EDI Frequently Asked Questions
Below you’ll find a list of the most often asked questions we receive from prospective and existing customers, students, and IT professionals who want answers to EDI frequently asked questions. You can click any of the linked questions below to be taken directly to that item on this page.
- What is EDI?
- Who uses EDI?
- What is a Trading Partner?
- What is a VAN?
- What are my choices in transmitting data? (i.e. AS2, VAN, FTP, FTPS, etc)
- Do I need to use a specific EDI method to send documents with my trading partners?
- Is EDI difficult to implement?
- Why is EDI so difficult to implement?
- What is the difference between EDI delivered with a VAN and EDI delivered over the Internet?
- What are my options when it comes to EDI solutions?
- Are EDI documents customizable?
- What are the benefits of an EDI software solution over an internet-based or EDI-as-a-service solution?
- Do I need specific experience to be able to do EDI?
- What are the infrastructure requirements of EDI?
- I don’t have the IT resources to dedicate to EDI. Can I outsource EDI?
- Is EDI secure?
- How is EDI regulated? Are there any standards I should know about?
- What does an EDI document look like vs a paper document?
- What are B2B and B2C?
- Why do I need to audit my EDI transactions?
- What is a Functional Acknowledgement?
- What are the benefits of doing EDI?
EDI Frequently Asked Questions
EDI stands for Electronic Data Interchange. Essentially, it’s the electronic exchange of data, such as purchase orders and invoices, between sources in a common format directly from one computer to another.
EDI is utilized by manufacturers, suppliers, and customers in just about every major industry, including automotive, aerospace, retail, finance, and consumer packaged goods. EDI has proven its utility and reliability over several decades, becoming the standard for the electronic exchange of documents from one company to another.
An EDI trading partner is a company with whom you exchange EDI documents or data. It is typical of OEMs to maintain a large network of trading partners. These networks are often referred to as ‘Trading Communities’.
A VAN is a Value-added Network. These private network providers serve as vehicles for the transmission of data between trading partners. It is not uncommon for a VAN to add value through EDI translation, encryption, management reporting, and secure e-mail, along with communication protocols that are not available when exchanging data via the Internet or regular phone lines.
There are several different data transmission methods you may come across in your EDI discussions and research. These include, but are not limited to:
- Direct EDI/Point-to-Point – A single connection between two business partners. Each connection is made at an individual level. Direct EDI is typically used when a high volume of daily transactions is involved.
- EDI via VAN or EDI Network Services Provider – An alternative to Direct EDI, this preferred EDI network model helps to insulate companies from the evolving intricacies that emerge when supporting the varied communication protocols required from one business partner to another.
- EDI via AS2 – Applicability Standard 2 is one of the most common methods for transmitting data in real-time. AS2 is a secure, internet-based communications protocol that facilitates EDI functionality between a client and a server.
- EDI via FTP/VPN, SFTP, FTPS – FTP over VPN, SFTP and FTPS are additional internet-based communication protocols used to exchange EDI documents. Each method can be used to connect to trading partners via Direct EDI or via an EDI VAN/Network Services Provider.
- Web EDI – Unlike EDI via AS2, Web EDI conducts EDI using a standard Internet browser. Organizations use different online forms to exchange information with business partners. Web EDI makes EDI easy and affordable for small- and medium-sized organizations and companies that have only occasional need to utilize such a service.
- Mobile EDI – A slowly developing alternative to EDI over a private network or VAN. Currently, representations on mobile devices and security concerns leave a lot to be desired. However, many dedicated software companies are currently working to develop more robust mobile EDI offerings.
- EDI Outsourcing – EDI outsourcing refers to the use of external specialist resources to manage a business’ EDI environment on a day-to-day basis. Many companies choose this option when tying into back-office reporting software, like Enterprise Resource Planning (ERP) platforms, and when they lack or do not want their internal IT resources to be tasked with the upkeep of EDI environments.
- EDI Software – This option is utilized by companies that want their EDI environment and development activities kept entirely in-house. Software is installed locally and maintained by a company’s IT staff.
EDI was developed to be rather universal. So, while there are many providers of EDI solutions, it makes more sense for you to focus on using EDI standards that conform to your business needs, rather than a specific EDI solution that your trading partners are using.
