What Is the Connection between ERP and EDI? 15 Facts

In the field of enterprise systems, the relationship between ERP and EDI is an important topic. This blog post describes the fundamental concepts underlying this relationship. You may also wish to read the preceding entry to learn more about the significance of EDI systems. 

What’s EDI?

EDI is the exchange of business documents between business partners using a standard electronic format.

Two trading partners exchange a Purchase Order and an invoice to demonstrate a fundamental EDI process.

Why EDI?

  • To initiate or maintain a business relationship with certain trading partners, vendors, and/or suppliers, you may be required to do EDI.
  • Transaction fees can be extremely costly. EDI offers a flat rate regardless of the volume of transactions.

What Is the Connection between ERP and EDI?

Integration Benefits

  • Transactional automation increases productivity.
  • Reduction of manual data entry errors
  • Validation of content (via EDI standards and receiving software) that verifies transactions contain all the necessary information for proper processing, tracking, etc.
  • Reduced operating expenses
  • Rapid processing
  • The capacity to sell in more locations.

A Trusted Integration Solution

We have already assisted a large number of outstanding businesses in establishing connections with their EDI trading partners. Here are several:

  • TeleDynamics
  • Diamonds in Boston Bay
  • Idea Village
  • Hitfar
  • Sunflower Farms
  • Division of Electronic Security at Diebold
  • Coravin

What is an ERP?

Typically, ERP (Enterprise Resource Planning) refers to a category of business management software — typically a suite of linked applications — that a company can use to gather, store, manage, and understand data from a variety of business activities. ERP systems monitor corporate assets including:

  • Cash Raw
  • Materials
  • Production
  • Capacity

Additionally, ERP systems monitor business commitments:

  • Orders
  • Purchase Orders
  • Invoices
  • Payroll

What is ERP and EDI integration?

EDI ERP integration is the process of enabling automatic data flow between the “front-end” EDI application and the “back-end” ERP system of a business.

Automating the transmission and translation between EDI and ERP solutions eliminates the need for manual re-entry of messages, orders, and invoices and the possibility of user error.

EDI to ERP integration is depicted in the diagram below.

  1. On the upper left, a retail, wholesale, or manufacturing partner transmits an inbound EDI 850 purchase order.
  2. This EDI 850 transaction is automatically tallied and converted to an internal format (Idoc, XML, FF) prior to being ingested into a right-hand ERP (SAP, NetSuite, Acumatica, Dynamics 365, Oracle E-Business Suite, Oracle JD Edwards).
  3. The information that was previously contained in these EDI documents, now in the correct internal format, is pushed into the ERP system on the right-hand side utilizing an API connection.

It is therefore not surprising that EDI and ERP integration has remained a priority for supply chain organizations.

The Value of Automated ERP and EDI integration

Traditionally, EDI and ERP have been separated by the boundaries of their respective software solutions. Each component would manage its own business process, but the two would not integrate well.

Companies would either manually enter EDI data into their ERP system or develop a haphazard, proprietary interface in an attempt to generate a data flow between the two systems.

Currently, this calculus has evolved. The integration of modern EDI systems with your ERP is both seamless and transformative.

Creating an ERP and EDI integration provides a number of benefits, including:

  • Improving data accuracy
  • Accelerating business cycle rate
  • Augmentation of supply chain visibility

Automating EDI ingestion and translation into your ERP minimizes the need for manual data entry, hence increasing the accuracy of your data. Generally, manual data entry will result in errors due to incorrect data entry.

Even if only 1% of orders are entered erroneously, these misplaced values will cause problems for the entire firm. Creating an automatic connection between EDI and ERP avoids errors from occuring.

Integration of EDI and ERP enables your company to significantly reduce processing times, thereby accelerating business processes. When EDI transactions can be automatically exchanged with trading partners in minutes as opposed to days, business cycles can be completed more quickly.

