EDI Solution

What is EDI?

EDI knowledge for your EDI connections

We have compiled everything about EDI for you here: from the functionality and definition of EDI, the EDI software required for it, the selection of a suitable EDI operating model and the classic EDI project flow to the implementation of an EDI solution for your company. In our FAQs, we have collected answers to the most frequently asked questions about EDI.

  1. Overview
  2. How does EDI work?
  3. Why are message standards necessary?
  4. What do you need to implement EDI in your company?
  5. How to choose the right EDI operating model
  6. What makes an EDI project successful?
  7. EDI project components
  8. Implementation of the EDI solution in your company
  9. EDI-FAQ

1. Overview

EDI (Electronic Data Interchange) is the electronic exchange of business documents such as orders, delivery notes and invoices. These documents are exchanged between business partners in the form of structured data and without manual intervention. EDI is not a specific technology, but a combination of electronic processes, exchange protocols (communication protocols) and established, internationally valid business document standards. The exchange of structured data itself must be simple and secure - i.e. via the established business document standards and independent of the specific formats or ERP (Enterprise Resource Planning) systems of business partners.

Automation of business processes by EDI is faster, more efficient and less error-prone than the exchange via other procedures, and EDI offers an enormous rationalization potential.

Advantages of using EDI in daily business operations include:

  • faster transmission times
  • lower transfer costs compared to paper
  • reduction of repeated entries
  • reduction of data entry errors
  • increased accuracy of information
  • reduction of paper-bound document flows
  • cost savings in data handling activities
  • increased unwinding speed
  • reduction of warehousing costs (e.g. through just-in-time or just-in-sequence)
  • less duplication of work
  • reduction of lead times
  • time reduction of processes

EDI also results in a broad spectrum of advantages for company management, because business-relevant information is available more quickly and, above all, in a more structured manner. The evaluation of this data using business intelligence methods enables improved process control through constantly available and up-to-date data.

Advantages of using EDI for planning, decision-making and control include:

  • simpler target/actual comparisons
  • deviation analyses
  • new forecasting techniques
  • newly obtained statistical findings
  • quickly available information
  • simulations
  • productivity analyses
  • improved cash management
  • better stock overview

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2. How does EDI work?

Message exchanges between companies follow established business document standards (also EDI message standards), which have been agreed upon by companies within an industry. For example, the European chemical industry uses the EDI standard EDIFACT, including the subset CEFIC (French: Conseil Européen des Fédérations de l'Industrie Chimique), which is specifically defined for the chemical industry. Since ERP systems do not master these message standards natively, the structured data is converted into the established message standard before it can be sent by the ERP system to the recipient via the agreed electronic exchange protocol (communication protocol). This involves three processing steps:

 

connection to ERP

(Receive messages in internal format from the SAP System)

conversion

(Transfer messages from the internal format to the message standard)

communication

(Technical dispatch via the agreed communication protocol)

Similarly, the processing steps on the receiver side must be carried out in reverseorder by confirming receipt of the message by the communication protocol in the communication-processing step, converting the message to the internal format inthe conversion step, and transferring the message to the receiving ERP system inthe third step.

3. Why are message standards necessary?

If business partners decide to exchange business data electronically, they must make clear agreements in order to understand each other's messages. In practice, the dominant business partner that initiates the EDI initiative (the "hub") dictates the standards used by all partners (the “spokes”). The metaphor of a wheel hub and spokes is used to illustrate the point of view of the dominant business partner, who seeks to standardize and connect smaller business partners in the same way.

The advantage of EDI message standards is illustrated by the following comparisons:

If many people who speak different languages try to communicate with each other, an unmanageable number of interpreters is required to establish communication:

2 people of different languages -> 1 interpreter

3 people of different languages -> 3 interpreter

4 people of different languages -> 6 interpreter

n people of different languages -> n(n-1)/2 interpreter

 

If, on the other hand, English is declared the international standard language, each person only needs one interpreter from his or her own language into English:

2 people of different languages -> 2 interpreter

3 people of different languages -> 3 interpreter

4 people of different languages -> 4 interpreter

n people of different languages -> n interpreter

Direct and indirect communication

In direct communication, each message is individually transmitted directly from the sender to each individual recipient. The point-to-point connection is particularly suitable for transmitting large amounts of data.

