Electronic Data Interchange (EDI) Software: Full Overview

edi software

In today's fast-paced, interconnected world, businesses need powerful solutions to streamline communication and data exchange processes. Enter the realm of EDI software, a game-changing technology that has revolutionized the way organizations exchange data and information with their trading partners.

By eliminating manual tasks, reducing errors, and accelerating transactions, this cutting-edge software has become an essential tool for organizations in the shipping industry seeking to improve efficiency, enhance collaboration, and ultimately gain a competitive edge. EDI software allows companies to quickly and securely send and receive orders, invoices, shipping notices, and other important documents in a standardized format. 

This article will provide an in-depth overview of EDI software, its features and benefits, and how it can be effectively used to maximize the efficiency of data exchange processes.

What Is Electronic Data Interchange (EDI) Software?

Electronic Data Interchange (EDI) is a technology that enables automated business documents and data transfer processes between organizations in a standardized format. This digital communication system streamlines the transfer of vital information between trading partners, such as purchase orders, invoices, shipping notices, and other essential documents.

There are several key components of an EDI software system:

Translator: The translator is responsible for converting data from the organization's internal format into a standardized EDI format, such as ANSI X12, EDIFACT, or XML. It also translates incoming EDI data into a format easily processed by the organization's internal systems.

Mapper: The mapper defines the relationships between the organization's internal data structures and the standardized EDI format. This ensures that the right data is transmitted and received accurately during conversion.

Communication protocols: EDI software supports various communication protocols, such as AS2, SFTP, and FTPS, to securely transmit data between trading partners. These protocols ensure the safe and reliable exchange of information across different networks.

Integration tools: EDI software often includes integration tools that allow organizations to connect internal systems, such as ERPs, CRMs, and accounting software to the EDI platform. This seamless integration enables businesses to automate workflows and improve overall efficiency.

How EDI Works

Here's a step-by-step explanation of how EDI works:

  1. Document preparation: The sender creates a business document (such as a purchase order, invoice, or shipping notice) using their internal systems, such as an ERP or accounting software.
  2. Translation: The sender's EDI software translates the document from the organization's internal format into a standardized EDI format, such as ANSI X12, EDIFACT, or XML. This process involves EDI mapping the data elements in the original document to their corresponding elements in the chosen standard.
  3. Envelope: The translated document is "enveloped" with additional information, such as sender and receiver identification, to ensure proper routing and processing by the recipient's system.
  4. Transmission: The enveloped document is securely transmitted to the recipient using a predefined communication protocol, such as AS2, SFTP, or FTPS. This ensures the safe and reliable exchange of data between trading partners.
  5. Receipt and validation: Upon receipt, the recipient's EDI software validates the incoming document to ensure it complies with the specified EDI standard and contains all necessary information.
  6. Translation back: The recipient's EDI software translates the validated document back into the organization's internal format, allowing it to be processed by their internal systems.
  7. Integration: The translated document is automatically integrated into the recipient's internal systems for further processing, such as updating inventory levels, generating invoices, or creating shipping notices.
  8. Acknowledgment: In some cases, the recipient may send an acknowledgment (e.g., EDI 997 Functional Acknowledgment) back to the sender, confirming the successful receipt and processing of the document.

What Is an Example of EDI?

A prime example of EDI in action can be seen in the realm of eCommerce, where efficient order processing and shipping are critical for customer satisfaction. Imagine an online store that receives hundreds of orders daily from customers worldwide. The eCommerce platform must efficiently communicate with its warehouse and logistics partners to ensure timely delivery and accurate order fulfillment.

By utilizing EDI technology, the online store can automatically transmit sales orders (EDI 850) to the warehouse in a standardized format, detailing product quantities, shipping addresses, and other essential information. Upon receipt, the warehouse can swiftly process the order and send back an Order Acknowledgment (EDI 855) to confirm the availability of items and the estimated shipping date.

As the order is prepared for shipment, the warehouse can generate an Advance Ship Notice (EDI 856), providing the eCommerce platform with crucial details like tracking numbers, carrier information, and expected delivery dates. Once the order has shipped, the warehouse can issue an Invoice (EDI 810) for payment processing.

