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What is The Difference between EDI Compliance and EDI Capability?

EDI Compliance:

To ensure successful exchange of the EDI documents, both companies trading with each other agree upon a specific EDI standard. EDI compliance in simple words refers to the business’s ability to comply with the agreed upon EDI standard. Usually, it is the trading partner that enforces their requirements on their suppliers and distributors and they have to abide by them. Otherwise, they receive chargebacks or fines from the trading partner because now the trading partners have to do extra work because of a mistake caused by the suppliers. Trading partner compliance documents vary from company to company. Most big box companies like Walmart, Target, Costco, Amazon etc. have detailed resources that are provided to their suppliers and distributors.

For e.g. Walmart’s EDI requirements mandate you to maintain a consistent AS2 connection and send functional acknowledgements no more than 24 hours from when the purchase orders were placed in your EDI mailbox. Suppliers that are unable to meet these requirements for some valid reason have to report to their EDI Support desk or non-compliance can also result in removal from testing and possibly penalties.

Considering the above example, it is imperative for suppliers like you to understand the EDI requirements and if you decide to work with an external entity (EDI outsourcing companies or managed EDI providers) for EDI implementation, you will need to ask necessary questions regarding how they handle compliance, turn-around times, kind of customer support they provide etc. in order to determine if they will be right fit for you.

EDI Capability:

Being EDI capable, simply means that you have an EDI solution in place to exchange documents with your trading partners.

In order to become EDI compliant, you will need to become EDI capable first with an EDI software in place. You can either outsource to a managed EDI provider and get their software on a subscription basis or you can build an in-house EDI system which has become cumbersome with the launch of easier cloud-based EDI systems.

Once you’re EDI capable, you either can start reaching out to different businesses to buy your products (market your business) or if you already have a business that is ready to buy your products and sell to its customers, you can start exchanging documents with them.

Once you and your trading partner have agreed to trade, you’ll receive trading partner requirements from them. You need to configure and test your EDI to make sure you’re communicating with the trading partner correctly and checking the flow of data “end-to-end”. Once you are in production, you and your team needs to keep monitoring the process to make sure there are no errors. If there are any changes to the compliance requirements, your trading partner notifies you and you will need to translate and map EDI data for their new protocols.

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Learn in detail at which stage of your business you should get started with EDI. Also, the steps you should take before you get started on an EDI project.

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