Electronic Data Interchange

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What is EDI?

The acronym EDI stands for Electronic Data Interchange, a technology that has been used in the business world since the 1960s, and which essentially permits the interchange of electronic documents between different computer systems. EDI is not a technology which is dependent on the internet, although the development of the network of networks has boosted its implementation and is today an agile, fast and safe system which facilitates the interchange of electronic data between all types of companies. EDI speeds up and streamlines relations between trading partners regardless of size, nationality or sector of activity.

In short, EDI is the key system for exchanging information between companies, enabling hundreds of thousands of companies to simplify their B2B2G management processes and ensure profitable trade relations between partners of any size, nationality or activity sector.

The standardized nature of the documents is what essentially differentiates EDI from other information interchange systems. Orders, delivery notes, invoices, inventories, price lists, etc., can be electronically interchanged between different trading partners thanks to the use of a common language which enables their integration into any computer system.

EDI automates the generation, sending, receiving and registration processes of all transactions. In real time and totally eliminates paper management

What EDI is not

EDI HAS NO COPYRIGHT
Ever since the creation of EDIFACT by UN/CEFACT, the basic aim of electronic data interchange has been to spread this technology to all industrial sectors, in any part of the world. Free from restrictions and without barriers hampering the uptake of EDI technology. The key lies in its open standards, available to any company.

This model allows companies to automate the exchange of information based on known and shared rules that are independent of the software used. Your customers or suppliers should be able to engage in EDI with you, even if they use proprietary solutions from providers other than your own.
EDI MESSAGE IS NOT AN E-MAIL

Although this design may remind you some point of the typical e-mail clients, they do not use the same working system or the same communication protocols.EDI messages are designed to be sent not by people, but by machines, so the way the message reaches its destination must be implicit in the data structure of the message per se. Forget your customer or supplier’s e-mail and start using terms such as GLN (Global Location Number).

What is it? What benefits does it provide? How does it work? All these questions are answered in the following pages.

EDI RETAIL
Technological solutions to optimize your business.

Carrefour, Nutrexpa, DIA, Harrods, Toys'R'Us, Printemps, Delhaize, Sony, Leroy Merlin, Nestle

   
EDI HEALTH
Leaders in the development of EDI and electronic invoicing for the pharmaceutical industry.

Abbot, Bayer, Merck, Lilly,Boehringer Ingelheim, Pfizer, Pierre Fabre, Kendall, Glaxo Smithkline

 
EDI AUTOMOTIVE
The fast, safe and profitable way to connect with your partners.

Feu Vert, Algontec, Fiberpachs, Michelin, Nissan, Ducati, Continental, Kenworth, Brogwarner

 
EDI LOGISTICS
To integrate a permanent communication flow between supplier, logistic operator and customer.

Logista, DHL Express, FCC Logística, Panalpina Group, TNT Expressm Exolgan, APL

 

 

EDI Key Messages

EDI (Electronic Data Interchange) is designed to automatically integrate your business documents into your ERP or Internal Management System. The higher the number of trading partners (customers, suppliers, logistic operators, etc.) and EDI transactions exchanged, the more benefits there are to be gained.

Several EDI messages can be exchanged between partners, although there are 3 key transactions that usually form the backbone of any electronic data interchange project

Key Benefits

  • • No paper involved

  • • Enhanced information processing

  • • Cutting down processing and storage costs

  • • Fewer errors

  • • Automation of operations

  • • Quicker response times

  • • Integration of procedures between all trading partners

What is required for EDI?

  • Standard Language: The Interchange of Electronic Data requires a common language shared by sender and receiver. The use of standards allows structuring of the messages in terms of standards known by the parties, standards such as EDIFACT, X12, XM…

  • EDI Software: Sender and receiver must be able to provide an EDI solution with which to construct and manage the messages. These applications are capable of processing different EDI standards with those which generate, receive and interpret the interchanged documents.

  • Communications network: EDI requires safe communications systems which are adapted to the peculiarities of this type of transaction. There are different options, although the most widespread are VAN, or Value Added Networks. Valued Added Networks (VAN) are private communications networks with high levels of permanent security and control which guarantee the correct sending and receiving of the different documents.

Which EDI documents may be interchanged


The standardised nature of the documents is what essentially differentiates EDI from other information interchange systems. Orders, delivery notes, invoices, inventories, price lists, etc., can be electronically interchanged between different interlocutors thanks to the use of a common language which enables its integration into any computer system. Nearly all transactions normally carried out by conventional means (fax, email, post…) can be managed via EDI.