Yes, it can be quite difficult. EDI implementation depends largely on the type of solution being implemented as well as the scale of the trading network it is being used to support. If the system is complex and requires purpose-built software to be installed locally, implementation time and difficulty can be increased for deployment, training, and additional activities before the solution is fully functional.
An EDI system is considered to be an evolving solution. EDI has been around for decades as a standard of document exchange across an array of industries. As a result, EDI professionals need to have an intimate knowledge of new standards, tools, and practices that emerge as Industry and EDI evolve alongside one another. Increasingly complex B2B networks, the need for more accountability and transparency, as well as rising costs all contribute to the difficulties surrounding EDI implementations.
EDI delivered over the internet and via VAN achieve the same goal. However, with EDI over the internet, exchange lacks the various added features that come with EDI delivered via Value-added Networks (VANs). VANs add value in a variety of ways, including but not limited to:
- Pre-built Industry-specific solutions
- Communication protocols not available through the Internet or regular phone lines
- Enhanced Data integrity
- Added security
- Visibility tools
- Auditing tools
- Formatting and validation protocols
- Best Practices workflows
There are three basic types of EDI: These are EDI software, Internet-based EDI, and EDI-as-a-service.
EDI software is installed on local machines owned and operated by your company. It provides the most flexibility and control as it ties into your backend systems to further improve in-house business processes. This type of EDI solution will allow EDI documents to be exchanged between your business and trading partners directly, also known as Direct or Point-to-point EDI. The result is fewer delays and minimal errors. Security is also high with this type of EDI.
Internet-based EDI is EDI software deployed via the internet. This requires some level of internet connection that must be maintained for the system to function properly. Manual data entry of EDI information is also required with this type of solution. Integration is more difficult as a result. Conforming processes to the system and giving up some control is another aspect of Internet-based EDI that users must contend with, as customization is limited.
EDI-as-a-service is when your business hires EDI contractors to oversee your EDI operations. Pay-as-you-go and subscription-based approaches are common with this type of EDI solution. In this case, your company will have the least control in terms of customization. However, capable contractors can customize your environment and mappings according to your business’ unique needs. This solution is ideal for companies looking to leverage the benefits of EDI, but do not have in-house resources to oversee EDI operations.
Yes. trading partners often use integrations that conform to specific EDI transactions. Some examples include codes or data fields that are unique to a specific trading partner, or fields whose lengths make mapping into a given EDI specification difficult. For these reasons and many more, users often customize or request contractors customize their mappings when these situations between trading partners arise.
The biggest benefit derived from EDI software is that it removes the manual components of EDI processes that internet-based and EDI-as-a-service retain. This means fewer opportunities for errors and more internal resources available to complete value-added and revenue-generating tasks for your business. In any case, EDI will improve your company’s operational capability moving forward. That said, you need to evaluate how much of that undertaking you are able to assume. Taking full ownership from an internal standpoint may not make the most sense or even be feasible. Outsourcing or bringing on experienced consultants to help or assume ownership of that business component may make more sense and cost you less.
Yes. Because there are multiple ways to approach EDI, you will need either in-house or outsourced professionals who not only specialize in EDI, but also the type of EDI solution you select for your business. While internet-based EDI is a simple, hosted way to interact with and manipulate EDI, it offers you less control as a business owner. The software gives you more control, but ownership is squarely on you and may require extensive training from a vendor, which can in itself be costly and ongoing.
Because EDI is a bi-directional technology, you need a standard language used to communicate between your business and trading partners. This way, all documents exchanged, both inbound and outbound, are interpreted, filed, and archived correctly.
An EDI platform makes for a world of difference when managing your inbound and outbound documents. New document creation, document access, and archiving all benefit from having an EDI platform built to address your industry’s unique needs. Auditing capabilities are also important to consider. Trading partners may require a standardized platform for traceability and security, not to mention the need to address electronic data exchange laws that may be present in your region.
Secure communications networks are a must when enacting EDI communications. This often takes the form of a VAN, which acts as a sort of secure mailbox for data exchanged via EDI platforms. Security is key for peace of mind, not just for your business but for your trading partners, too.
