What is EDI(Electronic Data Interface): Definition, Advantages, Implementation?
EDI(Electronic Data Interface) will replace the traditional market and is expected to hit the market with the $6 billion by the end of the year 2025. According to the latest research the electronic data exchange interface is proved as the top data transfer set up with the yearly transfer volume of data around 20 billions and save the millions of dollars of cost of business for the data exchange.
How Traditional data interchange was?
The following approach traditional data interchange follow:
Customer internal systems→ customer creates order→ customer sends order→ supplier receives order→ supplier enter order→ supplier internal systems→ supplier creates invoice→ supplier sends invoice→ customer receives invoice→ customer enters invoice→ customer internal systems.
What is EDI?
EDI stands for electronic data interchange for the exchange of the information between computer systems between two business partners within an organization. It is a fast and reliable system for transferring the business document with external entities in standard format. Electronic data interchange lowers the risk of error, cost and the overall processing time in an organization.
Customers internal systems→ EDI document→ suppliers internal systems
Statistics of EDI
- Over 80% of the data of business is transferred through digital format in the form of EDI. The percentage of the number is going from 3 to 5 percent annually.
- Bigger giants like Walmart, Hallmark cards, Jcpenny are the regular users of the EDI.
- Over 70% of the automation of the documents are in XML/EDI formats, portals or exchanges.
Document Format which EDI supports:
There are various terms for the EDI glossary need to be discussed here first:
- XML: It is the file format extended or extensible markup language for allocating the security in the world wide web.
- FTP: It is the file transfer protocol for the exchange of the data in the format of the electronic with greater security and reliability.
- ANSI: It is the American National Standard Institute for the arrangement and development of electronic data transfer since the year 1979.
- X12: It is standard structure for the US organization for the maintenance of the EDI security and laws under the ANSI.
- CSV: It is the secured file transfer extension of the document termed as the common separated values for the which have tabular format of data.
- EDIFICE(Information Technology): It is used for the computing and electronics of the secured data.
- EDITRANS(Transportation): This EDI term is used for the transfer of the data through the various countries and
- ETIS(Telecommunications): It is named as the EDI transportation for exchanging the data over multiple channels without any overhead of the security as maintained by the EDI layer of security protocol.
EDI and its software workflow:
Big companies are much dependent on EDI for saving their time, cost, and other resources. It is the best tool for all the necessary solutions. It includes the integration of the backend and transmitting the messages to traders.
- Prepare the document: The sender prepares the document which can be read with the EDI software. Meeting the EDI standards for the purchase order for the optimized results. The system contains the electronic docs with the data files and purchases the EDI software. In the electronic format there is the loading of the data rather than the printing of it manually and use of EDI software solutions.
- Translate the document into the correct format: There must be use of specialized EDI translation software. The documents are implemented in the EDI format. For fetching the history of the transfer of the data there is the EDI service provider to do the task.
- Transmission of the documents: The EDI documents can be transferred by using 3 approaches. Direct for directly sending of the data securely from one system to another. Mixed transfer transmits the large amount of the data via the service provider. VAN transfer sends the data via the service provider to the recipient system.
Advantages of EDI
Why it is important to implement the EDI solutions for your business. The main benefits are:
- Speed: The documents are transmitted very fastly in digital format. Transaction of documents must take a few minutes rather than hours for sending the postal mail or writing the letter electronically. The manual work may require a large number of people who can do valuable jobs. The EDI software can track real time and ensures the messages delivery at both the ends on time. This way cash order and the purchase to pay cycle boost a lot and supplies more stability in the business and customers are getting more discounts.
- Precision: Increased customer and client satisfaction is the must. The EDI solutions are integrated to deliver on time shipments, chargebacks, and reduce product costs. There must be no delay in the asn result and results in the decrease in the supplier ratings.
- Security: It provides the chain of risk free allocation of the data for the security purpose. It is the standard protocol that encrypts the data over the communicating protocols and maintains the safety standards.
- Cost Reduction: As all the things are done electronically this reduces the overall cost in an organization upto 35%. The storage, maintenance and the handling cost, paper cost, retrieval of the data cost and every aspect of the important cost is reduced due to the electronic medium.
- Efficiency Increased: The increase in the efficiency affects the overall growth of the organization. Rather than engage in the tedious work of repetition involves the error, cost and workforce but the electronic data interchange makes the task more efficient. High accuracy gives the more accuracy for the transfer of information that is gathered correctly and interpreted instantly and sent in the right order.
Implementation of the EDI:
As the trading partners will require a prototype to follow for handling the functional requirements of the organization. Proper Implementation is required for improvising the EDI.
- Installation of the EDI: The overall implementation with the Business Development requires for the proper installation of the hardware, VAN connection and proper software handling.
- Coordination with the business partners: There must be proper connection for the coordination and implementation of your business partner to maintain the EDI software correctly and without any confusion for the right protocols and standards and the guidelines to do so.
- Correct certification for the handling purpose: EDI protocols give an organization the full access to maintain the authorized certificate to provide best EDI solutions and regular tracking of the updates.
Conclusion: EDI is the electronic secure way to transfer the data securely with reduction of the recurring cost of the organization. Either it is smaller or large organizations the budget maintenance is affected by various factors and tedious, unsecured, non-function of the data deducts the efficiency. The future of EDI is very prominent and use of API will overtake it rigorously in the coming years.