Electronic Data Interchange (EDI) is a type of digital system that facilitates the computer-to-computer exchange of common business documents such as purchase orders, invoices, inventory levels, and shipping notes. It is capable of transferring business documents and data across a variety of technology platforms and programs. Labor-intensive supply chain communication methods such as phone calls, faxes or paper mail can now be replaced by EDI. EDI brings together manufacturers, suppliers and providers via their data systems in a global business-to-business setup.
All information of your company is usually stored in an ERP (Enterprise Resource Planning) system, e.g. B. Details of sales, stock levels, invoicing and billing, shipping, etc. When your EDI solution is connected to your ERP system, it gains access to the information and documents you need to do business with other companies.
Your suppliers and customers also have specific policies for their business operations. Shipping addresses, prices and other information must be taken into account when your orders are processed. EDI solutions share this information to improve coordination between companies along the supply chain.
EDI uses common information standards to ensure data formats from different trading partners are consistent. This helps trading partners avoid confusion and errors in order processing, invoicing, and other transactions. If two trading partners use different information standards, an EDI system facilitates communication through data translation. When communication between two partners is initially established, corresponding fields in each trading partner’s information systems are mapped to each other so that data can be shared reliably. When information is sent, it is automatically translated into the data format used by the recipient’s system.
The main benefit of EDI systems is highly efficient communication. Manually managing supply chain communications is too slow and error-prone for modern businesses. EDI solutions replace many manual processes with faster, more accurate automated transactions. With an EDI solution, incoming orders are automatically generated without requiring user input. There are no disruptions caused by operating across time zones or training new employees. Eliminating faxes and paper documents results in improved cash flow, faster buy and sell cycles, shorter lead times and reduced inventory levels.
Much like other business software like ERP systems, which used to be used exclusively by large companies, EDI solutions have come down in price and found their way into the hands of small and medium-sized businesses. Unlike ERP software, however, large trading partners can mandate EDI as a prerequisite before another company can join their supply chain. Therefore, the ability to trade with these large corporations is a major benefit of implementing EDI.
EDI solutions increase the reliability and accuracy of information exchanged between companies. After minimizing manual communication processes by implementing EDI, companies are seeing a decrease in errors and duplicate records. The direct transfer of information between your own ERP system and that of your partner ensures that it is correct and meets your partner’s requirements. This leads to improved trading partner relationships and fewer delayed transfers or costly chargebacks.
Automatic generation of sales orders, invoices, shipping reports, etc. will make work easier and easier for sales and warehouse workers. EDI solutions only grant access to authorized users and create audit trails to track usage and enforce information security. Integrating an EDI solution with your ERP system can bring other benefits as the integration allows for the automation of additional business processes.
For the above reasons, companies interested in improving supply chain efficiency, agility and ROI should consider EDI technology.