have been made in it by introducing self-service and AI.
Once adopted by large enterprises, these advanced EDI integration solutions have made their way into the hands of small and medium businesses. The usage is, however, different, in a way that in a large trading partner, retailer, or distributor system, EDI is often leveraged as a requirement on members of its supply chain.
Enterprises can benefit greatly from an EDI solution as it helps them streamline transactions and ultimately improve the ease of doing business. Additionally, the EDI software also improves efficiency for driving growth in small and medium enterprises.
What Are the Main Two Perks of Relying on a Modern EDI Solution?
Perk 1 – Saves Time and Improves Speed of Transactions
EDI integration solutions play an essential role in helping businesses increase the speed of information flows and transactions across their trading partner ecosystems. With an EDI solution in place, incoming orders are being created on an automatic basis. Organizations don’t need the support of IT teams in carrying out these processes, freeing them to focus on more important tasks.
Delays are brought to a minimum. Organizations need not deal with different time zones, get a person familiar with the term on the phone. The need for sending faxes, or paper trails gets eliminated, leading to a better cash flow, shorter lead times, and reduced inventories.
Perk 2 – Eliminates Errors and Becomes More Accurate
With an EDI software solution in place, the reliability of the data being exchanged between partners or customers improves by leaps and bounds.
Companies witness an enormous reduction in errors as they eliminate manual and duplicate data entry. Along with that, EDI solutions serve as not only the medium in which the information travels, but also ensures that information accessed and received is accurate and that all the conditions for the transactions are met.
As a result, companies can witness improved relationships with trading partners, minimizing costly chargebacks, delayed deliveries, or incorrect product prices.