Below are some Frequently Asked Questions (FAQs) surrounding EDI. Click on the question to show/hide the answer.
Electronic Data Interchange is the exchange of business documents, such as purchase orders and invoices, between business partners in a common format directly from one computer to another.
EDI is used in nearly all the major industries such as automotive, aerospace, retail, finance and CPG sectors. EDI is regarded as the standard for the electronic exchange of documents from one company to another.
An EDI trading partner is simply another company that you exchange documents with. Most OEMs will have a large network of trading partners which are sometimes referred to as ‘Trading Communities’.
need to use exactly this method to send documents?
EDI solutions are regarded as universal in nature and there are a number of functioning standards in existence which govern how companies should send EDI documents to one another. Your exact choice of which EDI solution to use should be aligned with those which suit your business requirements the best.
EDI can be implemented almost immediately, depending on the type of EDI solution chosen. If it is a web-based solution hosted by your customer or client, then all you will need to do is log into their web portal and simply fill in the necessary online forms before sending the required documents. More complex systems will require software to be installed on your company’s network that will then allow integration with your back-office systems. An EDI system can be considered as an evolving solution. As your business grows and you begin trading with more partners, the complexity of your EDI system will grow as well.
VAN stands for ‘Value Added Network’, which is private network where EDI traffic is exchanged securely. Trading partners will typically require an account with an EDI VAN such as GXS and this account simply acts as an electronic mailbox to both send and receive electronic documents. In addition to sending EDI documents to your trading partner via a VAN it is also possible to send EDI documents between VANs, these are known as ‘interconnects’. Interconnects are beneficial in so much as they will give you access to a much broader range of trading partners distributed across the world. Whilst EDI VANs have been around for nearly 30 years now, the Internet does provide an alternative method of transferring EDI documents. Even though the business benefits of using both are similar, the deciding factor of which to use will depend upon the partner agreement that has been prepared. Ideally, both EDI trading partners need to use the same method of transport, either a VAN or direct exchange through the Internet. Many of the larger companies will insist that all their suppliers should use the same method of sending documents.
Essentially there are three types of EDI solutions: EDI software, web-based EDI and EDI service bureaus. EDI software resides directly on a computer that your company owns and offers the highest level of flexibility and control. EDI software also allows you to possibly integrate with back office systems, thus improving business process efficiency. EDI documents are exchanged directly between your EDI software and your trading partner’s EDI software. This ‘point to point’ method of communication allows for minimal delays and reduced errors and a secure method of interacting with trading partners. Since the software for web-EDI resides on the Internet, using it requires some type of internet connection. Web based EDI is an interactive process and requires manual entry of your EDI information. This method provides little opportunity for integration and lessens the control you have over the day to day operations. Since data with a web-based EDI system is interactive, customisation of the EDI process is very limited. EDI service bureaus act as EDI contractors performing your EDI operations, they will typically use some form of pay as you go method. An EDI service bureau provides the least control over your day to day operations and the smallest opportunity for data integration with your business systems.
The first consideration is to understand the impact that EDI will have on your business processes. Since web-based and service bureau solutions will have a ‘manual’ element embedded in the process, there is scope for introducing errors to the business process. EDI software allows you to exchange data directly with back office systems, thus eliminating manual errors in the process. The time saved entering data and eliminating errors allows your company to spend more time improving order fulfillment and more importantly improves customer satisfaction levels. The important thing to remember is that whatever EDI solution is chosen it will impact your company’s operation moving forwards.
In most cases you will not need specific experience; it is directly related to the type of EDI solution you end up choosing for your business. Internet based EDI solutions are normally ‘hosted’ by a company and you merely access this through a web browser. This is therefore the simplest method of interacting with an EDI system. If you decide to implement EDI software then it would be advisable to ask your chosen EDI vendor to undertake some simple training for your employees.
Yes, as with any other form of IT technology, EDI can be outsourced to a company with the necessary resources to manage your total EDI requirements. GXS Managed Services provides an EDI outsourcing capability and this service will look after your complete EDI requirements — from developing maps to link documents together to recruiting partners to form trading communities. GXS has successfully worked with 135 companies around the world to undertake the management of their EDI infrastructures. GXS Managed Services will allow you to enable your entire supply chain, on a global basis, if required to do so.
strategy to them. Is there a way of achieving this efficiently?
Yes, GXS Community Link allows a company to quickly recruit trading partners to your EDI program. GXS will undertake the necessary marketing of your EDI service to your potential trading partners and will work with them to ensure they are able to trade documents with your company as quickly and seamlessly as possible.
Yes, it is possible to trade electronically with automotive suppliers in China. GXS recently announced a partnership with China Enterprise Online Data Exchange Services Ltd (CEDEX). This partnership has developed one of the only trading hubs dedicated to China’s growing automotive industry. The hub allows automotive companies in China to trade documents with both their domestic and international customers. China e-AutoHub is directly connected to GXS Trading Grid which allows a seamless connection to any trading partner around the world.
Yes, the industry associations are very important as they will allow you to implement industry best practices and get a better understanding of what other companies, in terms of EDI usage, are doing in your particular industry. They also work closely to develop industry standards for document exchange. These are important to understand if you want to implement EDI correctly and hence obtain a competitive advantage in the market place. Please take a look in the ‘Resources’ area of this microsite to find out further information about the numerous industry associations and EDI document types.
EDI has been around for over thirty years now and is regarded as a very mature IT technology. As EDI is so entrenched within many companies it is very difficult to replace with another technology overnight. As new technology, such as the Internet, has emerged, EDI has had to embrace these new technologies to remain an efficient business tool for communicating documents between companies. EDI will be around for many years to come.