Blog: Modernizing EDI: The Difference Between Classic EDI and Modern EDI

When we think about EDI, we tend to think about an enterprise moving standardized data between its trading partners and customers, both into and out of an ERP system.

However, today, the top EDI software platforms goes further than simply moving data from one place to another. EDI systems have grown to enable end-to-end data processing through your business ecosystem.

Today’s EDI is very different from what it was 10 or 15 years ago. When many companies made their last EDI technology investments, they were not facing the challenges they face today as they fill a supplier or intermediary role in the B2B value chain.

They must support new shared processes, transactions, document types, and communication methods, all while meeting more stringent service levels. Modern platforms extend EDI integration and automation capabilities more than just traditional EDI. The legacy EDI solutions most organizations have been working with for years simply cannot deliver the entire B2B process that your organization now requires.

Before we examine the requirements for a modern EDI system, it is important to first understand the traditional definition of EDI,

What is Classic EDI?

Classic EDI refers to the exchange of standard electronic document types, with syntax and semantics defined by standards organizations, principally X12 and EDIFACT.  While modern EDI systems still adhere to many of these standards, they also support non-standard, proprietary documents, such as flat file, XML, and spreadsheet syntaxes.

What is Modern EDI? 

Modern EDI software integrates across your ecosystem into your other workflows for true end-to-end processing and EDI visibility into the trading partner relationships driving revenue.

Modern EDI reflects the increased diversity of partner, application, and service interfaces present in business environments today. That diversity imposes new requirements on EDI systems, including support for connections that combine applications, services, and data resources in powerful end-to-end business processes.

Modern EDI also simplifies EDI interfaces by streamlining configuration and operation for IT and business users. IT personnel can onboard new partners and introduce changes to existing partner integrations using visual modeling, template-driven specification, and object reuse, instead of coding. And business professionals gain direct access to EDI activity data and results, through secure dashboards and email notifications.

Overall, modern EDI gives a business the ability to automate more kinds of partner interactions and improves quality, accuracy, turnaround, and cost per transaction. It provides increased flexibility to connect with partners on their own terms and makes it possible to respond faster to partner-driven changes.

The Key Difference Between Traditional EDI and Modern EDI 

EDI data is more than just the EDI format; it's about the EDI processes as well.

Modern EDI systems evolve to keep pace with your ecosystems, which are now much more diversified to include wide-ranging customers, trading partners, protocols, and formats, as well as new applications and systems that must be integrated.

Flexibility is key, and a modern, centralized integration platform enables EDI integration with partners on their terms and enterprises to respond quickly to any requests.

Organizations can then automate their interactions with partners and quicken the time it takes to onboard.  

Struggling with New EDI Requirements? Take this Assesment to Plot a Path Forward

Your 5 Options for Coping with New EDI Requirements

EDI today is very different from what it was 10 or 15 years ago, when many companies made their last EDI platform investments. Today’s businesses face a broader range of EDI software requirements, including the ability to support proprietary document interchanges, near real-time transaction response, and web services.

When we talk with prospective customers about how they cope with new EDI requirements, the answers boil down to these five approaches:

1. Do nothing, and deal with the consequences. When the consequences of inaction are minor, like having to manually process a few transactions per day, doing nothing can make sense, especially in small businesses. But over time, the overhead, latency, and higher error rates inherent in manual processing can inflict real business harm. The impacts of high processing costs, chargebacks, process bottlenecks, key-person dependencies, supplier scorecard demerits, lost business opportunities, and other consequences of manual processing can add up, over time.
2. Write code to address gaps in primary EDI software or services. The broad availability and affordability of point tools (see next point) has made coding a less common remedy for missing EDI capabilities than it used to be. But a combination of IT department pride and diverse open source assets have kept this option alive, particularly in larger companies. There are circumstances in which coding can be a valid choice: when the cost of EDI implementation is predictable and low, the number of coded exceptions is small, and the rate of change in requirements is low. But as more exceptions and changes surface, this approach becomes too costly for most businesses to sustain.
3. Acquire point tools to address gaps in primary EDI software or services. This option, like the previous one, is a hybrid approach. In this case, gaps in the capabilities of the primary EDI integration solution are addressed by acquiring complementary point tools, like process automation tools, web services toolkits, data transformation tools, and spreadsheet integrators. Again, when the exceptions are few and contained, this approach can make sense. But when requirements span tool boundaries – like invoking a web service as part of validating an EDI document – or the number of exceptions rises, the costs of acquiring, training, integrating, and maintaining multiple tool technologies can mount quickly.
4. Engage a third-party service to replace or augment your existing EDI solution. The main advantage of third-party service solutions is that they reduce dependencies on internal IT staff skills and availability, and can sometimes produce results faster, by eliminating learning curves. But third-party services can be slow to respond to needed changes, may cost more over time than internal solutions, and unless last-mile integration is part of the service solution, don’t completely eliminate the need for internal IT. Still, a service-based approach can be the right option for companies with limited IT staff availability, even if temporarily.
5. Migrate to a modern EDI integration solution. If your legacy EDI solution provider can’t offer the “modern EDI” capabilities called for by your trading partners and internal business needs, migrating to a broader, more capable integration solution may be the most efficient and cost-effective option, in the long term. The ability to address multiple kinds of EDI integration requirements with one solution can accelerate results and reduce both software and IT staff costs, by eliminating coding and internal integration requirements, reducing software licensing and skill set maintenance costs, and supporting simpler, more consistent methods.

