What Is EDI: A Crash Course

As more and more retailers and ecommerce businesses look into strategies for speeding up their processes (especially those surrounding fulfillment), EDI should be a part of the equation. EDI automation offers a variety of benefits for streamlining communications and processes, while reducing errors and delays.

What is EDI?

EDI is an abbreviation for electronic data interchange. EDI is a combination of both a system and processes that give retailers the capacity to exchange documents and transactions with their suppliers, vendors, and brands in a standard electronic format. For example, a retailer can send a digital purchase order to a vendor through EDI instead of sending a paper document or fax. The reverse is true as well – a vendor can send digital invoices and other transactional documents to their retailer partners electronically.

EDI systems offer a range of benefits that can improve the speed and accuracy of a retailer’s most important business documents. EDI automation can diminish or even eliminate paper documents, while at the same time ensuring that no transactions or orders get lost or stuck in the system. EDI greatly reduces manual processing and data entry needs, including the costly human errors that can hurt your bottom line. EDI also functions as one barrier of protection against improper documentation and fraud.

A wide range of business documents can be standardized and exchanged through EDI, including:

  • Invoices
  • Purchase orders (PO)
  • Credit and debit adjustments
  • Purchase order acknowledgments
  • Purchase order changes
  • Advanced ship notices
  • Inventory inquiries
  • And more!

But what does that mean?

In a world where we expect everything to be fast, EDI can empower the links in the retail supply chain with much of the agility needed to better deliver on what consumers want from their buying experiences.

For consumers, EDI automation streamlines the processes that propel ecommerce orders through fulfillment and shipping queues to make good on delivery promises. With improved inventory communication capabilities, EDI decreases the stock outs, backorders and delayed shipments that frustrate customers.

On the business side, EDI enables retailers, suppliers, distributors, brands, manufacturers, and other stakeholders to improve inventory management while engaging in accurate and speedy communications. It breaks down the barriers between departments and systems within organizations, which shortens lead times for getting orders out the door and to where they need to be. With EDI, businesses in retail and retail supply can increase efficiency, save money, scale quickly, and meet the requirements of larger trading partners, many of which now require EDI.

Benefits of full EDI integration

Just as with other important business systems, there are a variety of EDI options on the market with assorted strengths and weaknesses. They range from the very basic, which is often a separate web portal through which business documents are entered, to fully integrable EDI systems, which can connect directly to other systems. Some EDI solutions have a limited number of systems they can connect to, while others can be configured to connect to pretty much any channel or system your ecommerce business uses.

Fully integrated EDI solutions can connect to your:

When EDI is integrated with other business systems, the opportunities for efficiency gains and error reductions can grow exponentially. EDI solutions can break down the silos between the systems that companies use for different departments and duties. Once all of these systems can “talk” to each other, businesses gain the cross-departmental and cross-channel visibility and communication they need to meet the requirements of today’s retail and supply chain engine and the consumer demands fueling it.

Comparison of in-house vs. outsourced EDI

Beyond the type of EDI system, there’s the decision about how to implement it. The two most common options are in-house EDI and outsourced, cloud-based EDI.

1.Traditional in-house EDI

Traditional EDI software is a “do-it-yourself” affair, with all of the responsibilities and resources residing in-house and onsite at the business. With this DIY style of EDI, there can be considerable upfront costs related to hardware, software, staffing, and other resources. Though the costs may lessen after the system is in place and all of the bugs have been worked out, that could change as the company grows and more upgrades are necessary.

2. Online EDI solutions

As mentioned previously, some EDI systems can be accessed via an online portal, such as through a web browser or an app. These online EDI solutions are great for startups and smaller companies, as they can reduce expenses when compared to a traditional EDI department. However, it’s easy to outgrow these systems. Many aren’t capable of full integration with other systems, which means manual data entry needs often remain. Furthermore, online EDI solutions often still demand investment in onsite resources to make sure the existing network can support the flow of data.

3. Cloud-based EDI providers

Cloud-based EDI solutions have the best of both worlds. A cloud EDI provider maintains the hardware, network, software, upgrades, compliance requirements, and more, significantly reducing infrastructure expenditures and staffing needs compared to traditional EDI. There is an upfront setup cost and a monthly subscription fee, but the overall cost is significantly less than traditional in-house EDI. Most importantly, cloud-based EDI is infinitely scalable to the business’s needs. Some users who have moved from traditional EDI to cloud EDI have reported savings of up to 75 percent.

The world is accelerating, and that’s especially true in retail. Consumers want everything to move faster, and to keep them happy, retailers need to speed up their processes and communication – both within the organization and outside of it. EDI can do that and more, making it a vital component for any winning retail strategy.

To learn more about SPS Commerce and how their Fulfillment (EDI) solution can help optimize your supply chain, click here.

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If you’re in need of a 3PL that can help fulfill your B2C and B2B ecommerce orders, check out ShipBob’s 3PL services and fulfillment software.