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Discover a better way to collaborate with customers and suppliers
Electronic Data Interchange (EDI) is the digital exchange of business information, such as sales orders, shipment data, invoices, and purchase orders between companies in a standard format. EDI can overwhelm small businesses with ever-changing standards, cryptic document formats, and varied customer and vendor trading requirements.
Smaller businesses often need more resources to implement EDI, a requirement for conducting business with larger organizations. Further, EDI requirements change over time, requiring constant fine-tuning of settings to avoid business disruption and costly fees for non-compliance. It is also challenging to keep pace with customer and vendor trading requirements.
For example, Kroger requires different EDI documents than 7-Eleven. To complicate matters, Kroger does not require EDI testing and uses AS2 as a connection method. In contrast, 7-Eleven requires EDI testing on the specific EDI documents and connects with vendors using a value-added network (VAN).
Keeping track of customer and vendor requirements is difficult enough without disparate systems. That’s why modern ERP software like Acumatica provides embedded EDI capabilities to streamline collaboration with customers and vendors from a centralized business platform. With Acumatica and SPS Commerce, data flows seamlessly from the core business system into the correct format for transmission to customers and vendors. Likewise, inbound EDI documents are processed automatically into Acumatica using predefined maps with notifications when errors occur on any inbound or outbound EDI activity.
This eBook helps retailers, distributors, and manufacturers understand EDI. It discusses trading partners, transaction types, standards, mapping and translation software, and document transmission protocols. Readers will learn how modern ERP applications simplify EDI with real-time insights to streamline collaboration for improved profitability.
What is EDI?
Electronic Data Interchange (EDI) is the digital exchange of business information between companies in a standard format. EDI digitizes and automates manual, paper-based business processes such as customer invoicing and supplier purchase orders.
Traditional Paper-Based Workflow
A supplier creates, prints, and mails a customer invoice from their ERP system in a paper-based invoice process. The invoice is transmitted via postal service to the customer who receives it, enters the information into their ERP system, and creates a paper check that they mail back to their supplier. The supplier gets the check and records the payment in their ERP system to settle the account balance.
Automated EDI Workflow
In an automated EDI workflow, data files are created and delivered between companies digitally. Files can be sent directly between systems in a peer-to-peer scenario. Some companies use mailboxes on value-added networks (VAN) where 810 EDI Invoice files are generated from the ERP data, translated into an EDI format, and uploaded by the sender to an online VAN mailbox. The receiver can then access the file, map the data to their ERP system, and process the accounts payable transaction within their ERP application. Sometimes, the customer may send an 820 EDI Remittance Advice document to authorize payment. The 820 is not the payment itself. Instead, an 820 includes authorization and details the supplier needs to complete the payment process via EFT, ACH, or credit card transaction on their end.
EDI Benefits
There are many tangible benefits for companies that use EDI. These include time savings, data entry error reduction, and shorter business process cycles for intercompany financial, sales, and supply chain transactions. Further, smaller companies that do not implement EDI cannot do business with larger businesses that require EDI.
“All of our supply chain data is linked, so there are no gaps in our data. We know the second we go from a purchase and invoice to needing to transfer a SKU to a different warehouse, to its receipt at a warehouse, when it’s shipped to the customer, and even the shipping and tracking data. It’s all in one place so there’s no risk for any data integrity issues.”
Larger Sales Opportunities
Large companies like Amazon, Walmart, Home Depot, Costco, and Kroger require customers and suppliers to use EDI. EDI is prevalent in most industries, including retail, distribution, banking and finance, manufacturing, healthcare, services, and construction. Companies that cannot conduct business via EDI cannot capture more substantial sales opportunities, resulting in slower growth and considerable investments in sales and marketing.
Faster Cycle Times
Paper-based processes such as customer invoicing can take weeks or months from the time the invoice is created to the time the customer’s check arrives in the mail. EDI’s digital process can shorten business cycles to days or even hours. These cycle times apply to all transactions, including purchasing, shipping, manufacturing, and logistics.
Decreased Errors
Manual data entry results in errors. Once configured, EDI processes automate data capture from digital files and standardize processes for data sharing with customers and vendors.