Yes. Outsourcing EDI is no different than outsourcing any other IT-related task for your business. It is important to evaluate firms that specialize in EDI outsourcing and ensure they have a relevant skill set based around your industry. EDI managed services are another component of the outsourced EDI offerings you can leverage to unburden your internal teams.
In short, EDI is as secure as the protocols through which electronic documents are being exchanged. There are three such protocols that are considered most common. These are FTP, HTTPS, and AS2. While there are several other communication protocols through which EDI can be achieved securely, these there are those which you will see most often being utilized.
File Transfer Protocol (FTP) is a standard network protocol used for the transfer of computer files between a client and a server on a computer network.
Hypertext Transfer Protocol Secure (HTTPS) is an extension of the Hypertext Transfer Protocol (HTTP). It is used for secure communication over a computer network.
AS2 (Applicability Statement 2) is a specification about how to transport data securely and reliably over the Internet. Security with this protocol is achieved by using digital certificates and encryption.
EDI is regulated in several ways which vary depending on the industry. For instance, HIPPA regulations require several guidelines be adhered to when electronically sending patients’ health information. Government entities and organizations also have unique rules and standards when exchanging documents via EDI.
An EDI document does not look like a standard paper form. It is created and communicated with machines in mind. Those machines then interpret those documents into a readable format for backend systems, like ERP software.
Business-to-Business (B2B) and Business-to-Customer/Consumer (B2C) are common references to business models. Some companies only work directly with other businesses (B2B), when it comes to selling goods and services. Others work directly with consumers, which are referred to as B2C-oriented businesses.
In EDI, all transactions are completed electronically and without interaction with humans according to details that are predetermined in trading partner agreements. Because the traditional audit trail for transactions is not present. As a result, accountants require a way to verify the validity, completeness, timing, and accuracy of transactions. Some users will implement a control log as a form of audit trail, which will record transactions as they progress through the EDI system.
Just like paper transactions, a trail showing where data is coming from and where it is going to is essential for transparency. Not only this, but it provides you the ability to easily identify your EDI processes and recall important information when necessary.
A Functional Acknowledgement, also known as an EDI 997 document, is an electronic response or electronic receipt that an EDI transaction has been received. For example, once an EDI 850 document, also known as a Purchase Order, has been sent to a trading partner, the EDI 997 will respond with an acceptance, acceptance with issues or rejection notification.
The list of benefits EDI provides businesses is quite extensive. However, the biggest benefits any business will find with EDI are cost savings, speed, and accuracy.
Cost savings resulting from the elimination of paper, printing, reproduction, storage, filing, postage and document retrieval help businesses capture revenue slipping through the cracks. It is not uncommon for companies to realize savings of 30% or more after implementing EDI. Speed factors int the cost savings component of EDI when you consider it takes processing orders down to a fraction of the time. Imagine a PO that takes an hour and a half to process reduced to a minute and a half. That’s the cost-saving power of EDI.
Speed provided by EDI can improve business cycle times by more than 50% when transactions take minutes, rather than days or weeks. when relying on postal services to get the message out. Dirty data resulting from handwritten and manually entered values cost time to correct, as well. The automated and electronic aspects of EDI also help reduce the number of errors that appear when data is entered manually.
Accuracy ensures that transactions don’t need to be audited nearly as often and trading partner relationships thrive on the peace of mind that comes with partners getting it right on the first go.
Want to know more about EnTrust EDI?
EDI’s efficiency and a culture of forward-thinking in terms of digital transformation for an organization offer additional benefits. if this list of EDI frequently asked questions left you wanting more answers, get in touch with the EnTrust EDI experts at Encompass Solutions using the link below.
About Encompass Solutions
Encompass Solutions is a business and software consulting firm that specializes in ERP systems, EDI, and Managed Services support for Manufacturers. Serving small and medium-sized businesses since 2001, Encompass modernizes operations and automates processes for hundreds of customers across the globe. Whether undertaking full-scale implementation, integration, and renovation of existing systems, Encompass provides a specialized approach to every client’s needs. By identifying customer requirements and addressing them with the right solutions, we ensure our clients are equipped to match the pace of Industry.