It was introduced more than 40 years ago and served mostly military logistics and freight control systems. Now, in the era of digital transformation era, it is a globally deployed system that makes processing vast amounts of information much easier. We are talking about the electronic data interchange system (EDI). A study by Dart Consulting valued the current market at an estimated $1.68 billion (2018), with projections reaching as high as $2.1 billion by 2020. This is not surprising, considering that more than 160 000 companies have introduced EDI solutions in order to improve operational efficiency.
The smooth functioning of a company depends more and more on the speed of operations, reliability and error minimization. Unfortunately, the number of documents is still growing, and ever more employees have to be coordinated. Invoices, bills, contracts, orders… the sheer volume of organizational data can paralyze any enterprise. The first step towards tackling this is digitization.
EDI systems unify customers, suppliers, business partners, factories, manufacturers and logistics, create more effective partner relationships based on streamlined work procedures, faster information exchange, real-time control, increased productivity and stronger trade links. The implementation of EDI solutions will soon become crucial to any organization that wants to grow and cooperate on international and regional levels. The biggest players on the market already demand that their business partners operate EDI software.
Eventually, no business will be able to avoid EDI. This article will help you to prepare for upcoming changes. It explains how EDI solutions work and how to choose appropriate electronic data interchange software, and presents the most popular EDI services and the benefits they bring to your company.
What is EDI?
Electronic data interchange is the exchange of commercial and financial documents and data (orders, order responses, dispatching advice documents, receiving advice documents, invoices, corrected invoices, remittance advice documents, etc.) across a variety of platforms and programs in the form of standard electronic messages, directly between the IT systems of business partners. Introducing EDI solutions solves problems related to human errors and significantly shortens the data processing time, while saving on materials such as stationery and printing consumables (EDI is eco-friendly) and lowering administrative costs.
A global business-to-business network could not exist without an adequate IT system connecting manufacturers, distributors, retailers, producers, etc. In the not so distant past, we relied on phone calls, fax machines and paper documents sent by post or courier, all of which took lots of time. With EDI solutions, all manual processes are reduced to the minimum.
One of the greatest advantages of EDI solutions is that they support almost any file format. First and foremost, the UN/EDIFACT format (United Nations/Electronic Data Interchange for Administration, Commerce, and Transport), followed by XML, PDF, ANSI ASC X12, GS1 EDI, TRADACOMS, ODETTE, VDA, HL7, EDIGAS and many more. This lets companies use their chosen format, which the EDI software converts when documents are sent to business partners. For example, company A uses VDA files, but when their warehouse receives them they are displayed in XML, in accordance with the warehouse’s internal policy. This means you do not have to adjust your format, convert data via untrustworthy programs, or (even worse) type the orders or invoices manually and thus run the great risk of making a mistake. Even if you send the data properly, there is still a chance that an error will occur on your partner’s side. EDI software ensures one communication channel with all necessary information in a single database, updated in real time.
How Does EDI Work?
Full EDI integration ensures that human input into document processing is all but eliminated. Back in the day (and unfortunately still now in some enterprises), all paperwork had to be done manually. Paper records were typed into a computer, then sent via email or fax. The longer the chain of activities, the greater the risk that something would happen along the way. Bad handwriting can result in a wrong order, delayed deliveries, empty warehouses and inaccurate payments. Coordinating all those processes was time-consuming, stressful, and yet absolutely unnecessary. EDI solutions allow you to automate the transfer of documents and data exchanged between companies. You no longer have to rewrite invoices or contracts manually, which means that data exchange is much faster and as near to error free as possible.
Instead of wasting money and energy on outdated practices, implement EDI software that will help you exchange documents with your trading partners in a matter of minutes. Let’s use placing orders as an example. You create an order in your information system and send it in your own internal format. The order, without human input, is quickly and automatically sent via the EDI software to the supplier. At the same time, the original file format is being converted to the recipient's (supplier's) format. The supplier receives information in their own internal format, directly to their own EDI system, and is immediately ready to complete the order. Thus, both companies have the same order in the format they want, they know warehouse stock levels, the quantity of products ordered and payment details, and can adjust requirements in minutes if necessary.