Improved Efficiency
Manual data entry and processing paper documents for mail takes time. EDI applications streamline data transfers digitally, eliminating data entry and paper-based processing.
Reduced Costs
EDI is not free. Companies invest significantly in software and transaction fees, implementation, and consulting services. However, businesses realize significant cost savings by avoiding paper, postage, printing costs, and reduced labor with substantial improvements in cashflow and access to working capital.
Increased Security
Printing and mailing information between companies is risky. EDI provides significant security controls, especially for sensitive customer data and financial information.
Better Customer Experiences
Customers and vendors appreciate business partners who conduct business digitally. EDI saves trading partners time, reduces costs, improves security, and increases efficiency. Companies are more inclined to expand business relationships with partners who implement EDI.
Sustainability
EDI processes reduce the use of toxic printer toner cartridges and wasteful paper and postage materials. Further, digital processes eliminate carbon emissions and pollution caused by vehicle transportation of documents between geographically dispersed organizations.
Trading Partners
Every EDI transaction involves at least two trading partners. These partners are most often customers or vendors, but they may also include transportation and logistics providers, financial institutions, or other organizations.
In many cases, documents and files may be inbound or outbound. For example, a company may receive inbound 850 purchase orders from customers and transmit outbound 850 purchase orders to their vendors. In other cases, trading partners may assume two different roles. For example, a company may be both a customer and a vendor. It is important to understand trading partner relationships and which types of transactions are available to automate business processes for your organization.
“With Acumatica, we can manage inventory at a minute level. That was helpful during the pandemic because we could see purchase orders, processes, inbound freight from China, freight costs, and purchase price variants, which was important when something a year ago might have cost $8 dollars now cost $12. That causes profit erosion, and we are doing a much better job at managing that with full visibility into operating supplies.”
EDI Transactions
The most common EDI transactions include sales orders, advance shipping notices (ASN), invoices, payment order remittance advice, purchase order acknowledgment, and functional acknowledgments. However, there are many others, including industry-specific transactions.
Below is a brief list of common EDI transactions. This is a partial list across varied industry segments. Support for each transaction varies across EDI and ERP platforms. Make sure to discuss each transaction specifically with technology providers and understand which transactions are supported natively or through custom development. Other EDI transaction details are available on the SPS Commerce website.
“Now that everyone is using Acumatica, it’s one place to go to do their job. It’s made a big improvement having all that information in one platform, no more digging around wondering if the data is correct.”
What are EDI Standards?
Human communication relies on a mutual understanding of language and syntax. Each party must agree on which language and dialect they will use. Similarly, EDI standards define the format, codes, identification values, message designs, and syntax for EDI file transmission between organizations. There are many EDI standards and variants across industries. However, the most common standard in North America is ANSI.
The automotive supply chain relies heavily on EDI. Some standards, like EDIFACT, are used globally, while other automotive standards, like ODETTE in Europe, VDA in Germany, or TRADACOMS in the UK, are more common in smaller geographies.
Other industries rely on different standards. For example, HIPAA is used in the healthcare sector, RosettaNet by the electronics supply chain, SWIFT for banking and finance, and VICS for retailers.
There are different versions of each standard as well. Trading partners must agree on which version to use and when to implement new versions. Further, some companies modify standards to meet their needs. These changes must be communicated between trading partners. Lastly, not every EDI or ERP provider supports every standard. Talk to technology providers to identify which standards are available.
“I love to recommend Acumatica, but not to any of our competitors. Acumatica has transformed our business, given us access to real-time stock information, and given us the confidence that we can just keep on growing.”
ANSI ASC X12
The American National Standards Institute (ANSI) is a private, non-profit organization that oversees the development of standards for products, services, processes, and systems in the USA. ANSI represents the US in interactions with ISO, IEC, and IEF. Business documents are often referred to by their ANSI codes, such as 856 for ASN, 810 for Invoice, and 850 for Purchase Order.
UN/EDIFACT
United Nations/Electronic Data Interchange for Administration, Commerce, and Transport (UN/EDIFACT or EDIFACT) is the international EDI standard developed under the United Nations. It is popular in Europe for automotive, logistics, retail, healthcare, and manufacturing industries.