Basic Process


Commercial documents are generated in the enterprise resource planning (ERP). The internal IT system communicates with the EDI software, transferring to it the data of the documents generated. The EDI software recognises the transaction type and receiver. It transforms the data to the standard which the receiver expects to receive, and it is carried out through the agreed communication system: (ftp, VAN, AS2, WebServices...). The document is received by the receiver’s EDI software. It identifies the EDI standard recognising the sender and transaction type. It transforms the message to the ERPs own data structure, with which it communicates to integrate the transaction in the management system.

Benefits of Electronic Data Interchange


EDI applied to the different operational systems in companies permits the obtaining of important benefits resulting in more agile and efficient operations. Benefits which translate into important cost reductions, which according to the level of implementation, can be as high as 90% with respect to the same process carried out in hardcopy documents.


  • - Automation of operations
  • - Reduction in response times
  • - Integration of procedures between all interlocutors and trading partners
  • - Process status visibility
  • - Information exactness
  • - Improvement of service to end user
  • - Reduction of costs
  • - Improves financial ratios
  • - Optimisation of teams

Highlights


Different research carried out by consultants such as Gartner or Aberden Group, prove that EDI…

  • - Reduces costs for processing commercial documents by at least 35%.
  • - In the specific case of invoices, this saving can even be as high as 90%.
  • - Improves the quality of information, reducing document processing errors by between 30 and 40%.
  • - Speeds up administrative and operational processes, reducing response times by around 61%

How to set up your EDI Project


Electronic Data Interchange (EDI), is today a reality present in a whole spectrum of business sectors. A reality which simplifies commercial relations thus boosting the improvement and growth of companies worldwide. At first sight it could appear that EDI is more suited to large-sized companies with contrasted technological capacities. The reality is that to implement an EDI project is nowadays within the reach of any company, thanks to the economic solutions of fast set-up and ease of use which exempts users from any technical complexities.


How it Works

In a traditional process based on manual information management, a typical document exchange schema would look something like this:

Buying department issues a purchase order
 The purchase order is forwarded to the supplier by fax or mail.
Supplier receives the purchase order, opens it, reads it and records it in the IT system again.
Supplier issues the invoice, printed out and sends it to the client by fax, e-mail or postal service
Client receives the invoice, opens it, reads it and enters it in their Accounts Payable management system manually


EDI systems implement computer-to-computer solutions that enable the information management models to exchange data directly with each other, doing away with many of the tasks required in the manual process while streamlining the process and enhancing security.

Frequently Asked Questions

Practically all the transactions that you would usually engage in with any trading partner by conventional means can be done via EDI. Those most commonly interchanged are orders, despatch advices, delivery notes, invoices, inventories etc.

The great advantages of exchanging data between Information Systems compared with the traditional processing of documents on paper today make EDI a prevailing reality in a multitude of activity sectors. This, together with the great variety of structured messages available to carry out all types of transactions, has extended the use of EDI-associated technologies to multiple trading partners. So much so, that exchanging electronic information with distributors, suppliers, logistic operators, customs, ports, airports and public administrations is nowadays common practice.

Electronic Data Interchange (EDI) has a firm foothold in the Retail sector, as a means of widespread commercial transactions between distributors and suppliers. Many business sectors have gradually developed their own EDI extension projects, and nowadays it is a reality perfectly established in the scope of healthcare, the automobile industry, tourism sector, transport, etc.

  • • Standard Language: Interchanging electronic information requires a standardized language shared by sender and receiver to structure the messages. There are different standards, such as EDIFACT, X12, XML...
  • • EDI software: Sender and receiver must have an EDI solution to draft and manage the messages according to the standard in which the interchanges are to take place.
  • • Communications Network: EDI interchanges call for secure communications systems adapted to the peculiarities of this type of transactions.

Solutions are accessible from a web framework that lets you send and receive EDI messages. This type of solution creates messages to be sent by manual mechanization of data through simple web forms, so these applications do not require any modification of the ERP.

For situations where a high volume of documents is exchanged, it becomes necessary to integrate the EDI transactions with the ERP so that the process of constructing and recording the documents is automated to achieve full integration with the information system. In these systems, certain adaptations to the systems are required to enable extraction and integration of the data that will make up the messages sent and/or received.

Depending on the volume of transactions and partners to be managed from your EDI platform, you might need to put a certain amount of resources into administration and upkeep of your EDI applications part-time, or even full-time for larger integration projects. However, there are different outsourcing services that save you part or all of the management associated with EDI platform upkeep.

