EDI Integration – What, Why, and The How of EDI

EDI (Electronic Data Interchange) allows the exchange of business documents from one computer to another. It uses a standard electronic format between different business traders and partners. Many perks come along with moving to an EDI company for integration. The EDI helps to reduce the cost, automates workflows, processes documents faster, and fewer errors. Additionally, it creates a smooth working relationship among partners and traders.

EDI integration and transaction consists of important business transactions. It contains critical information and a popular example is EDI order processing.

What is EDI integration?

EDI integration is an EDI workflow established between trading partners and customers. You can achieve EDI integration using the following steps:

  • Start with establishing the EDI documents, protocols, transactions, and endpoints that you will need to transfer and receive data from your trading partners.
  • Next, convert the EDI data into a preferable format that is compatible with their back-end environments. It is necessary for the Enterprise Resource Planning systems and other accounting systems.

How does it work?

The technology of EDI integration is around for decades. However, many organizations are seeking EDI integration software and other solutions that are mandatory for the initiatives of EDI modernizations. Furthermore, these initiatives can help to extend EDI data integration and automation capabilities way behind just an EDI message. This process is vital to support different modern-day business requirements. Therefore, businesses and organizations must choose the right EDI service that offers an integrated approach.

The right EDI service should be capable of delivering automated workflows, increasing visibility to operations, and enhance customer service and satisfaction regardless of the industry.

Why EDI integration?

Most organizations need to use EDI for their critical B2B transactions. And a lot of companies are doing just that. However, the winners are the ones who use EDI integration beyond that to their full potential. These are the companies that are actually reaping the benefits of automation through improved business visibility. Additionally, you can also eliminate the manual processes.

There are multiple reasons why businesses go for EDI within their enterprise. EDI is one of the great tools that help to save money, offer accuracy, speed, and efficiency.

Accuracy: You can eliminate the need for manual data entry with EDI integration. It is necessary to automate your EDI transmission with your trading partners, in addition to ingestion and transformation into your ERP solutions. Therefore, manual data entry is not necessary and you can avoid the list of errors that come along. Firstly, automated data flows help you to prevent the mistakes themselves, ensuring you remain EDI compliant.

Business partner visibility: if the EDI is done perfectly, then you have more time and resources to focus on your business. With data accuracy, workflow automation, and data accessibility within the ERP, you can easily know how your EDI partners are affecting your business.

Business Cycle Speed: EDI integration helps you to reduce the processing time on significant levels. The Order-to-shipment business cycles are cut down by at least 50-60%. All your EDI transactions are complete in minutes instead of days means EDI integration makes all your processes faster.

 What are the main types of integration?

There are three main types of EDI:

  • Direct integration
  • Indirect integration
  • And Hybrid EDI

Direct Integration: This type of EDI is created using a particular type of protocol such as AS2 or FTP. These protocols establish a connection between the EDI trading partners and your internal ERP. Your EDI trading partners include customers, suppliers, and service providers. This is a specific instance of direct EDI and ERP. Mostly, direct integration leads to a business managing thousands of individual partner connections. More often than not, this leads to added complexity especially if your business does not have a standardized protocol. Direct integration works perfectly for large-scale integrations when there is a lot of data transfers between your ERP and the trading partners.  

Indirect Integration: An indirect EDI integration works through the use of an outside EDI Value Added Network or a similar type of broker. Firstly, the VAN is the middle man between your ERP and the trading partners. Next, message transfers from your ERP to the VAN. Later, after the message is received, the broker or the VAN transforms it. Finally, the VAN sends the message to the EDI trading partner in the preferred format.

Hybrid Integration: There are situations where an organization needs both direct as well as indirect integration. You might need a combination of the best of both worlds. A Value-Added Network might handle some of the organization’s EDI transmissions. However, the critical customers and trading partners connect by direct integration. Hybrid EDI integration is nothing but a combination of managed services with the help of in-house EDI resources. Hence, it helps to create a flexible EDI solution on the whole.

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