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What is EDI Compliance? A Complete Guide

Introduction

EDI Compliance, in simple words refers to a business’s capability to adhere to the trading partners’ requirements as outlined by them.

To ensure successful exchange of the EDI documents, both companies trading with each other agree upon a specific EDI standard. Usually, it is the trading partner that enforces their requirements on their suppliers and distributors and they have to abide by every single of them to avoid any chargebacks.

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.

Why is it important to be EDI Compliant?

Most likely any trading partner you work with will mandate you to adhere to their specific requirements and follow them. If their requirements are not met, the trading partner can charge you with fines or chargebacks which will cost you money and reputation.

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.

How to become EDI Compliant and Eliminate EDI Chargebacks?

Follow this step by step process to become EDI compliant:

  1. Become EDI-capable

Once your company decides on the budget and resources to start an EDI project, 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 pricing model that works for you or you can build an in-house EDI system which has become cumbersome with the launch of easier cloud-based EDI systems.

  1. Put together an EDI project team

The EDI project team comprised of internal and external personnel needs to come together to start setting up the EDI solution, interacting with your trading partner and get the implementation process started

  1. Gather and understand trading partner requirements

Next, your project team should ask for the EDI requirements from your trading partner which usually are provided in the “getting started guide” or on their website.

If there are any changes to the compliance requirements, your trading partner will notify you and you will need to translate and map EDI data for their new protocols.

  1. EDI testing
EDI testing is a process of checking EDI documents flow end-to-end between organizations and internal systems to ensure smooth data exchange before the actual EDI implementation. Testing needs to be done end-to end not only between you and your trading partner but between your internal systems and your EDI solution as well. This is the step to make sure you are being compliant with your trading partner requirements without any hiccups.
  1. Going live, EDI monitoring and Reporting
Once all parties agree on moving forward, a production date is decided to go-live and start sending and receiving the EDI documents. The EDI implementation process doesn’t end here. Continuous monitoring is necessary to correct any transmission or document errors and make sure you are avoiding any fines or chargebacks from your trading partners. You need to make sure your project team is reporting any errors properly

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