Visibility over trading partners: An automated EDI and ERP integration enables your organization to devote more time to expanding its business.

Because the data moving between EDI and ERP is accurate, automated, and easily accessible within your ERP, you can instead concentrate on how your EDI partners affect your business as a whole. No more frantically searching for missed orders or EDI transmissions that failed.

What Is the Connection between ERP and EDI?

When it’s time for a business to migrate to EDI, they must frequently decide whether to use their ERP software for EDI or to continue using separate apps. Regardless of how a business decides to adapt its environment, it is crucial to be aware of the risks associated with a combined ERP solution.

An EDI upgrade is the pinnacle of IT modernization, but the reality is that a large percentage of these projects fail.

According to industry analysts, up to 75 percent of all EDI migrations fail, often because businesses are unprepared for the complexity of the process and the EDI integration, which is typically not included in EDI solutions offered by ERPs.

Traditional ERP solutions such as Epicor, IQMS, and Oracle offer patched-on EDI solutions that are intended to complement and integrate with their core ERP components, but there is more to EDI than simply sending and receiving transactions.

In actuality, linking the EDI and ERP systems via an ERP vendor may end up increasing the organization’s risk exposure.

4 reasons why you should not combine your EDI and ERP solutions

1. Risk to partner relationships

One of the primary advantages of separating EDI and ERP software systems is the flexibility to complete software infrastructure modifications more quickly.

A well-oiled EDI supplier may establish partner connections in days rather than months, whereas ERPs’ bolt-on EDI solutions do not offer the same pace. This distinction results from a shift in emphasis.

Less emphasis is placed on front-end processes to improve EDI partner onboarding because ERPs are focused on improving their underlying product values, such as their order management and product inventory components.

Frequently, prioritizing work on ERP functions comes at the expense of incorporating a crucial EDI feature.

Waiting for business partners! Obviously, an ERP software vendor attempting to sell his EDI module will dismiss such concerns by stating that EDI services are “fully integrated” in the ERP platform.

This response fails to recognize the true location of EDI migration and integration efforts, which are the establishment of trading partners and the testing of interchanges.

Modern EDI systems and advanced EDI mapping tools will make EDI onboarding more efficient by decreasing the time and effort necessary to establish and manage trading partners.

An EDI solution streamlines changes to custom code required to support new trading partners’ ends. It provides a quicker turnaround time for change requests, which often results in increased revenue and decreased operating expenses.

In addition, EDI vendors have extensive experience connecting to tens of thousands of trading partners and frequently have pre-packaged EDI maps that can be rapidly deployed to establish a new connection. ERPs are an exception to this rule.

Evaluation and selection of software, both for EDI and ERPs, typically occur at a level above that of the operational EDI team. IT managers who are fueled by adrenaline must recognize the heightened risk associated with deploying haphazard EDI solutions on top of an ERP.

2. ERP Limitations

Attempting to install a new EDI system from an ERP provider can increase the chance of system failure by twofold. The most advanced platforms offer EDI visibility levels that cannot be matched by an ERP system. EDI vendors design their platforms to provide real-time status updates, precise error resolution, and precise business process tracking.

A vendor without a proven EDI interface cannot compete and frequently introduces multiple risks to schedule, cost, scope, and quality.

ERP systems are structured as data destinations and storage locations. They have inherent functional strengths and weaknesses. Good ERP software with “integrated” EDI capabilities may inhibit your ability to respond quickly to new standards and customer requirements.

Users lose options within rigidly coupled systems lacking in adaptability and flexibility. Frequently, the only “solution” to work around a brittle EDI solution provided by an ERP is to spend unbudgeted funds writing custom code outside of the EDI component to achieve the desired business result.

Due to ERP limitations, businesses may incur high maintenance costs, also known as “technical debt.”

In contrast, EDI systems with modern visibility tools enable your business to make complex EDI modifications on a single, well-defined platform.

