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:
  • 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.
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?.