So, let’s get right down to the B2B business. What exactly is EDI? I mean, after all, you did click on this blog. Defining EDI is the least we can do.
To put it simply, EDI stands for Electronic Data Interchange. It’s more like an inter-company communication of business documents in a standard format. It allows the movement of information across applications in organizations.
EDI allows automation and rapid sharing of information, instead of the hours, days, or weeks required with paper documents or other methods.
With EDI businesses can integrate and share documents of different types – from purchase orders to invoices to requests for quotations to loan applications and more with organizations who are trading partners that exchange goods and services frequently as part of their supply chains and business-to-business (B2B) networks.
How Does EDI Work?
There are three fundamental steps to sending EDI documents and we’ll break them down for you.
Step 1: Prepare the documents to be sent
The first step is to collect and organize your data. Perhaps instead of printing an order receipt, you can create an electronic file with the necessary info to build an EDI document.
The sources of data and the methods available to generate the electronic documents can include human data entry via screens, exporting PC-based data from spreadsheets or databases, reformatted electronic reports into data files, and others.
Step 2: Translate the documents into EDI format
Don’t worry. This is just as easy as the first step.
All you have to do is simply feed your electronic data through a translator software of your choice to convert your internal data format into the EDI standard format using the appropriate segments and data elements.
However, the translator software you use will likely require specialized mapping expertise in order to define how your internal data is to be mapped to the EDI data.
The good thing is that translation software is available to suit almost any type of computing environment.
If you don’t have access to a translator program, you can always enlist the services of an EDI service provider who offers the same translation services. In that event, just send your data to the provider who will handle the EDI format translation for you.
Step 3: Connect and Transmit your EDI documents
So far, so good? Good. Now that your business documents have been translated to the correlated EDI format, they can now be transmitted to your business partner.
You must decide how you will connect to each of your partners to perform the transmission.
You can either connect directly using AS2 or another secure internet protocol or you can connect to an EDI network provider (a VAN provider) using your preferred communications protocol and rely on the network provider to connect your business partners using your preferred partner communication protocol.
Lastly, you can do a combination of both. This depends on the particular partner and the volume of transactions you expect to exchange.
Benefits of Electronic Data Interchange
As it turns out, EDI can be and is very beneficial. EDI has proven to help automate the ordering process and improve efficiencies across the business. In fact, some of its benefits include:
- Increased Speed & Accuracy
- EDI can speed your business cycles by 61%. Exchange transactions in minutes instead of the days or weeks of wait time from the postal service.
- Improves data quality, delivering at least 30% reduction in transactions with errors and eliminating errors from illegible handwriting, lost faxes/mail, and keying errors.
- Cost & Time Savings
- Expenses associated with paper, printing, reproduction, storage, filling, postage, and document retrieval are all reduced or eliminated.
- Errors due to illegible taxes lost orders, or incorrectly taken phone orders are eliminated, saving time and money.
- Enhanced inventory and supply chain
- Increased efficiency
- Automating paper-based tasks allows your staff to concentrate on higher-value tasks and provides them with the tools to be more productive
- Quick processing of accurate business documents leads to less re-working of orders, fewer stock-outs, and fewer canceled orders.
What About E-Commerce?
B2B E-Commerce and EDI are just different types of solutions that solve different types of problems within an organization, but many companies are starting to combine them. Many EDI-focused businesses are launching B2B E-Commerce channels.
For example, Kellogg has launched a B2B E-Commerce initiative which includes product purchases and distribution on businesses that are not grocery-related, like convenience stores.
This incorporation of B2B E-Commerce strategies into growing channels like Kellogg will allow them and others to create a more modern ordering experience for customers.
Unlike EDI, B2B E-Commerce opens up the opportunity for their customers to have visibility into order data and track the status of orders, too.
They can also learn more about the products customers buy, receive tips on how to sell more of that product, and place orders on their own time.
Today’s buyers need and expect an intuitive ordering experience despite the fact that is for work purchases. The companies that invest in their buyers’ demands today with modern digital buying experience will enjoy a stronger outlook for their business.
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