You have likely been encouraged by your potential customers and incumbent customers to adopt an EDI system to allow for exchange of order and accounting data between your two firms. But you’re not quite sure which type of EDI system to go for as there seems to be many options and its hard to tell what key features you actually require. Well let’s take a look at some of the main options to help you decide on which EDI system is best suited to your business model and future growth.
What is an EDI System?
First thing to look at are what are the main features of an EDI system? Well to sum it up an EDI system is a replacement for the old ways of sending data and documents between two companies. So before you may have received an order from a customer via fax, email, telephone or letter. That form of receiving an order is now defunct and replaced with a direct electronic order. The order lands right in the center of your order management system, and can automatically place the order with your suppliers, send the order to your production team or request the stock to be allocated from your inventory. The electronic order automatically triggers further data exchange that in the past would have been pieces of paper to confirm receipt of an order, send an invoice for payment, and confirm receipt of payment.
As you can see a process that once took several days to process and utilize several hours of data entry and administration time, now takes place automatically within seconds. You can clearly see why larger retailers and wholesalers want their suppliers to be using EDI, because it saves both parties a lot of money in terms of hiring administrative personnel, and it greatly speeds up the order management process, while reducing paperwork.
Two Main Types of EDI System
There are only really two main types of EDI system, the first is web-based EDI systems which are SAAS solutions with browser based software that can be accessed by most devices. The main advantage of web based EDI is that there is no entry cost, you pay a monthly subscription usually per user, or by amount of data, for use of the software and cloud storage. The software provider ensure that it connects with as many ERP systems, accounting software, other EDI providers as possible and keep on top of it to ensure it is always online and connected.
The alternative is Internet based EDI, which sounds like it would probably be the same thing, but it is actually the original EDI software which is based on your own servers, and uses internet protocols to send and receive data. There is much more upfront cost having to purchase the software, provide the hardware, and then manage the system to ensure it is online and running smoothly. However in the long run it tends to be cheaper as you can choose exactly how much data you send.