3. Integration stretches beyond EDI and ERPs

Despite the fact that a substantial amount of external data will be ingested into an organization’s ERP, there are several other applications, such as your TMS, WMS, CRM, and/or eCommerce solutions, that may also require integration.

TMS platforms are indispensable to supply chain companies for planning, executing, and optimizing the flow of incoming and outgoing physical goods.

These systems also ensure that the shipment is EDI-compliant and that all necessary documentation is present. Notably, TMSs frequently sit between ERPs and external applications such as EDI, transforming orders into shipments before sending data to the ERP.

WMS systems also play an important role in facilitating the execution of processes such as the tracking of products and manufacturing resources.

WMS solutions are indispensable for warehouse functionality and distribution centers, as they provide businesses with real-time data on inventory levels. Integration with a WMS is crucial for third-party logistics providers. For total integration visibility, EDI data flows must traverse both the WMS and the ERP.

The CRM then manages customer information, purchases, and contact details. Connecting your CRM and ERP enables a centralized, automated information source that eliminates data duplication. The value of this integration for sales and marketing teams is unparalleled.

At long last, eCommerce has conquered the globe. The supply chain has been shaken by the Amazon effect.

eCommerce has skyrocketed the demand for last-mile logistics and increased the demand for shipping visibility among logistics companies. Many manufacturers are contemplating cutting out the middleman and shipping directly to consumers.

What Is the Connection between ERP and EDI?

In conclusion, wholesalers are utilizing eCommerce to expand into new distribution channels, diversify their product offerings, and prioritize transparency.

As your supply chain company adopts an eCommerce strategy, Amazon, Magento, and Shopify will be adopted as part of this initiative. The next frontier for application integration will be integrating your EDI, ERP, and eCommerce solutions.

A variety of external ERP connections are depicted in the diagram below. In addition to trading partners such as Walmart and Target, you also have data from eCommerce applications. On the right, these connections must be integrated with the Acumatica enterprise resource planning system.

Connecting all of your applications to your front-end processes, not just your EDI, has a tremendous value.

However, integration encompasses much more than merely connecting applications. The EDI implementation infrastructure required to set up an EDI-to-TMS-to-ERP can be extensive and requires in-depth knowledge of EDI and API.

If your business requires integration beyond EDI and ERP connection, the majority of ERP systems will not have “out-of-the-box” connectors or the expertise to develop a custom integration.

If your integration encompasses multiple trading partners and diverse applications, a true EDI integration platform is superior to an ERP vendor who has acquired an EDI tool.

4. Modern EDI Systems are already made to integrate with your ERP

After establishing the requirements for EDI and ERP integration, the reality of EDI integration becomes clear. Allowing each software system to perform its intended function will result in the greatest efficiency and lowest cost.

EDI was developed to facilitate the management of front-end relationships with trading partners.

As universal record-keeping systems, ERPs were designed to manage back-end processes.

Because each solution serves a fundamentally distinct function, it is in the best interest of every organization to keep them distinct.

The best EDI technology integrates with enterprise resource planning (ERP) systems and can handle both incoming and outgoing transactions.

Companies must have a thorough understanding of how EDI interfaces are maintained and the potential drawbacks of putting back-end systems in charge of front-end processes, regardless of whether the environment is flexible or run-time.

Modern EDI solutions provide B2B integration expertise and platform capabilities that cannot be matched by a simple EDI tool bolted onto an ERP.

If your company places a premium on real-time supply chain visibility, automated EDI document ingestion into your ERP, and faster trading partner onboarding, then an ERP cannot replace your EDI solution.

Advantages of an EDI-ERP Integration

Admittedly, the complexity of integrating EDI and ERP can be a formidable obstacle for many organizations, particularly smaller businesses just beginning their digital transformation journey. Due to the fact that the two technologies utilize different data formats, a substantial amount of integration work is required to make them view the data in the same manner.