RosettaNet
RosettaNet, a subsidiary of GS1 US (formerly the Uniform Code Council), is a non-profit consortium that defines standards for the computer, semiconductor, and electronics supply chain.
EANCOM
EANCOM is a subset of UN/EDIFACT standards governed by GS1. It links order information with the physical flow of goods through the supply chain. It is popular in Europe among retail and consumer goods businesses and has growing use in healthcare and construction industries.
HIPPA
The Health Insurance Portability and Accountability Act sets standards for electronic healthcare transactions and national identifiers for providers, insurance plans, and employers. The standards are based on the ANSI ASC X12 standard.
SWIFT
The Society of Worldwide Interbank Financial Telecommunication (SWIFT) manages EDI standards for the finance and banking community. SWIFTNet is the infrastructure used to exchange documents. FIN, InterAct, and FileAct are used to encode SWIFT documents for transmission.
EDI Mapping and Translation Software
Data in a company’s ERP database must be converted into the EDI file format using translation software. The file is then sent to the receiving trading partner directly or through a value-added network, where they use mapping software to decipher it and move the data into their ERP application.
Below is a portion of a sample EDI file. It includes sections that define the transaction date, invoice and purchase order numbers, currency, vendor, quantity sold, price, and item code. These segments are mapped to the corresponding fields in the receiving trading partner’s ERP database.
“SPS Commerce Fulfillment for Acumatica offers the cloud-to-cloud integration to our ERP, but more so they became our EDI department taking on the staffing, best practices, and troubleshooting so that we didn’t have to. As a young organization, handing off our EDI to SPS freed us from the complexities of EDI and the need for in-house expertise.”
EDI Document Transmission
EDI files are transmitted between companies in numerous formats. Sometimes, the chosen standard determines the format requirements. In other cases, the EDI VAN or trading partner may select the file format. Files are commonly formatted in comma-separated values (CSV) flat files, extensible markup language (XML), JavaScript object notation (JSON), intermediate document (IDOC), or other formats.
Files are transacted using varied transmission protocols for security and encryption. Popular protocols include file transfer protocol (FTP), hypertext transfer protocol (HTTP), file transport protocol secure (FTPS), secure file transfer protocol (SFTP), applicability statement 2 (AS2), and Odette file transfer protocol (OFTP). Data may also be exchanged using a representational state transfer (REST) application programming interface (API) for tighter data integration between disparate systems.
Connecting EDI with Your ERP Application
Entry-level accounting systems and legacy ERP software are often disconnected from EDI applications. This disconnect forces busy IT personnel to waste time manually formatting files and moving them between applications. Modern cloud ERP platforms like Acumatica provide embedded EDI to receive and send data directly from the ERP application, saving countless hours while avoiding data formatting and entry errors. Embedded EDI offers significant advantages for small and growing businesses, as outlined below.
“I have been working with SPS and Acumatica for over 2 years. SPS has been a solid partner, helping with all questions and support issues. Top notch!”
Reduced Training
Users familiar with the ERP system require minimal training to use embedded EDI apps like SPS Commerce for Acumatica.
Faster Document Preparation
Embedded EDI solutions streamline outbound file preparation and automatically convert inbound documents into ERP data, saving time and eliminating errors.
Turnkey Services
Acumatica partners with SPS Commerce for EDI because they offer turnkey services designed for smaller businesses. SPS Commerce manages the EDI implementation, updates document maps to support thousands of annual changes, performs end-to-end trading partner testing, and proactively monitors the system with 24-hour support every day of the year.
Simplify EDI Transactions and Compliance with
SPS Commerce for Acumatica Cloud ER
About SPS Commerce
SPS Commerce is the world’s leading retail network, connecting trading partners around the globe to optimize supply chain operations for all retail partners. We support data-driven partnerships with innovative cloud technology, customer-obsessed service, and accessible experts so our customers can focus on what they do best. To date, more than 120,000 companies in retail, grocery, distribution, supply, and logistics have chosen SPS as their retail network. SPS has achieved 92 consecutive quarters of revenue growth and is headquartered in Minneapolis. For additional information, contact SPS at 866-245-8100 or visit www.spscommerce.com.