With indirect communication, the message is sent once by the sender to a VAN (Value Added Network) provider, from where distribution to the individual receivers is controlled. The advantage of mailbox systems is that they can communicate independently of the partner. It is sufficient to establish a connection to your own mailbox.

Getting off to a successful start with electronic data exchange

Learn more about implementation and success factors of an EDI project

SEEBURGER Guide to the Introduction of an EDI Project

4. What do you need to implement EDI in your company?

EDI software consists of three components:

ERP Connector

for the integration of your own ERP system
(to dock the EDI software to the ERP system and receive and deliver messages in internal format from the ERP system)

Converter

for the conversion/transformation of in-house formats or messages
(to convert messages from the internal format to the industry standard agreed by the industry for message exchange)

Communication adapter

for the technical delivery of the "EDI Message” to the business partners

 

The ERP Connector for EDI

In many companies, an ERP system is the basis for controlling internal business processes. To enable electronic data exchange with external business partners, this ERP system is connected to the EDI system.

The ERP Connector connects the EDI software with the ERP software so that messages can be automatically transferred between the ERP system and the EDI software.

The following ERP systems have available EDI connectors:

  • SAP
  • Microsoft Dynamics AX / NAV
  • Infor
  • Oracle E-Business Suite
  • abas
  • ProAlpha
  • JD Edwards
  • APplus
  • IFS
  • Peoplesoft
  • NetSuite

You can use the SEEBURGER EDI solution to the build a connector for any ERP system.

The EDI converter

The task of the EDI converter is to convert data (messages) from the ERP system into standardized EDI messages. The convertor translates the messages into the languages required for communication. In order for data to be exchanged electronically between business partners, both partners must choose to use a specific message standard, such as UN, ANSI, DIN or the VDA.

  • During conversion, the information from the source structure is transferred to the target structure using an individually created mapping.

To exchange messages via EDI, business partners use uniform  EDI message standards.

In addition to the global EDIFACT standard, there are other regional or industry-specific standards.

International EDI message standards include:

  • EDIFACT (global)
  • XML (global)
  • ANSI X.12 (regional)
  • EIAJ (regional)
  • TRADACOMS (regional)
  • VDA (regional)
  • AECMA (branchenspezifisch)
  • HL7 (branchenspezifisch)
  • SWIFT (branchenspezifisch)

With a SEEBURGER convertor, you can convert many other data formats.

The EDI Communication Adapter

The communication adapter establishes a connection between the sender and receiver. When the connection has been established, the communication adapter securely transmits the previously converted message to the business partner.

You can exchange data via either a mailbox system or a point-to-point connection based on the TCP/IP Internet protocol.

Mailbox Systems

A mailbox system refers to an electronic mailbox. The sender sends the data to a mailbox where the recipient picks it up. The main protocol used for this purpose is X.400.

The advantage of mailbox systems is that companies do not have to be constantly ready to receive and send data. This allows you to communicate partner-independently. It is sufficient to establish a connection to your own box.

Providers of X.400 mailboxes are VAN providers such as Deutsche Telekom, IBM orBritish Telecom. The data remains in the box until active collection.

Point-to-point connection

The sender establishes a direct connection to the recipient for the duration of the data transfer. The sender and receiver systems must, therefore, be permanently accessible. The automotive industry primarily uses point-to-point connections, which are particularly suitable for transmitting large amounts of data.

Common transmission protocols include HTTPs, (s)FTP, AS2, AS4 and OFTP2.
Learn more about message standards and EDIFACT messages.

The selection of a suitable transmission method depends on two factors:

  1. The transmission frequency and
  2. The data volume.

In addition to known transmission paths such as e-mail and FTP, there are numerous national, product- or industry-specific transmission paths for communication in the EDI environment.

Common transmission protocols for EDI messages:

  • Value Added Network(VAN) 
    Atlas, AT&T, EXITE, IBM, KPN, OpenText GXS, Telebox X.400, Tradanet
  • Direktverbindung 
    OFTP(2), AS2, AS4, FTP(S), SFTP, http(S)


In practice, many other communication protocols are supported by a modern EDI solution.

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5. How to choose the right EDI operating model

EDI software can be operated on-premises, in the cloud or via the Internet as WebEDI.

