Implementing EDI
Implementing the right EDI solution can speed your business’s error resolution time, curb pesky internal errors, and dramatically reduce TCO (total cost of ownership).
However, integrating EDI across your digital ecosystem—which is composed of your internal systems and network of external business partners—can seem like a daunting task. That’s why we broke it down into 10, clear-cut steps that your business can easily follow. Keep reading to find out how your business can successfully implement EDI to start creating a more efficient and agile digital ecosystem.
Step 1: Build Your EDI Dream Team
Start by assembling a team with the necessary skills and experience to do everything from trading partner onboarding, day-to-day maintenance, error resolution, system upgrades, strategic planning, and more.
Essential EDI team structure may involve the following:
- EDI Coordinator: Typically an IT expert with a vast knowledge of EDI.
- Directing Committee: Led by the EDI Coordinator, this committee brings together key decision-makers. The team is made up of business leaders from impacted departments.
- Senior Business Leader: Strong commitment from senior management is crucial for any major IT project, and EDI is no exception. A sponsor from the executive ranks provides essential support and resources.
- Dedicated EDI Team: This that implements the EDI system. They'll be responsible for the day-to-day tasks of getting the system up and running, as well as ongoing maintenance.
Notability, the EDI Coordinator is an integral aspect to the success of an EDI implementation project. They work cross-functionally to keep the project running smoothly, guarantee company-wide support, and communicate the benefits that EDI will provide to the company.
Step 2: Perform a Strategic Review
EDI benefits vary from business to business. A strategic review will pinpoint the areas where EDI can have the biggest impact on your organization. For example, consider processes prone to errors, like purchase orders and invoices, or SLAs tied to EDI processes. EDI automation can provide tremendous improvements to these areas. See how Verst Logistics reduced its error rate by 94% after implementing EDI.
Traditional, manual business document exchanges rely on a mix of manual processes. To identify opportunities for EDI implementation, companies need to analyze their workflows and document their efficiency. The true value of EDI lies not just in automation, but in optimizing the entire business cycle, end-to-end.
EDI can transform a business’s operations by:
- Streamlining Processes: Remove redundancies that slow down your business cycles.
- Eliminating Data Entry Errors: Eliminate duplicate data entries to achieve greater accuracy and time-savings.
- Reducing Manual Workload: Free up your team by automating repetitive tasks.
- Optimizing Inventory Management: Reduce inventory holding costs by enabling just-in-time practices.
- Delivering Orders Faster: Improve customer service by speeding up order processing and product delivery.
- Strengthening Partnerships: Enhance communication and collaboration with trading partners with quicker and more detailed responses.
By evaluating their workflows, businesses can identify the specific business cycles that will see the most significant improvements from EDI implementation.
Step 3: Forecast Potential Costs
Conduct a thorough cost analysis to understand upfront and ongoing EDI expenses (software, hardware, training).
Project the expected payback period based on increased efficiency, error reduction, and fewer fees from missed SLAs. Be sure to include how much money EDI implementation will save your business, as well as how much it’ll grow and increase revenue for your business.
To determine which areas of the business will financially benefit from EDI integration, ask the following:
- Implementation Cost: Which process will cost the least to deploy EDI?
- Return on Investment: Which cycle promises the greatest profitability gains through EDI?
Two key tools when determining the return on investment of EDI include:
- Cost-Benefit Analysis: This analysis examines a company’s current technologies and processes to identify how EDI will improve these areas. It focuses on optimizing business cycles, not just automating them.
- EDI Survey: This survey evaluates a company’s trading partners' EDI capabilities (technology, skills, data requirements) to ensure compatibility with its EDI system.
Implementing EDI can require significant resources, especially for a larger organization. Therefore, performing a cost-benefit analysis and an EDI survey helps create a solid business case for EDI that can get leadership’s support. By combining these two tools, companies can create a comprehensive report that includes:
- Project scope
- SWOT analysis of current solutions
- Recommended EDI solution and its benefits and features
- Data integration and document customization needs
- Financial analysis (costs and ROI)
- Implementation plan (timeline, budget, personnel)
By completing these upfront steps, a team can provide upper management with concrete findings of the importance and payoff of an EDI modernization project.