EDI software facilitates seamless data exchange between the eCommerce platform, warehouse, and logistics partners throughout this process, ensuring a smooth order fulfillment experience for the online store and its customers. 

Is SAP an EDI Software?

Systems, Applications, and Products (SAP) in data processing is an Enterprise Resource Planning (ERP) software that helps businesses manage various operations, such as finance, human resources, procurement, and supply chain management. While SAP is not exclusively an EDI software, it has built-in EDI capabilities that allow for the integration of EDI processes within its SAP system.

SAP supports EDI by offering tools and functionalities that enable the exchange of standardized electronic documents between different business systems. These tools can be configured to generate, receive, and process EDI messages, allowing seamless communication with trading partners. However, your organization might require additional middleware or third-party EDI solutions to fully leverage EDI's potential within its SAP environment.

What Are the Types of EDI Software?

types of edi software

Understanding the different types of EDI solutions available in the market is essential. Each type offers unique features and capabilities that cater to varying business needs and preferences. They include:

  • Direct EDI/Point-to-Point: This type of EDI software allows direct communication between two parties without requiring a third-party provider. It is typically used when both parties have similar systems and processes.
  • EDI via VAN: This EDI software uses a Value Added Network (VAN) to facilitate data exchange between two or more organizations. The VAN acts as an intermediary, providing secure data transmission between parties while ensuring compliance with industry standards such as HIPAA and GDPR.
  • EDI via AS2: This type of EDI software uses the AS2 protocol to securely transmit data over the internet from one organization to another. It is commonly used in healthcare, finance, retail, and logistics industries, where sensitive data must be exchanged securely.
  • EDI via FTP/VPN, SFTP, FTPS: This type of EDI software uses File Transfer Protocols (FTPs) to securely transfer files from one organization to another over the internet or through private networks such as Virtual Private Networks (VPNs). It is often used by organizations that require large amounts of data to be transferred quickly and securely.
  • Web EDI: This software enables organizations to exchange EDI documents over the internet using web browsers instead of traditional client-server applications such as FTP clients or email programs. It is often used by companies that need real-time access to documents from multiple locations worldwide without installing specialized hardware or software on each computer system involved in the transaction process.
  • Mobile EDI: Allows organizations to send and receive EDI documents using mobile devices such as smartphones or tablets instead of computers or laptops connected to a networked system like an intranet or extranet server environment. It is often used by companies that need real-time access to documents while on the go but don’t have access to traditional client-server applications due to limited resources or security concerns associated with public networks.
  • EDI Outsourcing: This software involves outsourcing all aspects related to setting up and managing an electronic document interchange system for an organization, including hardware installation, system configuration, document mapping, testing & validation services, etc.

Top Benefits of Implementing an EDI System

By implementing EDI software, organizations can reap numerous benefits, including the following.

  • Reduced costs: Automating the exchange of business documents eliminates the need for paper-based processes, postage, and manual data entry, resulting in significant cost savings.
  • Increased accuracy: By minimizing human intervention, EDI software reduces the likelihood of errors in data transmission, ensuring higher data quality and accuracy.
  • Improved efficiency: Faster data exchange and reduced manual tasks increase efficiency in business processes, allowing organizations to respond more quickly to customer demands and market changes.
  • Enhanced collaboration: The standardized communication facilitated by EDI software fosters better collaboration between business partners by ensuring that all parties work with the same accurate and up-to-date information.
  • Compliance: Many industries have specific regulations and standards that require EDI for data exchange. Implementing EDI software helps organizations maintain compliance with these requirements.

EDI Deployment Options

EDI deployment options refer to how your organization can implement and manage its EDI systems. Each option offers unique benefits and trade-offs, depending on business size, resources, industry requirements, and data security needs. Here are some common EDI deployment options:

