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What is Electronic Data Interchange? Electronic data interchange (EDI) reduces business costs and minimizes errors by standardizing key communication between suppliers and buyers.\u00a0On average, businesses process 7 documents during each purchasing cycle<\/a>. The larger your business is, the more complex payment becomes. You\u2019ll likely see more errors or missing documents. The stakes go up, too.<\/p>\n <\/p>\n If a buyer denies an order you\u2019ve already fulfilled, a missing purchase order makes it hard to force payment.<\/p>\n If you issue an invoice with the wrong total, you impede your cash flow while taking time to identify the issue and send a new one.<\/p>\n Are missing documents and data entry errors an unavoidable part of growing your business?<\/p>\n Absolutely not. At the organizational level, EDI systems standardize your relationship with both buyers and suppliers. At the warehouse and logistics level, it facilitates smooth electronic document exchange and eases a number of traditional supply chain pain points.<\/p>\n <\/p>\n Contents<\/p>\n <\/p>\n BONUS:<\/strong> Before you read further, download our Warehouse Management Software Whitepaper to see how Logiwa uses real-time data to help you get up to 100% inventory accuracy and execute advanced fulfillment strategies like wave planning.<\/a><\/p>\n Electronic document interchange, or EDI, is your supply chain manager\u2019s way of using digital technology to simplify the process of ordering from suppliers, liaising with shippers, and communicating with customers.<\/p>\n EDI is a standardized communication system that uses structured data. In other words, it digitizes information that was previously transmitted manually. In the past, employees handled documents like purchase orders and invoices manually. They often executed several redundant steps that delayed transactions and increased the likelihood of errors.<\/p>\n With EDI, businesses standardize common process like invoicing. In the past, a company sending an invoice would go through the following steps:<\/p>\n While this can take several days, an EDI manages the process in a manner of hours or minutes. Your supplier enters invoice details using a standardized method, that invoice information instantly appears in your system, and the system sends a confirmation of receipt. When it comes to purchase orders, the same idea applies.<\/p>\n Paperwork gets a bad reputation, and it\u2019s a little unfair given its issues have more to do with the process surrounding it. At a high level, proper documentation legitimizes your business, builds trust with your investors and customers, keeps your organization compliant, and strengthens your governance procedures.<\/p>\n At the more detailed level, proper documentation protects your bottom line and your cash flow. Consider the documents exchanged during the average purchasing cycle<\/a>. This could include:<\/p>\n EDI enables straight-through processing and easy integration of different systems. This is a huge value-add for businesses that want to extend the capabilities of their straight-through processing systems.<\/p>\n For instance, Logiwa\u2019s allows customers to directly connect their systems through any of its EDI partners below.<\/p>\n SPS Commerce<\/strong><\/a>:<\/strong> SPS Commerce helps customers automate their supply chains and cut time spent on order processing by more than 50 percent. SPS offers quick set up with 100% compliant EDI solutions.<\/p>\n Commercehub<\/strong><\/a>: <\/strong>Ecommerce companies using Commercehub to organize their global drop-shipping strategies can easily link this \u201cintelligent inventory\u201d solution to their system.<\/p>\n Truecommerce<\/strong><\/a>:<\/strong> Retailers and distribution centers using ecommerce for a more integrated supply chain strategy can easily link their systems. Using this system, companies achieve higher customer service levels.<\/p>\n B2B Gateway<\/strong>: <\/strong>B2B Gateway has been in business since 1999, evolving with the needs of their customers. This company offers international fulfillment support, from full EDI integration to 3PL logistics<\/a>.<\/p>\n All of these documents protect your company and are far from frivolous.<\/p>\n Purchase requisitions prevent reckless expenditures. A proper requisition includes high level specifications as well as a Statement of Work (SoW) or Terms of Reference (ToR). As such, employees are less likely to request purchases that don\u2019t have a clear organizational value.<\/p>\n Purchase orders ensure you don\u2019t pay for products you never ordered. On the flip side, if you\u2019re a supplier, a purchase order ensures you get payment for goods you spent money to produce.<\/p>\n A goods receipt protects sellers from a buyer\u2019s negligence or dishonesty. For example, if a buyer damages the received goods, they can\u2019t later insist they received them that way.<\/p>\n And of course, an invoice ensures timely payment which is an essential element of good cash flow. A late invoice delays payment, especially when there\u2019s net-15, net-30, or even net-60 payment terms.<\/p>\n A poorly managed process minimizes the business benefit of a paper trail. Sometimes, the process is so poor, employees circumvent them altogether, exposing the company to risk.<\/p>\n By using EDI solutions to turn this paper trail into an electronic paper trail, a company can benefit from reduced costs and stronger communication with its business partners.<\/p>\n Perhaps the most confusing element of EDI is distinguishing it from other forms of communication.<\/p>\n For instance, email is an electronic form of communication but it isn\u2019t electronic data interchange<\/a>. A human must manage the data within an email. If a buyer sends a purchase order via email, the information has to be manually transferred to the supplier\u2019s system. On the other hand, EDI communication eliminates the need for human intervention when moving information from one system to another.<\/p>\n With EDI, there is a rigid format to ensure the receiving computer can read the information. Therefore, the information from the buyer can easily move to the supplier\u2019s system. While there are several different EDI standards in circulation, two trading partners must agree on the standard they\u2019ll use.<\/p>\n The most common EDI standard is EDIFACT, and within every standard EDI language there are<\/a>:<\/p>\n When segments come together, they create transaction sets which serve as electronic documents. For instance, the transaction set for invoices is referred to as EDI 810. Oftentimes, businesses send an EDI 810 in response to an EDI 850 or purchase order.<\/p>\n <\/p>\n Better Warehouse Performance = Higher Profit Margins:<\/strong> Logiwa syncs accurate data across your entire interface so the inventory numbers you see on your dashboard are what your employees see on their devices. Learn how Logiwa uses real-time data to help you get up to 100% inventory accuracy and 2.5x shipments.<\/a><\/p>\n There are a number of EDI transaction sets or file types that are useful for logistics and warehousing<\/a> businesses, including:<\/p>\n\n
What is Electronic Document Interchange (EDI)?<\/h2>\n
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How they streamline your current processes and protect your business<\/h2>\n
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EDI Systems Streamline the Exchange of Crucial Documents<\/h2>\n
How Do These Documents Safeguard Your Business?<\/h3>\n
The different types of EDI systems<\/h2>\n
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Understanding the Different Types of EDI Systems<\/h3>\n