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What Are The Different Types of EDI?

Electronic data interchange (EDI) is the most widely used form of exchange of business documents electronically. Whether you are looking to start doing EDI or planning to restructure your existing EDI or expand it to support a wide range of business partners, there are multiple types of EDI that you can choose from to support your needs.

  1. Direct EDI

This is the most traditional type of EDI which establishes a single secure connection between two businesses that would like to trade the EDI documents with each other. In this approach, an organization needs to communicate with each of their trading partners individually. This can be used when you are starting to do EDI with one or two trading partners but can eventually become a hassle as the business grows and has multiple trading partners to manage with multiple communication protocols. This could become complex and need multiple resources however, large corporations can afford to use this model. Usually, it makes more sense for organizations with small number of trading partner relationships to use this model.

Choose a software that enables you to use all different types of communication protocols and agree with each of your trading partners which one of these will be used for exchanging documents as each trading partner uses can use a different communication protocol like AS2, SFTP, VAN etc.

Direct EDI
  1. EDI via VAN

VAN is an acronym for value added networks and has been the most preferred option for document exchange via EDI. VAN is a secure network where EDI documents can be exchanged through a mailbox. Your company will be provided with a mailbox by your EDI service provider (like a post box where mail gets delivered according to the address). The sender connects to the VAN and sends the EDI documents from their side to the recipient’s mailbox. The receiver on the other side connects to the VAN network and receives documents. Documents will be sent and received from and to the mailbox and the business partners will check periodically to retrieve the documents. These days most service providers offer a notification service that informs the trading partners both sides when the messages have been sent and received in the mailbox. Any VAN service you use is usually designed to route the EDI documents to the correct mailbox and verify the identity of the trading partners and validate the messages set and received. The VAN service also tracks and records all the EDI messages as a part of their service. Ask your VAN service for data backup and document mapping services.

  1. EDI via AS2

Applicability Statement 2 is the secure peer-to-peer, point-to-point communication between two companies over the internet (live data push). It is one of the most widely accepted EDI protocol across industries. AS2 connection is established between two computers (a server and a client). AS2 creates an “envelope” in order to transmit data securely using digital certificates and encryption. The selected data is then transmitted between these two systems-one is the sender and the other is the receiver.

  1. EDI via FTP

The File Transfer Protocol is a communication protocol used for the transfer of computer files from a server to a client on a computer network. You have to upload the files on your side and the recipient downloads the files on their side (could be multiple times a day)

FTP was initially used to transfer files internally within an organization and still is. However, FTP alone cannot provide enough security for the data between organizations and also don’t provide any message management for your transactions. So, there are other added protocols that are slightly better for EDI communication.

There are 3 types of FTP Protocols:

  1. FTP with VPN (Virtual Private Network): There is an extra layer of security when you add a VPN to FTP. However, this still may not be the best option because it doesn’t provide assurance that the sender of information is provided with proof of delivery and the recipient is provided with proof of the sender’s identity. There were compatibility issues as well that were found between two organizations if they were not using the same vendor.
  1. SFTP (Secure File Transfer Protocol) and FTPS (File Transfer Protocol Secure): They both provide an additional layer of security along with data compression enabling faster file transfers.
  1. MFT (Managed File Transfer) or Secure File Transfer with Encryption: If your organization needs to move large volumes of sensitive data on a regular basis, you should consider this solution. MFT goes well beyond SFTP and FTPS to provide file encryption at rest and during transfer, robust management and user access capabilities, workflow automation and cyber security.
  1. In-house EDI

In-house EDI means that an EDI software is installed and run physically on your company systems. This model is ideal if you have a dedicated EDI team (internal resources) to be able to build, implement, maintain and upgrade the software. Mostly, you’ll see large companies opting for this model as they have dedicated resources to map different EDI document types, onboard new trading partners, continuously monitor for errors and be able to integrate EDI into other ERP software to automate the entire order to cash cycle. The entire responsibility of the EDI project roll out and making it a success lies in your hands as a company.

  1. Web EDI

Web EDI actually means conducting EDI through an internet browser in the form of web forms. The web forms contain individual data fields that can be used to enter information. Throught the web EDI software, the information is converted into an EDI message and sent via AS2, FTPS etc. The most important benefit of web EDI is that there is no need to physically install a software on indivdual computers. Web EDI is usually offered by trading partner organizations or big organizations in order to make it easier for smaller organizations that they trade with to exchange documents. The small and medium sized suppliers connect to the web forms through any internet browser and the information filled is converted into EDI format by the trading partner and processed.

  1. Managed EDI Services

A managed EDI service is an organization that offers a full-fledged EDI software and ideally should take care of mapping, testing, full implementation of the software and help continuously monitor for errors through the entire term of the contract for its clients. This is basically a third party provider that helps with executing an overall EDI project from start to end and continuously monitors the document flow for you in order to avoid any chargebacks or fines from your trading partners. A managed EDI service will provide you the software with updates. It is their responsibility to take the EDI burden away from you while you focus on your business revenue. This is one of the most common EDI practices that is happening in this day and age. Companies that do not have in-house EDI expertise are making the best use of this model by relying on these companies to help them trade with their business partners. However, you need to vet and choose your managed EDI service partner carefully considering not all service providers are alike. Consider what the managed EDI services lack, question them on their capabilities and the customer support they provide throughout the contract.

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Learn about the EDI rules that define the structure of all EDI documents in a specific industry and location/region.