Some companies are reluctant to introduce EDI software because they fear that the system will be complicated and hard to deploy. The fact is, EDI solutions can be implemented almost immediately, depending on the level of customization required. You can choose between web-based portals that require only logging in, or more advanced software installed on your company’s own computers. Everything depends on what you actually need. A good EDI system will evolve as your company grows, taking into account the number of trading partners and complexity of operations. So the question is, how do you know which solution to choose?
Introducing EDI Solutions to Your Company
If you decide to implement EDI solutions in your company, you can, theoretically, do it in-house, providing that your developers are able to create and write the appropriate software from scratch. Unfortunately, this method has plenty of disadvantages. It is very time-consuming, the budget necessary to develop a functioning EDI system may exceed the company's capabilities, and there may be additional costs related to debugging and ironing out potential incompatibilities with EDI systems used by your company's partners. This solution is completely out of reach for small, growing companies because it is just too costly and risky.
Fortunately, there are plenty of EDI solutions providers that have appropriate competence and experience to develop a dedicated solution for your company’s needs. Using the services of such a provider reduces the investment you need to make, guarantees that the EDI software implemented will work flawlessly, and minimizes risk by running practical tests. What is more, you will receive an EDI system that will grow with your company and can be adjusted to meet the demands of prevailing standards and legal procedures.
It is reasonable to leave the adaptation of customized solutions to the professionals. There are plenty of features that can be included in EDI software, from entering, converting and storing data to supporting the communication layer. An EDI solutions provider will not only adjust the system to your business model and resources, but also train your staff and guide them through the implementation process.
EDI Services to Implement in Your Company
EDI solutions provide your company with a competitive advantage by facilitating the swift and secure transmission of data to and from all business partners anywhere in the world. To introduce the most efficient and optimized software to your company, you need to decide what scope of services you are going to need. EDI solutions include multiple features, depending on who your business partners are, what products or services you offer, and how many documents you process annually.
Below you will find a few features of the EDI services offered by Comarch:
Master Data Management and Exchange
This allows the user to organize the process of exchanging and maintaining data. It eliminates chaotic email or paper communication that imposes double data entry. Using electronic forms and workflow processes integrated with master data systems not only eliminates the need for MDM employees to repeat data entry, it also allows the information to be validated at the beginning of the process so that the user can unify MDM processes on different systems.
Supply Chain Management
A solution that ensures the secure and rapid flow of information concerning the physical movement of ordered goods by utilizing EDI messages combined with logistics labels. Supply chain management enables management of the flow of goods. This solution communicates with various logistics service providers, allowing full integration with logistics systems.
E-invoicing enables the cost-effective handling of entire invoice-related flows, both electronic and paper, in one integrated suite. The multi-lingual service desk and interoperability with providers worldwide guarantees electronic communication with all vendors/customers in one place. You can rest assured that invoice content is validated, and that the format is converted in the right way. The transmission process is secure, and you have access to detailed information about all statuses. Moreover, you may fully streamline and automate your AP/AR invoice process.
This combines e-sourcing, e-procurement, e-invoicing and accounts payable invoice automation capabilities into a single and integrated suite. It enables improved collaboration both within your company and with your business partners, thanks to automated document handling and a holistic approach to data exchange, while leveraging financing solutions. As a result, your company, with prompt access to reliable reports, will be more efficient and can choose freely how to optimize working capital.
A B2B e-commerce solution that allows B2B collaboration with SME partners. This is an ergonomic web application that allows the user to run modern sales channels, even with the smallest customers. A user-friendly interface, graphically adapted to customer requirements, provides a simple and fast way to handle all the purchasing processes. The manufacturer/distributor can provide up to date information about new products or planned marketing campaigns.
Automating accounts payable and accounts receivable ensures a decrease in the workload associated with manual processing. Thanks to an easy to use web interface, every invoice is accessible, trackable and reportable at any time and from anywhere. Using the process engine accelerates the acceptance of documents and collects data entered at every stage of the process. Thanks to this, accounting staff can focus solely on verification and particularization of the entered assignment.
Benefits of EDI
Forrester has conducted research focusing on the future and benefits of EDI solutions. When asked about their reasons for introducing EDI software to their organizations, 82% of respondents wanted to reduce costs and exchange electronic documents with business partners. 81% were looking for real-time business process visibility, and 75% highlighted increased business agility. Furthermore, 74% of respondents cited the need for better solutions for supporting compliance and risk management for B2B exchanges.
Let us take a closer look at the benefits of EDI solutions and their advantages over paper systems.
