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This guide covers everything you need to know about EDI. How does EDI work? What does EDI mean? What software do you need for EDI? How do you choose the right EDI set-up? Discover what a typical EDI project looks like and how you could implement an EDI solution in your company. Finally, our FAQs at the end contain answers to the most frequently asked questions about EDI.
EDI stands for Electronic Data Interchange. It is the electronic interchange of business documents such as orders, delivery notes and invoices. These documents are exchanged between business partners in the form of structured data with no human intervention.
EDI is not a specific technology, but a combination of electronic processes, exchange protocols (communication protocols) and established, internationally valid business document standards. Structured data exchange must be simple and secure – i.e. using established business document standards and independent of the specific formats or ERP (Enterprise Resource Planning) system used by the business partners involved.
Automating your business processes with EDI makes them faster, more efficient and less prone to errors.
EDI also has a host of advantages for company management, since business-relevant information is available more quickly and in a more structured way. You also have a constantly available, up-to-date stream of data at your fingertips. Running this through business analytics tools gives you huge scope to improve process control.
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Messages are exchanged between companies using established business document standards (known as EDI message standards), which companies in a specific industry have agreed upon among themselves. For example, the European chemical industry generally uses the EDI standard EDIFACT, including the subset CEFIC (French: Conseil Européen des Fédérations de l'Industrie Chimique), which has been specifically defined for the chemical industry. Since ERP (Enterprise Resource Planning) systems generally cannot deal with these message standards on their own, before the structured data is sent by the ERP it needs to be converted from its initial format into the defined message standard before it is sent via the agreed communication protocol. This involves three steps:
(Receive messages in internal format from the SAP System)
(Transfer messages from the internal format to the message standard)
(Technical dispatch via the agreed communication protocol)
These steps are then carried out in reverse order by the receiver, who confirms the message has been received over the agreed communication protocol, converts the message to the format they need and then sends the message to the receiving ERP system.
Figure 1: How EDI works
If business partners want to electronically exchange business data, they need to have a clear agreement in place to ensure they can understand each other's messages. In practice, however, it’s the dominant business partner initiating the EDI initiative (known as the hub) who usually dictates the standards used by all subsequent partners (the spokes).These are existing industry standards.
The advantage of these EDI message standards can be easily illustrated by the following comparison: If several people who each speak a different language try to communicate with each other, they would need an unmanageable number of interpreters.
2 people, speaking two different languages -> 1 interpreter
3 people, speaking three different languages -> 3 interpreters
4 people, speaking 4 different languages -> 6 interpreters
n people, speaking n different languages -> n(n-1)/2 interpreters
If, on the other hand, they decided to use English as an international standard language, each person would need just one interpreter from his or her own language to and from English:
2 people, speaking 2 different languages -> 2 interpreters
3 people, speaking 3 different languages -> 3 interpreters
4 people, speaking 4 different languages -> 4 interpreters
n people, speaking n different languages -> n interpreters
The first scenario is an example of direct communication. The sender transmits each message to each recipient. This type of point-to-point connection is particularly suitable for transferring large amounts of data.
The scenario using English as an international standardized language illustrates indirect communication. Here, the message is sent just once, to a VAN (Value Added Network) provider, which manages distribution to the individual receivers. The advantage of this type of mailbox system is that senders can communicate independently of their partner. You just need to connect to your own mailbox.
Figure 2: EDI messaging standard: direct and indirect communication
The SEEBURGER Guide to Successfully Introducing EDI
The EDI software essentially consists of three components:
to integrate your company’s ERP system. This lets you send and receive messages in your ERP systems native format.
to convert in-house message formats to the industry standard needed by your partners.
to send EDI messages through the communication protocols your partners require.
Many companies rely on an ERP system to manage their in-house business processes. To enable electronic data exchange with external business partners, this ERP system needs to be connected to the EDI system.
An ERP connector connects the EDI software with the ERP software. Messages are then automatically transferred between the ERP system and the EDI software.
SEEBURGER can also build connectors to link up other ERP systems to EDI. Contact us for further details.
An EDI converter converts data (messages) from the ERP system into standardized EDI messages. Essentially, into the language needed to communicate. In order for business partners to be able to exchange data electronically, both need to decide on a specific standard. These standards are defined by various organizations such as the United Nations (UN), the American National Standards Institute (ANSI), the Deutsches Institut für Normung (DIN) or the German Verband der Automobilindustrie (VDA).
Business partners, who exchange messages via EDI, use uniform EDI message standards.
In addition to the global EDIFACT standard, there are other regional or industry-specific standards. You can find an overview of these in our guide to EDI message standards.
The SEEBURGER EDI converters let you work with a multitude of data formats.
A communication adapter establishes a connection between sender and receiver. Once both sides are connected, it securely transmits the pre-converted message.
The EDI software essentially has two transfer options. You can exchange data via either a mailbox system or a point-to-point connection based on the TCP/IP internet protocol.
This is essentially an electronic mailbox. The sender sends the data to a mailbox where the recipient will pick it up. The protocol mainly used for this purpose is X.400.