 
  • EDI solution on-premises (in-house operation)

With an on-premises solution, the company acquires the EDI software and operates it in its own data center, i.e. on its in-house or self-managed hardware. Operation and support are usually also carried out under the company's own responsibility, but can also be outsourced to a hosting partner.

The advantage of an on-premises solution is that all EDI requirements can be implemented without dependence on external partners. Sometimes the company policy requires that no data is given to the outside. Thus, only in-house operation is considered for EDI. In this case it is necessary to build up comprehensive know-how about EDI.

 
  • EDI as a Cloud Service

With cloud services, IT operations can be outsourced to external service providers. Data, software, platforms or even computing power are outsourced to the cloud provider and used via the Internet. EDI can also be booked as a cloud service. With this operating model, the investment in an EDI software is completely unnecessary; instead, the most standardized EDI cloud service of a service provider is used.

An EDI cloud service is particularly suitable for medium-sized companies, as the 24/7 in-house operation of an EDI solution often represents too great a challenge for them. The total costs of a clearly calculable EDI cloud service are often significantly lower than those of an in-house operation.

A cloud solution as an alternative to in-house operation should be considered in particular in the following cases:

  • Staff shortages and/or dependence on certain employees.
  • Investments in new solutions or significant enhancements are planned.
  • Increasing operational requirements (real 24/7 operation) cannot be covered.
  • A large number of new partners or processes must be connected.
  • The total cost (TCO) of the in-house operation (hardware, software, personnel, training, support) exceeds the costs of a transparent, calculablecloud service.

The advantages: Cloud Services

  • form the ideal basis for uncomplicated access to IT resources.
  • offer optimal conditions to support the digitization strategies of companies.
  • offer ready-made, standardized, scalable and immediately executable process modules with clearly defined interfaces.
  • can often be booked in self-service.
  • fulfill the desire of specialist departments for more flexibility and short time-to-market.
  • enable the so-called "Old Economy" to act agilely (quickly).
  • are increasingly proving to be the nucleus of new and sometimes disruptive business models (innovative).

Find out more about cloud services here and in the white paper "Move your Business into the Cloud".

 
  • WebEDI as an alternative for small and medium-sized enterprises

In order to operate EDI in the classical sense, small and medium-sized enterprises(SMEs) with low message volumes often lack the know-how. At the same time, in many cases there is no economic justification whatsoever for this. A further hurdle can be the technical connection to the internal ERP system.

If no uniform ERP software is used in the company, an EDI cloud service is often omitted as an alternative, since in this case data cannot be provided all electronically.

Data exchange via WebEDI is ideal for such an SME. WebEDI enables you to receive, record and send EDI-based messages to your business partners partially automatically via electronic forms using a web browser over the Internet.

Of course, it is advantageous if as many customers as possible (e.g. retailers) can be reached via such a WebEDI solution. Then the already manageable investmentpays for itself several times over!

More information about EDI for small and medium-sized enterprises can be found in our brochures SEEBURGER for small and medium sized enterprises and SEEBURGER express for EDI/B2B.

6. What makes an EDI project successful?

Three factors are decisive for the successful implementation of an EDI project in a company: the full support of the management, professional project management and an exact and clear definition of objectives.

 

  • Management support

The most important success factor in the introduction of an EDI project is the support provided by the management. The entire management is challenged to clarify the sense and purpose of the use of EDI and to provide active support in all areas across the departments concerned.

The priority of the EDI project in the company, for example, becomes clear to all employees from the outset through the introduction of classic controlling by higher-level departments.

Clearly defined reporting paths and management decision-makers make it easier for everyone involved to understand the project processes and find the right contact persons.

  • A positive attitude of the management significantly influences the acceptance of the system by the employees.

 

 

  • Project Management

The implementation project must be equipped with the necessary human resources for all phases of the implementation - from preparation to final acceptance and release of the solution. It goes without saying that the members of the EDI project team are appropriately qualified. The technical qualification is abasic requirement for all members of an EDI team.

This goes hand in hand with the necessary decision-making authority, which is assigned to the project participants. Short decision processes and sufficient time and personnel buffers can help to set up a time schedule that is easy to adhere toand avoid deadline pressure.

