In the 1960s, businesses began to notice that they were spending a significant amount of capital on items such as electronic funds transfers, purchase orders, invoices and bills of lading.
In an attempt to address this issue, financial firms began to exchange documents that were usually sent via post – such as fund transfers – electronically instead. Fast forward to the present, and EDI (Electronic Data Interchange) has become by far the best model for organizations looking to transmit data both internally within their own companies and externally to other companies.
Understanding EDI and choosing the right EDI hub will be essential for organizations that wish to see continued success in the digital era.
What is EDI?
EDI is incredibly valuable to organizations because it completely eliminates the hassle of distributing, collecting and disposing of paper documents. Organizations that utilize EDI no longer have to worry about printing, shipping, or handling costs.
As a result of the efficiency it engenders, organizations that use EDI can avoid time delays in communication between corporations; can eliminate the labor costs associated with paper communication; can increase the accuracy of data due to less possibility for interference at any stage of data consumption or transmission; and can increase the information access capabilities of their organization.
Additionally, EDI can provide great benefits to retailers when it comes to receiving B2B orders. The assumption that B2B EDI and B2B eCommerce are disparate or that one must dominate the other is patently false. Retailers can use B2B EDI in conjunction with B2B eCommerce to make the exchange of business documents (invoices, ship confirmations, purchase orders, etc.) between businesses both cost and time-effective.
Though it’s been in use since the 1960s, EDI is finding new use today, enabling supply chain automation, digital transformation and even as a key part of workflow and business process automation.
Features to look for in an EDI provider
Organizations interested in utilizing EDI essentially have two choices: they can either run their own EDI hub from within their organization or can outsource that work to an EDI provider. Both are viable options, and which is best for an organization often varies on a case by case basis.
For this reason, organizations interested in EDI will often find hiring an eCommerce consulting firm useful when deciding how they want to approach EDI. The biggest challenges typically encountered within EDI are generated by version incompatibility – which occurs when an organization transmits data via EDI that the recipient is not able to access because their systems cannot handle data written in that standard.
As an analogy, imagine somebody using Apple Pages receiving a Microsoft Word document on their computer. Unless they either purchase a license to Microsoft Word or the Word document is reformatted to be compatible with Apple Pages, the recipient won’t be able to access the data.
When an organization is choosing between various EDI hubs, they should make sure that they lean towards a provider capable of intaking, processing and, if need be, reformatting data transmitted in any EDI standard or version.
As a result of multiple highly publicized cybersecurity failures, consumers are also more distrustful of how businesses handle their information than ever before. It is increasingly important for organizations to be open and transparent with their users about what data they collect, how it is handled, and what it is used for.
It is also important for organizations to adopt policies which allow users to request that their data be purged from company databases. In conclusion, there is a variety of important quality of life features that organizations interested in EDI should inquire about and fully understand before either outsourcing their EDI needs to an EDI hub or handling EDI in-house.