The advantage of a mailbox system is that companies do not have to be constantly able to receive and send data. This allows you to communicate regardless of when your business partners’ systems are online. You just need to connect to your own mailbox.
Providers of X.400 mailboxes are VAN providers such as Deutsche Telekom, IBM or British Telecom. The data remains in the box until actively collected.
The sender establishes a direct connection to the recipient for the duration of the data transfer. The sender’s and receiver’s systems must therefore be permanently accessible. The automotive industry mainly uses point-to-point connections, and many other industries are following this trend. It is 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.
What is the best way to exchange EDI messages? This depends on two factors:
In addition to common transfer protocols such as e-mail and FTP, there are numerous national, product- or industry-specific transfer protocols for communication in the EDI environment.
Common transfer protocols for EDI messages include:
In practice, a modern EDI solution can also support many other communication protocols.
Our EDI software is available as a stress-free, fully managed, cloud-based service, or as an on-premises package that you can install in the public cloud of your choice or in your own private cloud or in-house hardware.
Would you like to keep some aspects in house while outsourcing others? Our Integration Platform as a Service (iPaaS) lets you choose what to manage in-house, and what to outsource to SEEBURGER.
We even offer web EDI for connecting trading partners new to EDI.
Get the benefits of EDI without the stress. We at SEEBURGER deal with set-up, onboarding, maintenance, security and compliance. We can even connectors.
This not only frees up in-house resources, there is a significantly lower initial outlay and TCO than for on-premises software, and the monthly costs are easier to accommodate in your yearly budget.
BIS, the engine behind the SEEBURGER EDI cloud services, has its data store in Germany.
EDI as a cloud service is particularly suitable for:
Cloud services give uncomplicated access to IT resources, with more flexibility and short time-to-market. They enable even traditional organizations to act agilely and are increasingly proving to be the nucleus of new, innovative business models.
Find out more about SEEBURGER B2B/EDI services and in the whitepaper "Move your Business into the Cloud".
An on-premises solution means that the company acquires the EDI software package. It runs it from a public cloud of its choice such as AWS, Azure or Google, its own private cloud, or on its own hardware.
The company is usually responsible for operating and supporting their on-premises software, however, it may outsource this to a hosting partner.
The advantage of an on-premises EDI solution is that a company can implement the EDI they need without liaising with an external partner. Sometimes, company policy stipulates that certain data may not leave the premises. If you run an on-premises solution, you need to have staff members with strong EDI skills and knowledge.
EDI on our iPaaS model lets you be hands on in mapping and managing your data streams, while outsourcing other more mundane tasks to SEEBURGER. Enjoy the autonomy inherent in an on-premises model and the time savings inherent in a cloud model.
WebEDI is an ideal way for smaller organizations to exchange data, even with bigger corporations. WebEDI lets you receive, create and send EDI-based messages to your business partners semi-automatically via electronic forms in a web browser over the internet.
Naturally, it would be good to use WebEDI for as many of your customers as possible. Then, the moderate investment would pay for itself several times over.
Read more about EDI for small and medium-sized enterprises in our brochures SEEBURGER for small and medium sized enterprises and SEEBURGER express for EDI/B2B.
Three factors are decisive for successful implementing EDI in a company. Full managerial support, professional project management and clearly defined objectives.
The most important success factor for adopting EDI is managerial support. Management at all levels needs to have a shared understanding of why the company is adopting EDI and to actively support all departments concerned. Good change management is part of successfully managing a project.
One way to demonstrate to your staff the importance of your EDI project is to introduce measures to track and ensure the progress of your project. It is also important to communicate progress in a targeted way to the various stakeholders in your company.
Clearly defined reporting paths and named decision-makers make it easier for everyone involved to understand the new processes and find the right person for their queries.
Ensure that your EDI project has the necessary human resources at each stage, from the initial preparation stages up to when the system is finally approved and released. Don’t forget that once released, your staff need to be able to use the new system – the quality of staff IT training can make or break a project.
Our SEEOcta blog series looks in more detail at how to successfully manage a project.
This all goes hand in hand with empowering the project participants to make necessary decisions. Speedy decision processes, sufficient time and staffing buffers can help create a schedule that is easy to adhere to and avoids deadline pressure.
At the beginning of every project, you need to clearly define your aims and objectives. This enables you to monitor throughout the project whether they are being achieved, and to react accordingly.
A good project goal has the following attributes:
Find out more in our guide to EDI projects or in our EDI FAQs.
The aim of a preliminary study is to quickly check where EDI would make sense, and what resources this would entail.
The preliminary study includes a description of the systems currently in use in each area and identifies how EDI would improve these.
The preliminary study forms the basis for the ultimate decision on whether to run the EDI project, the immediate gain for the organization and the best ways of using the new technology.
The report should be finance-oriented and provide management with a sound basis for decision-making.
Once you have a concept for your desired EDI solution, you need to start drilling down and creating a list of detailed requirements. These will later form the basis of your specifications.
