How to Implement EDI.
If you’ve read our “What Is EDI?” blog, you might be intrigued about how your company can get the benefits of EDI. EDI integration implementation is a strategic investment that can help you stay competitive, improve vendor relations, and create a better customer experience.
Let’s dive into how you can implement EDI at your organization.
What are EDI Standards?
EDI Standards were established decades ago to define a generic and repeatable set of structured data placeholders (data that resides in a fixed field within a record) and rules for the creation of common business documents. These documents include, but are not limited to, purchase orders, invoices, and shipment notices in an electronic form.
The main reason for creating these standards was to help businesses avoid spending valuable time and resources defining the layouts of common business documents. The end result for businesses is a reduction in electronic document integration costs and a more efficient process setting up integration components. Defining EDI standards is an ongoing process as business requirements are refined and extended and thus have to be recorded in a common data definition language.
There are a wide variety of industry specific EDI standards that have conventions that are specific to a region. For example, ANSI X12 is the North American standard, EDIFACT is the European standard and there are many others. The transaction sets could be X12 4010 that contain the different documents (PO, Invoice, Ship Notice etc.) The sets granulate even further into subsets for particular industries (eg. Retail, Manufacturing, Healthcare, Transportation & Logistics, etc.).
How to start and implement EDI integration?
Once your company and your trading partner decide that you want to conduct business using EDI, there are a few general steps you can take to begin the process:
- Obtain the EDI Implementation Guide from your trading partner. This will define how your selected electronic business documents will be structured.
- Purchase EDI software that includes document maps and a translator. This software is used to transform your accounting system data (i.e., orders, shipments, etc.) into the layout requested/required by your trading partner.
- Once this software is set up you and your trading partner will typically begin testing document exchanges.
- Communicate with your trading partner to determine how your EDI documents can be exchanged. The most common methods are via Internet EDI, a Value Added Network (VAN), or direct one-to-one/peer-to-peer electronic document transfer. The Jitterbit eiCloud solution uses Internet EDI as the primary method of exchanging business documents with trading partners. We can also exchange documents with VANs as interconnects.
- Conduct a set of tests with your EDI solution provider to verify that your software operates correctly and your trading partner receives the documents correctly.
- Perform parallel document processing where you still send and receive your paper documents with your trading partner.
- Eventually switch off paper business document exchange. You will notice a large reduction of document processing costs, dramatic increase of accuracy of the data, speed of exchange of business documents, improved cash flows, reduced processing errors and an increase in customer service levels.
How does the EDI exchange work?
Let’s take a simple example of a retailer and vendor setting up EDI. The relationship is now in place and the retailer sends a purchase order that will be received by the EDI software (such as that provided by Jitterbit’s eiCloud.) It would then be validated and an acknowledgement would be sent back to the sender. The receiver would now have visibility of the PO. After that process is completed, other choices become available, such as using the EDI software to transform and import the document into an accounting system or to convert the PO into an invoice to send back to the retailer (after the order is fulfilled).
In summary, EDI replaces the paper exchange and maximizes the efficiency of electronic consistency. How you utilize the efficiency is up to you by integrating these documents into your daily processes.