However, commitment to the process can significantly increase the value of the outcomes. Investing in EDI-ERP integration has several compelling advantages.

Enhanced Data Accuracy

Both ERP and EDI are crucial for streamlining business processes. By automating data collection, processing, and reporting, an ERP system reduces the amount of manual work and paperwork required.

In addition, EDI eliminates the time-consuming and error-prone process of document translation before sharing them with trading partners.

When deployed together, EDI and ERP facilitate end-to-end automation in which data is automatically collected, processed, shared, and received, thereby reducing errors throughout the supply chain.

Moreover, both systems share a standardized view of business data, preserving synchronization and data integrity and making it simpler to detect and resolve data issues.

With accurate and timely information, you can make better business decisions, prevent supply chain disruptions, and increase customer satisfaction.

Accelerated Business Cycle Speed

Using EDI and ERP to automate document processing and sharing eliminates bottlenecks such as manual data entry and multiple rounds of review, enabling businesses to operate more quickly and efficiently.

Purchase orders, invoices, inventory management, and payments can be generated, approved, and sent with minimal human intervention.

Moreover, EDI-ERP integration enables you to track internal and external data on the same platform, thereby providing a comprehensive view of ongoing operations. Having quick access to all pertinent information and data accelerates decision-making and reduces error margin.

Improved Supply Chain Visibility

ERP by itself is an excellent tool for internal transaction management. Nevertheless, the typical supply chain includes not only your organization, but also vendors, partners, and even customers.

Integrating EDI and ERP enables you to see more, if not all, of the supply chain by extending the data perimeter beyond your enterprise.

With enhanced supply chain visibility, you can manage inventory and resources more efficiently and even detect potential issues before they become severe.

Higher Customer Satisfaction

Constant EDI-ERP integration enables you to maintain a dependable and consistent flow of data between your business and trading partners. On the same platform, it is simple to monitor transactions, identify errors or exceptions, and take immediate action.

Streamlined information flow and visibility increase your effectiveness in resolving process, quality, and customer support issues, thereby reducing the likelihood of negative feedback and lost customers.

  • More effortless synchronization of data – Both EDI and ERP enable electronic file transmission. Consequently, they eliminate paperwork and save significant time. Moreover, users can log into their ERP systems to view synchronized files. They no longer need to rely on faxes.
  • Improved visibility – The supply chain may be lengthy and intricate. Fortunately, EDI integration with ERP improves the visibility of even the most intricate supply chains. Due to increased visibility, a business can process orders more quickly, shorten its order-to-cash cycle, and accept partners who are already utilizing EDI.
  • Efficient communication – EDI facilitates departmental and organizational file exchanges. It significantly reduces the use of paper for communication. Consequently, EDI integration ERP software reduces costs and streamlines the purchasing process.
  • Promotes customer care – It matters how your customer service department responds to customers’ inquiries. If customers must retrieve and exchange paper documents, the retrieval and exchange process will be lengthy and tiresome. EDI in ERP facilitates a swift resolution process and facilitates the retrieval of customer data. Prompt resolution leads to satisfied customers who return repeatedly.
  • Quicker order processing – Customers from all over the world adore businesses that provide prompt and efficient service. A combined EDI and ERP system can expedite the processing of orders and the resolution of issues. Additionally, they will reduce manual labor and reduce fatigue. Besides, if you process orders quickly, you can make more sales.
  • Expand your business faster – A business that desires to form new alliances must be willing to pay the price. Progressive organizations can readily accept partnering with a company that employs an EDI enterprise resource planning (ERP) system. Therefore, integrate EDI into your communication systems to obtain more valuable bids and opportunities.

How Can You implement EDI with ERP?

Often, integrating EDI into an ERP system is more difficult than it sounds. The flawless communication between these two solutions is necessary for optimal processing times, minimal errors, and consistent compliance, but many businesses struggle to achieve it.

EDI integration with ERP is particularly difficult for organizations transitioning to a cloud-based ERP platform while still utilizing heavily-patched legacy EDI.

