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Understanding the Advantages of EDI and How to Maximize Them

While meeting customer demands for speed and efficiency is an obvious key to staying competitive, many companies still rely on slow, error-prone manual processes, such as paper orders, that undermine operations.

One solution often presented for optimizing business processes is Electronic Data Interchange or EDI. By adopting EDI, you can electronically exchange vital documents and conduct transactions quickly and affordably.

Read on to learn the advantages of EDI, the roadblocks to implementing it, and how modern order automation platforms provide a superior alternative.

What is EDI?

Electronic Data Interchange (EDI) is a method of rapidly and reliably exchanging structured business documents with your partners’ computer systems in a digital format using specific standards and protocols. EDI liberates you from paper-driven workflows by replacing printing, mailing, opening, interpreting, retyping, and correcting forms, with a digitized process from start to finish.

Whether you need to send an invoice, share a shipping notice, or receive tomorrow’s purchase orders, EDI automates delivery in seconds with standardized formats that both systems understand.

How Does EDI Work?

EDI uses standardized formats and communication protocols to encode, transmit, and decode documents to and from the computers of you and your trading partners. EDI may seem complex, but at a high level, three key steps are involved:

Data Collection

Before digitally sharing documents via EDI, data must be captured and formatted for transmission. This involves extracting information from documents like purchase orders and invoices or sources such as databases, spreadsheets, or Enterprise Resource Planning (ERP) systems.

Employees can manually enter document data or export it automatically to save time. Translation software then converts this raw data into a standardized format that trading partners can understand on the receiving end. This translation process follows structured protocols like X12 or EDIFACT.

Message Transmission

Once transaction documents have been formatted for EDI, they are transmitted securely over direct internet connections or Value-Added Networks (VANs) to your trading partners’ systems. An EDI router that understands addresses and destinations facilitates this transmission process.

Data Reception

At the destination, specialized software decodes the files and transforms them for use with normal business systems.

This data integration allows transaction details from your EDI purchase orders, invoices, and other documents to flow directly into your partners’ software and databases for processing, analysis, and action.

What Are the Advantages of EDI?

Trading in your inefficient paper workflows for a streamlined digital alternative means your business can enjoy the following advantages of EDI:

Increased Efficiency and Productivity

Hours once spent opening envelopes, interpreting sloppy handwriting, and entering data can be reclaimed. EDI lets your team rapidly integrate orders, shipments, and payments with minimal handling. Without constant data entry bogging them down, employees can focus on driving strategic initiatives rather than tedious tasks.

Lower Costs

Printing, mailing, storing, and managing paper documents is extremely resource-intensive. EDI eliminates these costs by facilitating direct computer-to-computer transfers. It also reduces expenses associated with manually processing each transaction. And the standardized formats lower per-document handling costs for you and your partners.

Improved Accuracy and Data Quality

EDI minimizes errors by removing fallible human data entry from the document exchange process. Trading partners also validate the information in real time as it is received so issues can be spotted immediately. EDI documents follow consistent data standards that ensure both sides interpret key details accurately every time, creating reliable, error-free document exchange.

The Challenges and Limitations of Traditional EDI

EDI has been around since the 1960s, making it one of the longest-standing forms of digital document exchange. However, it has started to show its age as businesses demand more modern, flexible solutions. While traditional EDI solved the inefficiencies of paper-based processes, it is saddled with its own limitations, including:

High Implementation Costs

Transitioning from manual workflows to EDI via on-premises servers and software involves considerable initial investments. The costs quickly pile up from hardware, infrastructure, custom integrations with existing systems, and partner onboarding efforts. Ongoing expenses are also inevitable for maintenance, troubleshooting, and upgrades. This financial burden locks many small businesses out of EDI adoption.

Technical Complexity

Getting EDI operational requires navigating the intricacies of data translation protocols, infrastructure requirements, and connections to internal company systems. The specialized skill sets involved drive up implementation and management costs. It also makes it nearly impossible for in-house teams to maintain EDI without the ongoing support of IT consultants and vendors. This complexity is a barrier to efficiency.

