EDI in ERP: Why It’s Important to Your Business

Supriya Saxena

Supriya Saxena

Senior editor

Parul Saxena

Chief editor

Last updated: July 7, 2021

Sharing of information, documents, and large chunks of data is an integral part of businesses. From billing and invoice modules, project reports, purchase orders, notices to acknowledgment slips, there are so many documents that are shared within organizations as well as with their clients and partners.

Different businesses adopt different tools to share documents. Some rely on traditional practices like email, fax, or post, while some even exploit API. 

There’s another piece of technology that’s gaining significant traction. It is termed Electronic Data Interchange (EDI)!

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If you planning to implement ERP software, then you can choose to either embed EDI or integrate EDI in ERP. Whatever you choose, you’ll be able to bring together your back-end and front-end. How? We’ll discuss all that in this post. But before that, let’s start from the basics!

What is EDI Technology?

In simplest terms, EDI allows the exchange of business documents in a standard electronic format between businesses. Some of the advantages of moving to the EDI platform include: 

  • Minimized Errors 
  • Reduced Costs 
  • Automated Workflows 
  • Quick Document Processing
  • Facilitate Healthy Relationships With Partners and Customers.

Let’s start with the terminology first.

How is EDI different from an email and API?

EDI is quite similar to email as both are electronic methods of sending documents. However, the difference is that EDI doesn’t require human intervention. The whole process of exchange is handled through the computer. EDI is different from API as it operates within standards for the exchange of data.

Before heading to the EDI ERP integration, let’s discuss how EDI works! 

How Does EDI Work?

How Does EDI Work

As technology has been dominating the current landscape for decades, organizations are aggressively looking to adopt EDI solutions that may support evolving business requirements.

Let’s discuss how EDI works;

Step 1: Firstly, a sender exports a business document from an in-house system or application. For example, a purchase order to buy goods and services.

Step 2: After that, the business document or a purchase order is converted from a dedicated computer system into EDI format through EDI translators or a mapping software tool.

Step 3: The purchase order or the EDI business document then goes through EDI processing software to ensure that it’s based upon the current EDI standards.

Step 4: After that, the data from the EDI document is then transmitted via a secure communication protocol (SFTP, AS2, or HTTPS) to a value-added network.

Step 5: Lastly, the receiving party receives the file, identifies, and verifies the credentials, and then decrypts the files to ensure they must be ingested into the system.

Benefits of EDI

There are manifold reasons that companies are utilizing EDI to avail a multitude of benefits, making it a valuable tool, among others. Here’s the list of the benefits of choosing EDI.

1. Lower Operating Costs

With the adoption of EDI, you are likely to reduce admin costs while ensuring your upfront maintenance costs must be significantly minimized. Also, you don’t need any of the following things, like Document and file storage system, document retrieval, Printing, Postage, to name a few.

2. Increased Efficiency

While EDI prevents monotonous tasks, you can easily focus on core value-added activities. This would ultimately boost performance and efficiency, allowing you to deliver goods and services faster than before.

3. Faster Business Cycles

Your business cannot afford to lag especially when it comes to ordering processing times. EDI offers robotic process automation that can boost business cycles and eliminate delays associated with the manual entry of data.

As the technology will let you receive real-time updates, your approach to inventory management will be more streamlined and efficient. Due to communication protocols and sophisticated security standards, your transactions will be secured to an unprecedented scale.

4. More Accurate Records

There’s no denying that manual document processing is vulnerable to errors due to improper document handling, handwriting illegibility, potential issues, and more.

When you implement EDI, you’ll experience reduced rework and enhanced data quality. Also, you will get accurate records as they pass through minimum stages.

What is EDI in ERP? 

Today, most EDI solutions are specifically customized to integrate into platforms from the top ERP vendors. EDI solely can facilitate easier document exchange between your businesses, but when it is team up with ERP, these capabilities can be expanded. 

1. Improved Supply Chain Visibility

With integrate ERP in production planning, you will have in-depth visibility into your supply chain operations. The blend allows you to minimize lead times, process orders quickly, and reduce the order-to-cash cycle. 

Using the robust ERP connectivity, it’s easier to onboard new EDI-enabled customers. 

2. Easier Data Synchronization

After the implementation of ERP, users from different companies can display the exact same type of data in their ERP systems. 

Those days are gone when your business used to send a shipment order manually to a warehouse partner. With EDI in ERP, the data can be synchronized electronically, including destination and billing address and product numbers and quantities. 

3. Easier Communication

EDI makes communication easy. With EDI, data can seamlessly be exchanged with both customers and employees. This would ultimately reduce all paper-based activities while keeping the procurement cost low and streamlining the entire buying process. 

4. Faster Order Processing

With an integrated EDI and ERP solution, your business can be more agile, responsive, and productive. When it comes to your order management system, the features are especially beneficial. Also, the integration will help you close more deals and deliver a major boost to your sales figures.

5. Access to Larger, National Partners

Many businesses will mandate a specific EDI in ERP to eliminate the need for human communication. Make sure you don’t focus on phone or email to exchange data, as you might be losing opportunities.

Final Thoughts

So, that’s a wrap-up to the importance of EDI ERP integration

Now the question is- Why EDI in ERP? Well, it is a function that can save your company’s time, money, and partnership. 

If you’re a kind of a business that efficiently processes a huge volume of documents across different business partners, then you cannot overlook the importance of EDI in ERP. 

Irrespective of your business’s size, you must leverage EDI to streamline your efforts without any difficulty. 

Liked this post? If so, please let us know your thoughts about EDI in ERP in the comments section below.

Supriya Saxena
A logophile by heart, Supriya loves to research and write about the latest technology and trends. She believes that writing is the best medium to influence people in a positive way and has 3+ years of writing experience.

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