Businesses across different verticals are moving towards automating processes. This digital transformation is supporting organizations to process faster, make fewer errors and deliver accuracy.
Enterprise software development firms have a major role to play in this digital transformation. Their skill and knowledge are assisting companies in handling and managing large voluminous data in minutes, along with smooth transactions.
One of the commonly used digital platforms is electronic data interchange. The evolution of EDI was meant to replace commercial document management, faxing, printing all manually into electronic format. The industry that had the maximum benefit of EDI solutions was the supply chain, followed by retail, healthcare, automotive & many more.
Let’s understand how EDI is making documents management and transmission easier.
Understanding EDI Functionality in Steps
How companies can seamlessly prepare, send, and translate documents from EDI format to readable one will be explained in steps here.
Preparing Documents for Sending
You do not have to manually organize paper-based data for it. Once you have added the data to the EDI system, the system will organize and create an electronic file for developing an EDI document.
EDI system prepares data from various sources, such as databases, to create output files and is ready for transmission.
Translating the Documents to EDI Format
The next step is the integration of translator software. The translator software can convert the internal data into EDI format and further into human-readable text. With specialization in EDI mapping expertise, companies can define the internal data to be mapped for the requisite outcome. Here is an option to pick a translator as well if you do not have the expert personnel to manage translator software and mapping.
Connecting and Transmitting Documents
After the translation into the appropriate EDI format, they can be quickly sent to a business partner. All you need is to decide on how to connect with each partner, such as – connect directly using AS2 or any secure protocol, connect through EDI VAN providers – who uses a preferred communication protocol for secure transmission, and the last is a combination of both – depending on the volume of transactions.
The EDI transactions defined by set standards assure data quality. With several defined EDI message standards, industries can use the standards that fit best. The standards include – TRADACOMS, GS1, Peppol, ODETTE, and the ASC X12.
EDI document flow is usually the movement of various inbound and outbound addresses to execute a process. These messages are made of different data elements.
EDI data elements include items, such as sender ID and receiver ID, which are also stated as sender’s address and receiver’s address. A combination of different segments in EDI is used to make the message meaningful, consisting of structured distinct data types.
When observed, a global manufacturer regularly exchanges around 55 distinct document types. To enable continuous and uninterrupted transmission, companies must utilize metalanguages to complement EDI.
How EDI is Beneficial?
EDI transaction makes the B2B process super quick and efficient compared to the conventional forms of document exchange. Let’s closely look at key benefits of integrating EDI solutions into your business.
Agility In Business Processes
EDI is mostly seen to improve the agility of business processes. The transactions that once took days to process, when manually done, can be completed in minutes or hours, depending on its complexity. Large volumes of data transactions have no impact on the speed of business, however, may reduce processing time.
Implementing EDI can remove the paperwork and streamline the process at the procurement stage. EDI can leverage retailers to send an e purchase order to which the supplier can respond through confirmation records in no time. These quick proceedings offer room for improvements quickly when needed to expect a right outcome.
When you replace mundane manual work with automated processes, you tend to amplify your productivity. The reason being, more focus is on structuring critical processes. With EDI, you reduce process time, use resources efficiently, one-time data entry, automated reconciliation, and hassle-free management, increasing overall productivity.
Manual processes are much more expensive than automated ones, especially when you have to process complete purchasing orders, generate invoices, and obtain an advanced shipping notice cycle. As per research, an EDI can save up to 64% of business processing costs. So, instead of investing in multiple independent solutions, companies must thoughtfully spend on integrated EDI solutions.
Earlier, people were troubled not just with the mundane manual work, they also struggled with the errors lining up in their processes. When observed EDI data accuracy compared with paper-based, it was noticed that paper-based data processes had 5% inaccuracies.
With EDI integrated into your business, you can automate your inventory management system, distribution management, production management, and purchase order processing.
With automated processes, companies do not need to handle documents every minute or indulge a resource to monitor essential operations every now and then.
EDI is yet to evolve a lot, technology-wise, to bring stability, visibility, and optimization. When done right, you can take complete advantage of the technology. Here we are underlining a few challenges that you can avoid or deter to effective EDI implementation and substantial outcome.
Challenges with EDI Implementation
There are multiple formats of EDI, and not all are human-readable, such as the EDIFACT. So, if there is any error, you may not be able to relate and fix them. Even when you catch the errors, fixing them takes a lot of time and may sometimes cost too much. Additionally, you cannot still confirm the accuracy of a transaction.
How to Solve It – The data input in your EDI in the first place needs to be checked, whether it is correct or not, to expect the desired outcome. For instance, duplicate orders or incorrect prices can lead to wrong input, thereby giving you incorrect output. So, check your source data or data retrieved from a trading partner first, or have an error detection tool incorporated in your EDI to avoid trouble or check for the data each time.