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Step 4: Select a Business-Driven EDI Solution
The global EDI software industry is expected to increase from $1.98 billion in 2023 to $4.52 billion by 2030—that’s a CAGR of 12.5%. As more companies turn to EDI, more EDI providers will likely hit the market, making it more difficult for companies to determine the top EDI providers for their needs.
And interestingly, the best EDI solution for one company is not necessarily the best option for another. Carefully consider both your business’s unique technical needs, along with those of your trading partners.
Focus on compatibility and agility that will ensure seamless data exchanges now and in the future as EDI requirements evolve. Consider factors like scalability and ease of use for both your team and your partners, so you can grow your business while improving customer satisfaction.
When looking for an EDI solution, consider:
- IT Infrastructure Needs: This includes network capacity, data volume, partner connections, and internal system programming for EDI compliance.
- Data Integration Complexity: The level of customization required to connect internal and external systems with EDI.
Two key components of an EDI system are the EDI translator and the communications model.
EDI Translator
An EDI translator is a software program that’s typically licensed from a vendor. Its primary function is to translate EDI data from a sender into a format that’s compatible with the receiver's system. An EDI Translator can typically also handle EDI envelopes, manage documents for audits and record keeping, verify EDI compliance, and send functional acknowledgments.
Communication Models
Choosing the right communication model is crucial for connecting with your trading partners. The ideal approach depends on the size and complexity of your EDI network, as well as transaction volume. Here's a breakdown of the four main options:
- Direct Connect: This method involves establishing a direct connection with each individual trading partner. It's efficient for a small number of partners using compatible protocols. However, as the number of partners grows, managing individual connections, translations, and technical support becomes resource intensive.
- EDI Network: An EDI network, such as a value-added network (VAN) acts as a central hub for data exchange. The sender connects to the network. When they send an EDI transaction to a trading partner, the transaction goes through the VAN and is distributed to the partner(s) mailboxes within the network. They, in turn, retrieve documents from their mailboxes. This approach reduces a company’s workload by offloading communication management, security, and data backup to the VAN provider. It's a popular option for businesses with a moderate number of partners, however they can be expensive due to high transaction fees.
- Hybrid Approach: This combines direct connections for high-volume trading partners, with using an EDI network for lower-volume partners. This allows companies to avoid network transaction fees for high-volume exchanges while leveraging the network's infrastructure for less frequent interactions.
- Managed Services: Outsourcing your entire EDI program to a managed services provider offers a complete solution. The provider handles all aspects of EDI, from connecting to your trading partners to translation, technical support, maintenance, and reporting. This is a good option for businesses lacking the internal resources or expertise for EDI implementation.
Step 5: Choose the Right EDI Network Provider (Optional)
More and more, companies are opting for EDI solutions that use secure and direct protocols such as AS2 to create integrations that simplify connectivity. However, some organizations still prefer to use middleware software to integrate with internal and external systems, like a VAN.
If going the VAN provider route, consider factors like industry specialization, security protocols, and global reach.
Consider these factors when selecting an EDI network provider:
Services:
- Basic EDI vs. value-added services (training, partner onboarding, data validation, etc.)
- Do you need features like self-service reporting and transaction status visibility for your team?
Reach:
- Partner network coverage (are they used among your partners?)
- Industry expertise
- Global presence for support at anytime
Pricing:
- Cost structure (is pricing based on file size? Transaction volume? Other?)
- Flexible pricing models (pay-as-you-go, subscriptions, ability to switch tiers)
Industry Involvement:
- Does the provider participate in industry associations and standards bodies?
- Do they update offerings as requirements evolve?
Stability:
- Proven track record and long-term viability
Selecting a provider that excels in these areas ensures a reliable and future-proof EDI solution.
Step 6: Connect EDI with Your Business Systems
Using your team of experts, start connecting to each platform (ERP, WMS, TMS, financial platform, trading partners, etc.) in your digital ecosystem. How each integration is performed depends on each platform's unique requirements.
A skilled EDI team is critical for implementation. They'll integrate your EDI system with internal systems (ERP, TMS, WMS, etc.) for data exchanges, perform data mapping, onboard trading partners, and test connections. These tasks become more complex as the number of trading partners increases, since each partner has their own unique requirements.
When looking at an EDI solution or provider, look to see if they offer pre-built, out-of-the-box connections that can be customized to fit your exact needs. This can save a great deal of time and complexity, while also reducing custom development costs.