Although third-party integration plugins exist to connect traditional EDIs with ERP systems, they frequently require additional manual customization to meet the needs of specific organizations, which adds cost and complexity.

To avoid compatibility issues and maximize the performance of your systems, you must invest in an EDI solution that integrates seamlessly with your on-premises or cloud-based ERP.

If you are like the majority of businesses, you likely lack the in-house ERP-EDI integration expertise required. Therefore, the optimal course of action is to coordinate with a third-party partner, preferably an EDI services provider familiar with your ERP system.

What Is the Connection between ERP and EDI?

With the right vendor and platform, you can reduce configuration time and eliminate costly downtime during the integration process.

Why ERP EDI Integration?

The automation of EDI reduces the reliance on inefficient manual human processes, such as phone calls, paper invoices, faxes, and emails.

As a result, turnaround times are accelerated, errors are reduced, and staffing efficiencies are improved. By storing and manipulating data electronically, EDI reduces the cost of organizing, sorting, and distributing paper documents.

Electronic communication’s benefits include the elimination of manual data entry, the reduction of shipping and billing errors, and the acceleration with which partners receive and input data into their internal enterprise management systems.

The benefits of EDI include eliminating manual data entry, reducing shipping and billing errors, and increasing the speed by which partners receive and input data

Earlier iterations of EDI were simplistic and incompatible with other enterprise software. In contemporary ERP EDI integrations, protocols enforce best practices and data is encapsulated in modern technologies such as ERP.

In addition, data exchange intermediaries who standardize EDI implementations across businesses can conceal the complexities of data structures and formats.

In the past, an EDI implementation might have necessitated hundreds or thousands of hours of work to map individual data fields to one another.

However, today’s tools and procedures make this process seamless and straightforward. Numerous of the world’s largest corporations benefit from the EDI systems’ supply chain data communications.

How is EDI different from an API?

When comparing EDI to an API, it is essential to understand that EDI is a customized data exchange system. It is anticipated that each organization will implement its own variations.

Consequently, although a human-readable data format such as JSON/REST will be somewhat easier to implement, a similar mapping process to the partner’s data format will be required during system setup.

And for seasoned EDI integration vendors, the implementation time difference between an elegant JSON interface and a primitive ODETTE document is likely to be minimal as long as there is clear documentation and support for two-way protocols such as system receipt acknowledgements.

Companies that currently manage their supply chain communications manually can often realize the greatest cost savings by implementing EDI.

The ability to work with large national partners, many of which mandate a specific EDI implementation in lieu of human communication via email, postal mail, or telephone, is another advantage for smaller businesses.

As ERP technology has become a crucial link between manufacturing, transportation, and retail businesses, the need for seamless data communication via EDI has grown.

By integrating robust backend EDI interfaces with front-end management and administration tools, software solutions such as abas ERP have filled this void. Implementing EDI has never been simpler than with contemporary ERP software.

What does abas EDI offer?

abas EDI is an ERP module that facilitates the mapping of data between EDI files and abas system transactions.

The abas EDI software abstracts the complexities so that diverse company EDI implementations can be unified, regardless of the backend EDI technologies and file formats. Data fields in the EDI file will be mapped to corresponding fields in the ERP interface.

EDI often holds the biggest cost savings for companies who are currently manually managing their supply chain communications

The setup of the EDI system can be performed concurrently with other onboarding tasks for businesses that are implementing abas ERP.

While initial configuration may necessitate consultation with specialists, ongoing management of the system can be performed by anyone using the abas EDI Configuration tool in a self-service model.

abas EDI Configuration enchants the complex EDI mappings of data into place. Due to the fact that EDI formats vary from company to company, a setup period is typically required to ensure the ERP can interpret the data.

Both standard EDI formats, such as EDIFact, ODETTE, and VDA, and universal data formats, such as ANSI and XML, are supported.