  • Stringent project planning and control, clear assignment of tasks by the project management, high leadership qualities and close cooperation with the EDI solution provider are essential for smooth project execution.

 

 

  • Exact Definition of Objectives

The exact definition of the EDI project objectives is the beginning of every planning. The definition of objectives is the basis for the achievement of objectives and allows the control of the attainment of objectives during the entirecourse of the project.

  • The project objective must contain a clear, complete and verifiable description of the desired outcome of the project.

 

What can be achieved with an exact definition of an objective?

  • secure planning and action basis for the project manager
  • starting point for the development of the entire project planning
  • fixing the project completion date

What does an exact goal definition look like?

A correctly formulated project goal should have the following attributes:

  • achievable
  • complete
  • consistent
  • uninterpretable
  • testable
  • solution-neutral
  • documented

 

Which questions help to define the objectives?

  • Why is an EDI solution introduced? (cost savings, transparency, compliance, etc.)
  • What is to be achieved with the EDI project? (e.g. increase of the supplier satisfaction, acceleration of the process time by 10%, improvement of the enterprise image at the market)
  • How deep should the integration be or how high should the degree of automation be?
  • In which locations and countries should the EDI solution be operated?

Further answers can be found in our guidebook on the introduction of an EDI project or directly at the EDI FAQ.

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7. EDI project components

The Preliminary Study

The aim of a preliminary study, or pre-study, is to examine which areas and which resources require the use of an EDI project.

What is defined in a preliminary study?

  • project dimensions
  • product strategy
  • expenses for detailed analyses
  • implementation planning
  • potential of the EDI project
  • interests and needs of current trading partners

The pre-study includes a description of the existing systems in each functional unit and identifies how these systems can be improved with EDI.

The pre-study forms the basis for the final decision on the EDI project, the best immediate use in the organisation and the best ways of using the technology.

The report should be finance-oriented and provide the management team with a sound basis for decision-making.

 

Requirement criteria and system selection

As soon as the solution concept for the desired EDI solution has been defined, detailed requirements are derived from the target concept. These requirements form the basis for a later requirement specification.

In addition to the technical requirements, a general decision must be made as to whether an in-house or SaaS solution is to be sought.

The following criteria, among others, should be used for this purpose:

  • implementation costs of the EDI solution
  • additional software and hardware costs for operating the EDI solution
  • running costs for administration, maintenance, transaction
  • internal personnel resources

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8. Implementation of the EDI solution in your company

The EDI Concept Phase

During the EDI concept phase, which occurs prior to installation, standard EDI settings are installed in a real-world environment and the parameters are tested.

The concept phase includes the following processes:

  • installation of the EDI solution on the test server,
  • basic installation and parameterization of the EDI solution,
  • checking and, if necessary, cleaning up the master data and transaction data,
  • possible adaptations of processes and interfaces,
  • fixing and documentation of the installation,
  • decision to go live with the EDI solution,
  • creation of test scenarios and test plans with corresponding reference data.

The EDI concept phase enables the customer to comprehensively understand the functions of the software and services at an early stage and to develop a comprehensive understanding of the EDI solution and its technical possibilities.

 

The EDI Testing Phase

Test plans and reference data were defined in the EDI concept phase, and these are now intensively evaluated in the EDI test phase with the associated trading partners.

In this phase, an iterative process is used to determine if and which corrections are necessary with regard to the process or the EDI solution. These test-runs in turn entail a change in the definition and documentation of the overall system.
This process ends with the acceptance of the system.

 

Going live and running live

Once the test phase has been successfully completed, the EDI system switches from the test system to the production system.

Project experience has shown that after two months of live operation, it makes sense to conduct additional downstream training for key users, administrators and end users in order to solve any open questions and possible application problems.

Detailed information about EDI can be found in our EDI Guide.

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9. EDI FAQ

Frequently-asked questions about EDI implementation

Now that you have decided to implement an EDI solution to automate processes between your business partners and company, how do you get started? Read our answers to the most frequently-asked questions about getting started with EDI:

Before you start implementing an EDI project, make sure that there is an employee in your company who has the necessary knowledge to take over the management of your EDI project. Alternatively, an external expert can be called in for the EDI project and implementation phase.

