Communications systems have always been the key to productive commerce, and Electronic Data Interchange (EDI) is the core that ensures good trade connections for any organisation. EDI is a system that optimises data exchange and management to control an organisation’s entire data interchange. However, EDI communication is becoming more and more difficult to manage as technology around security is becoming more complex. With this in mind, we ask the question, what does the future hold for EDI?
A brief history of EDI
In the mid-1960s, various large companies began using proprietary linked computer systems to send and exchange invoices. As technology progressed into the 80s, the American National Standard Institute (ANSI) published an X-12 standard for electronically exchanging data known as Electronic Data Interchange (EDI). Today, EDI has become the standard in the paperless exchange of information between computer systems. It allows organisations to digitally create and maintain all relevant documentation required in the business of selling consumer goods such as:
- Invoices
- Purchase Orders (PO)
- PO Acknowledgements
- Shipment Notices
With EDI, a business can reduce the rate of incorrect orders, lost orders, and shipping problems. It also prevents lost revenue from charge-back penalties and missed opportunities due to processing delays. Finally, it prevents loss of reputation and credit with consumers.
Other benefits of integrating EDI in your business include:
- Eliminates Manual Entry Data Errors. Manual entry data can potentially ruin a purchase order causing chargeback penalties. Direct communication from ERP to ERP avoids this completely.
- Streamline Inventory. EDI can efficiently manage suppliers, warehousing, merchandising, and other components in the supply chain system.
- Increase Productivity. EDI allows organisations to become more cost-effective by reducing headcount or deploy staff on more value added tasks, while increasing productivity and reducing errors.
- Receipt Verification. Improving record keeping processes allows your organisation to stay competitive with larger retailers as you gain a good reputation as a results-oriented business entity.
A victim of it’s own success
Supply chain globalisation and rapid advances in technology mean that EDI adoption is becoming more widespread. In fact, some retailers now demand EDI capability from their suppliers. However, in line with the increasing prevalence, is an increasing concern with security, and it’s with this in mind that Value Added Networks (VANs) have been introduced.
In simple terms, VANs is a hosted service that acts as a means to transform business documents into a particular EDI type. An example would be converting an EDI standard which is used in North America to EDIFACT standard, which is used in the UK.
The ability to support VANs are crucial as many trading partners demand this level of security. But suppliers may find that it’s simply too costly to buy and configure the EDI management systems that are needed to communicate in this way with multiple trading partners.
EDI is limited in scope
When EDI is successfully integrated, it provides a fast, error-free method of communication that empowers supply chains. However, if the majority of a supplier’s orders are received in a non-EDI format, then adopting the technology will have limitations in how much it will streamline your business.
The future includes EDI, but is not limited by it.
The future of EDI certainly looks very promising and organisations have a lot to gain in using this technology. However, EDI is only part of a larger automation strategy where other technologies can be employed when EDI is not the right tool for the job.
At OmPrompt we provide solutions that give you all the benefits of EDI, for ALL your communications. We manage your EDI communications for you, so you don’t have to worry about VANs and other EDI protocols across your customer base. And we can provide direct to ERP communications for all your non-EDI documentation too. And we can do this for almost 100% of your supply chain activities.
Originally published at blog.omprompt.com.
