How Does EDI Actually Work?
ASNs? Vans? ERPs? The world of EDI is seemingly full of endless acronyms and confusing jargon. But how does EDI actually work? Well, it’s not as complicated as it first appears and if you want to get the most out of your business relationships it’s worth getting your head around the basics of EDI and the huge benefits it can bring to your company.
First, a definition…
EDI is easy to define. It stands for Electronic Data Interchange and it is the system by which a business exchanges crucial, automatic messages (orders, invoices and shipping notices) with their business partners. So, instead of an employee having to manually prepare an invoice in response to an order, the response is automatically sent out from the EDI system with no need for human intervention.
Implementing EDI opens a whole new world of efficiency and opportunity for businesses or all sizes but especially for businesses looking to expand their client base and take on larger trading partners. There are some larger retailers that will only trade with suppliers if they are EDI capable.
How does it work?
In order to implement EDI, most companies will enlist the services of an EDI provider, such as ourselves. We provide the software solutions that businesses need so they can exchange all their crucial documents automatically and securely and to integrate all their data into their existing back-office systems.
All the information related to your business, such as inventory levels, accounting, invoicing and billing and so on is stored within your ERP System (Enterprise Resource Planning). EDI software solutions, like NeTIX, use API technology to retrieve the necessary information so that documents are produced accurately and exactly when they are needed.
For EDI to work, you and your trading partners need to communicate using a standard format, so that the computers receiving the EDI data can understand it. All these technical aspects of your system will be taken care of when your EDI software is first installed and when fields are mapped to each other. Your provider will make sure that your data can be converted so that the receiving computer can understand it.
What is an AS2?
An AS2 is one network that only works for two parties to communicate directly, so there’s no interconnect. We have our own AS2 license, which means we make it possible for our clients to directly connect to their business partners so it’s just them ‘talking’ to each other.
There’s a real-life cost saving when it comes to AS2, especially for the hub, as they don’t want to be charged every time they connect with a VAN. VAN stands for Value Added Network and is a third-party network that is sometimes used to send EDI messages. It works a bit like a phone network and there is an added cost when you use a VAN.
The Benefits of EDI
Here are some of the main benefits of EDI:
• Increased efficiency and speed,
• better relationships with partners due to fewer errors,
• access from any device connected to the internet (with cloud-based EDI),
• all your ERP and EDI data visible on the same platform and,
• savings in both time and money.
For more information on how EDI can help the day-to-day efficiency of your business, just have a look at our previous blog, What is EDI and how can it benefit my business?
PEPPOL and Messaging Standards
There are several different messaging standards and some of them are associated with particular industries. For instance, the Healthcare sector is associated with PEPPOL, Banking is associated with Swift and the European Automotive Industry with OFTP.
PEPPOL is a type of messaging standard that is being rolled out across all the public administrations in Europe, including the NHS in the UK. The aim of PEPPOL is to make electronic procurement easier and faster for public administrations and for there to be a standard format for all their suppliers. In order to be able to connect their customers over PEPPOL, EDI providers must be specially licenced.
NetEDI is the number one provider of PEPPOL solutions in the UK and we have been chosen by NHS Supply Chain as their PEPPOL provider. To learn more about the benefits PEPPOL will bring to the NHS and the importance of uptake in the industry, have a look at our previous blog.
Hopefully, this blog has explained the main ins and outs of EDI and how it can increase efficiency across the board. If you still have questions be sure to explore the rest of the site and if you’d like to see how EDI can benefit your business, just get in touch using one of the options at the top of the page.
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