With abas EDI Configuration, this data association process is carried out using a graphical desktop tool that depicts the field mappings between the ERP system and the segment numbers and columns of the EDI data files.

This is a significant improvement over legacy ERP systems, which may have required software developers to write thousands of lines of code to specify what actions must be performed on the data fields.

Data synchronization with EDI

Once EDI and ERP are integrated, individuals from two distinct companies can view synchronized versions of the same data. Their respective ERP systems are able to display the information that was once contained on paper documents.

A paper shipment order, for instance, would instruct a warehouse to ship merchandise to a retailer. Now, in each ERP system, a worker can view the same information regarding the shipping destination, the billing address, and the list of product numbers and quantities.

Whether a business processes a few hundred or millions of orders, EDI can lead to cost savings. Manual communication regarding invoices and shipments frequently consumes a considerable amount of employee time.

In addition, automating communications with trading partners expedites turnaround times, reduces errors, and improves reporting.

The Value of Integrating EDI with ERP

In the supply chain industry, EDI ERP integration is a top priority. As the COVID-19 pandemic continues to disrupt the global flow of commodities, companies have realized the importance of ensuring seamless communication between themselves.

By integrating EDI and ERP, your business can achieve the overall resiliency necessary to withstand current and future supply chain disruptions.

Here are some of the most important advantages of integrating EDI with an ERP system.

End-to-end Process Automation

Integrating EDI and ERP automates the information flow throughout your enterprise systems. Bills of materials, purchase orders, receipts, and invoices can be transmitted cross-functionally with minimal human intervention, thereby improving speed and precision.

Greater Supply Chain Flexibility

EDI ERP integration expands your business’ pool of potential partners. You are able to conduct business with organizations utilizing different ERP systems and confidently select the suppliers and third-party service providers offering the optimal combination of price and efficiency.

Reinforced Data Security And Privacy

Integrating EDI and ERP automates information transfer between the two systems, eliminating the need to pass files containing sensitive data. In addition, you can set permissions that restrict data to relevant users.

Effective Analytics

Integrating EDI and ERP unifies enterprise data, thereby streamlining analytical processes such as capacity planning, inventory management, and financial reporting. As a result, you can make better-informed decisions and increase your profitability.

Why avoid using ERP “plug-in” EDI Modules?

Integrated ERP system EDI is becoming an increasingly common entry point into EDI ERP integration, particularly among small and medium-sized businesses. However, as you will see below, this option has several significant limitations.

Costly Integration Delays

A key advantage of separating EDI and ERP is the streamlined deployment of system modifications. A suitable EDI provider can set up new partner connections on a stand-alone EDI solution within hours, independent of ERP system integration.

Bundled EDI ERP packages frequently fail to provide the same level of efficiency when connecting new partners, primarily because ERP providers prioritize their core product over add-ons such as EDI.

Your trading partners cannot afford to wait while you set them up on your system, so they will likely move on to a more agile company. Choosing a dedicated EDI solution from a specialized EDI provider will ensure timely updates and expedited onboarding, resulting in strong partner relationships.

What Is the Connection between ERP and EDI?

ERP Limitations

ERP systems are typically not optimized for EDI transactions due to their inherent design as data archiving systems. Even enterprise resource planning (ERP) software of the highest quality may lack the EDI routing and translation capabilities required for optimal operational efficiency.

Therefore, selecting a bundled EDI ERP solution may hinder your ability to respond quickly to changing industry standards and customer demands.

Working around the rigid EDI add-on frequently requires custom coding to achieve the desired outcome. In addition to the unanticipated expense, these extra configurations can increase integration complexity and system failure risk.

Limited Integration With Other Enterprise Platforms

Although the majority of an organization’s EDI data flows through the ERP, other applications, including TMS, WMS, CRM, and eCommerce channels, must also communicate with EDI.

A bundled EDI ERP solution may function well with the ERP but not with the other enterprise systems in your organization.