Common EDI Mistakes
EDI mistakes can easily happen with so many interconnected systems and processes. Errors cause inefficiencies, confusion, and costly fines for non-compliance. The good news is that modern ERP platforms with embedded EDI streamline and error-proof EDI processing with updates to comply with ever-changing standards.
Communication Failures
Avoid communication errors with rigorous testing and define processes to monitor communication networks with alerts when failures occur. You can often implement acknowledgments to verify that trading partners received data. Schedule periodic meetings with trading partners to plan for system upgrades or changes, such as upgrades to new EDI standards or changes to value-added networks.
File Translation and Mapping Errors
Data translation and mapping errors are easily avoidable with proper testing. Connected EDI and ERP systems enable companies to properly configure trading partner files and data maps. Testing and oversight from turnkey EDI providers like SPS Commerce ensure that required data elements are included in the correct sequence.
Standards Updates
Develop standard procedures when upgrading to new EDI standards. Even minor updates can wreak havoc on pre-established processes. Collaborate with trading partners to determine which standards will be updated and when each organization will be prepared to implement the changes. Coordinate with your ERP consultant and EDI provider to reconfigure system settings to support the new standards.
Trading Partner Errors
You can do everything right with EDI and still need help with issues if trading partners are making mistakes on their end. They may need more training to map files correctly into their systems, or they may transmit documents that contain errors. Collaboration with trading partners is essential to ensure high-quality transactions. Work with trading partners to test files you have sent and notify trading partners when you encounter errors.
Lack of Visibility
Disconnected EDI applications create barriers to information, such as file transmission or formatting errors. Companies are unsure if files were transmitted, resulting in duplicate transactions that frustrate trading partners. Connected systems like Acumatica and SPS Commerce provide visibility to identify issues with automated notifications and flexible reporting to drill down into EDI transactions directly from the ERP application.
Manual Processes
Manual EDI processes are prone to data entry and formatting mistakes. Minimize errors by automating EDI file creation directly from the ERP system with predefined maps to streamline inbound and outbound files. Automation provides efficiencies, enabling companies to do more with fewer resources while improving partner experiences.
Discover Why Modern Supply Chains Rely on Acumatica for Digital Commerce
EDI Feature Checklist
Acumatica provides a general ERP feature checklist with standard accounting requirements. Similar checklists are available for retail, distribution, construction, and manufacturing. The checklist below provides a consolidated list of features business leaders should expect to find in modern business platforms that provide embedded EDI functionality.
📷 In the PDF, the Priority column is a Low / Medium / High choice for each row, the Acumatica column (headed with the Acumatica logo) has a tick on every row, and two blank navy columns are left for comparing other vendors.
Simplify Omnichannel Sales with Acumatica’s Embedded EDI from SPS Commerce
EDI success is only possible with the right partners. Small organizations need more resources to manage the EDI system, onboard and test transactions with new trading partners, and stay abreast of changing standards. Disconnected systems and manual processes result in confusion, non-compliance fees, and unhappy trading partners.
A more dynamic and digital world demands a connected and collaborative business management platform with embedded EDI to automate and streamline customer and vendor communication and collaboration.
For over a decade, Acumatica and SPS Commerce have partnered to deliver EDI capabilities that are fully embedded within Acumatica, giving businesses the agility to take advantage of the native power of Acumatica and full-service EDI expertise.
With Acumatica and SPS Commerce, retailers, distributors, and manufacturers capture more substantial revenue, improve efficiency, mitigate errors, reduce costs, and streamline sales, purchasing, shipping, transportation, and financial business processes.
With fully embedded EDI from Acumatica and SPS Commerce, you can access a dedicated team of experts to provide the staffing, expertise, and ongoing monitoring to ensure your success.
Together, we are driven to continuously seek out better ways to work so that we can redefine business management software and trading partner relationships for everyone.
“We’re also looking to do direct integrations with suppliers, with vendors, and potentially with international partners . . . I would definitely recommend Acumatica to other businesses. It covers the full ERP functionality, it integrates with other products well, and it’s cost-effective.”