What makes EDI modernization such a difficult topic is that there is no best way to modernize. Under the right circumstances, each of the approaches above can make sense. Where problems arise is when companies apply strategies that don’t fit the circumstances they are facing, usually for cost or expediency reasons.

And both companies and their circumstances change over time, of course. So that solution that made sense a few years ago might become the next problem to solve.

In the end, every business is limited by budgets, circumstances, and its ability to predict change. So the ability to add modern capabilities and move between service- to self-implementation as needed, without sacrificing EDI integration investments, maybe the most important decision factor in EDI modernization.

The Risk of Not Modernizing EDI

Throughout your digital ecosystem, from customers to trading partners, companies must handle the many EDI transactions that move throughout their environment. Onboarding a new trading partner also means there is a clear understanding of the expectations that an enterprise needs to meet or risk penalties.

Companies that are unable to keep up with demand and complete accurate transactions are also going to be faced with violating their SLAs – a costly proposition. Failure to meet SLAs will have a negative impact on an organization in multiple ways.

For starters, it’s going to cost them customers and trading partners who will simply go to a competitor who is able to keep up their end of the deal. Secondly, a company’s reputation will surely take a hit when word gets around that they cannot meet customer and trading partner expectations.

The reality is that companies who insist on relying upon their outdated and legacy systems are the ones who will risk violating SLAs. Those companies who have modernized their EDI solutions are going to rest easy knowing their SLAs will be met and they can continue to scale, and maintain business continuity.

The SLA Violations are Piling Up

When companies for one reason or another fail to upgrade their EDI solutions, they are much more likely to be unable to hit SLAs or meet deadlines for implementing new trading partner requirements, including ASN updates.

The impact of these violations makes for a high cost simply to conduct business. Being known as the vendor who consistently fails to fulfill its obligations is going to quickly and negatively affect its reputation.

And let’s face it, the last reason a company wants to lose a customer is because of its own doing.

A modernized EDI solution offers plenty of benefits, but perhaps the most important is that it is a much more reliable way to conduct business with a digital ecosystem.

Chargebacks occur when a company is unable to meet an SLA, and there are a variety of reasons to cause them.

Whether an organization has infrastructure challenges, such as hardware failure, connectivity problems, or manual processes, these are all potential roadblocks.

But as far as business processes go, an SLA violation can happen because of an EDI-related miscue, such as missing EDI order processing data, incorrect bill of laden, or an inaccurate shipping notice.

EDI technology that isn’t reliable or requires a great amount of custom coding will inevitably lead to costly chargebacks. As many as 55% of IT decision-makers say that any deficiencies in integration resources and EDI capabilities contribute to a loss of between 50 and 150 orders annually, resulting in thousands of dollars in SLA fines and lost revenues.  

Does Your Company Need Modern EDI?

As you’re considering whether to modernize your IT systems and transform your digital business, ask yourself a few questions to better understand how modern EDI tools would help enable your important business outcomes.  

1. Can My Existing IT Environment Stand Up to Higher Volumes?

Of course, you want your business to grow to heights previously unrealized. But with new business comes new responsibility.

As your company and its ecosystem grow, it becomes more complex to manage the higher transactional volumes that come with serving more customers.

Your business needs the ability to scale quickly and efficiently, and taking on new customers should not be viewed as a headache.

