What is EDI and what is its role in companies?

Today the digital environment provides the primary method for exchanging information between companies, especially in sectors such as manufacturing, retail, logistics and finance. However, if each software uses a different language, communication can be more difficult. Nevertheless, Electronic Data Interchange (EDI) emerges as a solution to this issue. After all, do you know what EDI is and how it works?

In this post, you will find everything you need to know about this system, as well as some tips for you to be successful when implementing it in your company. Check it out!

What is EDI?

Electronic Data Interchange (EDI) is a technology that integrates data between companies. Its objective is to facilitate and streamline the exchange of information, a critical activity for the commercial segment. Roughly speaking, EDI allows different technologies to “speak the same language”, exchanging data with each other to avoid the need for human intervention.

Communication is difficult due to the fact that each software developer uses their own programming languages, strategies, and methods. Therefore, a file generated by a commercial platform may be unreadable for a different system. After all, the latter might not read that format or even search for data in the wrong place.

EDI operates through a type of protocol that contains standardization rules for issuing digital files, called the EDI layout. In the logistics market, for example, the XML format and the EDI Proceda standard are the most used by companies.

And as the market pace requires greater productivity in the receiving process, this technology becomes irreplaceable.

What is the impact of EDI on the supply chain?

When we mention that human intervention is no longer necessary in certain processes, it means synchronizing data between two companies. When the distributor sends a product to the retailer, for example, EDI allows the data registered in the company issuing the tax documents to be automatically incorporated by the receiving system.

In addition to providing significant time gains, the technology makes operations more secure. The same logic follows the entire supply chain, including raw material suppliers, manufacturers, and retailers. See a practical example.

When the retailer sends an order to the manufacturer, it is automatically registered in the system. When performing picking and packing, the risk of human error will be eliminated. In practice, in addition to saving time, EDI ensured that the manufacturer is sending precisely what was requested.

Between the carrier and the manufacturer, some processes optimized by EDI involve sending:

• Invoices related to the products to be transported.
• Report of products delivered that day, in addition to transportation events.
• Document with the list of materials ready for pick-up in the company.
• List of materials already in the carrier’s possession.
• List of bills of lading already billed.
• Billing documents for deliveries made by the carrier.

These are activities that directly impact the dynamics of logistics, a sector whose performance is strategic for all companies involved in the supply chain.

How to apply EDI in companies?

Before starting, it is necessary to keep in mind that adopting EDI involves aligning the strategies with the other parties involved: suppliers, customers, carriers, and business partners in general. They must understand the advantages of using this technology, as well as the practical impacts we mentioned earlier.

From this point on, you can take the following steps.

1. Put someone in charge of the process

The investment requires, of course, time and money. Hence, it is essential to plan the deployment details, which can be done more easily with a person or team focused on it. Their basic responsibilities should include organizing quotes, establishing the steps (installation, training, etc.) and coordinating the process across all departments involved.

It is worth noting that the person or team responsible will be the main point of contact with customers regarding the installation of the system.

2. Map the company processes

In order for EDI to deliver the best performance, it is necessary to have a deep understanding of the organization’s operations, its demands, and opportunities. Therefore, a process mapping helps to identify the connection points with other companies. Then, you will be able to define what will be the best way to insert technology in this context, respecting the organizational culture and dynamics.

3. Select a provider for the technology

There are different EDI providers, which means you will have to find one that meets your company’s specific demands. It’s worth considering, for example, whether EDI communicates specifically with the modules of the solutions you use — such as the Sales & Operations Planning (S&OP) software, ERP, CRM, etc.

An interoperable value-added network (VAN) is another important advantage, in addition to issues related to the interface itself: language options, technical support, complementary solutions, etc. Remember to research the satisfaction of other users and the reputation of the provider in question to make the right choice.

4. Establish working methods and run tests

A new process mapping must be done considering the post-implementation scenario, as departments will have to adapt to changes. At this point, it is crucial to have the support of the EDI provider to monitor the process, answer questions and help with standardization.

An important tip is to set deadlines for each step and, of course, closely monitor the process from start to finish. A pilot project can be a good alternative to avoid a full migration all at once. If you choose this path, complete the installation, and start transferring activities to the system little by little.

Finally, it is worth highlighting the importance of being thorough when choosing technological solutions as a whole. One of the digital transformation trends is data integration, centralizing processes on more comprehensive platforms, thus, bringing departments closer together. Consequently, the company operates organically, with all teams aligned around the same goals.

Now that you know what EDI is and how it works, analyze your supply chain, and see how it can benefit from such a solution. As a result, you can promote greater agility and security in your business operations!

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