Alongside technical requirements, you also need to decide whether to go for an on-premises installation or an SaaS solution.
You will need to consider the following:
Before actually installing your EDI solution, it’s worth running a proof of concept. This involves using standard EDI settings in a realistic environment to test the parameters.
The proof of concept phase involves:
The EDI proof of concept phase lets the customer explore the functions in the software and services at an early stage. This helps him develop a comprehensive understanding of how the EDI solution works and the technical possibilities it gives his organization.
Test plans and reference data were defined in the EDI concept phase. The EDI test phase is the opportunity to intensively test these with your connected trading partners.
In this phase, an iterative process is used to determine if and which corrections are necessary to either 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 once the system is commissioned.
Once the test phase has been successfully completed, the EDI system switches from a test environment to a productive environment.
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 remaining questions and possible application problems.
Detailed information on EDI can be found in our EDI Guide.
You have decided to implement an EDI solution to automate processes between your business partners and your company. However, how do you start? Answers to the most pressing questions about getting started in the world of EDI:
Before you start implementing an EDI project, make sure that there are people in your company with the necessary knowledge to manage your EDI project. Alternatively, you could call in an outside expert to manage 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 s/he liaises between your company and the IT partner in charge of implementing your EDI project, s/he has a huge influence on the project’s ultimate success.
There are two main routes into triggering an EDI project:
a) In most cases, introducing EDI into a company is triggered by an outside request. Maybe a supplier or a customer needs you to be able to participate in a digitally transformed process, and has made this a requirement for future cooperation. In this scenario, the supplier or customer acts as a hub that connects you and other spokes with EDI.
-> In the role of a spoke, your initial EDI environment will be to the specifications of the B2B/EDI infrastructure of your hub – the supplier or customer who has initiated this digital transformation. However, you now have the perfect foundation to connect to further business partners and start automating and digitalizing your own business processes.
b) Another scenario is that you are the hub, i.e. the initiator of the automation of your business processes, because you want to benefit from the advantages electronic data interchange can offer your company. By adopting EDI for digital data interchange, you gain a competitive edge by making your processes more transparent, secure and efficient.
-> You will plan and design your EDI environment tailored to your needs. You decide which processes and which business partners (spokes) are integrated.
Regardless of how the need for EDI arose in your company arose, you will need a detailed list of business partners with whom you can usefully implement the solution.
Was the decision to implement EDI in the company triggered by an outside request? Do you want to keep your company competitive by automating business processes? However you arrived at the decision to adopt an EDI solution, you will need to meticulously define which processes are to be automated through EDI. Factors to consider include supplier or customer requirements as well as the scope of your own ERP system.
Many small companies are required to use an EDI solution by external partners. If a company doesn’t use an ERP system, EDI is challenging but not necessarily impossible.
WebEDI is a simple yet powerful browser-based solution that allows smaller partners to electronically exchange data with the hub without investing in the normally necessary infrastructure.
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 certain interfaces. Most ERP systems already contain these interfaces. If you use a home-grown ERP system, you will probably need to still have the necessary interfaces developed.
Have you checked out our connector page to see if we have already developed a way to connect to your ERP system.
Before you can electronically exchange data with another partner, both sides need to decide on a technical standard. These standards have been defined by various organisations such as the UN, ANSI, DIN or the German VDA.
The most commonly used format is UN/EDIFACT message (United Nations rules for Electronic Data Interchange For Administration, Commerce and Transport). This format contains a number of variations, usually by industry. (for example EANCOM). These variations are referred to as subsets.
In-house messages are individually adapted to the particular needs of the in-house system.
Take a look at a list of current message standards and EDIFACT messages.
Data can be exchanged using a mailbox system, a point-to-point connection or over the internet. You need to consider, do you want a system independent of your communication partners, to cultivate intensive communication with your business partner, or just to transport small amounts of data at low cost?
You can find more information about the possibilities offered by these three communication channels in "What do you need to implement EDI in your company?".
We offer EDI as stress-free, fully managed, cloud-based services, particularly suitable for companies who don’t have the resources for 24/7 operation.
SEEBURGER EDI is also available as an on-premises package that you can install in the public cloud of your choice, in your own private cloud or on in-house hardware.
Would you like to keep control of some aspects in house while outsourcing others? Our Integration Platform as a Service (iPaaS) lets you choose what to manage in-house, while outsourcing other more mundane tasks to SEEBURGER.
We even offer WebEDI for connecting trading partners with no ERP system, with a low message volume, or just new to EDI.
You can find out more about the various deployment options for your EDI needs in "Selecting the right EDI operating model for your company".
Experience from larger EDI projects has shown that software license and hardware costs only account for 20 to 30 percent of the total deployment and operating costs during the first three years. Organizational measures, adapting the EDI solution to company-specific requirements, operating and further developing the system account for the majority of these costs.
EDI solutions can therefore only be used economically if a long-term strategy is in place that takes a company's future requirements into account. Before the system is installed, you need to do significant groundwork. The following principle applies to any EDI project: "Strategy before organization, organization before technology".
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