The EDI project manager must have a good knowledge of internal processes as well as basic IT knowledge. As an interface between your company and the IT partner who implements your EDI project, he or she can optimally contribute to a smooth and fast implementation. With a competent project manager at your side,you can tackle the next steps.

There are two ways to define your entry into an EDI project:

a) In most cases, the request to introduce EDI in the company is made to you externally. For example, a supplier or customer has obliged you to handle the work processes digitally in order to ensure future cooperation. In this case, the supplier or customer acts as a hub that connects to many spokes via EDI.

-> You, as Spoke, first adapt your EDI environment to the specifications of the B2B/EDI infrastructure of your supplier or customer (the hub), but on this basis you can include further business partners and at the same time consider the automation and digitization of further internal business processes.

b) You are the hub, i.e. the initiator of the automation of your business processes,because you want to benefit from the advantages of electronic data interchange in your company. By implementing B2B/EDI, you remain competitive by making your processes more transparent, secure and efficient.

-> You plan and design your EDI environment optimally tailored to your needs and decide with which processes and with which business partners (spokes) you would like to introduce EDI at B2B level.

Regardless of how the need for the implementation of an EDI/B2B solution in yourcompany arose - a detailed list of business partners with whom you can usefully implement this solution will help you to narrow down the project.

Whether the impulse to implement EDI in the company was given to you from theoutside, or you yourself want to keep your company competitive by automating business processes - the processes that are to be automated via an EDI system must be defined consequently. Factors such as supplier requirements or the possibilities of your own ERP system play a role here.

For many small companies, which are obliged to use an EDI solution from external sources, the topic of digitization represents a challenge, especially if there is no uniform ERP software available in the company to connect an EDI system.

 

Data exchange via WebEDI offers a simple and powerful solution, in which the EDI services are provided via a web solution, without extensive investments in hardware becoming necessary.

If you are already working with an ERP system, it is important to find out whether it is EDI-compatible.
In order to communicate with an EDI system, your ERP system needs so-called interfaces. Common ERP systems have interfaces. If you use a self-developed ERPsystem, interfaces usually remain to be developed and programmed.

An overview of common ERP systems that have interfaces can be found here.

In order for data to be exchanged electronically between business partners, both must decide to use a certain standard. These standards are defined by various organisations such as the UN, ANSI, DIN or the VDA.

The most commonly used format is the UN/EDIFACT message (United Nations rules for Electronic Data Interchange For Administration, Commerce and Transport). Within this format, there are a number of variations (usually defined by an industry, for example EANCOM). These dialects are usually referred to as subsets.

In-house messages are individually adapted to the special needs of the in-house system.

Get an overview of the current message standards and EDIFACT messages.

Data can be exchanged via a mailbox system, a point-to-point connection or the Internet. Decisive for the selection of the appropriate communication channel is whether you want to communicate independently of your partner, maintain an intensive communication relationship with your business partner, or only want to transport small amounts of data at low cost.

You can find more information about the possibilities offered by these three communication channels here.

The EDI software can be operated on-premises (in-house), as a cloud model or viathe Internet, as WebEDI at a provider.

The advantage of an on-premises solution is that all EDI requirements can be implemented without dependence on external partners.

An EDI Cloud Service is suitable for medium-sized companies because they cannot always guarantee 24/7 in-house operation of an EDI solution and the total costs of a clearly calculable EDI Cloud Service are usually significantly lower than those of in-house operation.

Small and medium-sized enterprises (SMEs) with a low message volume and no ERP connection usually run best with a WebEDI solution.

You can find out more about the EDI platforms here.

Experience from larger EDI projects has shown that software license and hardware costs together account for only 20 to 30 percent of total deployment and operating costs during the first three years. Most of the costs are for organizational measures, adapting the EDI solution to company-specific requirements, operation and further development of the system.

EDI solutions can therefore only be used economically if a long-term strategy is inplace that also takes into account a company's future requirements. The technical implementation of such a system can only be accomplished through organizational preparatory work. For all EDI projects, the following principle applies: "Strategy before organization, organization before technology".

-> According to a 2009 study by GS1 Germany, a company saves an average of 16 euros with every invoice that is created and sent electronically instead of in paper based form.

Interested in finding out more?

We would be pleased to support your digital transformation projects.

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