Not necessary, since all applications and systems needed to setup an EDI solution can run perfectly well in service mode.

Benefits of EDI

EDI applied to the different working systems in companies provides important benefits, resulting in more streamlined and efficient operations. These benefits include important cost reductions, which depending on the level of implementation can be as high as 90% compared to the same process carried out in hardcopy documents.
Automation of operations
The printing of commercial documents, their handling, classification, inserting into envelopes, franking, sending, registration in ERP, etc.
Quicker response times
EDI documents are sent and received in seconds. Total or partial automation of the associated processes also means that registering documents in the ERP, validating quantities or prices, or cancelling appropriate amounts, can be carried out almost instantly.
Information accuracy
The information exchanged is based on standards known to the sender or receiver, thus ensuring their correct interpretation regardless of nationalities or activity sectors.
Cost cutting
Automation of operations, faster response times, fewer errors, no more use of paper… All these enhancements result in a much more efficient management system and a drastic reduction in costs.
Team optimization
With EDI technology it is possible to handle a much higher number of commercial operations with less manpower. The phasing out of tasks associated with management of paper documents frees up these teams to carry out tasks of greater added value.
Integration of procedures between all trading partners
The interchange of electronic documents is agreed between sender and receiver.
Process status visibility
Replacing paper with e-documents facilitates monitoring. We can integrate transactions such as acknowledgement for orders, invoices, amendments to purchase orders, status of payments pending, etc.
Improved service to end user
Implementing EDI involves the application of optimum work flows and response times. The possibility of receiving advance receipt notification prior to the delivery of goods allows, for example, the planning of resources and needs for unloading or redirection.

EDI Standards

There are several different standards for EDI message construction. Some of them have better penetration in certain sectors or regions of the world, and although they may have their own particular features, they all respond to the same premises:
  • • They are managed and maintained by supranational organizations that ensure their validity and timeliness.
  • • They set out standards and rules on how to construct business documents The rules include operational and technical criteria for generation of these messages.
  • • They are well-known and the information on how to run them is accessible and in the public domain.
UN / EDIFACT
One of the most widely implemented standards, especially in Europe.
UN/EDIFACT (United Nations/Electronic Data Interchange for Administration, Commerce and Transport) is the EDI standard developed by the United Nations and subsequently maintained by UN/CEFACT (United Nations Center for Trade Facilitation and Electronic Business) under the auspices of the UN Economic Commission for Europe.

The EDIFACT standard is based on syntactic rules for structuring the messages that allow the exchange of these data electronically in a multi-country and multi-industry environment. ANSI ASC X12
The American National Standards Institute (ANSI) developed this standard in 1979 to facilitate the exchange of structured information between US companies.
Thanks to the development of this standard and its degree of implementation, nowadays hundreds of thousands of businesses worldwide (not only in the USA) are using it in their EDI projects.

ODETTE
Odette’s initials stand for “Organization for Data Exchange by Tele Transmission in Europe”, an interest group representing the automotive industry in Europe that develops tools and provides recommendations to improve processes associated with supply chain management in this sector.

EDI Protocols

As an e-mail user, you are bound to receive several messages in the form of spam or advertising among your e-mails. Can you imagine if these messages were to reach your management system directly for integration into your ERP?
The criticality of the documents exchanged by EDI and the particular features of a model designed so that the internal IT systems of both sender and receiver can be automatically integrated without any human intervention make it necessary to develop secure communications platforms specially devised for these purposes.
The main communication protocols and services in an EDI system are as follows: VAN (Value Added Network)
Not only communication protocols. We are talking about private networks specifically designed to exchange these messages. There are several different private networks worldwide around which the different EDI messages between businesses are exchanged. The interconnection between these networks is the basis that allows the exchange of EDI transactions between users who may be in different VANs.
AS1 and AS2
They are versions 1 and 2 of what is known as the Applicability Statement. A point-to-point communication system that uses internet as its communication channel
OFTP2
Odette File Transfer Protocol was developed in the 80s by the “Organization for Data Exchange by Tele Transmission in Europe” (ODETTE) to exchange data through dedicated servers allowing the transfer of large volumes of information under maximum security guarantees.
SFTP
Secure File Transfer Protocol implements file access, transfer and management services. Initially designed as an extension to SSH 2.0 (Secure Shell Protocol) to provide it with file transfer capacity, it can also be implemented over other protocols.

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