If you're like some folks, you've probably heard of EDI but aren't exactly sure what it is, what it does, or what benefit it can offer your company. In this article, we define EDI technology, evaluate its benefit, and take a quick peek at integrated EDI vertical solutions that are available for your ERP software system.
Electronic Data Interchange (EDI) is the process of electronically exchanging data, or more specifically business documents, between companies. Business documents might include Orders, Invoices, Acknowledgments, and Advance Shipping Notices. EDI transmissions generally contain the same information that would be included in the "paper" version of the document. It's essentially an electronic conversation between two businesses ... or more accurately, between two business systems. Companies that send or receive documents from each other are referred to as "trading partners" in EDI terminology.
To explain how it works, we'll use an example of a Purchase Order that has been processed in your system. Information from that Purchase Order is translated to a specific data format and submitted directly to your suppliers system via the internet. In some cases, a Value Added Network (VAN) acts as an intermediary between you and your trading partner. In the most basic form, a VAN acts as a post office that receives transactions and routes them to the appropriate recipient. It's like a clearinghouse that simplifies communication between trading partners (i.e. you and your vendor or customer) and ensures that the data exchanged is structured and standardized.
Primary benefits of EDI technology include accuracy and efficiency which can result in both direct and indirect cost savings.
Accuracy – errors are reduced because data is not being re-keyed into another system. Improved accuracy results in a host of benefits including elimination of excessive shipping charges and the cost of returns for incorrect orders.
Efficiency – electronic documents are delivered far more quickly than their paper-based counterparts resulting in faster order turn around, happier customers, and competitive advantage.
Direct and Indirect Benefits - EDI technology can reduce direct costs such as paper & forms, postage, printers & toner, and document storage. Indirect benefits can include reduced lead times, more frequent inventory turns, better use of warehouse space, and improved cash flow (faster delivery, faster invoice, more timely payment).
There are several EDI solutions that offer various features and price points available for your Sage X3, Sage 100, or Sage 500 ERP software. Some feature the ability to send and receive transactions using an interface that is similar to email, free software upgrades, automated email event notification, automated EDI invoices and advance shipping notice (ASN), and much more.
Get In Touch if you have questions about how EDI technology can impact your business or to discuss integrated EDI solutions available for your Sage ERP software.
Want to learn more about EDI technology and the benefits of electronically exchanging data? In this webinar replay, we break down the key components of EDI, it's place in the supply chain, and the associated benefits.