  • On-Premises EDI: This option involves installing and managing the EDI software on the organization's local servers and hardware. On-premises EDI deployment provides greater control over the system, customization options, and enhanced security. However, it requires significant upfront investments in infrastructure, maintenance, and IT resources.
  • Cloud-Based EDI: Also known as Software as a Service (SaaS) or hosted EDI, cloud-based EDI involves hosting the software on remote servers managed by a third-party provider. This deployment option offers scalability, flexibility, and cost-efficiency, eliminating the need for extensive hardware investments and ongoing maintenance costs. Cloud-based EDI provides easy access, seamless updates, and reduced reliance on in-house IT resources.
  • Managed EDI Services: With this option, your organization outsources its EDI operations to a managed service provider (MSP) that handles all aspects of the EDI process, from setup and integration to ongoing maintenance, support, and monitoring. Managed EDI services allow your business to focus on its core competencies while benefiting from the expertise and resources of the MSP.
  • Hybrid EDI: Hybrid EDI deployment combines the advantages of on-premises and cloud-based solutions, offering a flexible approach to data exchange. Your organization can maintain control over certain aspects of its EDI environment while leveraging the benefits of cloud-based services for other components. Hybrid EDI systems can be tailored to suit a company's unique needs and preferences.
  • Web-Based EDI: This deployment option uses browser-based platforms to access and manage EDI transactions. Web-based EDI is ideal for small to medium-sized businesses with limited resources, as it offers a simple and cost-effective way to engage in electronic data interchange. While web-based solutions may lack some advanced features in other deployment options, they provide an accessible entry point into the world of EDI.

Key Features to Look for in an EDI Solution 

edi systems

When evaluating EDI solutions, it's essential to consider the key features that best support your organization's needs and requirements. Here are some crucial features to look for in an EDI solution:

  • Ease of integration: The EDI software should integrate seamlessly with your existing business systems, such as ERP, accounting, or supply chain management software. This ensures smooth data flow between systems and reduces the need for manual intervention.
  • Support for industry standards: The EDI solution should support various industry-specific standards and document formats, such as ANSI X12, EDIFACT, or XML. This ensures compatibility with your trading partners and compliance with regulatory requirements.
  • Scalability: As your business grows and evolves, your EDI solution should be able to accommodate increased transaction volumes, new business partners, and changing industry standards, without compromising performance.
  • Security and compliance: The EDI software should provide robust security features, including encryption, authentication, and access control, to protect sensitive data during transmission and storage. Additionally, the solution should adhere to industry-specific compliance requirements, such as HIPAA for healthcare or PCI DSS for eCommerce.
  • EDI mapping and translation: The solution you choose should offer flexible and efficient data mapping and translation capabilities, enabling you to convert business documents from your internal format to the standardized EDI format, and vice versa.
  • Automated processes: The EDI software should support automation features, such as document generation, validation, routing, and acknowledgment, to streamline operations and reduce manual data entry.
  • Error handling and alerts: The EDI solution should provide tools for detecting and resolving errors in transmitted documents, and alerting users to potential issues, all in real-time.
  • Customizability and flexibility: The software you select should be customizable to suit your organization's unique needs and preferences, allowing you to tailor the system to your specific requirements and workflows.
  • Reporting and analytics: The EDI solution should offer robust reporting and analytics capabilities, giving you insights into key performance metrics and trends, such as transaction volumes, document processing times, and error rates.
  • Customer support and training: The EDI software provider should offer comprehensive customer support, including technical assistance, training resources, and documentation, to help ensure a successful implementation and ongoing maintenance.

How to Find the Best EDI Software

While the features of EDI software are important, there are other factors to consider when selecting the right solution for your organization. Here are some tips on how to find the best EDI software:

  • Define your requirements: Begin by analyzing your organization's specific EDI needs. Consider factors such as the number of trading partners, transaction volumes, industry standards, and document types. Also, assess your current business processes and identify areas where EDI can streamline operations to improve efficiency.
  • Determine your budget: Establish a budget for your EDI software investment, considering not only the initial purchase cost but also ongoing expenses such as maintenance, support, and upgrades.
  • Research available options: Explore various EDI software providers and compare their offerings based on features, pricing, and deployment options (on-premises, cloud-based, or hybrid). Look for solutions that cater to your industry's specific requirements and standards.
  • Request demonstrations and trials: Request demos or free trials from shortlisted vendors to gain hands-on experience with their EDI software. This will help you assess the user interface, ease of use, and overall performance of the solution.
  • Consult customer reviews and testimonials: Gather feedback from current and past users of the EDI software to gain insights into the strengths and weaknesses of each solution. Look for reviews on independent websites, forums, and social media platforms.

