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What are EDIs and why are they important for efficient supply chains?
What are EDIs and why are they important for efficient supply chains?

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For a supply chain to be effective, data must be transmitted and shared across multiple stakeholders and vendors accurately and efficiently.

Imagine being a truck driver and having to wait for weeks to get paid, because a dispatcher somewhere entered incorrect data into the company’s dispatch and operational billing system.

Time and money has to be spent to rectify this costly data entry error in the invoice, slowing down the supply chain and affecting its efficiency. EDIs offer a viable solution here.

They can help reduce lead times, eliminate procurement errors, clarify inventory status information and enhance strategic alliances throughout the supply chain. Today, we’ll look at what they are in more detail.
 

What is an EDI?
 

EDI — short for Electronic Data Interchange — is a protocol that is used for the computer-to-computer exchange of business-related transactions or messages.

An EDI allows businesses with two different business systems to use a common language to talk to each other by automating this process. This minimizes human interaction, which consequently reduces or eliminates the chances of mistakes.


What are some common forms of EDI transactions?
 

EDI transactions are all around us. Here are the 3 most common forms of EDIs:
 

  1. Invoices — Invoices are sent to request some payments.
  2. Advance Ship Notices — It informs a company when and how their items will be shipped. It also includes barcode information which indicates and identifies the specific item in each box.
  3. Purchase Orders — These are used to initiate an order.
     

>> The components that make up an EDI Solution
 

For an EDI to exist there has to be two trading partners that exchange business documents — the supplier and the customer.

To implement a fully integrated EDI solution, four components are required:

1. Mapping — This software ensures that the EDI data being pushed and pull appears in the correct places in all documents.

2. Translation — This software converts those documents and the data to and from the EDI standards.

3. Network — A secured network is required to be able to exchange EDI transactions with the partner.

4. Support and Maintenance are needed when implementing an EDI system for it to run smoothly.
 

What are the 5 Advantages of EDIs?
 

  • Manages a large number of transactions
  • Eliminates delays
  • Has minimal operating cost
  • Eliminates data entry errors
  • Improves speed and accuracy
     

What are the 4 types of EDIs?
 

1. Direct EDI
 

Direct EDI is also known as point-to-point EDI. It establishes a single line that is highly secured between two business partners. In this approach, the organization must communicate with each business partner which means managing thousands of separate connections.

Further, the two business partners connect via the Internet using the same protocol so this approach can become very complex if different partners are using different protocols.
 

2. EDI Software
 

This approach is considered when the company has the required resources to implement the software and maintain it. It requires the resources to understand how to map different types of documents.
 

3. EDI via AS2
 

AS2 is quite a popular method for transporting EDI data over the Internet. It involves machines/computers — a client and a server. It creates an envelope for EDI data which is then sent securely over the internet.
 

4. EDI Network
 

An EDI network is simply a secure network where we exchange EDI documents between business partners. Documents are sent and received via the mailbox provided by the organization. This mailbox is checked regularly to receive the documents.


What does an EDI document comprise of?
 

An EDI document consists of data elements, envelopes, and segments that must be formatted according to a particular EDI standard.

Whenever one creates an EDI document, one must strictly follow the formatting rules since these rules dictate where and how a piece of information can be found.

In EDI, a document such as an invoice, purchase order, or any other document is called a transaction set or a message. The transaction set or message consists of data elementssegments, and envelopes.

1. Data Elements

The data element represents the individual items’ information in the document. In an invoice or a purchase order, data elements such as quantity, and the city will be present.

2. Data Segments

A group of similar data elements is known as Data segments. A segment describes each section in an EDI document.

3. EDI Envelopes
 

An EDI envelope is a package that contains the EDI documentation that needs to be sent to partners. There are three different levels of packaging.

1. Transaction set envelopes — different envelopes for different documents.

2. Group envelopes — used for grouping the documents.

3. Interchange envelopes — used for interchanging documents from one sender to one receiver.
 

Conclusion
 

EDIs are important for businesses in the supply chain and transportation industry as they solve many issues specific to these two sectors:

  • They use standardized data formats that can be used by any other logistics application that also uses that specific format.
  • They automate many administrative processes, helping avoid issues caused by human error and data duplication.
  • They also integrate with several supply chain platforms.

This last point is crucial as players in the supply chain and transportation industry often work with multiple vendors, each having unique contracts and invoicing structures. This also results in the use of a variety of disparate systems to meet their invoicing needs.

Author — Aman Singh Pilkhwal, DLT Labs

About the Author: Aman is an IT practitioner who is skilled in Java and has hands-on experience with Electron and Node.js.


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