EDI stands for electronic data interchange, and it's been around for longer than you might think. As far back as the early 1960's an electronic message format was developed by Ed Guilbert to send cargo information between Du Pont and Chemical Leahman Tank Lines. Guilbert's idea was actually an automated form of his paper-based approach to standardize business documents that was born in 1948 when he was an Army Master Sergeant that needed to work out the logistics of dropping 2.3 million tons of goods into West Berlin. Over the years, more and more companies adopted EDI technologies, and by 1991 there were 12,000 U.S. businesses using it. According to IndustryWeek, today the total annual value of EDI transactions is between $1.8 and $3.2 trillion globally. In a world where IT innovations are constantly replacing existing technologies, it's rare for a solution to stick around for decades. However, that's exactly what happened with EDI. Why? IndustryWeek simply says, "It Works."
How Does EDI Work?
EDI allows your documents to flow directly from your computer to the receiver's device. For example, you may store data related to purchasing, inventory, invoicing and billing within your ERP system. An EDI solution uses a set of standards, such as ANSI or EDIFACT, to ensure your data is compatible with the recipient's, so that processing can begin immediately. When requests are received, data is converted to fit the information required by the recipient. That standardized data is used to create incoming and outgoing documents.
The Benefits of EDI
Businesses using EDI realize numerous benefits, including these six.
- Speed. EDI allows information to flow almost instantaneously. There are no delays due to time zones or key employees that may be out sick. There's no need to wait for faxes or create a paper trail. The result is a faster buy-sell cycle.
- Productivity. Orders are created automatically without any employee interference. Employees are freed up to handle other tasks, increasing overall productivity.
- Accuracy. By eliminating manual data entry, errors are reduced. EDI solutions not only provide a way for information to travel, but they also serve as a gatekeeper, verifying that the information accessed and received is accurate.
- Cost savings. EDI saves money in several ways, including increased staff productivity and faster buy-sell cycles. Additionally, costly charge backs, late deliveries, incorrect pricing and damaged relationships with partners are avoided, protecting your company's reputation.
- Security. EDI solutions are accessible only by authorized users. Plus, they feature audit trails that track use. Companies know who made changes and when.
- Transparency. Electronic confirmations build transparency between parties, resulting in more secure business relationships.
How to Implement a Successful EDI Solution
Although EDI has been around for decades, technology has allowed it to evolve and get better. There are four main components to implementing a successful integrated EDI solution.
- Implementing an EDI solution that uses universal web forms ensures that even if your partners are not EDI-enabled, you'll still be able to use EDI to send data. Learn more about IBM's web forms here.
- Data mapping is critical to the EDI process because it enables your in-house file format to be converted to an EDI format, so that it can be sent to your partner. Simply put, the mapping process analyzes data, saves the results in a map specification and creates a program that forms to that specification.
- Maintaining a secure network is a top priority for any business. Securing your network and maintaining compliance with government standards on data usage is critical to staying in business and guarding your reputation. EDI solutions build on that security by ensuring that data transferred between you and your partners is secure.
- Support and maintenance play a critical role in the success of your EDI solution. Businesses grow. Technologies change. An effective EDI solution must be scalable and reliable. Choose a vendor that will provide continual support through future upgrades and business process changes.
Talk to the highly skilled team at CTL Global Solutions about how an EDI solution could benefit your business.