When shopping around for the top EDI company to cater to your business-related needs, it is important to first have a solid understanding on what EDI is and how it works. Maybe you already know that the letters EDI stand for electronic data interchange. But do you actually know anything about electronic data interchange?
The Basic Definition of EDI
According to EDI Basics, electronic data interchange is “the computer-to-computer exchange of business documents in a standard electronic format between business partners.” Nowadays, pretty much every business operation involves this practice.
Have you ever seen a business in the modern world without communication through digital means? Probably not. EDI can takes communication to an entirely new level, especially when it involves sensitive information and data.
EDI utilizes only electronic communication methods, hence the name electronic data interchange, and this completely eliminates paper-based communication. There are some major benefits of switching to an entirely electronic business model, and it’s more than just the fact that you’ll save a ton of money on paper goods and products – as well as postage.
3 Types of EDI
There are actually several types of EDI methods to choose from, but only three main ones that most businesses gravitate towards. The first is Direct EDI, also called Point-to-Point. With Direct EDI, there is one connection between two business partners and they can send and receive documents directly. This is the ideal choice for large businesses with lots of customers and daily transaction (major corporations like Walmart use direct EDI).
The next commonly-used type of EDI is EDI through a Network Service Provider. Instead of a direct connection, businesses must first go through their service provider when sending documents. This is actually a great choice if you work closely with a business partner that uses a different form of EDI. In this case, you wouldn’t be able to send directly – the documents would first have to be translated by the network service provider to be compatible with the receiver’s EDI program.
The third type of EDI is web-based. The ones we’ve just discussed both typically work through software installation, but there is also the option to perform EDI via a web browser. With web-based EDI, you’ll typically pay a monthly subscription to a provider and it is much cheaper than the alternatives. This is ideal for small and medium-sized organizations that want a more affordable yet effective option.
The Major Benefits of EDI Implementation
We’ve already discussed one of the major benefits – you’ll be saving on paper and postage costs – but that’s not all that EDI will do for you. EDI saves costs in other ways, mostly because it enhances all business operations and allows them to run more smoothly. EDI helps with everything from processing orders to managing inventory lists.
One research study on EDI shows that the cost of processing an order manually costs about $35USD more per order than one that has been processed through an EDI program. Operations will run more smoothly at a faster rate with less chance of error when you incorporate EDI into the mix.