Getting Started with Electronic Data Interchange (EDI)

What to consider when getting started with EDI

You’ll have the choice of a few general options to implementing EDI transactions, ranging from basic to sophisticated.

Before you decide which option is best, consider these four factors:

The first factor to consider is how much EDI transaction volume you expect to have in the future. Will you be using EDI for all cash-to-order business transactions or just a few types? Will you be exchanging a few documents per month or thousands? Will you be working with one or two trading partners or dozens? Will you be exchanging documents once a day or continuously? Answers to these questions will determine if you will be a light EDI user, a super-user, or somewhere in between.

EDI typically involves three key business transactions: 1) purchase orders, 2) advance ship notices and 3) invoices. This means that EDI can involve your purchasing system (for purchase orders), your logistics system (for advance ship notices) and your accounting system (for invoicing). And if your company has an Enterprise Resource Planning (ERP) system EDI can involve this system.

You’ll need to decide how you want to support EDI transactions. Do you plan on hiring someone specifically to do EDI, or will EDI be small part of someone’s responsibilities? Do you have someone at your company who can program your systems to interact with EDI? This will help you decide if you can support EDI internally, or if you need to outsource.

Your trading partners will expect that your EDI capabilities are available 24/7. This means that you’ll need to have a transmission system in place to support this demand, and be able to troubleshoot any transmission issues as they happen. Will you have the staff and systems to support this internally, or will you need to outsource this?

Implementing EDI

How you answer all these questions can help you decide how you will implement EDI. You have three general choices:

Web EDI is the most basic level of implementation and could be a good first choice for light users or people just getting started. It allows users to conduct EDI transactions through an internet browser. It “translates” paper-based documents into a web form that contains fields users enter information into. Once the form is complete it converts the fields into EDI messages and sends them securely to trading partners. Users can also receive EDI messages. It can be customized to meet the needs of your trading partners. The benefit of Web EDI is that users do not have in install any EDI software or manage an EDI environment. The disadvantage is that it’s not scalable – meaning that it’s not efficient for large volumes of EDI transactions. Also, your trading partner may not support Web EDI. If they don’t, then EDI as a Service could be a good option.

There are two basic types of EDI as a service: Fax to EDI and Managed File Transfer. With Fax to EDI the service will translate actual paper documents into EDI messages and will send them to your trading partner. It can also receive EDI messages from your trading partner and translate them to faxes. With Managed File Transfer you can send your information to the service provider in a file (for example, Excel, csv, text) and the service will translate your file content into EDI messages and send them to your trading partner. The service will also translate EDI messages from your trading partner and return them back to you in the file format you prefer. EDI as a Service is good for companies just getting started with EDI because you don’t have to invest a lot of money to begin using it. No software is needed, getting started is quick and you don’t need any EDI expertise to use it. It’s also easy to migrate to an integrated solution later. However, it’s only practical for low volumes of EDI transactions, and the cost per transaction is higher than an integrated solution.

This involves integrating EDI into your ERP system. You’ll need a B2B Gateway software solution, which will manage the relationships with your trading partners and exchange the EDI standard files with your trading partners using an agreed-upon method of exchange. You’ll also need EDI Translation Tools, which translate EDI standards messages into electronic files that your ERP system can process.

Integrated EDI is scalable, meaning it can handle large volumes of transactions, reliable, and immediate. Also, the cost per transaction is low. However you’ll need to have software to support it and it requires a high upfront cost to begin. There are also ongoing system maintenance costs and you will need people to manage the system. Integrated EDI is good for companies that are committed to EDI, that may want to expand EDI transactions beyond order-to-cash transactions, and that have high volumes of EDI transactions.

What to do next

The best thing to do is talk to your trading partners and find out what their EDI requirements, preferences and capabilities are. Then decide what EDI solution fits with both your trading partners’ needs and your capabilities. Last, find an EDI provider who can help you get started by using our Solution Provider Finder.