What is EDI?
Companies share standardized messages electronically. Data interchange between business partners takes place automatically. This process is known as Electronic Data Interchange (EDI).
EDI enables companies to convert business data such as orders, delivery notes, bills, and article catalogs from their in-house ERP system into structured, standardized data and to relay it electronically in seconds. The most frequently used standard data format is the UN’s UN/EDIFACT message (United Nations Electronic Data Interchange For Administration, Commerce and Transport).
The Positioning of EDI Software Between Business Partners
The rationalization potential for business transactions is enormous. With EDI, manual input can be reduced and data quality can be improved at the same time.
EDI can provide competitive edge over competitors that do not use EDI. EDI improves the efficiency of your own organization, simplifies and strengthens business relations with partner companies (suppliers, customers, shipping companies, banks, etc.). It enables companies to demonstrate competence and a high quality of service to business partners. In the automobile industry, for example, it took EDI to make just-in-time deliveries possible.
EDI is suitable for companies that regularly exchange data on a mid to high frequency basis with their partners WebEDI is a sensible alternative for companies with low data volumes.
Standardized data formats for messages and uniform communication channels on which to transmit / receive them are a prerequisite for using EDI. To achieve this both business partners need EDI software. This software consists essentially of three components:
1. ERP Connector
The ERP connector connects the EDI software with the ERP system, enabling messages to be transmitted automatically between the ERP system and the EDI software. There is a separate connector for each ERP system.
Widely used ERP systems for which EDI connectors are available on the market:
SAP Business One
SAP Business ByDesign
Infor LN (formerly BAAN)
Infor Lawson (formerly Movex M3)
Dynamics NAV (formerly Navision)
The converter’s task is to convert data (messages) from the ERP system into standardized EDI messages.
EDI message formats
To exchange messages by EDI, business partners use uniform message standards. In addition to the global EDIFACT standard there are further regional or industry-specific standards. The following is a selection of standardized EDI message formats:
ANSI X.12 (regional)
3. Communications Adapter
The communications adapter establishes a secure connection between the sender and recipient. In principle there are two variants: indirect communication via Value Added Networks (VANs) and direct communication such as over the Internet or via ISDN.
With a VAN, each business partner has a mailbox through which documents are sent and received. Messages are automatically relayed to the correct mailbox. A VAN is a secure private network supplied by specialist providers.
With a direct connection, the business partners link up with each other individually and directly (point- to- point), which can mean managing hundreds or thousands of separate connections. It is a flexible, controllable, and secure approach for use between, say, customers and suppliers.
The transmission method used depends on the transmission frequency, the data volume, and the number of items in the message. In addition to well-known channels such as SMTP (e-mail) and FTP (file transfer) there are many domestic, international, or product industry-specific transmission channels for communication in the EDI environment.
Standard transmission channels for EDI messages:
Value Added Network (VAN)
1. On-Premise (In-house)
With this cap-ex model the EDI software is purchased and operateds at the customer’s own data center on hardware that it either owns or manages itself. Operation and support are also mostly in-house.
2. Cloud Services
With this op-ex model, IT services such as EDI can be outsourced to an external service provider. Data, software, platforms, or computing power are outsourced to the cloud provider and used via the Internet. Companies that use this operating model always have access to the latest technology that supports the numerous technical standards and trade regulations. A cloud solution offers a choice of service options to meet customers’ requirements for operating the EDI solution at external data centers.
Small and medium-sized enterprises (SMEs) with low message volumes usually lack the know-how to operate EDI in the classical manner. To do often doesn’t make economic sense either. That is why they prefer to exchange data by WebEDI. With WebEDI business partners can receive, record, and send EDI-based messages semi-automatically on electronic forms over the Internet by means of a Web browser.
The Benefits of EDI at a Glance:
A well equipped EDI system is faster, more efficient, and less error-prone than conventional methods of exchanging data, providing:
- A competitive edge and an enormous cost reduction as a result of simplified processes and uniform technologies
- Accelerated and transparent business processes and message processing by split-second data transfer, which is important for just-in-time delivery (JIT, JIS) in the automotive industry
- Strengthened business partner relations by means of coordinated processes, master data, and product ranges (leading, for example, to a reduction of inventories)
- High data quality by means of correct data without manual interaction or a media gap (paper/data)
- Better adaptation to market changes, such as fast onboarding of trading partners
- A swift return on investment (ROI)