EDI explained - what every business owner should know about EDI

EDI explained - what every business owner should know about EDI

15 Nov 2019
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Several decades ago, the world took its first steps towards paperless business with a technology called EDI or Electronic Data Interchange.

The origins of EDI can be traced to the Berlin airlift in 1948. In an incredible feat of logistics, 2.3 million tons of goods were airlifted into the cut off West Berlin.

The military developed standard shipping manifests to organise the process.


EDI explained


EDI relies on the creation of standardised text files sent between businesses in a specific format.

Formatted data travels directly from one company’s computer system into its trading partner’s system without manual intervention.

EDI automates the exchange of business documents, such as invoices and purchase orders between trading partners.

It’s an integral part of the supply chain for producers, wholesalers and retailers of goods and services.

It’s hard to find a large commercial concern that doesn’t use EDI technology in some way – especially in the FMCG, shipping & manufacturing sectors.


Setting up an EDI solution


There are three main elements involved.

1. Sourcing the EDI Software
2. Integrating the EDI Software with your existing business application
3. Choosing the medium by which the EDI messages will be transmitted

The EDI Software is the engine that translates the data from business documents like invoices and purchase orders into EDI messages.

The software manages the movement of message batches between the translation and communications functions.

A link is created from your business application to the EDI software. Data used to create business documents is now available for interpretation.

When sending messages, the EDI software only reads the information it requires, no modification to the data already stored takes place.

When receiving messages, the EDI software translates the data into the format required by your back-office system.


Choosing the medium to transmit EDI Messages


Once data has been exported it must be sent to your trading partner via a communications link. This could be by direct link, by a public data network (e.g. the Internet) or by subscription to one of the many private Value Added Networks (VANS).

Traditionally, VANs have been the most popular way to transmit EDI messages. Celtrino’s software is network independent and can connect to any network.


EDI explained – messaging standards


The format the EDI message takes, depends on what country you operate in, your industry sector and trading partners.

One of the commonly used messaging standards is the EDIFACT standard. EDIFACT is managed by the EU and is an international syntax for EDI.

An example of an industry-wide standard is the EDIFICE Standard, adopted to meet the needs of traders in the electronics industry. Similarly EANCOM is a subset used the retail sector.

Nationally standards also exist. TRADACOMS  is widely used in the UK and the ANSI X12 is a national standard in the United States.


Benefits of EDI


It’s estimated that over 25 per cent of commercial documents contain errors of some kind. More than half are re-keyed into another computer system with the majority, at some stage, entrusted to manual paper-based systems.

Successful implementation brings many benefits:

Time Savings – By the use of data networks, EDI messages may be transferred in a reliable and speedy manner, providing the most up-to-date information.

Cost Savings – EDI offers cost benefits by reducing data errors, delivery times and stock holding days. It improves reporting and cash flows.

Improved Sales, Finance and Stock Administration –   EDI brings a more predictable and speedy payment of invoices. By having up-to-the-minute information, stock control is improved.

Better Decision Making – The quality and accuracy of management decisions, based on reports derived from that information is improved.

New Business Methods –  Just-in-time manufacturing, revised levels of stock holding and better cash management can be employed.


Can you afford not to adopt EDI in future?


As a dominant provider of EDI services to the UK, Ireland and the Eurozone, Celtrino have a wealth of experience in helping companies benefit from EDI.

Speak to one of our experts today – contact us now. 

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