What Is EDI?

Learn everything you need to know about EDI. What does EDI mean and how does it work? What software do you need for EDI and how do you choose the right EDI set-up? Discover what a typical EDI project looks like and how you can implement an EDI solution in your company. Finally, our FAQs at the end answer the most frequently asked questions about EDI.

EDI stands for Electronic Data Interchange and means 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. For simplicity and security, structured data exchange must use established business document standards regardless 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, leading to reduced lead times through faster data transmission
Reduced unnecessary task repetition and data entry errors through less manual workIncreased information accuracy and less costs through automation
Reduced warehousing costs as EDI enables just-in-time or just-in-sequence logistics

EDI also has a host of advantages for management, since business-relevant information is available faster and in a more structured way. You also have a constantly available, up-to-date stream of data readily available. Running this through business analytics tools gives you huge scope to improve process control.

For planning, decision making and control, EDI means:

Up-to-date statistical findings through simpler target/actual comparisons and deviation analysis
Improved information availability through simulations and new forecasting techniques
Improved cash management and a better stock overview through productivity analyses

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 systems are generally not capable of these message standards, the structured data 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:

1. Connect to ERP and receive messages in internal format from the SAP System.

2. Convert and transfer messages from the internal format to the message standard.

3. Communicate and technically dispatch data via the agreed communication protocol.

The receiver carries out these steps in reverse order starting with confirming the message has been received over the agreed communication protocol, then converting the message to the format they need and then sending the message to the receiving ERP system.

The SEEBURGER BIS B2B/EDI solution supports you in the comprehensive integration and management of all B2B partners through the B2B gateway and various portal/cloud applications.

The SEEBURGER BIS B2B gateway connects the most important business partners, handling the routing and processing of B2B/EDI messages according to industry standards.

The gateway is complemented by portal applications for efficient management of numerous business partners, such as the Community Management Application or the BIS WebEDI Supplier Portal.

Figure 2: SEEBURGER BIS B2B/EDI Solution

If business partners want to exchange business data electronically, they need to have a clear agreement to ensure they can understand each other's messages. In practice, however, it’s the dominant business partner initiating the EDI process (known as the hub) who usually dictates the standards used by all subsequent partners (the spokes). These are existing industry standards.

The following scenarios illustrate the advantage of these EDI message standards: If several people of different languages 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 an international standard language, each person would need just one interpreter from their 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

Figure 3: EDI messaging standard: direct and indirect communication

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 one international standard 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 – they just need to connect to their own mailbox.

The EDI software essentially consists of three components:

The ERP connector integrates your company’s ERP system, allowing you to you send and receive messages in your ERP system’s native format.
The converter transforms in-house message formats to the industry standard needed by your partners.
The communication adapter sends 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 connected connection, i.e. integration, to the EDI system.

An ERP connector links the EDI software with the ERP software, and then automatically transfers messages between the ERP system and the EDI software.

We have EDI connectors for these widely used ERP systems, and more:

SEEBURGER can also build connectors to link up other ERP systems to EDI. Contact us for further details.

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.

Mailbox system

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.

With a mailbox system,companies do not have to be constantly able to receive and send data. This allows them to communicate regardless of when their business partners’ systems are online, as they just need to connect to their 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.

Point-to-point connection

The sender establishes a direct connection to the recipient for the duration of the data transfer. The senders’ and receivers’ 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.

Which is the best way to exchange EDI messages depends on the frequency and data volume.In addition to common transfer protocols such as email and FTP, there are numerous national, product- and industry-specific transfer protocols for communication in the EDI environment.

Common transfer protocols for EDI messages include:

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

Amodern EDI solution can also support many other communication protocols.

Our EDI software is available as a stress-free, fully managed, cloud-based service, 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 WebEDI for connecting trading partners new to EDI.

Get the benefits of EDI without the stress. SEEBURGER deals with everything – from set-up, over onboarding and maintenance tosecurity and compliance.

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 annual budget.

The SEEBURGER BIS Platform isthe engine behind the SEEBURGER EDI cloud services.

EDI as a cloud service is particularly suitable for:

companies who may not have the resources for 24/7 operation of an on-premises EDI solution
companies unable or not wanting to recruit dedicated staff members experienced in EDI
companies wanting to offload time-consuming maintenance and security updates to let their people focus on other tasks

Cloud services give easy access to IT resources, with more flexibility and short time-to-market. Even traditional organizations are empowered to operate with agility through them, and they are increasingly demonstrating themselves to be the core of novel and innovative business models.

