EDI (Electronic Data Interchange) is a standardized way of sending and receiving business documents between two organizations. In EDI, instead of sending documents/information manually to your customers via email, phone, fax or mail by printing the document from your computer, you would send them to the receiver electronically. There are set standards that specify the formats, character sets, and data elements used in the exchange of business documents and forms. Both parties must adhere to the same set of rules.

Common EDI documents include purchase orders, invoices, shipping notices, inventory reports as per the ANSI X12 standards. There are more than 300 different types of ANSI X12 EDI standards, all delegated by a different three-digit number, for different industries such as food/retail, finance, government, health care, transportation, and others.

Other EDI standards include EDIFACT, TRADACOMS and ebXML, HIPAA for specific industries with specific versions. Two businesses have to agree on using a specific EDI standard to trade documents with each other.

How is the EDI industry growing?

EDI accounted for more than three-fourths of B2B digital commerce in 2021 but had the slowest growth rate among B2B digital channels at 8.3%, according to data and analysis in the 2022 B2B Ecommerce Market Report. EDI is the biggest B2B electronic sales channel that not only conducts transactions between two organizations but increases productivity and effectiveness in the overall order to cash cycle.

What are the benefits of EDI?

1. Increased Quantity of Orders and Revenue

2. Reduced Time and Money Spent on Overall Processing

3. Serves as a Marketing Tool for Business Expansion

4. Reduced Errors

This is an obvious benefit of EDI because lesser the manual data entry into systems and more automation, lesser are the chances of EDI errors that can occur while document transmission. However, there is a constant need for your team to keep monitoring for errors proactively even before they appear, make sure all your connections are well set, EDI testing is done before you go into the final production phase. Reduced errors mean few to zero fines or chargebacks from your trading partners which is great because in some cases fines cost millions of dollars for a business.

5. Increased Business Efficiency and Performance

6. Enhanced Visibility into Overall Process

EDI provides visibility and transparency into the entire document exchange and integration process which is greatly useful in every industry whether it is to track origination of errors, inventory data, track shipments, track and trace drugs, transportation of good etc. Data loss is minimal if EDI implementation is followed step by step and is a win-win for all parties involved-your team, your trading partners, your EDI software provider.

7. Paperless and environmental friendly

What is e-commerce? How is the ecommerce industry growing?

Ecommerce is buying and selling of services or products online. Covid accelerated ecommerce sales between 2020-2022 where all businesses (including brick and mortar) were forced to pivot to an online model. Per Statista, In 2021, retail e-commerce sales amounted to approximately 5.2 trillion U.S. dollars worldwide. This figure is forecast to grow by 56 percent over the next years, reaching about 8.1 trillion dollars by 2026. This growth is expected to be driven by the growing number of buyers and businesses using digital channels to buy goods and services from the comfort of their desk and advanced technologies like VR and AR that make it even easier (by bridging the gap between in-person visits to the store and trying something virtually) to shop online. Per Digital Commerce 360, the survey of 750 executives done by McKinsey & Co. in the fall of 2021, found customers now regularly use ten or more channels to interact with suppliers, up from just five in 2016. Buyers are more willing than ever before to spend substantial amounts through remote or online sales channels, with 35% willing to spend $500,000 or more in a single transaction (up from 27% in February 2021). 77% of B2B customers are also willing to spend $50,000 or more.

What is the difference between B2B e-commerce and EDI? Can they co-exist?

EDI on the other hand is a way of placing and receiving orders by buyers online following a set of standards called the EDI standards (as discussed above) using EDI platforms on both ends that talk to each other. For e.g. An order is placed via a purchase order (EDI 850) document by the buyer through their EDI platform. The seller receives it and sends an acknowledgment (EDI 855) from their EDI platform. The seller sends an advance ship notice (EDI 856) as the order is ready to be shipped with all the shipping and tracking details and then sends an invoice (EDI 810) as in when the shipment is delivered to receive the payment from the buyer.

How does EDI work in e-commerce?

The most effective way for EDI to work in an e-commerce setup is by integrating your ecommerce store with your EDI platform and ERP software. The reason is an end-to-end automation will help save a lot of time, reduce manual errors and increase efficiency for your business. There are two ways to integrate all your platforms- either through flat files (XML, PDF, CSV etc.) or APIs whichever your systems allow from a technology stand-point. You need to work with your ERP consultants, internal tech team and your EDI consultant or managed EDI service to put an automated system in place.