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EDI Business

Understanding the Basics of EDI

Understanding the Basics of EDI

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What is EDI Business?

EDI business is a generic term that can be used to describe several forms of EDI usage in a business environment.  EDI business could be used to describe a company that sells EDI software or services.  At the same time the term could be used to describe the process of exchanging transaction information using EDI.  It is this latter definition that will be the focus of EDI business in this article.  In this definition an EDI business is simply an organization that exchanges transaction information like purchase orders and invoices with its customers and vendors using an electronic form.  An EDI business would begin by selecting the EDI standard that it wishes to use.  There are three predominant standards available for use by an EDI business.  The ANSI X12 standard was created by the ANSI standards board and is the predominant EDI format used in the US.  The UN/EDIFACT standard was created by the United Nations and is widely adopted outside the US.  The Tradcoms standard on the other hand was created in the UK and is heavily used there.

Benefits for the EDI Business

Using EDI in your exchange of transaction data is a well established and proven model.  The automotive industry was one of the first deployments of EDI business with the goal of enabling "just in time" inventory models by minimizing the number of steps required to exchange transaction information.  Estimates place the amount of time to process a single paper transaction as high as 17 minutes; an EDI business can save a significant amount of time and money by replacing those paper transactions with electronic equivalents.

The EDI Business Process

When exchanging transactions and EDI business uses a process that is very similar to a paper one, but fully automated.  As an example, assume a business is sending a purchase order to a supplier.  A standard business they would create a purchase order, print it and send it to the supplier by mail.  The supplier would take the purchase order, manually key it into their computer for tracking and ship products to the customer along with an invoice.  For an EDI business the entire process can become electronic with the customer generating a purchase order that is sent to to the supplier, also an EDI business.  The supplier in turn takes the received electronic document, sends products to the customer and an invoice.  Depending on the configurations used, the entire process can be electronic when two or more companies are an EDI business.

Enabling EDI Business for your Company

Becoming an EDI business is actually a much simpler process than most organizations understand.  Most companies become an EDI business through some form of web-based tool that allows for EDI business exchanges with minimal knowledge required on the part of the user.  Over time, however, you will want to bring your EDI business in-house and you will need to invest in in-house EDI software to enable your EDI business.  This transition can actually happen very quickly, and if many of your trading partners use EDI it may be worth-while from the very beginning.

EDI Business in the Future

As you consider whether EDI business is right for your company, you should keep in mind its longevity.  EDI business has been performed in one fashion or another for more than three decades - well before the Internet became popular.  This broad adoption and usage of EDI business means that the likelihood of another technology displacing EDI business is very small.  As your organization embarks on an EDI business venture, you can rest assured that the long-term health of the EDI business strategy is solid and reliable.

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