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“EDI” Comes Before “ERP”

Adam Hughes
EDI Before ERP

When you’re replacing enterprise systems, remember the alphabet: “EDI” comes before “ERP”

Many organizations facing enterprise-wide systems upgrades link the EDI and ERP systems selection processes, even though this approach may end up taking more calendar time and exposing the organization to greater risk. However, there may be other benefits to implementing modern EDI software first, benefits that may be much greater than that of interface compatibility (which is often an ERP system issue).

First, let’s understand EDI ERP integration by defining each part. 

What is EDI? 

EDI is a computer-to-computer exchange of business documents in a standard electronic format between different business partners.

What is an ERP?

An ERP (Enterprise Resource Planning) usually referred to as a category of business management software—typically a suite of integrated applications—that an organization can use to collect, store, manage and interpret data from many business activities.

What is ERP and EDI integration?

EDI ERP integration is a process of enabling data to automatically flow between a business' front-end” EDI application and its “back-end” ERP system. Automating the transmission and transformation between EDI and ERP solutions removes the need for manual re-keying of messages, orders, or invoices and eliminates the possibility of user error.

The ERP/EDI Relationship

When the time comes for a company to upgrade its ERP system, often the decision becomes whether to migrate ERP and EDI together, or separately. No matter how an enterprise decides to transform its environment, ERP upgrades must be thought of in relation to EDI integration.

An ERP upgrade is IT modernization at its very peak, but the reality is many of those projects actually have a very high failure rate. In fact, up to 75% of all ERP projects fail, according to industry analysts, often because businesses are unprepared for the complexity of the process and the application integration, which usually isn’t part of the ERP deal.

It's important for enterprises to think about EDI integration as a crucial part of a postmodern ERP strategy that blends on-premise and cloud ERP solutions in order to give businesses the flexibility they need to better manage the members of their digital ecosystem, from trading partners to customers.

Here are 7 reasons why you must tie EDI and ERP selection together:

1.  The Issue of Duplicated Work

One of the frequent pushbacks to decoupling the EDI system decision from the ERP system decision is “We don’t want to do it all over again,” meaning “We don’t want to migrate to new EDI on the old system and then do it again on the new system.” This is a valid consideration but it misses on two points: the new system may enable a much faster trading partner setup, and the only rework is the “back-end integration” (where the EDI application connects to the ERP application). The back-end work has to be done again but that’s a single well-defined task often accomplished with target-application assistance whereas migrating hundreds of trading partners will be hundreds of time-consuming tasks. Not all trading partners believe reporting the results of a test is important, and small delays of this nature can have a serious impact on the migration schedule.

2. Getting It Done Faster

One of the key benefits of separating the EDI and ERP software decisions is the ability to get the complete software infrastructure changes completed quicker. Evaluating and selecting software, both EDI and ERP often happens at levels above the operational EDI team. There is merit in one team for EDI evaluation and another team for ERP evaluation—but only if both teams report to the same manager. In many cases, the administrative side of the sales process—negotiating prices, developing an implementation plan, and running the agreements through Legal (probably multiple times!) can burn up weeks and months. Does it make sense for two decisions to be held up because one’s legal review is dragging on? Sometimes, perhaps, but usually not—those days are lost to the project and the business. Since the EDI decision cycle is often much shorter than the ERP cycle, moving ahead with EDI provides an important deployment benefit: staggering the EDI and ERP implementations eliminate the risk in the “big bang” (all new systems go live at once) approach. Even adrenaline-powered project managers recognize the greatly-increased risk that comes with closely-spaced deployments.

3. Overlapping EDI and ERP

If the EDI system is selected first, the EDI operations team can begin the partner conversion process while the ERP search continues. New trading partners can be implemented in the new EDI system quickly—a critical need in the fast-moving supply chain world— thanks to design tools that are easy to use and that enable the reuse of previously-developed EDI artifacts.

It’s possible the EDI system will not have ready-to-go interfaces built for the ERP system, and it could take considerable work to build them. But the number of defined interfaces should be a key factor when evaluating the EDI system: if the top ERP candidates are Epicor, SAP, and VAI, selecting an EDI system without interfaces to any of them probably would be unwise. It’s reasonable to assume that an organization won’t be comparing SAP and QuickBooks, so the pool of EDI candidates should target the pool of ERP candidates.

At the same time, current trading partners are migrated to the new system, a task that often takes time because the people that do it—the EDI operations team—usually have daily production responsibilities too. But EDI systems with modern design tools will actually make time available by reducing the effort required to set up and manage trading partners. Changes to custom code necessary to support new trading partners' end. Faster turnaround of change requests often translates into increased revenue and reduced operating costs, if there’s no requirement to maintain old and new EDI systems. But there’s a much more significant reason to implement EDI right away.