Save time – act faster
The need for manual data processing is reduced to a bare minimum, because the processes of translation, conversion and data exchange are performed automatically by the appropriate computer software. Document exchange is incomparably faster than for traditional methods such as mail. You can search the database for specific goods at any time, place an order and receive the confirmation almost instantly. There are no delays due to different time zones, no long waits to get the person responsible for contact with your company on the phone, no talks, discussions or error correction that could hold up settlement of final agreements, etc. Transactions happen in minutes instead of days or weeks, and you no longer have to rely on the postal service or courier companies in order to conclude them.
A Dart Consulting report shows that manually processing a paper-based order can cost $70 or more while, processing an EDI order costs less than $1. In the long run, EDI software can save you thousands of dollars annually. Exchanging e-documents improves the visibility and speed of transactions, while decreasing the amount of money you spend on paper, printing, copying, filing, storage, postage, and manual labor.
Minimal risk of errors and improved data quality
EDI solutions improve data quality by reducing human errors caused by illegible handwriting, misunderstandings on the phone, lost mail, typos and so on to a minimum. There is no more need to copy data from paper documents to the computer system, as everything is handled electronically.
Better and wider business relationships
Electronic data interchange is becoming an international standard, so you need to keep up with it and not fall behind your competition. Furthermore, strategic benefits include strengthening market relations with trading partners, better customer service and increased competitiveness.
For small firms, EDI is a guarantee of growth and better time management that frees up valuable hours for key tasks. Replacing manual, slow and repetitive paper processes with a fast and reliable digital solution allows the small company to use the time saved on neglected tasks and future development.
Big companies benefit from EDI solutions as well. Organizations operating on EDI software are more willing to cooperate with other enterprises using the same system. You may call it an international electronic common language for data exchange. This means that electronic data interchange systems are a gateway to cooperation with the best and the biggest on the market. In fact, many companies require EDI from a potential partner wishing to build a business relationship with them. And no wonder, for without EDI solutions they would be swamped with documents and would not be able to afford to hire even more people to process them manually.
Security and real-time control
The traditional methods of data exchange are not 100% reliable. Post goes missing, emails land in spam, and hardly anyone uses the fax machine any more. All of these methods can be compromised or intercepted by unauthorized parties. With EDI solutions, you have an assurance that all your documents will reach the appropriate receiver safely. Access to the system needs to be authorized, so you can check who has viewed and modified files in your database. Business-critical documents can be tracked in real time, at each step of verification, leading to faster decision-making and responsiveness.
Being able to exchange documents swiftly and with almost zero chance of errors lets you execute orders at higher speed. Your company will not be left with an empty warehouse, or with shelves overflowing with unsold products. EDI systems offer balance in inventory levels, better use of warehouse space, and fewer instances of items being out of stock. Processing business documents quickly and accurately leads to less re-working of orders and fewer cancelled shipments.
Bringing automation to paper documents and manual processing tasks allows your employees to concentrate on neglected tasks (the most common being customer service and marketing), and makes them more productive.
Shorter delivery time
Faster execution of commercial transactions shortens the order-sales-invoicing-delivery-payment cycle. Shortening order processing and delivery times means that organizations can reduce their inventory levels and lower freight costs through fewer cases of deliveries needing to be expedited.
Electronic solutions are far more ecological than paper-based processes. Switching to EDI solutions will significantly reduce your use of paper, ink, and other office supplies. This leads to less waste and lowers the amount of trash produced by your company.
Companies are digitizing as many processes as possible, so it is no wonder that electronic data interchange solutions have become standard in international business. They not only simplify the work of your employees, but also save your organization a lot of time and money. In order to grow, your company needs a stable and reliable system to process documents, data and information. The sooner you introduce it, the greater your advantage over your competition. Once you implement EDI software, it will grow with your company, because you can add and adjust functions at any time.
Comarch can help you to implement EDI solutions adjusted to your needs, budget and expectations. We specialize in secure and versatile solutions, compliant with international formats and standards.
 Dart Consulting Report: Electronic Data Interchange (EDI) Global Market and Its Applications in Industries.
 Forrester Report: The Future Of EDI. It’s Time to Take A More Holistic Approach, by Ken Vollmer
 Dart Consulting Report: Electronic Data Interchange (EDI) Global Market and Its Applications in Industries