Limited Flexibility and Scalability

Once configured, EDI systems use baked-in processes and data formats that prove inflexible over time. Even small changes to business workflows or document structures require expensive and time-consuming alterations by technical specialists. Traditional EDI architectures also scale poorly to accommodate new trading partners and increasing transaction volumes, making growth and adaptation major pitfalls.

Dependency on Trading Partners

A major shortcoming of EDI is that it isn’t useful for emailed, faxed, or paper orders and relies on trading partners to adopt the same standards before value can be realized. Research shows that 45% of B2B customers still prefer to place orders manually via email or fax rather than through EDI. Without 100% partner alignment, these non-EDI orders get left out of digital workflows.

EDI’s technical learning curve and infrastructure requirements also slow down the onboarding of new trading partners, restricting a company’s ability to scale its partner network efficiently.

Lack of Visibility and Control

After sending transactions through EDI, companies lose visibility into the status and specifics of document exchange. Traditional EDI does not provide a dashboard showing whether orders or invoices have been successfully received, processed, and integrated on the other end.

There are also insufficient controls for sending companies to validate data quality before documents reach partner systems. This raises the risks of transactions being rejected or errors going undetected until problems surface.

The Benefits of Automated Document Processing

Modern solutions like Conexiom can now augment your EDI investment to enable 100% digital order management. These platforms overcome the limitations of EDI by combining automation, artificial intelligence, and seamless interoperability with existing systems. Conexiom + EDI allows you to:

Increase Customer Satisfaction

By instantly converting orders received via email, fax, or EDI into digital data, order fulfillment is accelerated. It also reduces delivery errors and improves responsiveness when issues arise, driving customer satisfaction.

Automate Data Capture and Processing

AI and ML algorithms built into document processing platforms can automatically extract order details from paper, images, PDFs, email documents, and other unstructured formats with 100% accuracy. This eliminates slow and error-prone manual data entry.

Integrate Seamlessly With Existing Systems

Cloud-based document processing integrates with your ERP, accounting, CRM, and other critical software. There is no need to invest in complex customizations. Platforms instead provide adapters that enable real-time, bi-directional data flows between systems.

Lower Implementation Costs

Cloud-based software-as-a-service (SaaS) document processing platforms remove the need for expensive on-site hardware and infrastructure. They also mitigate the costs of customized EDI connections, saving significant capital costs and in-house technical skills.

Provide Flexibility and Scalability

The machine learning engines that drive these solutions can ingest and extract data from diverse order, invoice, shipping notice, and order acknowledgment formats without relying on rigid document standards. This allows easy accommodation of new workflows, partners, and higher order volumes without added costs.

Eliminate Dependency on Trading Partners

Unlike EDI’s requirement for both parties to use compatible technology, automated document processing handles all incoming order formats, enabling digitization whether partners support EDI or prefer to email orders. This allows you to implement digital document exchange at your own speed.

Enhance Visibility and Control

User-friendly cloud dashboards provide real-time visibility into transaction volumes, partner communications, and processing. Platforms also enable customizable data validation rules to guarantee information accuracy across systems.

Electrical distributor Graybar Electric receives over 1,500 customer orders daily. Since implementing automated document processing from Conexiom, Graybar has seen orders flow directly into systems without errors while processing 83,000 documents with 9.5 million line items in six months.

 

How Conexiom Helps You Make the Most of EDI

While EDI delivers noticeable improvements over paper-based business communication, it has notable downsides including high costs, complexity, inflexibility, and constrained scalability. These limit EDI’s effectiveness, especially when working with non-EDI partners.

Conexiom offers advanced order automation services that provide a cutting-edge upgrade or replacement for traditional EDI frameworks. Leveraging AI and machine learning, the platform can ingest orders from emails, faxes, EDI, and other channels without manual intervention.

By extracting order data automatically, routing it to existing systems, and updating related workflows, Conexiom eliminates slow and error-prone manual work. This enhances visibility across all document types while seamlessly connecting with your current ERP, accounting, and other critical software.

The benefits for your business are transformative, including:

  • Reduced operating costs
  • Faster order fulfillment
  • Improved trading partner collaboration
  • Flexibility to painlessly onboard new customers regardless of their technical capabilities.

Learn more about how Conexiom’s order automation solution can complement EDI to help you boost productivity, lower expenses, scale seamlessly, and delight customers.

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