You may even be compelled to manually circumvent the EDI service or implement costly custom integrations, which can compromise the affordability and dependability of the system.

Modern-day EDI Solutions Can Seamlessly Integrate With ERP Systems

EDI vendors are aware of the significance of a seamless EDI ERP interaction and are continually refining their platforms to enhance this connection.

Cloud-based or on-premises, the best EDI solutions can accommodate a variety of ERP systems and upgrades. In addition, leading EDI service providers are able to implement EDI ERP integration quickly and affordably, thereby significantly reducing the ROI realization period.

In light of the advantages of a separate EDI platform, the cost and complexity of integrating EDI with ERP are no longer a valid reason for selecting an integrated solution.

Instead, opt for a specialized EDI service that is compatible with your current ERP and other enterprise systems and allows you to deploy future upgrades and onboard new partners with ease.

FAQ about ERP and EDI

What is EDI integration in ERP?

EDI is abbreviation for Electronic Data Interchange. It’s a piece of software that automates paperless communication between businesses.

ERP EDI integration allows businesses to minimize manual data entry and enables the ERP to transmit data in real-time. Combining EDI and ERP improves data synchronization, order processing, communication, scalability, and so on.

What is API vs. EDI?

Here, we attempt to distinguish between API and EDI. EDI is an electronic data exchange system suitable for businesses with a high volume of transactions. The acronym API stands for Application Programming Interface.

Although it performs the same function as EDI, the two systems operate independently. EDI establishes a link between two communication systems, whereas API offers an internet-based protocol that permits multiple systems to communicate simultaneously.

What is an example of EDI software?

There are numerous EDI software systems. Jitterbit, SPS Commerce Fulfillment EDI, TrueCommerce EDI, Cleo, GoAnywhere MF, and ParnerLinQ are a few examples.

Business scenarios in EDI integration

Consider a scenario in which Company A has a manufacturing facility in Europe and a logistics service provider in the United States to deliver its products throughout the United States.

Very few of Company A’s trading partners use EDI, and the volume of documents exchanged between Company A and its logistics service provider is enormous.

What are the choices available to Company A in EDI integration?

Scenario 1: Direct EDI Integration

Direct EDI integration is a direct connection over the internet between your ERP system and trading partners using a specific protocol to establish a secure communication line for exchanging electronic documents (also referred to as messages). Your trading partner and you must employ the same communication method or protocol.

When you exchange a large volume of documents with your trading partners, direct EDI integration makes sense.

It is the simplest option and works well for beginners, but its implementation is time-consuming and requires a great deal of expertise when you need to set it up for numerous trading partners.

When you have multiple trading partners with different systems and communication protocols, you must integrate your ERP system with each of them separately.

With our EDI Studio and Connectivity Studio solutions, direct EDI integration is possible, although it requires significant effort. It gives you complete control over the EDI integration, and with the proper training, you can onboard new partners yourself.

Scenario 2: Indirect EDI Integration

What if, however, Company A wishes to make EDI scalable by establishing numerous EDI connections with other trading partners?

The solution of direct EDI integration is not scalable. When this occurs, indirect EDI integration is utilized.

Indirect EDI integration describes the electronic exchange of documents/messages through a Value-Added Network (VAN) or a Managed Service EDI provider, also known as an EDI broker.

A broker that facilitates electronic data interchange (EDI) provides your business with automated communication channels in multiple formats for communicating with its trading partners. Brokers also utilize VANs to connect with customers from around the world.

You only need to create a message containing all the possible data fields you could use for any of the customers. This is the golden message or document.

The broker is responsible for selecting the appropriate fields based on the customer’s specifications, performing the translation/transformation to the correct EDI format (both document format and protocol), and ensuring that it complies with regulatory requirements.

You may be aware that EDI standards vary across industries (X12, EDIFACT, Odette, VDA, and Tradacoms are a few examples of EDI compliance standards) and that these standards have specifics.

