EDI Integration: A Comprehensive Overview with 4 Significant Facets
The world of Business has gone digital in the way they store data and information. In most cases, Businesses store useful information in Digital Documents. Business Managers and other users in the Business will need to view these documents from time to time. The Business will also need to exchange and share these documents with other Business Partners. Thus, there is a need for a mechanism to facilitate the exchange of documents between Businesses in a faster, secure, and cheaper way and with fewer errors.
Table of Contents
EDI or Electronic Data Interchange and EDI Integration can help facilitate seamless B2B Communications. This way, a Business can stay in touch with its Trading Partners. In this article, we will be discussing EDI Integration in detail.
Here’s an outline of our comprehensive guide:
Table of Contents
- What Exactly is EDI Integration?
- Different Types of EDI Integration
- How EDI Integration Works
- Significance of EDI Integration
- Conclusion
What Exactly is EDI Integration?
EDI or Electronic Data Interchange is the process of exchanging Business Documents in an Electronic Format between different Trading Partners via the Internet. The EDI System facilitates Cost-saving, faster Processing, lesser errors, and improved Customer or Partner Relationships in an Organization.
The IT Department and Business Users are the two major stakeholders in EDI Automation.
An EDI Integration is created after an EDI Workflow has been established between Trading Partners. It is achieved in two main steps:
Step 1: Establishing the EDI Protocols, Documents, Transactions, and Endpoints that will be used to exchange data with the Trading Partner.
Step 2: Converting the EDI Data into a format that makes it usable in your Back-end Technical Environments like your Accounting Solution or ERP System.
The Data Structures within the Organizations must be translated into mutually agreed EDI Standard Format (such as EDIFACT, ANSI X12, and more). This makes it possible for the Trading Partners to communicate with each other using a common language.
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Different Types of EDI Integration
The following are the three types of EDI Integration:
Direct EDI Integration
Direct EDI Integration is created by the use of a Specific Protocol such as FTP or AS2 to create a connection from your EDI Trading Partners (like Suppliers, Customers, and Service Providers) to the Internal ERP. Such a specific instance of direct integration is referred to as EDI ERP Integration.
In most cases, Direct Integration leaves a Business managing thousands of Individual Partner Connections which can bring complexity, especially to Businesses that lack a Standardized Protocol. It is suitable for Large-scale Integrations that move huge volumes of data back and forth between Trading and ERP Partners.
Indirect EDI Integration
Indirect EDI integration is created using an outside EDI Value-Added Network (VAN) or a Broker. See the VAN as a middleman between your ERP and the Trading Partners. Messages are sent from the ERP to the VAN. Once the message has been received, the VAN or Broker will transform and then send it into the necessary format as agreed with the EDI Trading Partner.
Hybrid EDI Integration
Sometimes, an Organization will need a combination of Direct and Indirect EDI Integration. For example, an Organization may use a VAN to handle some EDI Transmissions, but critical Customers may be connected via Direct EDI Integration. Thus, Hybrid EDI Integration combines Managed EDI Services with In-house EDI Resources to come up with a flexible EDI Solution.
How EDI Integration Works
Most Businesses are now considering implementing EDI Integration. This comes after realizing the benefits that EDI Integration can bring to an Organization. EDI Integration works as follows:
Step 1: The Sender exports a Business Document from an In-house Application or System. For example, a purchase order to buy goods or services.
Step 2: The Business Document is converted from the In-house Computer System format into the EDI format that is needed using a Data Transformation Mapping Software or an EDI Translator.
Step 3: The EDI Document is run through an EDI Processing Software to make sure that its structure is accurate depending on the agreed-upon EDI Standards that are currently in place.
Step 4: The EDI Document Data is then transmitted to a VAN via a Secure Communication Protocol such as HTTPS, SFTP, or AS2, which can be built into a similar Validation Software or another Application, or be transmitted to the client through a Direct Connection over similar Protocols.
Step 5: Direct EDI creates a secure line between different Businesses, enabling Enterprises to connect to Trading Partners without having to pay any document fees and get Real-time Communication Capabilities. The recipient receives the file, verifies its credentials, authenticates the origin of the file, and decrypts it so that it can ingest the EDI Doc right into its Systems. The recipient also sends back a Message Disposition Notice (MDN) to the sender to acknowledge the delivery.
Significance of EDI Integration
EDI Transactions are very important to B2B Processes and they continue to be the preferred way of exchanging documents and transactions between businesses, both small and large.
EDI Technology offers the following benefits to Organizations:
Improved Visibility Across an Organization
When you manage all your Trading Partner Transactions from your ERP System, you will gain Real-time Visibility over messages from your Trading Partners instead of having to log into the individual Web Portals.
Eliminates Manual Processes from the Supply Chain
EDI Integration automates the flow of messages between your ERP and the EDI Solution, which enables you to redeploy valuable resources into strategic areas of your Business while removing erroneous data that is caused by human error.
Improves Customer Service
With EDI Integration, you can combine Message Automation with Advanced Error Checking and Stringent Business Rules to improve the accuracy of messages and ensure that you don’t miss a Trading deadline.
Data Accuracy
Automating EDI Transmissions to your Trading Partners, combined with Ingestion and Transmission into your ERP will eliminate the need to enter data manually.
Manual data entry is prone to errors. Automated Data Flows will prevent mistakes from occurring and ensure that you remain EDI compliant.
Conclusion
This is what you’ve learnt in this article:
- You’ve learnt about EDI Integration.
- You’ve learnt the different types of EDI Integration.
- You’ve learnt how EDI Integration works.
- You’ve learnt the importance of EDI Integration.
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