What is EDI (Electronic Data Interchange)?
Electronic Data Interchange (EDI) is a standardized format for businesses to exchange information and order and purchase documents along the supply chain with partners. By using a standardized format between businesses—for instance, a supplier making a product and a retailer (Amazon, Home Depot, Bed, Bath, & Beyond) who sells it on their channels —document exchange and data translation can be automated and accelerated.
Since EDI is a standardized approach to information sharing, it uses numbers to represent different kinds of documents. Nearly every type of document you can imagine has a corresponding number, which can feel a bit intimidating at first, but here’s a simple example that illustrates how document exchanges work with EDI. First, the buyer sends an 850 EDI purchase order to the supplier. Then, the supplier acknowledges the order with an 855 EDI Purchase Order Acknowledgement, telling the buyer what can be fulfilled. Then, the supplier sends an EDI 856 advance shipping notice with information about what’s being sent, when, by whom, and more. Finally, the supplier sends an EDI 810 invoice to the retailer.
Now, if that all had to happen manually, it could be a time-consuming process—both in terms of employee hours needed and in terms of overall timeline. With EDI integration, automation expedites the order processing, acknowledgement, and shipping process by populating the appropriate fields into Enterprise Resource Planning (ERP) and back-end systems, freeing up team members time to focus on customers.
Now, let’s get into some specifics of how EDI can benefit your business.
Integrating EDI with Operational Systems
Having your customer, retail partner, and inventory data connected and centralized is key if you want to become more efficient and scale your business. This is especially important when it comes to processing transactions in the commerce space using Electronic Data Interchange.
EDI is the common format for transacting documents from Business A (retailer) to Business B (brand). These documents include, but are not limited to, purchase orders (e.g., EDI 850), invoices (e.g., EDI 810), inventory levels (e.g., EDI 846) and advanced shipping notices (e.g., EDI 856). Additionally, the data needs to mirror itself in two different places, in the retailer marketplace such as Amazon, Bed, Bath, & Beyond, Home Depot, CommerceHub, etc. and the ERP such as NetSuite, Sage, Quickbooks, Microsoft Dynamics, etc. If businesses rely on processing EDI documents and hand-keying data into the ERP they are more vulnerable to key data point errors such as inaccurate addresses, inventory counts, shipping info, etc. This is why it is essential to automate the bi-directonal data exchange between EDI and back-end systems/ ERP.
Let’s take a closer look at the benefits of integrating EDI with your ERP or back-end systems.
Integrating EDI and ERP Systems
If a customer order is placed through a retailer like Amazon, Bed, Bath, and Beyond, etc., a business that relies on manual processes has to hire someone to hand-key the order and customer information into the ERP, CRM, or account system to set off another chain of events such as shipping and packing that are most likely done manually as well.
Not only is this taxing on staff, but it also creates bottlenecks and takes them away from helping customers with more pressing matters. One misstep—such as an inaccurate address or incorrect order fulfillment—can lead to unhappy trading partners and customers, ultimately hurting the bottom line. If these processes are automated by integrating EDI with ERP, everything becomes more efficient for team members, the retail partner, and the end customer.
EDI ERP Integration 101
A robust EDI commerce solution translates EDI data into a standardized format and then pushes that data to an ERP or accounting system. This includes all types of data including order, shipping, inventory, confirmation, etc. By automating the exchange of data between EDI and ERP order processing is faster and more accurate because the margin of error from manual data entry is eliminated.
EDI ERP Integration benefits the business by:
- Reducing time and money spent on manual efforts
- Improving team productivity and accuracy by eliminating bottlenecks
- Accelerating the rate at which information is updated for the retailer or customer
- Providing better visibility of data for forecasting and scaling the business
- Creating a better customer experience through timely confirmations and product updates
- Creating better relationships with retailers with accurate, timely fulfillment and inventory counts
Okay. Now that we’ve covered the basics of EDI integration, we’ll look at what it takes to implement it in our next blog.