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How Does EDI Work?

Are you wondering what is EDI, how does EDI work and what can it do for your company?

How is EDI used by businesses?

Businesses today rely upon fast transactions between trading partners. For example, getting product components or supplies to keep their business running.
A warehouse needs to keep its inventory accurate. A car factory needs bolts, metal frames, and many other components.
Each business must be efficient in relaying their needs through the supply chain. At the same time they must avoid costly data errors. That is why electronic data interchange (EDI), became a business standard.
EDI refers to the exchange of business documents from one computer system to another. The documents exchanged include things such as ship notices, purchase orders and invoices.
The benefits of EDI systems are many. EDI is fast, reliable, and replaces the mailing and faxing of documents. Also, it reduces cost associated with paper processing.

How does EDI work?

There are three steps to break down how EDI software works.
Step 1:
EDI requires electronic files. It is necessary to get and organize the data to send. For example, this might include exporting data from spreadsheets or reformatting reports.
Step 2:
Translating EDI electronic documents into the correct format is next. This stage requires feeding electronic data through translator software. The software converts the data into the correct EDI format.
The other option is to use an EDI translator service provider. In this case, you would send your data to the provider to handle the translation.
There are many EDI standards today:
  • UN/EDIFACT
  • TRADACOMS
  • ODETTE
  • and more
For this reason, it can be difficult to choose the right one. Some formats are specific to region or even industry. Those getting into using EDI should consult a partner specializing in EDI. Their experience makes the communications process effortless.
Step 3:
This stage is where you send your EDI files to your business partner. First, you’ve ensured the business documents are in the correct EDI file format. Next, you must connect to your partners directly for computer to computer exchange. There are several options for this connection.
  • Secure internet protocol
  • EDI Network provider (aka VAN provider)
  • A combination of both
Your EDI partner can guide you through setting up the proper point-to-point connection.
Now that we’ve covered the basic steps of an EDI transaction, let’s cover some frequently asked questions.

EDI Frequently Asked Questions

What is EDI (Electronic Data Interchange)?
EDI is the digital process by which businesses exchange information with one another. These businesses are also called ‘trading partners’. EDI documents can be safely and securely exchanged using EDI standard formats.
Companies use a special software to translate the EDI formats. Then internal applications, back-end computer systems or ERP can use that information.
EDI can solve a variety of industry and compliance issues. Also, it may come with business benefits that aren’t possible when using manual processes.
What types of business challenges will EDI software help me solve?
Growing businesses can’t rely on exchanging information through manual data entry. The risks of errors, compliance issues, and the drain on employee time becomes too great.
Adopting EDI software allows businesses to replace manual processes and paper-based systems. Thus, they can reduce waste, cut human errors and align with compliance standards. Also, EDI improves both efficiencies and relationships between trading partners.
EDI software increases the speed and accuracy with which employees exchange information. Plus, it drives down costs as businesses scale. Also, adopting an EDI solution creates a foundation for future growth. Specifically, scaling the business will not add to the complexity and risk of information exchange.
What are the benefits of EDI platforms?
EDI software helps companies optimize day-to-day business processes, partner relationships, and reporting. For example, EDI transactions replace inefficient document exchange methods. These include emails, phone calls, and paper-based exchanges. Plus, it automates the entry of POs, advance ship notices (ASNs), and invoices.
EDI systems also create many efficiencies. These include reducing inventories, shrinking fulfillment times, and preserving IT resources. Establishing these practices drives long-term value.
What types of reporting does EDI software provide?
Standardizing information exchange creates new opportunities for the management and reporting of information. Unlike with manual processes, EDI solutions feature built-in reporting solutions.
  • Detailed reports for inbound transactions
  • Extensive demand reporting
  • Shipment compliance reporting
  • Order and release accounting
What sorts of business benefits can I expect?
Companies who adopt the right EDI solution can expect many benefits. These include improvements to the speed, accuracy, and costs of their information exchange. Plus, they may overcome long-standing internal compliance issues as well.
Over time, they can improve productivity by removing manual processes. Also, adopting EDI software positions companies to leverage future business opportunities. They can consider new business partners without concern over managing new requirements.
How do I get started?
EDI software is accessible for almost any business, regardless of industry. Choose an EDI partner with flexible deployment options. Also consider services like outsourced EDI management and reliable Value Added networks (VAN). Plus, look for a company with a long history of successful EDI implementations.

How to Choose an EDI Provider

Electronic data interchange software (EDI) is an essential tool for partners in today’s supply chains. But integrating EDI software can be a complex maneuver, with a lot of moving parts—transfer and translation, standardizing integrations, building and parsing EDI documents, and integrating those documents with back-end applications. How do you choose an EDI provider?

You need to ensure the software you select will meet all your partners’ requirements in the long term. You need to meet near-term requirements, too. These may include transitioning customer and supplier collaboration to your new EDI deployment.

Securing the right EDI software and services for your business is essential for meeting these requirements. That’s why we’ve identified four criteria to help you choose the right EDI solution. Consider the following steps as you work to improve how you manage mission-critical information in your enterprise, and see how partnering with a total solution provider can facilitate that success.

Find a Solution Whose Benefits Align with Your Goals

Your solution should align with a predetermined list of business and operational objectives agreed upon by all affected parties. Whether it’s reducing redundancies and unnecessary costs, maximizing ROI for external business applications, or simply improving inter-party trust, find a provider who can help you connect the technical aspects of your EDI software integration with these goals.

Find a Solution That Makes Integration Easy

One key to making EDI work for you is ensuring that transaction data is available for analysis. As a result, you’ll be better able to anticipate and respond to critical business events.

Also keep in mind that each of your trading partners may have their own requirements. The right EDI provider is agile enough to format the EDI solution to each partner’s unique specifications to keep you compliant.

A total EDI solution provider will help you achieve integration between your EDI and enterprise applications. Your provider will position you to begin working towards your predetermined objectives immediately, without risk of disrupting existing processes or partner relationships.

Find a Solution You Can Personalize

Find an EDI platform that allows you to choose your preferred deployment method and select only the technologies you need for critical business processes. A Cloud environment can grow with your business and doesn’t require hardware purchases. Alternatively, an On-premise solution gives you more control over your hardware and data.

Also, you’ll want to consider your in-house team’s ability to manage EDI in-house. You may decide you’d rather free yourself from the day-to-day maintenance of an EDI system. If so, be sure to select an EDI provider which offers cost-effective Managed Services.

Partnering with a total solution provider will allow you to easily outsource certain processes, if you choose, and expand capabilities in the future as your business needs, and partner relationships, evolve.

Find a Solution That Supports Long-Term Agility and Growth

You need a flexible platform—one that supports critical processes and enables you to make short-term adjustments, but also supports larger customizations over time. Patience and persistence are key to finding the right EDI company. Choose and EDI service provider that can tailor a solution to fit your unique needs.

Why do companies partner with Radley for expert EDI consultation and ongoing managed services as they prepare for tomorrow’s supply chain challenges? Because our systems integration experts learn and understand our partners’ needs before designing long-term solutions to meet their key requirements. Contact us and discover how easy meeting all of your information exchange requirements can be, starting today.

Radley’s software platform offers a variety of flexible and affordable EDI software. Real time, B2B integration is possible.
Are you still wondering how EDI will work for you? Rely on our 40 years of experience to show you how. Contact a Radley EDI expert today to start streamlining your business processes. Or visit our resource page, What is EDI?.
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