EDI
A brief introduction
What is EDI?
EDI stands for Electronic Data Interchange. EDI is a standardized method for transferring data between different computer systems or computer networks. It is commonly used for e-commerce purposes (such as sending orders to warehouses, tracking shipments, and creating invoices) although there are hundreds of available messages.
EDI and other similar technologies save a company money by providing an alternative to, or replacing information flows that require a great deal of human interaction and materials such as paper documents, meetings, faxes, etc.
Even when paper documents are maintained in parallel with EDI exchange, e.g. printed shipping manifests, electronic exchange and the use of data from that exchange reduces the handling costs of sorting, distributing, organizing, and searching paper documents.
EDI and similar technologies allow a company to take advantage of the benefits of storing and manipulating data electronically without the cost of manual entry.
Another advantage of EDI is reduced errors, such as shipping and billing errors, because EDI eliminates the need to rekey documents on the destination side.
One very important advantage of EDI over paper documents is the speed in which the trading partner receives and incorporates the information into their system thus greatly reducing cycle times. For this reason, EDI can be an important component of just-in-time production systems.
Why adopt EDI?
- EDI comes into its own when repetitive manual tasks are required to support a business relationship; Electronic Data Interchange simply eradicates them by automating the process and removing the paperwork element.
- It increases accuracy by eliminating the re-keying of data. The quality of data is enhanced by agreeing product codes, prices and location codes in advance.
- EDI also helps to cement customer/supplier partnerships by reducing the supply chain costs associated with manual processing.
- Adopting EDI makes your trading relationships more cost effective and easier to deal with.
EDI can also be found supporting business supply chains in a vast spectrum of industries ranging from Electronics to Motor Manufacturers, from Pharmaceutical Supply to HM Revenue & Customs. There are no barriers to the use of Electronic Data Intercharge in any industry.
The expansion has been driven by major clients insisting that suppliers adopt electronic data interchange (EDI) to reduce overhead costs, thereby helping to enhance the on-going competitiveness of their business.
Widely used across Europe, North America and the rest of the world, EDI is actively encouraged by European governments using United Nations' EDI standards to facilitate cross border trading.
EDI messages - how are they exchanged ?
EDI normally involves the use of secure private networks known as VANs (Value Added Networks), which securely and reliably deliver information between trading partners.
The VANs are accessed by specialist communications software providing access to the user's "mailbox". Typically EDI systems are likely to be PC-based (even if the backoffice system is on another platform), leveraging the exceptional PC power at very low cost.
In recent times there has been a move towards AS2, leveraging the power of the Internet to allow real-time delivery of messages without the associated costs of the VANs.
EDI Software is needed to enable the communication, management and translation of messages into and out of the EDI formats.
EDI messaging standards - what are they?
First we should define EDI standards. Standards can be imagined like a spreadsheet in which every "cell" or element defines a part of the message, say the colour or quantity of an item on an Order. Both ends of the relationship need to agree the standard and implement it precisely.
The most common EDI standard is named EDIFACT: it is a set of message definitions laid down to describe the data elements that are used to make up an electronic data interchange message, involving multiple business processes and multiple currencies.