Author: Elliott Rebuck Mar 16, 2023 7 Min READ

EDI Integration Guide (Types + Benefits)

7 Min READ
EDI Integration Guide (Types + Benefits)

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Automating business communications is increasingly critical in modern commerce. Most businesses store their useful information in digital documents. Therefore, your business managers and others need to view such documents frequently.

Plus, your third-party logistics (3PL) warehouse or ecommerce business must share and exchange documents with other business partners. It’s pertinent that you have a mechanism that facilitates document exchange between yourself and other business partners in a cheaper, more secure, and faster way with few errors. 

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Ecommerce integration, specifically EDI integrations, can help you support seamless B2B communication. This way, your business stays in touch with its trading partners. Here, we explore everything you need to know about EDI integration, including types, how it works, and steps to getting started. 

What is EDI Integration? 

Electronic Data Interchange (EDI) is a telecommunications technology for exchanging business documents between organizations through computers without manual intervention. The technology helps streamline communications with vendors, customers, and other business partners. 

EDI integration involves connecting and configuring two or more computer systems to exchange documents electronically. This is achievable using a direct connection between the systems or using an EDI service provider offering translation and communication services. 

You can create the integration after establishing an EDI workflow between trading counterparts. Establish the workflow by: 

  • Creating EDI transactions, endpoints, protocols, and documents that you use to exchange data with a partner. 
  • Converting the EDI data into a format that works in your back-end technical environment, including your accounting system. 

EDI integration also involves translating data structures into mutually agreed upon EDI standard formats, such as EDIFACT and ANSI X12. Translating your internal data into EDI files allows all partners to communicate in a common language. 

3 Types of EDI Integrations  

There are three different types of EDI integrations that you can add to your business. 

Direct EDI Integration  

The direct integration option involves a direct relationship between your internal ERP system and a partner’s system using a protocol, such as FTP. The internet connection connecting business partners includes a service provider, supplier, or customer. 

This integration form creates a business that manages each association with a partner, resulting in multiple connections. However, implementing the process can be very complex if you’re not using a standardized protocol. 

A direct EDI integration is an excellent choice if your company has many integrations with lots of data moving back and forth. 

Indirect EDI Integration  

An indirect EDI integration involves another connection, such as an external EDI Value-Added Network (VAN) or another broker, to move files between your software and suppliers, customers, or third-party logistics firms. 

This EDI integration version involves moving a message or files from your system to the broker or VAN. The broker receives the message or files and converts them into formats your customers or suppliers prefer. The last step is sending the message and files to the suppliers or end customers by the broker. 

Hybrid EDI Integration  

Some businesses prefer using the benefits of indirect and direct EDI integration. The first version of a hybrid EDI integration lets you exchange messages, directly and indirectly. However, all the parties in the network are already on EDI and have the knowledge and tools for the integration process. 

The second hybrid EDI integration uses non-EDI communication to allow integration with customers and partners not using EDI. For example, VANs (Value-Added Networks) or brokers can exchange EDI messages through other communication types, including email with excel sheets or PDFs attached. 

[FIND AN EDI INTEGRATION] 

The Benefits of EDI Integrations for Ecommerce Brands and 3PLs  

Electronic data interchange removes the need for data entry, eliminating costly errors. EDI integration solutions and software help ecommerce brands and 3PLs extend their data management capabilities with additional business benefits. 

Here are some of the advantages of integrations. 

Lower Operating Costs  

The industry must deal with challenges such as inflation, the shift towards sustainable practices, and new governance and regulations. It’s time logistics businesses look for new ways to decrease overhead costs and utilize current resources better. EDI for 3PL warehouses and ecommerce brands can help with both.  

Proper implementation of EDI integration helps reduce overhead and administrative costs for businesses of all sizes. The system alone can decrease costs, such as paper, printing, filing, storage, and document management. 

Further, the system relieves the burden of manual data entry from your team, so they can concentrate on increasing productivity for higher revenue. 

