EDI Software

What Is EDI Software?

EDI is the acronym for electronic data interchange. This process allows businesses to transfer documents from one computer to another. The documents are in specific, standard formats. This process is often used internally between business partners as well as externally with external sources. The specialized formats allow the data to transfer safely.

In any business's operations, there are times when it is necessary to share documents with external organizations. EDI software offers the ability to do this electronically. This buyer's guide will introduce EDI software and offer advice on what an organization needs to know before purchasing.

Companies use EDI software to pass many types of documents. Here is a partial list of what is typically shared using this software:

• Purchase orders
• Invoices
• Shipment notifications
• Bills of lading
• Payment documents
• Inventory

EDI software allows the computer-to-computer exchange of any document containing pertinent information regarding a business transaction. The software eliminates the need for less reliable transfer methods including mail, fax, and email. An EDI system can make these transfers automatically, reducing potential human error and significantly speeding up business transactions.

Standardized document formatting is what makes EDI a reliable standard for many businesses. The standard formatting allows computers to understand and extract pertinent information. A good example of this is that all dates must appear in an agreed format such as mm/dd/yy and fractions must be written to the .01 decimal place.

Due to different needs across industries, businesses use a number of EDI standards today. With so many options, it is important for companies that plan to exchange documents to agree on which EDI standard they will use to avoid confusion. There are EDI translators which can help with transfers between different standards.

Features of EDI Software

Exchanging documents electronically sounds simple, but the amount of work necessary to get documents ready, transfer them, and process them is significant. Let's look at some critical functions an EDI system should perform.

Translation

The software takes the formatted data and translates it into human-readable English (or another language the user specifies).

Mapping

The software can assist users with formatting transactions and sharing data for other business areas, like your accounting department or another ERP system.

Security

For security purposes, EDI software transmits data between users using encrypted data, secured networks, or both.

ERP and SCM Integration

Integrating a standalone EDI system with a company's existing software is critical, especially with enterprise resource planning (ERP) and supply chain management (SCM) systems. If a company does not do the integration, the only other option is to have someone manually undertake document formatting and exchange. That would completely bypass the main reason companies use EDI software.

Onboarding

EDI software often comes with training and templates to make it easy to add a new partner to the system.

The Benefits of Using EDI Software

EDI is a standard software used in many organizations that handle distribution. Its benefits are well-known:

• Reducing costs associated with document creation and management - It costs money to print a physical document, address the envelope, put a stamp on it, send it out, and keep a second copy in a file drawer. With EDI software, a company can save money on supplies and labor.
• Increasing speed of business transactions - Business transactions are much faster using an EDI exchange instead of sending documents through the mail. It's almost instantaneous instead of the multiple days it would typically take the postal service.
• Reducing human error - Human errors are going to happen. Those errors cost businesses lots of money, and they can slow down any process. Using EDI software helps eliminate the need for a human touching the document. It also drastically reduces factors that can interfere with business transactions. A good example of this is poor handwriting or transposition of numbers.
• Improves employee efficiency and productivity - The use of EDI software eliminates a substantial amount of work for your employees. This allows them to focus on other critical processes your company needs. It also eliminates the need to do work twice since the human error factor is removed from the exchange. Because the EDI protocol allows business processes to happen faster, a company can see positive impacts on inventory and the ability to respond to customer needs faster.

EDI Software Options

Due to its long use in the distribution industry, EDI software is now available in many options. It's important to know what the options are when selecting an EDI solution for your business.

• Point-to-point EDI - Also known as direct EDI, this option creates a dedicated data-sharing point between two organizations.
• Web EDI - This option allows organizations to fill out forms using a browser like Chrome or Firefox. Once entered, the data is sent to the receiving organization. This option is attractive to smaller businesses that cannot afford dedicated EDI software.
• Mobile EDI - This option allows apps developed for mobile devices to transfer data at any time. This option does have security concerns. However, as the use of it increases, these security concerns will be addressed.
• Outsourced EDI - This option involves using a third-party organization to handle their EDI exchanges.
• Dedicated EDI software - For companies that need to transfer data frequently and/or need a high level of security, this is the preferred option.

EDI System Implementation Concerns

When implementing any EDI system, buyers need to pay attention to common challenges many organizations encounter. Here are two of the more common ones:

• Poor planning - It is critical that a business has a well-crafted plan before switching from a manual process to an EDI solution. A company needs to provide proper training for all impacted by the transition as well as policies towards strict adherence to the new protocols.
• Running over budget - The cost of transitioning to an EDI system is more than the cost of the software. A company needs to budget for needed hardware, ongoing maintenance costs, implementation costs, and training.