Electronic data interchange (EDI) occurs when software communicates with each other without human intervention to complete business processes such as ordering and invoicing.
EDI can improve data quality and transaction speeds while freeing up staff to prioritise more important tasks. Despite these benefits, many organisations are reluctant to implement EDI solutions due to misperceptions around cost, complexity, errors, speed, and the technology itself. It’s important for businesses to understand the reality behind these myths so that they can leverage the benefits of EDI.
EDI is much more than simple digitalisation because it lets computers talk to each other automatically and tracks business-critical data in near real time. EDI reduces the need and cost to print, file, store, post, and retrieve paper documents and scanned PDFs, which can be error-prone.
The goal of EDI is to remove the need for people to manually manage routine business processes, streamlining these processes and strengthening relationships among businesses in the supply chain.
EDI eliminates manual processes, increases efficiency, strengthens relationships, and lowers costs. However, there are five key myths that make some businesses reluctant to implement it:
Myth 1: EDI is costly
There’s an assumption that EDI is costly and not worth the investment. This myth is often based on outdated technologies. Technology has advanced significantly over the decades, and EDI service providers can provide a range of cost-effective options for businesses. For businesses looking to comply with retailer requirements, a simple EDI web portal where users send and receive EDI messages is a good option. This can add up to the same cost as a monthly phone plan making EDI affordable.
EDI integration can work out to be extremely cost-effective. It involves the exchange of business information directly between business software. While this method can be more expensive than a web portal, the benefits can justify the investment. EDI integration automates manual processes and sends documents electronically, which creates massive and exponential cost savings. For example, the Australian Taxation Office estimates that it costs businesses $30 to process a paper invoice and less than $10 to process an electronic invoice.
Myth 2: EDI is complex to implement
There’s a perception that EDI is difficult to understand and needs expert skills to use on a day-to-day basis. EDI messages are just another file format, sometimes even XML or CSV. Once a user understands how they’re constructed and what each element means, using EDI is easy. There are now even EDI standards, which have simplified this even further. Partnering with an experienced EDI provider can make the process even easier.
Myth 3: EDI creates errors
There’s a misconception that EDI is prone to causing bugs and errors; however, providers conduct a range of tests and approvals before a company goes live with EDI. For example, the provider will likely perform testing between the company and the EDI provider, as well as end-to-end testing with the company’s trading partners. It’s only once these tests are completed and passed that EDI is moved to production, so errors and bugs are highly unlikely to occur.
Myth 4: EDI causes business disruptions
Some business leaders can worry that moving to EDI will be disruptive to their businesses, believing that EDI interferes with business processes and slows down workflows. In reality, EDI can be quick to implement. By staging the EDI implementation correctly and gearing the implementation to achieve the company’s biggest objective first, businesses can see improvements in speed and productivity, giving staff more time to work on other tasks. Using EDI also reduces the risk of errors and the time needed to correct them.
Myth 5: EDI is used less, and has been overtaken by APIs
Confusion around the difference between EDI and application programming interfaces (APIs) have led some to believe that EDI use is declining. On the contrary, APIs are used by most current EDI service providers. They shouldn’t be thought of as an opponent to EDI, rather as just another connection protocol for EDI, like SFTP or AS2. Moreover, APIs don’t follow a generic standard, whereas EDI does. That means it’s faster and easier to onboard new trading partners.
EDI can provide massive business benefits that far outweigh any risk. While these myths may have prevented some organisations from embracing EDI in the past, the truth is that EDI can boost business growth, lower costs, and increase accuracy. In a modern business environment, there’s no reason why people should be manually managing processes such as ordering and invoicing.
EDI will help organisations compete more effectively into the future, even in highly competitive and commoditised marketplaces. By working with an experienced provider, organisations can adopt EDI without significant risk.
John Delaney is managing director of MessageXchange.