Step 7: Connect Data Across Your Digital Ecosystem
Each application in your digital ecosystem will have its own data structure. Review each application’s data structures to verify they translate into a format your EDI solution can understand.
Analyzing impacted business systems ensures smooth data exchanges by addressing issues like inconsistent data formats between applications. Different systems may store the same information (e.g., customer ID) in different ways. The EDI team will need to reconcile these discrepancies to ensure accurate data transfer between systems.
Another key consideration is data key management. There are two main types of keys:
- Primary Keys: These are crucial, standardized pieces of information like customer PO numbers or invoice numbers.
- Secondary Keys: These are more specific to individual partners and are more likely to vary, such as a carrier code.
Industry-wide codes like the Standard Industry Code (SIC) ensure consistent use of key identifiers across different organizations. These codes are often adopted as best practices within specific industries.
Step 8: Start Data Mapping
EDI data mapping translates your internal data format into the language of EDI documents for smooth information exchanges between your internal systems and trading partners. This step eliminates manual errors and ensures clear communication across your supply chain.
EDI mapping is the process of taking data from one EDI format and transforming it into another so that it can be received and understood by a recipient's system (e.g., ERP, WMS, TMS). This may involve reformatting data, translating codes, or converting file types. Typically, EDI data mapping is performed using specialized software or tools that can automate the process.
Many trading partners have specific EDI guidelines that specify the data format they want for every transaction. To be EDI compliant, you need a map that corresponds to the required data format of your trading partner.
One thing to keep in mind when data mapping, the more customization required the more complex it becomes to manage and the more susceptible the integration is to errors. Try to keep the integration relatively standardized for simplicity.
Step 9: Test Your EDI System
Before a full rollout, conduct a trial project with a small group of trading partners. This allows you to test the system so you can identify and address any issues on a smaller scale, as well as refine your approach prior to a hard launch.
When testing your EDI system, try to find trading partners that already have EDI experience, as this will make the process easier.
Each test should start with one specific aspect of a process, for example, purchase orders. Start by sending a purchase order to the test partner. Once the purchase order is properly processed by the test partner, the partner can send data back which can be evaluated. Continue testing different sections of the EDI process until the entire process can run perfectly, end-to-end. Then you can start sending actual orders through using EDI.
Throughout the testing process, ask yourself:
- Control: Does your business have the control necessary to update maps, manage integrations, onboard trading partners, etc.?
- Visibility: Can you access the data and information you need to maintain system uptime, meet SLAs, keep trading partners informed, resolve errors, etc.?
- Benefits: Is your business receiving the benefits promised at the project’s onset?
- Volume: Can the EDI solution manage the expected volume level of EDI transactions?
- Satisfaction: Does the EDI solution meet your business’s overall expectations and needs?
Step 10: Deploy EDI Solution to Trading Partners Network
The final step involves implementing EDI across your trading partner network. There are various rollout strategies that factor in elements like partner size and industry, to prioritize who goes live first. This ensures a successful launch for everyone involved.
When it’s time to officially deploy an EDI solution to your trading partner network, companies often have priority partners they wish to onboard first. Priority partners could be the most lucrative or largest partners, ones that have EDI compliance deadlines, updated mandates, etc. By ranking your trading partners in order of priority, your business has a guide and timeline of when each trading partner should be onboarded.
To help guarantee a successful deployment of your EDI solution, you should also:
- Assess Partner Readiness: Survey trading partners to understand their current EDI capabilities.
- Educate: Distribute a communication plan that outlines your program goals and provides EDI training resources and FAQs.
- Offer Flexible Options: Cater to suppliers without EDI capabilities by offering them solutions such as CIC PAVE (procure-to-pay automation) or CIC ORCA (order-to-cash automation).
- Ongoing Support: Provide ongoing support throughout the onboarding process.
The work does not stop once EDI is fully implemented. To keep your digital ecosystem running smoothly, be sure to invest resources in:
- Error Resolutions and Support: Invest in skilled personnel to monitor communication, troubleshoot issues, address partner inquiries, and generate reports.
- Maintenance and Updates: Regularly update translation maps and communication protocols as new documents, changes, or upgrades occur to maintain business continuity.
If you’re interested in learning more about EDI implementation or solutions for your business, or you have questions about what was covered in this blog—contact us at sales@cleo.com, +1.815.282.7695, or by completing our brief form fill. And be sure to explore some of our educational resources through our content hub.
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