Although EDI has been widely used since 1960s, it is now being applied to more new uses, making supply chain automation, digital conversion possible and even becoming a key part of workflow and business process automation. This article will give you a comprehensive interpretation of EDI and help you quickly master the basic knowledge of EDI in a short time, including:
What is EDI?
EDI (Electronic Data Interchange) is a secure standard connection between computers of trading partners, with the purpose of automatically transmitting business documents. Then analyze all aspects of EDI one by one, so that you can have a comprehensive understanding of EDI.
Computer to computer
EDI has replaced manual B2B communication methods, such as mail, fax and mailing.
The file is transferred directly from the sender's computer application to the receiver's application.
Traditional manual process
Automated electronic data interchange process
Business document
EDI can automatically transmit a large number of business documents (standard EDI messages or non-standard EDI messages).
Common business documents include: orders, invoices, delivery information, logistics status, delivery information, customs information, inventory information and payment confirmation.
Standard EDI format
The computer processes EDI service messages that can be recognized by the computer according to international EDI standards.
EDI standard defines each data segment in EDI message and its corresponding format, such as file type, data field and field format.
EDI standard eliminates the differences between enterprises and makes all business partners' computers use a unified "communication language".
Different industries, regions and use cases have different EDI standards, and each standard has a different version, so both sides of EDI communication must use the same EDI standard and version.
Common EDI standards are: ANSI X 12, UN/EDIFACT, ODETTE, VDA, HIPAA, RosettaNet, IATA Cargo, TRADACOMS, etc.
trade partner
EDI information is usually transmitted between two different organizations, which are called business partners or trading partners. For example, Company A purchases goods from Company B, and Company A sends purchase orders to Company B during business cooperation, otherwise Company B sends delivery notices and invoices to Company A. ..
Secure, standardized connection
EDI technology adopts a series of security protocols to ensure the security of EDI message transmission.
Trading partners must use the same protocol confirmed by both parties for EDI transmission.
Establishing EDI connection needs EDI-based software, such as RSSBus Connect, which can quickly connect your trading partners at low cost.
Protocols range from time-honored technologies (such as file transfer protocol) to network-based electronic data exchange through AS2, systems based on application programming interface (such as AS4) and other options (such as mobile electronic data exchange).
Support a variety of protocols, from a long-established protocol, such as FTP, to a network-based protocol, such as AS2, and then to an API (Application Programming Interface)-based system, such as AS4.
automation
The pre-configured workflow in EDI system can automatically send EDI messages.
The translation function of EDI system converts EDI messages into a format that can be recognized by internal applications of enterprises, thus realizing automatic processing.
Automated processes can be extended to data integration and other workflows within an organization. For example, when an enterprise receives an EDI order message, the logistics system will immediately generate a business person to deliver the goods to the warehouse.
Electronic data interchange and traditional paper/email
In order to explain EDI and its meaning more effectively, let's compare the examples of using traditional paper/email and using EDI to do business with trading partners.
Traditional paper/email processing flow:
The buyer needs to place an order with the supplier after receiving the system notice, or needs to place an order with the supplier after checking the inventory and finding that the inventory is insufficient.
The buyer enters data in the purchasing system interface to generate an order, and then prints the paper order and sends it to the supplier or sends it to the supplier by e-mail.
The supplier receives the paper mail order or electronic order, and then manually inputs the order information into the sales order system.
The supplier prints the invoice and packages it with the goods to the buyer, or sends it to the buyer separately by mail or e-mail, and then confirms to close the order.
The buyer manually enters the invoice information into the accounts payable system.
In the above example, mailing paper documents will increase the round-trip transportation time by about one week. At the same time, using e-mail or paper documents cannot avoid manual operation errors and prolong the order processing cycle.
EDI processing flow:
When the inventory reaches the predetermined inventory warning line, the buyer's purchasing system automatically generates an order, which is processed by the EDI system to generate an order message in EDI format, and then sent to the supplier's EDI system.
Supplier EDI system receives the order and forwards it to supplier sales order system.
The supplier system automatically notifies the transportation department to deliver the goods.
After the goods are packed and ready for transportation, the transportation system generates a delivery notice to the buyer's receiving department.
Supplier ERP system generates invoices, which are processed by EDI system to generate invoice messages in EDI format, and then sent to supplier EDI system.
EDI advantage
EDI can help enterprises optimize the speed, accuracy, efficiency and cost of supply chain, and give full play to the advantages of EDI in strategic business. Here, we will introduce the practical significance of EDI in commercial applications.
Speed up processing speed
EDI accelerated the business cycle by 6 1%.
EDI can complete a transaction in a few minutes, instead of spending days or weeks communicating by mail or email back and forth.
Automation liberates employees from repetitive and low value-added jobs, promotes them to obtain higher-value tasks, and enhances personal income and value.
Handle business documents quickly and accurately, and reduce the occurrence of repeated orders, out of stock and order cancellation.
Cross-supply chain automation application can ensure that data exchange is sent regularly and tracked in real time *, shorten the order processing and delivery cycle, and effectively reduce the inventory backlog.
reduce costs
EDI reduces the costs of paper, printing, copying, storage, filing, postage and document retrieval, and helps enterprises save more than 35% of transaction costs.
For buyers who deal with a lot of transaction information, using EDI can make them get payment discounts and save millions of dollars every year.
In some cases, the EDI processing cost of each order is only 1/20 for manual processing.
EDI eliminates errors caused by vague faxes, lost orders or incorrect telephone answers.
More accurate
EDI can reduce wrong transactions by 30-40%.
EDI eliminates human errors caused by illegible handwriting, lost mail and typing errors.
Improve business cooperation.
Shorten the cycle from order to cash and significantly improve the seller's cash flow.
In fact, EDI has shortened the cycle time from order to cash by more than 20%, thus improving the business process and the relationship with partners.
Reduce disputes caused by error handling and save valuable time for business personnel.
Strategic interests
EDI provides real-time visibility of transaction status, which can make decisions faster, better respond to customers and market demands, and help enterprises take countermeasures in time.
Enhanced product features and shortened delivery time.
EDI provides a universal global business language, which simplifies the process of entering new fields.
environmental benefit
EDI replaces paper documents, reduces carbon dioxide emissions and promotes the sustainability of resources.
EDI improves operation efficiency and reduces errors and waste of resources.
EDI message structure
To give you a better understanding of what EDI is, let's take a look at the key parts of EDI content. EDI message consists of three core parts: envelope, data segment and data element, and its format conforms to the specific EDI standard. EDI messages (such as EDI 850 purchase order messages) follow strict format rules, which accurately define the location and business meaning of each data in the document, so that EDI systems of both data transmission parties can find all key business data immediately. For example, the name of the buyer's company, purchase order number, purchased goods and price. Then, the data will enter the supplier's order system in a pre-agreed internal format without manual operation.
Envelope (envelope)
EDI document transfer uses three envelope systems to accommodate transaction sets:
Mail envelope
Group envelope
Exchange envelopes
Segments (line segments)
A segment in an EDI transaction set consists of a set of similar data elements.
Data element (element)
Data elements are data in EDI transaction set, such as purchased goods, quantity, etc.