Blog - Understanding How to use Electronic Data Interchange (EDI) to Automate Business Processes

Suppose you were to suggest to someone that their organization could save time and money by using computers to transfer information from one business to another. In that case, they’d probably look at you as if you had said, “Did you realize the sky is blue?”

To get more specific, if you were to recommend “EDI” (electronic data interchange) to improve business efficiency and cut costs, you might assume you were using a generic term for something ubiquitous like email.

However, EDI is different, and it’s a relatively simple technology that is very underutilized in most businesses. In this post, we’ll explain what EDI is, what challenges it can solve, what opportunities it can create, and how your organization can leverage EDI to improve its business-to-business communications.

What is EDI?

EDI stands for electronic data interchange, and it refers to the computer-to-computer exchange of business documents in a standard electronic format between business partners. The “in a standard electronic format” part points to one of the primary distinctions between EDI and email. While email is written in a human language (i.e., English, Spanish, etc.), EDI uses computer language because no humans are directly involved in the exchange.

A great example of EDI communication is the exchange between companies of purchase orders and invoices. Indeed, these are two of the most common types of business documents exchanged via EDI. In this example, a customer company transmits an electronic purchase order to a vendor company. No human involvement is needed other than to set up the rules by which the purchase order is triggered. Often, this is based on an automated inventory management tool: if the company’s inventory of widgets falls below 200, it automatically triggers an order for 500 more. An order could also be based on a schedule: each year, on October 1, a purchase order is submitted via EDI for a renewal of an annual software license. On the vendor side, its system can be set up to send an invoice upon receipt of a valid purchase order, again without the need for human interaction.

So, in this example, orders can be submitted, and invoices generated without human interaction. A process that may have once been conducted via snail mail or over the phone was greatly improved by the advent of email. But email requires a human on each end of the communication to create and process the message. EDI removes the human element, saving considerable staff time for both organizations while simultaneously cutting down on manual errors.

The other key benefit of EDI relative to email and other common communication vehicles is that EDI can be automated. We have a couple of examples earlier: an inventory system automatically initiating purchases of low-inventory products and a calendar feature automatically triggering purchases of software license renewals.

Common Challenges with EDI Implementation

While EDI offers significant benefits relative to more traditional forms of business communication, there are challenges with this solution that derail EDI implementation efforts if the business is not properly prepared, and the rollout and maintenance of the EDI program are not properly executed.

For example, the growing volume of EDI transactions can overwhelm companies that aren’t set up to handle that many interchanges. Another common challenge is coding errors when EDI fields are created, and mappings are defined during the development. A single mapping error during EDI setup could cause the entire program to fail.

Even companies with long-standing and effective EDI systems can run into challenges based on various factors. The costs of setting up and maintaining EDI systems can get out of control if not properly managed. Increasingly, companies are demanding more real-time EDI transactions with greater transparency. Different companies may use different EDI formats, making it difficult for one system to “talk” to the other. And, of course, security concerns are always at the forefront of any form of electronic communication involving business data.

Finding the Right EDI Partner

Given the significant opportunities and challenges involved in an EDI implementation, choosing the right technology and service provider is essential for a successful implementation. NITCO is a recognized leader in EDI technologies, and our explicit goal is always to simplify EDI solutions for our clients while maintaining data quality and security while minimizing costs.

NITCO offers our customers EDI solutions using various EDI platforms like IBM Sterling Integrator, Boomi, and Jitterbit, and we also provide cloud-based EDI solutions. Our EDI experts have vast experience in delivering solutions using these platforms. In addition to development, we offer EDI platform implementation/setup services. We also provide 24x7 production support for EDI clients. Our EDI team includes Business Analysts, Architects, Senior Developers, and Platform Administrators.

NITCO’s Track Record

NITCO has successfully implemented scores of EDI integrations for hundreds of our customers across a variety of business functions, including logistics, manufacturing, invoicing, and warehousing. Our secure technical solutions provide transparency, high scalability, enhanced speed, reduced errors, cost savings, and reporting functionality.

NITCO provides solutions for several EDI transaction types, including the following:

  • Invoice
  • Purchase Order
  • Sales Order
  • Shipment Status
  • Booking
  • Booking Cancel
  • Book Change
  • Files receipt
  • Advanced Shipment Notice

We have developed solutions using a variety of formats, including:

  • X12
  • ANSI
  • UCS

EDI could save your business time—and money. To learn how NITCO’s EDI team can help streamline and modernize your business-to-business communication, contact NITCO today!