Let’s first understand what EDI and EDI order cycle is. EDI stands for electronic data interchange which is the process of exchanging standardized documents between two entities electronically. EDI has been around for more than 50 years and is not going anywhere because it has been the gold standard for selling and buying products and overall supply chain across all major countries around the world. Whether its big box companies/stores or small mom and pop shops, most likely all of them operate with EDI as the medium of effective document transmission.
What does an EDI Order Cycle or Process Look Like?
- First, an EDI 850 Purchase Order is sent by your trading partner to you (seller)
- An EDI 855 Purchase Order Acknowledgment is sent by you (seller) to the trading partner to confirm that EDI 850 was received
- An EDI 856 Advanced Shipping Notice (ASN) is generated and sent by the you (seller) describing the contents of each shipment and tracking details once the products are dispatched from your warehouse.
- An EDI 810 Invoice is created by you (seller) and sent to the trading partner
Now let’s talk about how does this process work manually. Depending on the volume of transactions and your budget, you hire staff to hand key information one by one into your EDI software and your ERP/Accounting software, converting an invoice from your accounting software to an EDI format manually and sending it to your trading partner and vice versa. What if there are 1000s of transactions? Imagine, the amount of time and money spent on these resources that can be used to do other important tasks. This is where EDI order processing automation comes in.
EDI Order Processing Automation with an Example
EDI should be an important part of your overall growth strategy and should fit into your company’s system infrastructure including how your back-end and accounting systems are setup. As tenured EDI consultants who have helped multiple companies, we always advise companies to integrate their systems to get effective business outcomes and save time for your resources to focus on revenue-generating tasks for your business.
Having said that, what needs to be done is creating an automated process where there is a free flow of information from your ERP/any backend-system to your EDI software and vice versa.
Let’s look at a perfectly automated scenario using the same EDI processing example as above considering all systems are integrated and automated with minimal to no human intervention.
Let’s say you use an EDI software and an accounting system like Quickbooks or Freshbooks and maybe a WMS (Warehouse Management System) like SkuVault.
- When you receive an EDI 850 from your trading partner, it should directly get converted into the specific file format or sent via API to your accounting software (that is integrated with your EDI software) and be sent and stored as a sales order in your accounting software.
- An EDI 855 should be automatically generated in your EDI software and sent to your trading partner without having to manually create it.
- As soon as you receive information from your warehouse team that the shipment has been dispatched and the tracking details are ready through the WMS platform, the shipping file format should be converted an EDI 856 standard format and sent to your trading partner.
An invoice in created in your accounting software and is further converted into an EDI format and sent as an EDI 810 to your trading partner.
Listen to this video about what our team has to say about EDI Order Processing and Automation
Top Things to keep in mind when selecting an EDI Software Service Provider with automation capabilities:
- Being able to accommodate both file-based and API integration and automation is important when your company is planning to scale up.
- Companies are moving towards cloud-based solution which is great but it also depends on what kind of back-end system you have (cloud based or an on-premise solution). An EDI software should fit into your existing infrastructure and should be an extension to it versus a system that you cannot integrate with and need special expertise.
- Having an agile and flexible EDI solution that scales up with you as your volume of transactions grow.
- A strong customer service and talented project team that is available timely to support any disruption that happens during the EDI implementation process.
You need to set clear goals and business objectives in order to determine how EDI automation can make your life easier by reducing repetitive tasks, manual data entry and making your overall processes lean and effective.
Learn how long does it take to implement EDI in different scenarios- a brand new EDI setup, a brand new ERP setup, an existing setup of all systems and an existing ERP you want to your EDI to integrate with.