EDI Software 101: Types, Benefits, and Use Cases

For years, enterprises were looking for a reliable and secure solution to overcome the problems related to paper-based commercial transactions and communication. Considering that paper-dependent data exchange is time-consuming, prone to errors, inaccurate, and involves higher labor costs, it is not at all adaptable and effective in this digital era. Businesses prefer faster, secure, and instant mode for modern consumers and partners. Hence, Electronic Data Interchange comes into the picture.

Although EDI may seem a novel concept to many, it has been around since the 1970s. It is a communication technology used for structured data transmission between partners and organizations by electronic mode. The system converts business documents of one enterprise into a universal standard, transfers them to another partner or business, maps them into usable docs via their technology tools or systems. EDI software solution handles all the critical B2B communications, such as invoices, automated purchase orders, shipments, health insurance codes, etc. Despite EDI being used by many businesses and being around for various decades, many companies still lack a basic understanding of different types of EDI software and solutions, which one they must implement in their organization, and what are the benefits of each.

There are several types of EDI options available across the trading community, the right solution is based on the company’s size, partners, transaction frequency, etc. It also depends on how EDI communication connection is organized. If broadly classified, then there are two main categories. The first is “proprietary EDI solution” in which EDI tools and conversions are in the own property of customers and the EDI user is responsible for the entire operation and development. On the other hand, the second option all the EDI services are offered by a third-party provider and users don’t have to worry about communication protocols or standards. Also, there is no need to invest heavily in EDI upgrades or maintenance. Whether you are starting EDI for the first time or looking forward to expanding to update the existing one to connect with global business partners, you need to be meticulous while selecting an EDI solution for your business based on your needs, budget, and technical capabilities.

Direct EDI/Point-to-Point

Direct EDI was brought into prominence within the retail space by Walmart. Also known as point-to-point EDI, it establishes a single direct connection between business partners. This approach allows you to connect with each partner individually and offer control for the business partners. Used commonly by large enterprises with a high number of daily transactions and EDI documents, it can be highly complex and resource-intensive if partners use different communication protocols, a common practice in the trading communities. For utilizing direct connection, you will need a reliable EDI service provider for a value-driven software platform that suits all your implementation communication protocol guidelines. For this model, you will need software packages that can use protocols, such as AS2, SFTP and FTPS. Also while connecting directly via the internet using the same protocol, you also need to agree upon a few points with your partners. First, communication methods or protocols to be used and second, the specific protocol used for EDI documents exchange.

EDI via VAN

Value Added Network or VAN is a secure and private network that offers solutions to the complexities involved in a single connection. Through this outsourced network, businesses can exchange electronic EDI documents with partners. It is like a provider of EDI-as-a-Service, not as EDI software. A third-party service provider manages the network and provides organizations with mailboxes to send and receive documents. The EDI software development solution also includes management information, EDI outsourcing, back-office integration, community and business partner enablement, etc. VAN providers also offer alerting services to notify the sender when the message is sent successfully and alerts the receiver about new message waiting. EDI via VAN also takes care of:

• Inspection and authentication of all EDI messages where it verifies the authenticity of partners and validity of messages.
• Full mailbox service to route messages automatically to the right mailbox.
• Ancillary services that include an array of services, such as document mapping, data backup and recovery, compliance, and more.
• Full audit trail to track and record all EDI messages.
• Message notification where partners are notified about messages entering the mailbox.

Web EDI

Web EDI uses a standard Internet browser, such as a web-based platform to enable small and medium-sized enterprises to create, send, receive, and manage electronic documents. Businesses use different online forms while communicating or exchanging crucial information with trading partners. It is an easy and cost-effective EDI model recommended highly by EDI experts to companies that occasionally need to seek such services. It replicates paper-based documents into web form consisting of fields to enter personal information by users. This is automatically converted into an EDI message which is shared via secured internet protocols. Enterprises can connect and comply with all the requirements with built-in business rules and partners can communicate without a dedicated resource for EDI implementation. Web-based EDI works on the ‘hub and spoke’ model where major partners are called hubs and smaller partners act as spokes. The former implements EDI, developing a web forms option to be used by small and medium trading partners. The forms are hosted on hub’s site or you can say EDI network provider.

EDI Through AS2

AS2 is a popular communication protocol for transmitting data, especially EDI data, securely and reliably via the internet. Through internet access, it delivers the functionality of EDI and is now considered the most secured and widely used mode for data transport. Many businesses choose EDI integration services for AS2 connectivity as it enables constant ability to receive EDI transmissions. EDI via AS2 involves two computer systems, each belonging to a client and a server that are connected in a point-to-point manner via the web. The server of the receiving organization should always be listening out for the messages addressed to it. In case the message is not received by a server, it is missed just like a phone call. Hence, it is better to use EDI network provider for AS2 connectivity so that EDI transmission is received without a miss. By creating an envelope for the EDI data, AS2 sends it securely without any theft or infringement using encryption and digital certificates over the internet. Walmart gets all the credit for the popularity of AS2 and driving its adoption within the retail sector.

Mobile EDI

Mobile is an emerging trend to access EDI, unlike private networks, such as VAN or the internet that are commonly used by businesses to send and receive EDI business documents. Honestly, EDI applications were never designed keeping mobile users in mind. It can be either due to security concerns with mobile devices for EDI infrastructure or because of restrictions with smartphone technology, mobile EDI has limited adoptions. There has always been no surety if users would prefer mobile phones for their purchase orders or invoices while working remotely or from out of office. In fact, the quality and size of mobile screens have been improved recently to make it accessible for EDI. Companies have now started developing software applications that are compatible with mobile devices. Their focus is to mobilize their supply chain and soon enterprises will be able to install EDI and supply chain related apps from corporate app stores. The salesperson would be able to track the status of product delivery to suppliers while driving or traveling and business managers could review the performance of suppliers while negotiating in a meeting. There is no denying the fact that mobile EDI has transformed the way businesses connect and exchange data.  

Wrapping Up

Apart from these above-mentioned EDI options, there are other types of solutions as well that you can use based on your business requirements and transaction needs. You can seek EDI outsourcing services, also known as managed EDI services, where you can make the best of external resources without a huge investment. You can have a team of experts managing and maintaining EDI environments regularly. Moreover, there are other EDI software, such as proprietary EDI, Specific Integration Software, EDI through FTP/VPN, SFTP and FTPS, and more.

If you cannot decide which is the right one for your organization, then avail of our product engineering services. Our team of EDI professionals will assist you select the right software solution and monitor implementation and deployment process throughout.

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