Stated simply, EDI is the exchange of business documents, such as purchase orders and invoices, in a common format from one computer to another. Sounds straightforward enough, but it still leaves many executives wondering why they would need an EDI system over a web-based or service bureau solution. Or, for those who don’t believe the time has come yet, at what point of the growth cycle might EDI become necessary?
Who needs an EDI software solution?
Measure the extent to which an EDI solution would remove errors, and that should help you begin to know whether it’s time to consider this type of investment. Since web-based and/or service bureau solutions tend to have a manual element at some point in the process, that means that these options present the possibility for errors to occur. On the contrary, an EDI solution exchanges data directly with back office systems, which translates into virtually no errors. With so much time freed up from addressing errors, employees have more time to invest in improving order fulfillment and ultimately enriching customer satisfaction.
Three approaches to EDI
Before making the choice, evaluate the three EDI solution options that follow. Each one offers different levels of integration and varying degrees of control over daily operations.
- EDI software. EDI software resides openly on your company’s computer. It is the option that offers the maximum level of flexibility and influence. It’s also possible the EDI software you purchase will allow your company to integrate with back office systems. EDI documents are exchanged directly between your company’s software and that of the company with which you’re doing business. A decrease in errors, minimal stoppage, and a protected method of interacting with other businesses are the paramount reasons given for choosing this option.
- Web-based EDI. An interactive process, this method requires manual entry of a company’s EDI information. If you aren’t looking for a system that would allow for integration and you are okay with giving up some control over daily operations, this strategy may be your best choice.
- EDI service bureaus. This strategy is for companies looking to hire an EDI contractor to handle all EDI operations. Essentially, it’s outsourcing your order fulfillment process. As such, it offers the least control over day-to-day operations as well as the least possibility of data integration with your business system.
While most people don’t realize it, EDI is a mature technology that’s been around for over 30 years. It’s a proven-effective solution for the processing of complex data transactions.