Tips for Setting Up Your EDI Software System

edi software system

Setting up your system is the next step once you've chosen the best EDI software for your organization. Here are some tips that will help ensure a smooth implementation process:

  • Test the system: Before going live, thoroughly test your EDI software system to identify and resolve any technical issues or data inconsistencies. Conduct end-to-end testing with your trading partners to ensure successful communication and document exchange.
  • Develop an implementation plan: Create a detailed project plan outlining the steps, timelines, and resources required for your EDI implementation. This will help you stay on track and proactively address potential issues or roadblocks.
  • Establish a project team: Assemble a dedicated team responsible for the EDI implementation, including representatives from IT, operations, finance, and other relevant departments. This will ensure all stakeholders are involved in decision-making and clearly understand their roles and responsibilities.
  • Define your goals and objectives: Start by identifying the specific goals and objectives you want to achieve with your EDI implementation, such as reducing manual data entry, improving accuracy, or speeding up order processing.
  • Analyze your current processes: Assess your existing business processes to identify areas where EDI can streamline operations and improve efficiency. This will help you determine which documents and transactions should be prioritized in your EDI implementation.
  • Train your staff: Provide comprehensive training for all team members involved in the EDI process, including IT, operations, and customer service personnel. This will ensure everyone is familiar with the new system and can do their part effectively.
  • Integrate with existing systems: Ensure seamless integration between your EDI software and existing business systems, such as ERP, accounting, or supply chain management software. This will enable smooth data flow and minimize the need for manual intervention.
  • Monitor and optimize: After your EDI system is up and running, continuously monitor its performance and make necessary adjustments to improve efficiency and accuracy. Regularly review your processes and workflows to identify opportunities for enhancement and optimization.

How Much Do EDI Solutions Cost?

The cost of EDI solutions can vary significantly due to several factors. Each organization's requirements and preferences are unique, and the pricing of EDI solutions will depend on these specific needs. Here are some factors that contribute to the variation in EDI solution costs:

  • Type of deployment: EDI solutions can be deployed on-premises, as cloud-based services, or through managed services. On-premises solutions may have higher upfront costs for software licensing and hardware, while cloud-based and managed service options usually have recurring subscription fees.
  • Size of your business: The size of your organization and the volume of transactions you process can impact the overall cost of your EDI solution. Larger businesses with more business partners and higher transaction volumes may require more advanced features and capabilities, resulting in higher costs.
  • Features and functionalities: Different EDI solutions offer varying features and functionalities, such as data mapping, integration options, automation, and reporting tools. More advanced features typically come at a higher price.
  • Number of trading partners: The number of trading partners you need to connect with can also influence EDI solution costs. Some providers charge based on the number of partners, while others offer tiered pricing plans that accommodate a certain range of partners.
  • Implementation and setup costs: The complexity of implementing and setting up an EDI solution can vary, affecting the overall cost. Custom integration, data mapping, and configuration may require additional expenses.
  • Maintenance and support: Ongoing maintenance and support fees can be a significant part of the total cost of ownership for an EDI solution. Depending on the provider and deployment type, these fees may be included in subscription pricing or charged separately.
  • Connectivity and transaction fees: Some EDI providers charge fees for connecting to their network or per-transaction fees based on the volume of documents exchanged with your trading partners. These fees can vary widely between providers.

ShipNetwork: The Best EDI Software Solution

best edi software

Selecting the right EDI software solution is vital for businesses aiming to streamline their eCommerce order fulfillment processes. ShipNetwork stands out as the best EDI software solution, offering the scalability, flexibility, and cost savings that retailers need.

By focusing on building a global fulfillment network, we are dedicated to delivering fast, accurate, and efficient distribution solutions for online retailers and consumers, enabling seamless, borderless eCommerce. Our client support team of eCommerce shipping professionals emphasizes strong relationships with clients, ensuring exceptional service.

Choose ShipNetwork as your go-to EDI software solution and watch your eCommerce business achieve new heights of success. Request a Quote today to learn more about how we can help your business grow and thrive.