An Insight into How Does EDI Works

Electronic data interchange (EDI) is a standardized exchange of vital commercial information and documents in an electronic format between companies. Companies are opting to automate the processing of business data arising from the transactions they enter into with their trading partners. Taking such a step significantly improves the overall efficiency of the companies’ supply chains. Even small business owners are now following the footsteps of their corporate counterparts using electronic data interchange technology for their businesses.

An understanding of how does EDI work?

Business experts say electronic data interchange technology enhances the speed and accuracy of processing information resulting from business transactions. It can integrate and configure with a company’s enterprise resource planning platform with ease. This enables the corporate enterprise to ensure a smooth exchange of necessary business documents with its trading partners. This is the reason why many small business owners want to adopt electronic data interchange. The specialists explain that these owners should have a clear understanding of how does EDI works? Only then can they appreciate how this form of automation can streamline their commercial operations in the market.

The business experts go on to explain electronic data interchange involves three basic steps which are as follows:

1. Preparing the necessary business documents to be sent via EDI

The first step a company needs to take is to organize the data to prepare the business document it wants to send via EDI. It is necessary to create an electronic file with all the relevant information. To do this, the company can use various sources. These include exporting PC-related raw data from databases or reformatting computer reports into relevant data files. The company can also buy software application with a built-in EDI interface from the market.

2. Translating the business document into relevant EDI format

The company then needs to convert the business document it wishes to send into specific EDI formats. For this, the business can acquire and operate a suitable translation software application. The company will also need to employ a professional who has expertise in mapping.  This specialist can then convert the corresponding internal data into the equivalent EDI format. Alternatively, the company can hire a reliable EDI service provider to carry out this function for a reasonable price.

3. Connecting and sending the business document to the trading partners’ computer system

After translating the relevant business document into an EDI format, the company has to send it to its trading partners. To do so, the businesses need to decide which EDI process to adopt to carry out the transmission. For this, the company and its trading partner can choose between point-to-point connection or value-added network. Point-to-point allows the businesses to establish a secure connection vis File Transfer Protocol or Applicability Statement 2. On the other, the value-added network involves using a third-party secure hosting service to conduct the transmission.

Owners can take their businesses to the next level by using electronic data interchange. For this, they need to understand how does EDI works? Only then can they know how to prepare the necessary document and translate it into relevant EDI formats. Moreover, the owners have to decide with their trading partners which EDI process to use to transmit the document effectively.