Find out more about SEEBURGER B2B/EDI services and in the whitepaper "Move your Business into the Cloud".

Three factors are decisive for successful implementing EDI in a company: Full managerial support, professional project management and clearly defined objectives.

A positive attitude from management significantly influences employees’ acceptance of a new system

The most important success factor for adopting EDI is managerial support. A shared comprehension of the reasons behind the company's adoption of EDI is essential for management at all levels, along with their active support for all relevant departments.Good change management is part of successfully managing a project.

To showcase the significance of your EDI project to your staff, implementing tracking measures and ensuring project progress can be effective. Additionally, communicating progress to different stakeholders within your company in a focused manner is crucial.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.

The Preliminary Study

The objective of a preliminary study is to efficiently assess the potential benefits of implementing EDI and determine the required resources involved.What should the preliminary study define?

Project size
Product strategy
Resources required for detailed analyses
Planning the implementation and realization stages
Potential of the EDI project
Interests and needs of current stakeholders

The preliminary study incorporates an evaluation of the existing systems utilized in each department and highlights the potential enhancements that EDI implementation could bring. It serves as the foundation for making the final decision regarding the EDI project, assessing the immediate benefits for the organization, and determining the optimal utilization of the new technology. The resulting report should have a financial focus, offering management a solid groundwork for informed decision-making.

Defining your EDI requirements

After formulating the concept for your desired EDI solution, the next step involves delving deeper and generating a comprehensive list of specific requirements. These requirements will serve as the foundation for developing detailed specifications at a later stage.Alongside technical requirements, you also need to decide whether to choose an on-premises installation or a SaaS solution.

When contemplating your desired EDI solution, several factors need to be taken into consideration, including the following:

The implementation cost associated with your desired EDI solution.
Additional expenses related to software and hardware required to operate the EDI solution.
Ongoing costs for administration, maintenance, and transaction volume.

Availability of internal personnel resources to support the EDI implementation.

Prior to the actual installation of your EDI solution, it is beneficial to conduct a proof of concept. This entails testing the parameters in a realistic environment using standard EDI settings.The proof of concept phase involves:

installing the EDI solution on a test server,
doing a basic installation and parameterization of the EDI solution,
checking and, if necessary, cleaning up the master data and transaction data,
potentially adapting processes and interfaces,
deciding upon and documenting the ultimate EDI installation,
deciding when to go live with the EDI solution,
creating test scenarios and test plans with corresponding reference data.

During the EDI proof of concept phase, you gain the opportunity to delve into the software and services' functionalities at an early stage. This enables them to develop a comprehensive understanding of the EDI solution's workings and the technical capabilities it offers to their organization.

Figure 4: SEEBURGER BIS Platform for all B2B/EDI business processes

Frequently asked questions about implementing EDI

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:

Who can implement EDI in my company?

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.

What skills does an EDI project manager need?

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.

Who determines which partners join an EDI project?

There are two main routes into triggering an EDI project:

a) The adoption of EDI within a company is often initiated by an external request. This request typically stems from a supplier or customer who requires your participation in a digitally transformed process, making it a requirement for future collaboration. In this scenario, the supplier or customer serves as a hub, connecting you and other spokes through EDI.

-> In the role of a spoke, your initial EDI environment will be configured 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.

Which processes are to run via EDI in the future?

Did an external request prompt the decision to implement EDI within the company? Do you want to keep your company competitive by automating business processes? Regardless of how you arrived at the decision to implement an EDI solution, it is crucial to carefully determine and specify the processes that will be automated using EDI.Factors to consider include supplier or customer requirements as well as the scope of your own ERP system.

Do you need an ERP system before implementing EDI?

External partners mandate many small companies to utilize an EDI solution. 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 exchange data electronically with the hub without investing in the normally necessary infrastructure.

Does my ERP already have the necessary interfaces?

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?

Which messages will I need to send or receive?

Before you can electronically exchange data with another partner, both sides need to decide on a technical standard. Various organizations, including the UN, ANSI, DIN, or the German VDA, have defined these standards.

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.

Look at a list of current message standards and EDIFACT messages.

What communication protocols should I use for EDI?

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?".

What’s the best way to deploy an EDI solution?

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".

What expenses should I expect?

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.

To achieve economical utilization of EDI solutions, it is essential to have a long-term strategy in place that considers a company's future needs. Prior to system installation, substantial groundwork needs to be conducted. The guiding principle for any EDI project is as follows: "Strategy before organization, organization before technology."