The term EDI stands for Electronic Data Interchange and is defined as the computer-to-computer trading of business documents such as purchase orders, invoices, inventory levels, and shipping notices.
The software facilitates the exchange of documents and data over a variety of platforms, this joins numerous industries such as manufacturers, distributors, and retailers through their information systems within a worldwide business to the business network.
B2BE’s EDI product is a managed product that creates a highly efficient automated and integrated environment that is managed by B2BE removing the need to allocate specific resources, hardware, or the requirement for software. Your organization only needs to be able to send and receive data in a format you can handle. The B2BE EDI product handles the translation, mapping, enrichment, and validation of the documents and data.
Where is EDI used?
Commonly, EDI was used in the past primarily by automotive and retail businesses—however, in recent years it has been more widely adopted and is now frequently used in industries such as manufacturing, healthcare, pharmaceutical, utility, and construction to name a few couples of Electronic Data Interchange clients.
For example, a retailer attempting to implement a “just-in-time” inventory philosophy which is cutting down on overstocked inventory and replacing inventory in demand could do very well to implement an Electronic Data Interchange solution.
What are the components of EDI?
- Standard Document Format: This is a standardized format agreed upon by both parties which do not require complicated hardware or software to access information where both parties communicate directly through a business application.
- Translator and Mapper: Is a translator is used to convert the raw data into meaningful information according to specifications provided by a mapper. A mapper is used to create conversion specifications, it compiles the specification and then gives instructions to the translator on how to translate the data.
- Communication Software: This communication software is used to transmit data and convert business documents into a standardized format. It follows a standard communication protocol that is incorporated into the software.
- Communication Network: This is a communication network that provides a direct link between trading partners who are willing to exchange business documents through EDI.
Modem: It is a hardware device that transmits data from one computer to another.
- VAN: A network that connects the computer system of one organization to another.
Point to Point Link: A direct communication link between two computers.
What are the applications of EDI?
- Retail Sector: Retailers use a common model stock for each shop location and the POS stock position is updated continuously and data is fed via EDI enabled supply chain management network. The EDI software monitors all the logistics and makes updates in original stock.
- Manufacturing Sector: In the manufacturing sector EDI facilitates material requirement planning and just-in-time manufacturing. This helps the supplier to plan and schedule supply according to the requirements of the manufacturer. The suppliers respond via EDI with an ASN to identify the parts/materials to be delivered and the approximate delivery time and this is updated when the shipment is delivered.
- Automobile Sector: In this sector, EDI is used to keep customers updated with current product and pricing information during the purchase cycle. An ASN is transmitted through EDI to the customers to prepare a loading schedule and to ensure proper receipt of goods via EDI to speed up the payment process.
- Financial Sector: EDI replaces the labor-intensive activities of collecting, processing, and dispersing payments with an electronic system, facilitating the flow of payment between the bank accounts of trading partners without requiring any human intervention. A payee’s bank account is electronically credited and the payer’s account is electronically credited on the scheduled day of payment, such an exchange is known as Electronic Fund Transfer (EFT).
Why do we use EDI?
At a minimum, Electronic Data Interchange replaces the mail preparation and handling associated with traditional business communication. The real power of EDI is standardizing of information communicated in business documents, which makes a ‘paperless’ exchange, a traditional invoice illustrates what this can mean.
Do you want to embark on an electronic EDI-based onboarding solution to trade with your suppliers? B2BE has all your bases covered with B2BE’s Web EDI product. Now you know more about EDI, why not get in touch and see how B2Be can assist you further in your EDI needs.