EDI is one of the simplest technologies used by companies to exchange documents digitally. The standardized electronic format of computer exchange has aided companies with reduced costs, automated workflows, faster document transmissions & transformation, reduced errors, and smoother relationships with partners and consumers.
The process of EDI is quite simple where the buyer submits a purchase order for a product, the supplier then sends an invoice and both parties acknowledge it to complete the process. EDI integration usually takes place when an EDI workflow is established between trading partners via the following steps –
- Establishment of EDI documents, protocols, transactions, and endpoints for data exchange.
- Next, conversion of EDI data into the preferred format to be used in the back-end technical environment.
Note: The integration includes standard formats, such as ANSI X12 or EDIFACT for internal data translation. This standard lets trading partners speak a common language and communicate with each other.
Why Should You Think of EDI Integration?
As the adoption of digitalization is accelerating to standardize business processes and operations, the need for EDI services has been accentuated. In order to reap the benefits of EDI to its fullest potential, integration solutions have become imperative. For those who haven’t integrated EDI, below are the reasons that show that you should get EDI integrated with your internal systems.
Business Cycle Speed: Integrating EDI can help organizations to cut down the processing time, such as order-to-shipment business cycles can be reduced by 50-60%. EDI automated transactions are done in minutes instead of days to complete the process faster than ever before.
Trading Partner Visibility: EDI is not just about computer document exchange, it is more than that. The key to integration is also about knowing the status of the data – whether or not it is accurate and easily accessed within other systems. EDI gives a complete and real-time view of how the partnership with each trader is impacting your business.
Data Accuracy: The most important factor that any business would require when integrating an automated system is the accuracy of the data. EDI encourages the automated transmission of the data along with ingestion to eliminate manual data entry into systems. Manual entry can plague the system that would require extra time and resources to identify and correct them, but with EDI, you can ensure error-free data and seamless data flows, ensuring they are compliant with requisite regulations.
Let’s move further to understand the types of EDI integration for the business depending on their needs.
Types of EDI Integration
There are three types of EDI integration from which you can pick – Direct, Indirect, and Hybrid. Let’s talk about them one by one.
Direct EDI – This integration method of EDI uses a specific protocol, such as FTP or AS2 to establish a network between you and your trading partners. Direct EDI integration is used when the company has difficulty managing thousands of individual partner connections without standardized protocol. Usually, a large organization with lots of everyday data that moves back and forth between ERP and trading partners prefers this type of integration.
Indirect EDI – Indirect EDI is established when a third party or an outside value-added network is involved. VAN acts as a mediator between the ERP or internal systems and the trading partners. VAN here is responsible for sending and receiving the messages and transforming them into the right format preferred by you as well as your trading partner.
Hybrid EDI – Many organizations look for both solutions at a time hence, hybrid EDI integration is the result of such demand. The combination of VAN and direct EDI can manage both customers and trading partners that are connected to you in different ways, thereby creating a flexible solution.
In order to integrate EDI, you need an expert solution provider that can understand your business needs and requirements. You can either outsource your EDI integration or employ an in-house team.
However, depending on the size of the company, the expected response time of trading partners, and other considerations specific to your specific business may help you understand which you should pick among the two. Below table explains the pros of each – outsourcing EDI and in-house EDI.
It is important to realize which is the most appropriate solution for you. If you have complete knowledge about the EDI and want to have control over every transaction, then you must go in-house. And if you want an expert solution, then you must go for outsourced EDI services.
Even if you are looking for a hybrid model, where you want to provide support to your in-house EDI system while managing the expanding trading relationships, EDI outsourcing is the option for you to take.
Outsourcing EDI now has become a viable option in order to become more efficient in a competitive market. It is comparatively cost-effective than implementing software and employing an in-house team to manage it. The additional benefits of outsourcing EDI are streamlined below.
