Improving Supply Chain Efficiency with EDI Order Processing

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The growth of eCommerce has drastically changed the way businesses manage orders. Today, handling customer order management efficiently requires a powerful eCommerce shipping solution. Electronic data interchange (EDI) order processing is an automated way to streamline communication and collaboration between different businesses, allowing them to exchange orders efficiently.

With the increased demand for quality services and ever-rising consumer expectations around personalized service, EDI helps B2B vendors compete by decreasing errors and improving customer satisfaction.

Automating data exchange between vendors and customers ensures orders are accurate, secure, and efficient. This comprehensive solution can help streamline your fulfillment processes while lowering related costs. This explores the features of EDI order processing, including its benefits for streamlining supply chain management and improving customer service.

What Does EDI Stand For?

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Electronic data interchange is a computer-to-computer exchange of standard business documents in a digital format. EDI enables organizations to electronically exchange documents, such as invoices, purchase orders, and other business records, over the Internet or other network. This helps reduce costs, speed up processes, and improve customer service.

EDI eliminates manual data entry and is considered one of the most important business process improvements in modern times. EDI began in the 1960s when military organizations began using telecommunication systems to exchange business documents. Over time, these systems evolved into EDI, a more efficient and secure way to send and receive data.

Today, EDI is used by all sorts of organizations, from small businesses to large corporations. Its applications include supply chain management, order tracking, inventory control, eCommerce, customer service, and more. EDI allows companies to quickly exchange data with their trading partners, helping them increase efficiency, reduce errors, and save money. 

What Are the Major EDI Standards?

Major EDI standards enable different parties to send and receive business documents electronically. These standards allow companies to replace paper-based data exchange with an automated, digital process.

The most popular EDI standards include the following:

ANSI ASC X12: This is one of the most widely used EDI standards, established by the American National Standards Institute (ANSI). It is used mainly in North America and is designed to be used across multiple industries, including retail, finance, and transportation. ANSI X12 comprises numerous transaction sets that companies can use to share data.

EDIFACT: This EDI standard was established by the United Nations and is used mainly in Europe and other parts of the world. It is an international standard that includes message structure, syntax rules, and code sets.

VDA: VDA is a standard the German automotive industry created as a framework for EDI communication. It supports different message types and facilitates data exchange between automakers and suppliers. It coordinates production plans and schedules, invoices, delivery orders, transport documents, customer complaints, and more.

TRADACOMS: This is one of the earliest EDI standards developed in 1981 in the United Kingdom. It's mainly used to exchange information between retailers and suppliers. TRADACOMS ensures orders and payments are accurate, timely, and secure.

What Are the 4 Major Components of an EDI?

For any EDI system to be successful, it must have four major components. These include:

1. Standardized data formats: The EDI system must have a standard format for exchanging data between two systems. This helps ensure the data is sent and received seamlessly, eliminating potential human errors when manually inputting data. 

2. Software for exchanging data: EDI requires computer-based technology that enables data transmission between two trading partners. This software lets businesses quickly and efficiently exchange EDI documents, such as purchase orders, invoices, and shipping notices.

3. Translation of messages: EDI technology also ensures that both parties understand the data transmitted. This is done by translating different types of messages into a specific format, such as XML or EDIFACT.

4. Secure communication channels: EDI ensures secure communication between two trading partners. This is done by sending data in a specific format accessible to both parties. It also provides authentication through digital signatures and encryption for secure exchange.

What Is EDI Order Processing?

EDI order processing allows companies to electronically exchange business documents, such as orders, invoices, and delivery notes. It involves automating the order process and streamlining the data exchange between a buyer and supplier. 

The process uses standardized document formats exchanged using secure data transmission over the internet. EDI order processing allows companies to automate their ordering systems, reduce errors and mistakes due to manual processing, and improve communication between buyers and suppliers.

It eliminates traditional, time-consuming order processing procedures and reduces the cost of ordering goods. EDI order processing is becoming increasingly popular with companies because it reduces their costs and improves the speed and accuracy of their orders. It also enables companies to respond faster to customer needs, providing a better customer experience.

What Is EDI Order Entry?

An EDI order entry involves creating and sending orders to vendors, manufacturers, and other trading partners electronically. This method replaces manual processes, such as faxing or mailing, saving time and money. It also eliminates the errors and delays inherent in manual processes, leading to increased accuracy, faster delivery of orders, and better inventory monitoring.

Before the order is entered, it's usually checked for accuracy and to ensure it meets the requirements set forth by both trading partners. The EDI order entry process is completed when the trading partner receives and processes the purchase order. Once the order is processed, it can be tracked by both the sender and receiver, allowing for better order management. 

The EDI system also stores all related documents and data, giving both parties a complete record of their interactions. This helps ensure both parties are aware of any changes or issues that may arise during the order process. 

How Does the EDI Process Work?

The EDI process begins when an order is sent from one business partner to another. This message is transmitted via a secure, automated order management system. The order is transferred using XML or EDI standards, which are rules dictating how information should be exchanged. 