Faster Order Processing Time  

An EDI integration lets you automate most of the business processes in the supply chain. The EDI implementation allows for preset rules that trigger data exchange automatically. Your supply chain becomes more efficient and productive because order details connect directly to the enterprise resource planning (ERP) platform or accounting system. 

The result is less time spent on tedious manual tasks, including invoice generation. Further, the system also helps increase customer satisfaction. After all, order tracking is the top consideration for up to 91% of customers, and EDI’s ability to offer real-time oversight of orders can enhance customer satisfaction.  

Higher Data Accuracy  

Replacing paper-based processes exposed to human error with EDI helps accelerate data accuracy. EDI in your logistics supply chain eliminates costly manual errors such as mistyping or miskeying information. 

EDI’s automated nature also means unusual purchase orders, such as abnormal order quantity, are flagged for manual signing off. The process ensures you prepare orders for timely deliveries while ensuring a smooth supplier relationship. 

Improved Data Security  

An EDI solution allows transferring data among your partners using predefined and customized security protocols. The connection is also secure. This structure ensures you maintain the confidentiality and integrity of sensitive business documents, improving your overall business security assurance. 

Significant Return on Investment (ROI) 

EDI ensures a significant ROI across your logistics processing because it’s easy to meet customer and trading partner demands. An opportunity to build lucrative and effective relationships with your suppliers is valuable. EDI solutions offer simple onboarding processes that help guarantee faster returns. 

Reducing manual errors also makes it possible to avoid costly mistakes. You can reallocate the resources to the benefit of increasing the investment into a higher value or growing other departments in your business. 

How Does an EDI Integration Work? 

The first step to using EDI integration is collecting and organizing the data required to build your document. Data sources and methods of collection include human data entry systems, exporting PC-based data from databases or spreadsheets, and software with built-in interfaces for EDI files. 

Next, feed the electronic data through translator software to convert it into EDI standard format. The translation software is available for just about any budget and computing environment. 

Lastly, transmit the translated business documents in their appropriate EDI format. You can send the documents directly, via an EDI network provider, or a combination. 

7 Steps to Getting Started with EDI Integration  

Getting started with EDI integration can be daunting, especially for small- to medium-sized businesses. Such firms face different IT challenges than larger enterprises, including reduced staff and budgets. 

However, there are steps to help you quickly set up EDI for multichannel inventory management and other tasks. 

Ascertain Your Needs  

The first step to getting started with your EDI strategy is understanding complexity. Your EDI solution needs to meet your needs and those of customers and trading partners. 

Some business complexity factors to consider are: 

  • Your internal skill sets — Evaluate what technical skills your workforce has. You might have to outsource some aspects of your EDI integration. After all, EDI and B2B integration are not your strengths.  
  • Integration goals — Consider what your goals are. You might want to work more with trading partners, seize upcoming market opportunities, or prefer a deeper insight into your transactions. The best EDI integration strategy considers these goals for a successful implementation.  
  • Your present capability utilization — Your current IT staff may have deep B2B integration knowledge, but their everyday tasks keep them from handling your integration requirements. Again, consider outsourcing to partners with the resources.  

Choose an EDI Provider  

The provider offers EDI services and software to businesses, either in a self-service or managed package. Different providers may specialize in specific capabilities or markets. They help you transfer standardized data between trading partners such as manufacturers, ecommerce sites, or suppliers. 

The best EDI provider should deliver transparency, visibility, and agility for better governance, onboarding, and management. You need a provider who demonstrates how EDI processes can be a valuable revenue-generating engine. 

Some things to look for in the right EDI provider include: 

  • Support for any standards or formats you require and might need 
  • Capability of helping you create automated business processes that enable seamless B2B communication and EDI order processing 
  • Offering a dashboard that you can use to gain customer insight and intelligence for informed business decisions 
  • An expedited trading partner onboarding process that helps increase time to value and adds to your credibility 
  • Services that eliminate errors and provide notifications and alerts for events and non-events when a document doesn’t arrive as expected 
  • The EDI provider should be capable of offering an extensive integration library that connects your system to leading marketplace and ecommerce partners 

Extensiv Integration Manager is pre-integrated with leading EDI providers such as SPS Commerce, Commerce Hub, Radial, AIMS360, and we have a True Commerce buildout in the works. For an additional fee, we can build out support for other providers.  