The process must be simplified, but if you are trying to scale a homegrown solution or a traditional EDI managed service provider, who’ll likely charge for every change to partner configuration or EDI map, the costs are going to grow out of control. A modern EDI integration platform should help you scale smarter.

2. Are We Constantly Penalized for Missing Documents or Failed Transactions?

It’s no secret that missing a customer’s service level agreement (SLA) or a deadline on a new trading partner requirement can prove costly.

Your reputation is everything, and the last thing you want is for potential customers or trading partners to think that you are unreliable.

Well, that’s precisely what will happen if you are constantly falling short on your obligations to the members of your business ecosystem. If that becomes the norm and not a rare occurrence, your customers are going to quickly seek out your competitors.

3. What is the Price to Modernize vs. the Cost of a Data Breach?

Much of the tried-and-true legacy EDI software companies have relied on for so long is no longer being updated by their vendors. Once that happens, your company is at risk of falling out of compliance when a trading partner has a new requirement or a new mandate like GDPR comes out.

There’s also the reality that when something goes wrong with these legacy solutions, you no longer have someone to call to fix it.

A lack of ongoing support means it’s a matter of time before you’re hampered with incompatible software, poor performance, and increased SLAs and security risks.

Do you really want to put your business at risk because you didn’t want to upgrade your EDI?

4. How Easy Is It to Sleuth EDI File Transfer Errors?

Custom-coded EDI solutions can lead to a brittle and complex infrastructure that becomes increasingly difficult to manage. Those same systems also do not offer centralized monitoring, reporting, and visibility into your EDI and non-EDI transactions.

The result: Your IT teams may never even know a file didn’t go through or an error happened until they hear about it from the customer, and then they waste valuable time and resources trying to figure out the root cause.

Your business relies on its ability to interact with its B2B trading partners, and the information you need to monitor and act on your EDI processes should be comprehensive, accessible, and understandable.  

Benefits of EDI Modernization

Improving how you accomplish EDI provides many benefits to your organization, including how you interact with your business partners. Purchase orders, invoices, and other B2B processes are the lifeblood of modern business, and enabling those processes ensures the reliable exchange of goods and services and ultimately dictates whether your business will make money.

When you rely on legacy and disparate systems that are complex, expensive to manage, and complicated to use, those trading partner relationships – and revenue streams – are in jeopardy.

5 Benefits of Modern EDI integration:

1. Speed and Time to Value

Enterprises with a central integration platform can considerably cut their processing time via automation, which speeds up order-to-cash cycles and improves business efficiency. Instead of taking days or weeks to onboard a new partner, for example, modern, integrated EDI systems leverage prebuilt connections to get you 80 percent of the way there.

2. Automation That Reduces Errors

Once you’ve made the decision to migrate from your legacy environment, you no longer have to spend valuable time and employee resources on manual data entry and integration tasks. Instead, automated EDI solutions, including an EDI translator, expedite those processes and reduce the number of human-generated errors. 

3. Cost Savings Modern

EDI systems reduce costs and overhead that companies previously were responsible for. If enterprises are still relying on custom-coded legacy systems, the resources required to manage and maintain your bulky and cumbersome equipment are going to run higher than if you were using a modern EDI integration platform. 

4. Gain Real-Time Visibility

Your central integration platform should offer robust business and technical user dashboards for insight and intelligence into your data and the state of your business ecosystem. This allows you to have real-time visibility and data reporting and provides alert notifications for your important B2B relationships.

5. Accelerate Business Ecosystem Integration

A modernized platform improves EDI service by consolidating and automating data workflows seamlessly. It’s never been easier to connect with your ecosystem, improve partner onboarding, and integrate end-to-end data flows  

A New Way to Conduct EDI

EDI is about much more than simply moving data to and from a location. Today EDI is about enabling your larger ecosystem and growing beyond the exchange of standard electronic data. Modern cloud-based EDI solutions bring an increased need to integrate application-based workflows into an enterprise’s traditional EDI processes.

EDI modernization extends B2B integration and automation capabilities beyond that traditional EDI that companies have grown accustomed to.

Quite frankly, legacy EDI cannot deliver the entire B2B process, from the format, transformation, and movement to orchestration and integration that today’s modern enterprise truly requires. A central integration platform takes advantage of EDI in ways that drive true business value to your bottom line.

Whether that means aggressively bringing on more trading partners, expanding into new geographic markets, or launching new revenue models like omnichannel or e-commerce, modern EDI integration throughout your digital ecosystem is critical. 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.