4. Risk Reduction

Reducing risk increases the chance of success, and few projects don’t have components of scope, schedule, resource, activity, and project risk. Trying to install a new ERP system and a new EDI system at the same time doesn’t double risks, it squares them. The workload on the project management team is doubled and management has to make the inevitable resource tradeoffs between competing projects. Deployments, particularly the big-bang type, also increase risk considerably. On the other hand, an ERP vendor without a proven interface to the ERP system adds multiple elements of risk: schedule, cost, scope, and quality.

5. Scheduling

Because ERP implementations seldom take the same amount of time as EDI implementations, it’s very tough scheduling them so that both applications are ready to go into production at the same time. What do you do if the new ERP system is ready and EDI is not? Do you hold off on going live with an ERP project and risk crashing the EDI implementation schedule? And if the systems are ready simultaneously and go live, what happens when a trading partner identifies an error? There’s an additional layer of troubleshooting: is it the EDI or the ERP application?

Trading partners are waiting! Of course, the ERP software vendor hoping to sell his EDI module will wave off such concerns by referencing the fact that ERP and EDI are “fully integrated.” That response fails to acknowledge where the real EDI migration effort takes place—setting up trading partners and testing the interchanges. Why is that important? Consider an EDI implementation that takes 100 units of work and an ERP implementation requiring 1,000 units. It’s easy to field 50 resources across the broad scope of an ERP implementation, so that’s 20 units of work per resource. But if there are only two resources (EDI is a technical skill), each resource has 50 units of work. So even though EDI is usually a smaller effort, there are far fewer resources, and the result is that EDI implementations benefit from an early start.

6. Vendor Perspectives

ERP systems have functional strengths and weaknesses. A good ERP application with “integrated” EDI capabilities may limit your ability to respond quickly to new standards and customer requirements. This is because an ERP vendor may prioritize work on the order management or inventory applications instead of adding a critical EDI feature. Users don’t have an option with tightly-coupled systems, their “solution” is to spend unplanned dollars writing custom code outside of the EDI component to achieve the desired result while shouldering the high costs of ongoing maintenance, a.k.a. “technical debt.”

7. Evaluation Considerations

The best EDI systems integrate with the ERP systems offered by leading vendors. Among these vendors are DST, Epicor, Oracle, Retalix, SAP, TMW, and VAI, and with other systems offering defined EDI interfaces. Integration of EDI and ERP is not one vendor’s responsibility: the ERP vendor must provide a clean, stable, and well-defined EDI interface for both inbound and outbound transactions and the EDI vendor must provide flexible setup and run-time environments. In every ERP evaluation, the vendor should explain how the EDI interfaces are maintained, while in every EDI evaluation, the vendor should explain the impact of changing back-end systems.

What’s the Bottom Line?

It’s smart to consider enterprise-wide requirements when starting the search for new EDI and ERP systems—those requirements will help you focus on the key capabilities of each system. In addition, the EDI and ERP candidates should be compatible with a customer size/requirements perspective. Once the base requirements are established for the enterprise, the best efficiency and lower cost will be the result of allowing each implementation to proceed at a normal pace, and the total time required for both implementations be minimized.

EDI systems with modern tools reduce the manual effort it takes to set up and manage trading partners. Instead of having to migrate hundreds (or even more) of trading partners individually, with modern EDI technology, enterprises can do so within a single, well-defined task. Additionally, the EDI decision cycle is often much shorter than the ERP cycle, so moving ahead with an EDI integration can be done efficiently and quickly.

The very best EDI technology integrates with ERP systems and is able to handle inbound and outbound transactions. Whether it’s a flexible setup or run-time environment, companies must have a clear understanding of how the EDI interfaces are maintained and what is the impact of any potential changes to back-end systems.

Modernize Your ERP and EDI Systems

EDI is integral to the supply chain and remains the standard. This is why modern companies need a modern EDI solution to conduct business. 

Enterprises stand to significantly improve their data exchange capabilities, enhance partner relationships, and also reduce the risk of costly errors by consolidating integrations among your business systems. Organizations that do decide to replace a legacy system must ensure that they can quickly and easily make the move without disrupting existing business workflows and processes, and enterprise integration technology enables a successful data migration.

Modernizing your EDI integration positions your company to take on new business and respond quickly to customer and trading partner requests. The last thing you need is to disrupt your data flow and business processes because your environment isn’t up to date. Here are a few ways a modernized EDI system can enable game-changing business advantages. 

Cleo Integration Cloud elevates your EDI integration processes and streamlines your B2B communications. Cleo Integration Cloud helps automate your EDI processes in order to connect, transform, and route your EDI and non-EDI transactions through your ecosystem without piling on the custom code.

Modernize Your EDI Today

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