Carry Out a Strategic Review 

The analysis will help you identify possible applications for deploying EDI while setting priorities for its conversion. Some factors are the number of customers, suppliers, and other partners. Others are the volume and transaction types the players require. 

The result of the review is a description of your current business systems and how EDI can help improve them. Issuing and receiving each business document depends on a system combination of machine and human efforts, all of which are documented and analyzed for EDI efficiency. 

Planning  

The results of the review and analysis steps provide the knowledge to develop a comprehensive plan for the EDI system. Some components of the planning steps include identifying specifications, such as: 

  • The volume of expected EDI traffic and IT infrastructure capable of handling it 
  • Identifying your internet network infrastructure for supporting the EDI data 
  • Network connections required for managing traffic with your trading partners 
  • Programming to ensure your internal systems are in line with the requirements of EDI standards and trading partners 
  • Amount of customization required for integrating your internal and EDI systems 

Integrate EDI With Your Business  

The greatest risk for most EDI systems is integrating them with the current applications. Its critical data required by EDI standards and trading partners are mapped onto data on existing systems. 

Basic tasks include: 

  • Integrating the EDI with your in-house ERP systems for seamless data extraction and loading 
  • Creating EDI documents via mapping extracted data through proper segments and data elements 
  • Installation and configuration of communication software for receiving and sending the documents 

Undertaking Data Mapping  

After completing data analysis and understanding the data structures, it becomes easy to define a map to the EDI translation software. An EDI coordinator defines the map for many EDI packages and VAN services. 

The mapping defines how EDI transaction data relates to the internal system’s information. EDI software stores the map, and the translator uses it to determine where each transaction goes and if the data requires reformatting. 

Start a Pilot Project and Roll Out 

An EDI pilot enables you to refine the system, show the benefits achievable, and ensure data integration with partners. Start the project with a few trading partners. Each partner confirms receiving the documents accurately. 

Pilot partners can then return some data for testing. It’s only after completing these tests successfully that each pilot partner can send real orders. However, you will only eliminate paper transactions after trading partners are happy and the system works as expected. 

Easy EDI Integration with Extensiv 

Unleashing the power of EDI for your 3PL and ecommerce brands is a straightforward process with the right software and experienced EDI experts. The integration helps translate common file types into a unified format for better communication and a simplified onboarding process. 

Extensiv works with several EDI service providers who we can introduce to you as a trading partner for better warehousing growth and scalability. Extensiv Integration Manager offers EDI integrations pre-built for easy setup and the capability to print out standard documents for an improved retail fulfillment process that meets industry standards. 

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EDI Integration FAQs

Can EDI integration be outsourced?

Yes, you can outsource your EDI integration needs, and many businesses do. An in-house team offers its set of benefits, but outsourcing means you’ll not hire additional staff or consultants. 

It also means you will not purchase, install, and configure required software, or translate and map data, among others.

Are there different types of EDI integration solutions?

There are multiple EDI integration solutions. Direct EDI (point-to-point) is the most popular and oldest type. Other solutions include indirect and hybrid EDI integrations.

What types of B2B transactions take place with EDI integrations?

Common B2B transaction types with EDI integrations include Ship Notices or Manifests, Invoices, and Purchase Orders. Others are Purchase Order Acknowledgment, Payment Order or Remittance Advice, Functional Acknowledgment, and Warehouse Shipping Order.

Written By:
https://www.extensiv.com/hubfs/elliott%20profile.jpeg
Elliott Rebuck

Since 2007, Elliott has been immersed in ecommerce, warehousing, and omnichannel fulfillment. With 14 years of in-house experience at pioneering skate, surf, and snow brands, he is now a Marketing Manager at Extensiv, committed to empowering brands and 3PLs with cutting-edge technology for enhanced efficiency and growth.

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