5 EDI Outsourcing Services Benefits You Should Check Out
No More Complexities
Supply chain and eCommerce services are continuously evolving sectors and hence require keen observation of the changing market and customers’ needs. Big organizations can keep up with integrating the latest technology to align with the market and take complete advantage of the same. While technology integration can be challenging for small organizations, outsourcing can help them relieve this burden. Proficient service providers can respond to the trading partners as well as keep pace with the changing trends and technology on your behalf.
No More Frustration
Frustration comes when you have expanded trading partners and have to meet individual trading requirements while managing the business. Since it is a forced cost of doing business through EDI, there can be unpleasant issues while trading, such as chargebacks and unilateral penalties. Along with these challenges, when you lose a key resource, it makes things worse, leading to the failure of the company. In order to avoid these circumstances, outsourcing EDI is the most effective solution of all. Neither do you have to bear costly replacements or chargebacks or fear of losing resources, the outsourced team is there to manage all.
EDI services are meant to increase the accuracy and efficiency of the business while trading with traders globally. With an experienced, adroit, and proactive outsourcing team companies can prevent multiple challenges while improving responsiveness to the customers. With EDI outsourcing, companies can eliminate these challenges –
- Maintaining changes to trading partners and implementation guides.
- Onboarding new trading partners and document implementation are timely.
- Providing support apart from regular business hours.
- Handling global customers’ requirements.
- Matching the new technology demands in every sector.
- Up-scaling infrastructure in order to match increased transaction volume.
Focus On Core Business
When companies handle the errors, resources, infrastructure, technology, chargebacks, and even trading requirements by themselves, it is extremely difficult to focus on prime business activities. EDI is a technology that also requires monitoring, timely updates, and changes to keep up with the changing technology and trends. Meeting EDI requirements can also be expensive and time-consuming hence, outsourcing can help save a lot of time and energy for the company. They will get time to focus more on their crucial business operations and activities and expand globally.
Reduced Operational Costs
EDI implementation and management are not simple. It requires time and cost both. These are a few operational costs that run simultaneously with EDI systems.
Staff – Implementing an EDI system means, setting up trading partners, mapping and integrating new documents, changing maps, translating software integration, coordinating with trading partners, and regular monitoring, testing, and troubleshooting errors. One or two staff members are sufficient for small organizations with limited transactions and traders. Large organizations, on the other hand, require a complete team, and the cost of managing a team may range between $50,000 – $75,000. Outsourcing EDI may just cost you $100 – $250 per hour.
Infrastructure – Integrating an EDI system requires hardware and communication software. These hardware and software also require maintenance regularly to avoid any failure in the system. Hence the cost for enter-level configuration can cost from $5,000 – $15,000 whereas a mid-level configuration may cost around $25,000 – $50,000 and enterprise level configuration costs around $50,000 – $150,000. The annual maintenance and support costs may range between 15 – 20% of the initial purchase price. A large organization might be able to pay the amount, but small and mid-sized firms cannot bear such huge costs.
Penalties and Chargebacks – As aforementioned, EDI is a complex process and rising demands of the trading partners’ trading requirements may lead to frustration. This may lead to mistakes, such as keying or typo errors, incorrect formatting, missing data, duplicate or redundant transactions, failure to acknowledge a transaction, unable to meet compliance requirements, and unable to meet data transport schedules. Where using AS2 is the most complex EDI transaction, Outsourcing EDI to an expert and proficient can deter all these penalty-causing factors, thereby improving accuracy and business scalability.
In a Nutshell
For efficient and faster EDI solutions, outsourcing EDI is the most promising solution that can be picked anytime regardless of the geolocation. Whether it is project urgency, need for extended control over supply chain management entities, managing multiple trading partners, overcoming the scarcity of qualified IT teams, requiring customized integration, and handling stringent service level conditions, EDI outsourcing is the key to all.
Additionally, EDI outsourcing services can have a greater impact on customers and your reputation. The team will assist you from the beginning of the integration to the onboarding stage, so if any issues arrive, they can quickly handle them. They will also help you with clearing out obscure data formats and protocols while researching on your behalf to meet the needs of your trading partners, customers, and market.
Scarlett works with the editorial team of A3logics, a leading company offering EDI Solutions. 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.