Electronic data interchange (EDI) is the exchange of critical business documents and information between companies in a standardized format via computers. Individual enterprises adopting this software technology transmit and execute business transactions are known as trading partners. However, the companies first have to mutually agree on using a specific industry-based EDI messaging standard to facilitate the data transmission. This transmission can be done using a point-to-point connection or value-added network. The common EDI messaging standards are ANSI ASC X12, ODETTE, UBL, GS1, TRANSCOMS, or ebXML. These EDI standards specify what type and format of business information the companies are transmitting using their computer systems.
How does an EDI software solution work?
Companies of all sizes store all of their vital business data within a suitable enterprise resource planning (ERP) system. This business software solution generally contains valuable information relating to cash flow, financial performance, inventory levels, customer details, sales, and invoicing. The EDI software platforms which credible corporate vendors sell to these enterprises integrate easily into their enterprise resource planning solutions. This ensures hassle-free accessibility and execution of the information which companies need to create relevant business documents in a digital format. Only then can these organizations conduct their commercial activities with other businesses in the market for the purpose of earning profits.
The execution and transmission of business documents between companies using an EDI software solution involve the following steps:
- Companies use their ERP system to create a file containing the data they wish to include in an EDI- compliant document,
- The enterprises then transmit the data file from the ERP system to their EDI software solution,
- The EDI platform’s messaging standard then collects, translates, and organizes data within the ERP file,
- The EDI standard goes on to convert the ERP document file into its equivalent EDI version,
- The EDI software then transmits the document to the computer systems of companies’ trading partners via the Internet, and
- The trading partners’ EDI system generates and transmits a receipt on receiving the document.
Why use an EDI software technology?
Companies choose to install and operate a suitable electronic data interchange software platform to automate their business operations. The system is a convenient and cost-effective alternative to manually process business documents. Moreover, it eliminates the companies’ employees’ need to constantly re-record identical business data in two disparate business solutions. This hastens the speed of executing business data and significantly minimizes avoidable clerical errors. The EDI platform is even instrumental in enabling the enterprises to:
- Boost internal efficiency by streamlining workflow in their business processes,
- Enhance the business communication they maintain with their trading partners, and
- Improve the accuracy of data they are exchanging with their trading partners.
Operating an EDI software platform enables companies to automate their businesses and strengthen the commercial relations they maintain with their trading partners. The system they ultimately choose should integrate easily with other business solutions in IT infrastructure. Moreover, the EDI platform needs to be adaptable to the latest artificial intelligence and machine-learning technologies. Above all, it should be cost-effective for the companies to install as a cloud-based, on-premises, or hybrid platform with success.