Wrong EDI Type
EDI is primarily of three different types and is suitable as the business requirement. With requisite knowledge of your business needs and EDI types, only then you can make the right choice to take complete advantage of EDI. Let’s quickly highlight three types of EDI –
EDI via VAN – This type is a private network established by a third party, as aforementioned. Integrating VAN leverages the flexibility and opportunity to outsource maintenance.
Direct EDI – With this type, you can establish a single connection with each of your trading partners. This is mostly used for on-premise, and with a skilled and in-house expert team, you can execute it cost-effectively.
Web EDI – This type lets you exchange documents with web forms. This is a simple and effective way for data exchange, which is again offered by third-party EDI-managed providers.
EDI managed providers have a big role to play here. When implementing a software solution such as an EDI, if you lack the requisite knowledge, you will end up using the wrong type, detering you from explicit benefits that you can enjoy.
How to Solve It – Modern EDI developments must be focused on simplifying processes. Companies are moving more towards cloud solutions. Opting for a web-based EDI gives you effective EDI implementation and long-term execution. Evaluating the skill set available currently in your organization will help you to better pick.
Security is one of the major concerns for any industry, especially those businesses with multiple partners and sources to gather data. Sharing data inter continent is another concern as people use different legal frameworks, privacy, and data protection rules.
How To Solve It – To have a secure information transmission by EDI with your multiple partners, ensure to encrypt the transfers protocol. Additionally, ask your partner to have proper data storage and discuss the security policies with your partner to ensure that you follow the encryption practices that are comfortable for everyone. Practicing stringent precautionary measures will ensure even sensitive data, such as invoices or healthcare information, to not get exposed.
Cost-effectiveness is the need of the hour to obtain profit. Industries, such as supply chain and logistics, have to streamline their delivery process and workflows for complete visibility. Plagued data can be an additional cost for the industries to incur. Additionally, implementing EDI when you already have a troubled system, you may face costs at every stage, which will include –
- Rolling out trading partners
- Developing EDI solution each time
- Building EDI skills
- Digitizing data
- Collaborating with EDI provider
How To Solve It – To Avoid cost at every stage after implementing EDI, proper planning before integrating EDI into your system is essential. Will your current infrastructure align with modern systems to provide the desired outcome.
With the assistance of an expert provider, you can quickly identify the faults, underline the goals of your business and select the right implementation of EDI. Your managed provider can suggest flexible solutions and simply the elements of implementation.
Understanding Complexity of Business
Industries, especially supply chains, have a very complex process to manage. EDI is basically a composition of different standards and protocols to help deliver your message to another trader. However, if the solution doesn’t streamline your processes and aligns with business culture, that is an utter waste of time. A supply chain industry requires a flexible solution, rigid EDI won’t fit in. Instead, it will leave the company struggling with more manual inputs than automated tasks.
How To Solve It – The type of EDI, mentioned previously, has a lot of impact on business, as it can either simplify the issue or integrate more troubles for you. Your systems must accommodate different transmission protocols, such as HTTPS. FTP, SFTP, OFTP, & more. In addition to EDI type, you must ensure to follow the standard as described –
ASC X12 The standard is usually used in North America and is often referred to as ANSI X12. This protocol is managed by American National Standards Institute, along with numerous XML schemas for service sector industries, such as Healthcare, Government Transportation, Insurance, and Finance.
UN/EDIFACT is another standard that is mostly used by the Administration, Commerce, and Transport industry. It is also the only international transaction set and is widely used today.
GS1 EDI is a subset of EDIFACT, that is popularly used to transmit messages within the global supply chain industry, which supports modern development.
What Can We Expect From Future EDI?
We can expect EDI to become the core element for data exchange capability. Additionally, new technology integrations will be compiled with EDI to make it more efficient and robust. We may see EDI to have –
AI Agent to be integrated into EDI to monitor relevant events and quickly recognize the non-compliant event. These agents may identify any replacement needed, initiate new orders/shipments, and authorize any returns.
Other than AI, we may see Blockchain technology to offer a shared version of the information flows to underline the faults and quickly resolve them avoiding any chargeback disputes.
IoT Sensors may also jump into the race of technology advancement. Sensors embedded with IoT technology can be tied to EDI messages such as EDI 855 and 214 to improve package conditions in real-time.
Author’s Bio: Alicia works with the editorial team of A3logics, a leading company offering IT consultation services. Exploring the latest technologies, reading about them, and writing her views have always been her passion. She seeks new opportunities to express her opinions, explore technological advancements, and document the details. You can always find her enjoying books or articles about varied topics or jotting down her ideas in a notebook.