The supplier's system receives the order and then validates the message, meaning it confirms the order has been received in an acceptable format. If the order does not pass validation, the supplier's system will respond to the sender, informing them there was an error in the order.

Once the order is validated, the supplier's EDI system receives and processes it. This means they will create an electronic invoice and send it back to the buyer, along with any other required documents. This process is completed quickly and securely, eliminating manual errors and increasing efficiency. 

When the buyer receives the invoice and other documents, they can approve or reject them. Once approved, the payment is sent to the supplier, and the EDI order process is completed. 

EDI Transactions

Documents sent and received electronically in a specific format are known as EDI transactions. As a standardization method, transactions have codes that quickly identify them. This makes it easy to automate the data exchange process and track records of all transactions.

Some codes include:

  • EDI 810: Invoice
  • EDI 850: Purchase Order
  • EDI 855: Purchase Order Acknowledgement
  • EDI 856: Advance Shipping Notice/Dock Receipt
  • EDI 869: Order Status Inquiry
  • EDI 870: Order Status Report
  • EDI 879: Price Information
  • EDI 940: Warehouse Shipping Order
  • EDI 997: Functional Acknowledgement

These codes are globally accepted, making EDI transactions convenient and secure. They help reduce clerical errors, reduce transaction costs, and enable effective communication. EDI transaction code is essential in improving the efficiency of business processes.

How to Choose an EDI Order Processing System

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When selecting an EDI order processing system, it's important to consider the needs of both your business and suppliers. The choice of EDI system should be based on the supplier's EDI system capability and how well it can receive your orders. As such, you should look for a system that can send your orders in the correct format and with the right details needed by your supplier. 

The following are some features you should look for when selecting an EDI order processing system:

Compatibility: Make sure your chosen EDI order processing system can easily integrate with your supplier's EDI system. This ensures the orders you send will be received without delays or errors. Look for a system that can easily plug into your order management, shipping, inventory, and financial programs to ensure no process interruption.

Cost: You should also consider the cost of setting up and using the EDI order processing system. Speak to providers and ask for quotes to determine the most economical option for you. Compare different suppliers, services, and plans to choose the one that fits best within your budget.

Functionality: Your EDI order processing system should include all the features your business needs to run smoothly. Look for a robust analytics system, advanced search capabilities, and reporting tools to help monitor and manage orders.

Scalability: When selecting an EDI order processing system, consider its scalability to accommodate your company's growth. Ensure the platform can easily handle more transactions, customers, and data as your business grows. Scalability ensures the system can meet the increased demand. 

Support: Finally, ensure the system you choose provides superior customer support. The right EDI order processing system should have round-the-clock customer support and quickly resolve software issues. You should also be able to easily contact the vendor if you need help understanding the features of their system or setting up your order process flows.

Data security: Data security is essential when choosing an EDI order processing system. Ensure there are no security flaws or weaknesses in the system and that the data is encrypted so it's protected from unauthorized access or malicious attacks. You can do this through layered security measures, including firewalls, access control systems, and authentication protocols. 

Advantages of an EDI Order Processing System

An EDI order processing system is essential for businesses of all sizes. It helps streamline the ordering and fulfillment process, reducing errors and providing access to real-time data across multiple channels.

Here are some advantages of an EDI order processing system:

Increases efficiency and accuracy: EDI processing reduces manual errors, improves accuracy by automatically validating data, and offers faster turnaround times that can save up to 61% of the time it would take to process orders manually.

Reduces costs: By decreasing manual labor, EDI systems reduce the cost of processing orders. This includes costs related to productivity, eliminating paper usage, and reducing shipping times, all of which can save businesses thousands of dollars per month.

Improves visibility of inventory levels and shipping information: EDI order processing systems make tracking a company's inventory easier, enhancing visibility and enabling better planning for future orders. It also provides more detailed information about when shipments are scheduled and how they are progressing.

Improves customer service: An EDI order processing system simplifies and speeds up the ordering process, reducing delays in customer service. It ensures orders are accurately received and quickly processed. The system also automates order tracking, making it easier for customers to monitor their order progress and ensure they receive the right product promptly.

Improves return on investment (ROI): An EDI order processing system results in a much faster turnaround time for processing orders. Fewer resources are needed to manage it, resulting in an improved ROI. This system enables businesses to streamline the process of receiving and sending orders, reducing time and cost. 

Getting Started with EDI

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When it comes to EDI order processing, businesses today need a reliable partner that can meet their needs. ShipNetwork is that partner — with our scalability and flexibility, you get a global fulfillment network to provide fast and accurate solutions. With regular check-ins with our client support representatives and partnership managers, you receive dedicated customer service beyond the box.

At ShipNetwork, we believe in an optimized, borderless eCommerce supply chain ecosystem. We're here to help you find the right EDI system to drop ship orders for merchants like Walmart, Amazon, Target,, and Nordstrom. 

Contact a fulfillment advisor today if you're ready to take your eCommerce operations to the next level. With ShipNetwork's dependable processes and support team behind you, you can rest assured that expanding into the big box stores will be great news for your business.