1. What is EDI?
EDI stands for Electronic Data Interchange.
EDI is the computer-to-computer exchange of business documents between
companies. EDI replaces the faxing and mailing of paper documents. EDI
documents use specific computer record formats that are based on widely
accepted standards. However, each company may use the flexibility allowed
by the standards in a unique way that fits their business needs. EDI
is used in a variety of industries. In fact, over 80,000 companies have
made the switch to EDI to improve their efficiencies. Many of these
companies require all of their partners to use EDI.
2. Why does my business partner require EDI?
The computer-to-computer exchange of
information through EDI is much less expensive the manual handling
of paper documents. Studies have shown that processing a paper-based
order can cost $70 or more while processing an EDI order costs a dollar
or less. Much less labor time is required. Fewer errors occur because
computer systems process the electronic order documents instead of
manually processing the documents by hand. EDI transactions between
companies flow faster and more reliably than paper documents. Faster
transactions support reduction in inventory levels, better use of
warehouse space, fewer out-of-stock occurrences, and lower freight
costs through fewer emergency expedites. Paper purchase orders can
take up to 10 days from the time the buyer prepares the order to when
the supplier ships it. EDI orders can take as little as one day. EDI's
efficiency has made it an important contributor to the efficiency
of business communications in many industries. Business documents
like invoices, purchase orders, and advanced ship notices can all
be exchanged more efficiently between companies through EDI.
3. Why do I need EDI?
More and more customers want their suppliers
to have the ability to reliably exchange EDI documents. They are under
pressure to reduce their procurement process costs by automating manual
processes such as invoice data entry. Because EDI is so efficient,
many companies require their business partners to be EDI capable as
a condition for doing business. Suppliers want to develop closer customer
relationships. They want to make themselves less expensive to buy
from by reducing the administrative burden on their customers. There
is a continuing need for most businesses to increase efficiency. Suppliers
are finding they can reduce costs by automating B2B (business-to-business)
processes with EDI. Money is saved through improving the speed and
accuracy of electronic documents they exchange with their customers.
4. What is EDI compliance?
EDI compliance is the ability to send
and receive EDI documents in the way that your partner requires it.
Each EDI document must be exchanged with each partner in exactly the
format they specify. Each trading partner has unique EDI requirements.
Most partners will have an EDI implementation guide or kit that explains
their specific requirements. Maps are required to translate the EDI
documents from the trading partner's format into the format that is
useable by the receiving party. EDI compliance must be tested and
approved. Many options are available for mapping, translation, communication
and testing requirements. EDI compliant with your EDI business partners.
5. How do I become EDI capable and EDI compliant?
EDI capability involves either buying
or outsourcing the following components: Software for communications,
mail boxing of EDI transactions, mapping and translation. VAN, ASYNC,
BISYNC, and Internet communications will be required by various partners.
A server or PC, communication devices, and peripherals will be needed
as well as secured office space, monitored security, backups and redundant
power. Additional software will be needed if integration of the EDI
transactions with back office systems is desired. A VAN will need
to be contracted for transmissions. Personnel must be trained in how
to use the software and communication devices. Maps will then need
to be developed for translating the encoded EDI documents into a useable
form. All that is usually need is a fast Internet connection and email.
You will be notified of new EDI transactions via email. Your EDI documents
will be translated by the VAN into easy-to-read web forms on a secure
internet site. You will be able to see your EDI documents at the office
or at home or anywhere you have internet access.
6. Do I need an EDI VAN?
Yes, an EDI VAN is needed for EDI with
many business partners. A VAN is a Value Added Network. A VAN is responsible
for the secure and reliable communication of EDI documents. Your business
partner probably already has one. Your VAN will interconnect with
your business partner's VAN. Some business partners do not use a VAN
and use the internet for transmission of EDI documents via AS/2.
Here is an example of how an EDI transmission
works: A buyer prepares an order in his purchasing system and has
it approved. Next, the EDI order is translated into an EDI document
format called an 850 purchase order. The EDI 850 purchase order is
then securely transmitted to the supplier either via the internet
or through a VAN (Value Added Network).
The buyer's VAN is a like an electronic
post office that interconnects with the supplier's VAN. The VANs make
sure that EDI transactions are sent and received. The supplier's VAN
ensures that the supplier receives the order. The supplier's EDI system
then processes the order. Usually only internet access and email are
needed. Data security and control are maintained through out the transmission
process using passwords, user identification and encryption.
Both buyer's and supplier's EDI applications
edit and check the documents for accuracy. Each trading partner has
unique EDI requirements. These will include the specific kinds of
EDI documents to be processed, such as the 850 purchase order used
in the example above, 856 advance ship notices and 810 invoices. In
fact, most any business document that one company would exchange with
another company can be sent via EDI. However, each EDI document must
be exchanged with each partner in exactly the format they specify.
Many partners will have an EDI implementation
guide or kit that explains their specific requirements. Maps are required
to translate the EDI documents from the trading partner's format into
the format that is useable by the receiving party. EDI capability
involves either buying or outsourcing the following components: Software
for communications, mail boxing of EDI transactions, mapping and translation.
VAN, ASYNC, BISYNC and direction connection and Internet communications
will be required by various partners. A server or PC, communication
devices and peripherals will be needed as well as secured office space,
monitored security, backups and redundant power.
Additional software will be needed
if integration of the EDI transactions with back office systems is
desired. A VAN will need to be contracted for transmissions. Personnel
must be trained in how to use the software and communication devices.
Maps will then need to be developed.
