Blog General retail Electronic Data Interchange (EDI) what is it and how it can improve the operation of your business
18 October, 2022

Electronic Data Interchange (EDI) what is it and how it can improve the operation of your business

Being able to transmit information from one company to another quickly is an important component of a well-run business. Every day, important files and contracts like purchase orders, invoices, shipping notifications, and catalogs need to be sent. Having Electronic Data Interchange (EDI) software that can interface with different computer networks and digitally get this documentation to someone you’re doing business with is vital.

Stratview Research has predicted that the global EDI software market will grow from USD $1,845.6 million in 2020 to USD $3,244.6 million by 2026, which is a Compound Annual Growth Rate (CAGR) of 9.9%. While most businesses, especially large ones, are already using EDI to send documentation, there may be some smaller companies that haven’t yet made the digital switch. These companies can reap enormous benefits from adopting EDI.


What is EDI software?

EDI software allows you to send documentation directly from your computer system to that of another company. EDI puts data from one computer system into a format that allows it to be read by another computer system. Without it, a document a company sends out could not be read by the recipient.


What is EDI integration?

When different computer systems can interface because of EDI, they have EDI integration. It’s a seamless, instantaneous way for trading partners to exchange documents like invoices and purchase orders. EDI integration can also be established internally within a company. This means different divisions of a business are able to electronically transfer information between each other and digitally have it at their fingertips. For instance, data kept by the warehouse can be shared with the company’s accounting department.


Steps to establish EDI integration

The overall process of producing a business document and getting it to a trading partner electronically is called the workflow. To successfully set up an EDI workflow, you’ll need to do the following:

  1. Make a list of the companies you’ll be exchanging documents with – your trading partners. This will consist of your suppliers, vendors, wholesalers, etc.
  2. Establish what your EDI endpoint will be. Your endpoint for EDI is the segment of your internal computer network system that will be used for the data exchange. This could be your ERP system, accounting software, logistics system, or warehouse management system (WMS).
  3. Decide which business documents you want to send to your trading partner or partners.
  4. Define your EDI standards. EDI standards are a set of globally recognized rules in the digital world for creating documents that have uniformity. It’s a system for producing documents that can be recognized by different computing systems. There are several established EDI standards; ANSI ASC X12 and ODETTE are two of them.
  5. Select an EDI protocol. An EDI protocol is a kind of language that allows computing systems to communicate with each other. In order to exchange documents from one company to another, both have to use the same EDI protocol. There’s a wide range of EDI protocols available, but the four that are most commonly used are: HTTP, OFTP2, AS2, and REST API.


How does EDI integration work?

The sheer volume of data businesses produce every day means they have to have a centralized database to store it in. This is an ERP system. EDI software integrates seamlessly with ERP systems.

To transmit data, or documents, using EDI, you have to take the following steps:

  • Prepare the document for the ERP system your company uses.
  • Get the document into an EDI format by using an EDI translator.
  • Convert the EDI document into an agreed-upon EDI standard by using EDI conversion software.
  • Transmit the document through EDI communication protocols like OFTP, AS2 or HTTP.


Types of EDI integration

1. Direct EDI integration

Direct EDI Integration or Point-to-Point EDI means that the Internet is being used to facilitate a direct connection between your ERP and your trading partners. Ideal for large-scale organizations that transfer enormous amounts of data on a daily basis, Direct EDI uses a specific protocol.

2. Indirect EDI integration

This involves the exchange of business information between your ERP and your trading partners by using an EDI broker or a Value Added Network (VAN). VAN converts the raw data into EDI data and routes it to the receiver’s endpoint using the EDI communication protocol.

3. Hybrid EDI integration

Hybrid EDI means being able to use both direct and indirect EDI integration. For instance, an organization may use a VAN for indirect EDI transactions when sending some documents, while using direct EDI integration for others.

4. EDI integration as a service

This means using a third-party EDI service provider. There are several reasons why companies would outsource their EDI like this. They may not have the resources to have the software inhouse themselves, or they may choose to focus their time and energy on taking care of the day-to-day operations of their businesses.


EDI for small businesses

Fortune Business Insights predicts that globally EDI software will grow to USD $4.04 billion by 2029, which is a CAGR of 11.6%. The main reason for this is that EDI has become more affordable, which means that instead of only being used by large organizations, small and midsize companies are now able to buy it.

Today there’s sophisticated software like Cin7, which has robust EDI capabilities, a large EDI network, and tools that let you manage your EDI customers in one automated system. Cin7 eliminates the need for any third-party EDI software provider.

Cin7’s software is a fast, efficient, full-fledged EDI tool that offers the following:

Workflow automation

  • Automation for any of your business processes,
  • A streamlined integration between many trading partners, and
  • A better EDI operation in general.

Full service

  • Support from Cin7 all the time,
  • Design and configuration services,
  • Compliance testing that meets the standards you expect, and
  • 24/7 monitoring that looks for errors in your system and resolves any issues you may have.

Data transparency

  • The status of your orders can be checked anytime.
  • There won’t be a need to spend money on third-party EDI providers.
  • Your data can be accessed in real time, and all your orders will be fulfilled accurately.
  • All your data transfers will be standardized.

Support for multiple fulfillment models

  • Seamless coordination with your product distributors, 3PL providers, and commerce channels,
  • An intuitive EDI dashboard that makes EDI easy to use, and
  • Multiple options for cartonization, which means being able to fulfill numerous orders instantly.

Pre-built EDI mapping

  • Ability to track the workflow of orders you have with several of the companies you trade with, and
  • EDI software that’s compatible with American National Standards (X12) and European Standards (EDIFACT), so you can trade globally easily.


How Cin7 can help you with EDI integration

Cin7’s EDI software can interface with major retailers worldwide. As a cloud-based inventory management system, it takes care of your orders and oversees them from initiation to fulfillment while securely transferring your business documents electronically. You won’t need to employ a third-party vendor for these transactions. Cin7’s software takes care of everything.

When orders are fulfilled quickly and accurately, as they are when you use Cin7’s EDI, customers are happy and more likely to become repeat buyers. Since most established firms prefer EDI for B2B transactions, if you invest in the software, you’ll attract clients who, in turn, can expose you to more business opportunities.

Moreover, automating your business processes frees up your employees to work on other, critical areas of your business. These could include client relationships and expanding your inventory, areas that can significantly grow your business.

So, what are you waiting for? Reach out to our Cin7 team for a demo and learn how Cin7 can help you with EDI solutions.



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