It is difficult for a company to retain all of this knowledge. As they work with organizations from various industries, however, brokers are adept at adhering to diverse standards.

To-Increase has a strategic partnership with TIE Kinetix, a leading provider of Document Exchange SaaS solutions, to provide Microsoft Dynamics 365 customers with an all-inclusive EDI solution.

Therefore, if your organization is looking to expand now or in the future, it is easier to establish a pipeline with these brokers, who will handle all EDI integrations with your trading partners, allowing you to focus on your core workplace-related responsibilities.

Compared to a direct EDI integration, this method is certainly more expensive, but it also provides greater scalability and flexibility.

Two-Step Indirect EDI Integration

Referring to the preceding illustration, what would be the next step if company A has multiple global trading partners but the broker does not have connections with all of them?

In this instance, two-step indirect EDI integration, a slight variant of indirect EDI integration, would be the optimal solution. A broker establishes relationships with VANs to facilitate EDI integration with global trading partners.

Scenario 3: Hybrid EDI Integration

Consider the case of company A exchanging voluminous volumes of documents with trading partners Y and Z. In addition to Y and Z, it has a large number of other trading partners with whom it exchanges documents at a lower volume than with Y and Z.

What would be the right option for EDI integration in this case?

It appears that you require both direct and indirect EDI integration. This is referred to as hybrid EDI integration.

The exchange of electronic documents occurs both directly and indirectly in Hybrid EDI integration.

Here is why indirect EDI integration cannot be used in this instance. When there is a high volume of data (any data, not just EDI documents) flowing between trading partners, direct EDI integration is the optimal solution.

Another reason could be that the trading partner can personally handle the golden message or document. It makes no sense to have millions of transactions go through a broker, as this would incur additional costs.

When the volume of messages is low and different standards and protocols must be adhered to, indirect EDI integration can be utilized. In short, hybrid EDI provides the option to select based on transaction volume, frequency, and complexity.

To-Increase can assist in establishing both direct and indirect EDI connections for businesses that desire greater control over the EDI process.

Scenario 4: EDI Integration 2.0; Connect customers without EDI!

Despite the fact that many of your large trading partners may use EDI, some of the large and mid-sized businesses with whom you exchange a great deal of documents may not. (due to associated costs or technical limitations)

So how do you onboard customers or suppliers who are not able to do EDI messaging?

Because we are adding another level to EDI communications, I like to refer to this scenario as EDI 2.0. It differs from the standard EDI integration that you would normally implement.

Here is an example to illustrate this point. Imagine you have customers or suppliers who can generate an Excel document for an order or a PDF for an invoice and email it to you.

The trading partner transmits the document to the broker, who transforms and translates the message into the same integration with D365 as standard EDI messaging. Such brokers as TIE Kinetix specialize in onboarding Non-EDI customers or vendors.

Users of Dynamics 365 will not notice any changes and will be able to handle all documents in the same manner; this is what I refer to as true digital transformation.

Some EDI brokers also offer web portals with the same branding as the D365-using organization. They can integrate this portal with Dynamics 365 using the same integration that allows customers to add orders to this portal.

As you can see, a broker’s ability to manage all the different standards and connect customers or vendors with non-EDI channels can add significant value.

What Is the Connection between ERP and EDI?

The Right Way Forward

Organizations must continue to invest in B2B infrastructure to remain competitive in a digital world that is constantly evolving. Moreover, EDI is an indispensable tool for businesses seeking rapid integration of business processes and increased business agility.

At To-Increase, we provide a variety of dynamic EDI solutions tailored to your company’s requirements. We can help you succeed as a competitive company that offers the highest value to its trading partners.

Conclusion

EDI is frequently used by ERP systems to facilitate business communication. The 1980s-introduced EDI technology was utilized to transmit electronic documents both within and between businesses.

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Pat Moriarty
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