Definition and benefits of EDI, electronic data interchange
In the paperless age, EDI is an initiative that standardizes, automates and facilitates digital BtoB exchanges.
Information processing speed, traceability, reliability, data security and cost reduction are just some of the challenges that dematerialized exchanges can address.
Particularly beneficial in the industrial, logistics and commercial sectors, standardized electronic messages are transmitted from computer to computer, making it easy to process various business documents.
But what exactly is EDI? What are the advantages of using an EDI platform in logistics or commerce? And how does EDI flow work?
What is EDI?
EDI: definition
Electronic Data Interchange is the automatic exchange of information between two machines, using standardized messages.
EDI: how does it work?
EDI is a digital solution for exchanging documents in a standard electronic format between partners (customers, suppliers, accountants, public authorities, banks), thus avoiding the need to send documents by post, e-mail or fax.
These documents can be :
- commercial (orders, invoices, delivery notes, shipping notices, quotes, loan applications, etc.),
- administrative and accounting (tax returns, DAS2, etc.).
The information gathered is interpreted and integrated directly into information systems, for immediate processing without human intervention.
Manutan sums up EDI in this short video:
What is a standardized or normalized message?
Standardized messages are codified in terms of syntax and vocabulary.
For example, a date is always written as DDMMYYYY, to avoid errors and omissions, and so that computers can read and interpret them using a common language.
Information is collected and translated into data elements, such as :
- sender ID (identity),
- recipient ID,
- address
- document type (invoice, quotation, etc.),
- document number,
- Date
- product reference,
- quantity,
- unit price,
- country (a dedicated code),
- type of partner (supplier or customer, another code),
- control key (as on barcodes), etc.
Here is the translation of a purchase order in EDI format, according to the EDIFACT standard:
Each sector has its own standardization organization, for example ODETTE for the European automotive sector and GS1 for the retail sector.
What are EDI standards?
Data is structured according to technical standards.
Among the best-known, EDIFACT is one of the United Nations standards.
It describes the technical modalities for electronic data interchange in the administrative, commercial and transport sectors, as well as in the pharmaceutical industry.
There's also RailML, based on XML (Extensible Markup Language), which enables data exchange in the rail sector, and the ODETTE EDI standard , developed for the German automotive industry but distributed to other European manufacturers.
What protocols are used in EDI?
First of all, there are a number of prerequisites for using EDI. Both sender and receiver must use :
- the same standard language (or EDI standard),
- EDI software to read it,
- a secure communication system adapted to EDI's specific requirements.
Computers are connected either :
- via dedicated links: two computers or systems connect without intermediaries over the Internet, using secure protocols;
- via a VAN (Value Added Network): the third-party network manages data transmission and ensures, among other things, sender authentication and message validity.
There are several EDI transmission protocols on the Internet, including :
- SFTP (Secure File Transfer Protocol),
- SOAP (Simple Object Access Protocol),
- Applicability Statement 2 (AS2) protocol, based on HTTPS, etc.
EDI: benefits and objectives
EDI offers a number of advantages, meeting the objectives of competitiveness, productivity and profitability:
- financial savings: the dematerialization of exchanges reduces the costs of printing, sending and archiving documents, as well as the human resources needed to process them;
According to GS1, the retail sector saves 775 million euros every year thanks to EDI.
- time savings, particularly in the order processing process;
- instantaneous, automated processing of commercial exchanges;
- data reliability, guaranteed by strict standardization and formatting, secure protocols, automated data collection and no need to re-enter information;
- fewer disputes: fewer errors, fewer omissions, and shorter processing and delivery times;
- real-time visibility of transactions, from order to collection, and improved cash flow (order-to-cash).
EDI benefits both small and large companies, putting them on an equal footing when it comes to sales management.
Why use EDI software?
According to IBM, companies will have to manage an exponential number :
- document formats,
- transmission options.
Today, an international manufacturer would regularly exchange over fifty different types of document, with nearly 2,000 partners.
EDI software facilitates all these exchanges, and enables :
- management of all types of format, i.e. all variants of the EDI standard, as well as proprietary files such as XML, CSV, etc,
- support for all common communication protocols,
- centralized, secure message routing, etc.
Connected to your ERP system, the EDI platform considerably improves your sales and logistics management.
Choose either :
- an ERP with its own EDI module, like Hélios, dedicated to the aeronautics industry,
- an ERP that can interface with a third-party EDI module.
Dematerialize your exchanges to accelerate your business
EDI is an essential document exchange tool for B2B transactions.
And it has a bright future ahead of it! With Internet of Things (sensor), blockchain and artificial intelligence technologies, IBM predicts that EDI will adapt to new needs, for ever more effective traceability, real-time communication and risk prevention.
Article translated from French