It is hard to believe that a technology developed originally in early 1970s is still relevant today. It is common for businesses to have their own systems and these systems do not always integrate seamlessly. If that's the case, EDI might be a good candidate to look into to improve operational efficiency.
As we enter an era of rapid digitalization within business, there are still areas that often overlook. One of those areas is the lack of connectivity between system to system. It is understandable that each and every business may need different systems. However, when it comes to business dealings, most activities are still done manually with numerous touches. EDI allows companies to transfer data seamlessly, eliminating the need for paper-based documents and manual processes. EDI encompasses various documents, including purchase orders, invoices, shipping notices, and more, using a structured format that enables different systems to communicate effectively.
What is EDI?
EDI, or Electronic Data Interchange, is a system that facilitates the electronic exchange of business documents in a standardized format between trading partners. It replaces traditional paper-based methods and manual data entry, streamlining communication and improving the accuracy of information shared. EDI transactions are typically carried out using standardized protocols such as EDIFACT, ANSI X12, and others, ensuring that all parties involved understand and can process the information consistently.
Here is what a typical manual process looks like:
Here is the same process with EDI:
There are many different kinds of EDI documents, the most common are as follows:
- 810 Invoice
- 846 Inventory Inquiry
- 850 Purchase Order
- 856 ASN
To see the full list, visit here.
Benefits of EDI for Companies
The adoption of EDI brings numerous benefits to companies, enhancing their competitiveness and operational effectiveness. Some of the key benefits include:
EDI automates and accelerates the flow of information, allowing companies to process orders, invoices, and other documents faster and with greater efficiency. This leads to quicker turnaround times and improved customer satisfaction.
By eliminating the need for paper-based processes, EDI reduces costs associated with printing, mailing, and storing physical documents. It also decreases labor costs related to manual data entry and error correction.
EDI reduces the likelihood of errors by ensuring that data is entered and transmitted in a standardized format. This leads to more accurate and reliable information, which is crucial for decision-making and operational processes.
EDI provides real-time information about orders and shipments, enabling companies to manage their inventory more effectively. This helps in reducing stock levels, avoiding stockouts, and optimizing warehouse operations.
Companies that use EDI can respond more quickly to their partners' needs and requirements. This improved responsiveness and reliability can strengthen business relationships and lead to long-term partnerships.
EDI systems can easily scale to accommodate growing transaction volumes and adapt to new business requirements. This flexibility allows companies to expand their operations without significant disruptions.
EDI helps companies comply with industry regulations and standards, reducing the risk of non-compliance penalties. It ensures that data exchange practices meet the required legal and industry-specific criteria.
Companies that adopt EDI can differentiate themselves from competitors by offering faster, more reliable, and cost-effective services. This can be a significant advantage in industries where timely and accurate data exchange is critical.
EDI + Odoo (How it works?)
You and your trading partner(s) would have to identify the necessary EDI documents that will be exchanged (a link above will take you to the full list). Once the EDI documents have been identified, your team will need to select between the two methodologies:
- Through the native integration with SPS Commerce: You can read more about this here.
- Through direct communication with your EDI trading partners: Developed by OERP, we would map out each document and establish the exchange directly.
Implementation Cost | Maintenance Cost | |
Through SPS Commerce | From US$ 3,000 per trading partner | Tiered model based on transaction volume |
Through Direct Communication | Low cost per document per trading partner | Low monthly fee |
Choosing the correct methodology will depend on each use case. If you are unsure, consult with our experts below.
Ready to start using EDI?
OERP can assist your company’s EDI needs. We have successful experience in both methods for EDI integrations. Connect with us below to see which method suits you best.
Conclusion
Electronic Data Interchange (EDI) is a powerful tool that modernizes and streamlines business processes, providing significant advantages in terms of efficiency, accuracy, and cost savings. By adopting EDI, companies can enhance their operational performance, improve relationships with trading partners, and gain a competitive edge in their respective industries. As technology continues to evolve, the relevance and benefits of EDI will likely increase, making it an essential component of business strategy in the digital age.
Understanding Electronic Data Interchange (EDI)