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Understanding the Basics of EDI

Understanding the Basics of EDI

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What is EDI VAN?

A Value Added Network (EDI VAN) can be described as an organization whose purpose is to enable communication between parties.  The EDI VAN was born out of the need for companies that used EDI to easily and affordably exchange EDI messages with multiple recipients.  In this form the EDI VAN was nothing more than an electronic post office; as adoption of the Internet for B2B communication grew, the need for the EDI VAN was greatly reduced; but even today the EDI VAN provides a valuable service - especially to smaller businesses.  It is quite common for an EDI VAN to become useful when an organization has EDI volume with between 4 and 6 trading partners.  As we will see, the value of the EDI VAN has varied greatly.

How an EDI VAN Works

As we stated earlier, an EDI VAN is nothing more than an electronic, commercial version of the US Postal Service.  Just like the Postal Service, an EDI VAN receives mail from senders, sorts it for intended recipients, and delivers the mail to the recipient's mailbox.  For the EDI VAN the messages are simply electronic EDI messages instead of paper mail.  The EDI VAN uses electronic "mailboxes" for each trading partner that uses the EDI VAN service.  A trading partner using the EDI VAN transmits electronic messages either through a direct dial-up connection or through another Internet connection type.  The electronic messages are then sorted to the receivers' mailboxes until they are called for, or sent to, the recipient.  An electronic mailbox at an EDI VAN can be used whether you only send EDI messages, receive them, or both.  The EDI VAN usually allows each customer to "pick up" their incoming messages at the same time that they drop off outgoing messages.  The EDI VAN typically also allows for 24-hour per day, 7-day per week access to your electronic mailbox.  This workflow eliminates a number of problems associated with establishing direct communication links with all of your trading partners.

The Evolution of the EDI VAN

As the adoption of the Internet as a means of exchanging communication between businesses has grown, the EDI VAN has come under attack by new technologies and new means of exchanging data.  FTP was one of the first 'Internet friendly' communication protocols that the EDI VAN began to support; but with the advent of the AS2 communications protocol it became possible for companies to connect directly to their trading partners using secure protocols, bypassing the EDI VAN altogether.  As a result of these technological developments, the EDI VAN has been forced to add a lot of services aimed at increasing the value proposition, but revenues in this sector of the EDI market have been significantly reduced.

First Exposure to EDI VAN

For most businesses their first exposure to EDI will be through an EDI VAN.  Regardless of your company size and expertise with EDI, however, using an EDI VAN could still be an important aspect of your EDI strategy.  As the adoption of new technologies has changed the landscape, the EDI VAN has become an aggregator of small businesses.  The EDI VAN then can be very useful to both small companies that are adopting EDI for the first time, and to larger organizations that exchange EDI data with small businesses.

Is an EDI VAN Right for You?

Whether you should work with an EDI VAN depends on several factors.  Some retailers only accept EDI through an EDI VAN; in these cases you have little choice.  For the majority of businesses using an EDI VAN will come down to simple question.  An EDI VAN allows you to get set up quickly and easily, since you only need to communicate with the EDI VAN; the EDI VAN in turn is already set up for communications with your trading partners. The other side of this equation has the cost of the EDI VAN.  Since an EDI VAN charges you by the volume of EDI data sent, the cost of using an EDI VAN will vary with how much EDI data you send.  The question of using an EDI VAN therefore comes down to ease of use and expense.  

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