Electronic Data Interchange (EDI) Benefits & Costs

EDI is used in some form by hundreds of thousands of companies around the world to exchange business information with business partners. If you are new to EDI, then you are probably aware by now that there is a tangible cost for the equipment, software, and communications required to conduct business using EDI processes. What you may not be aware of is the intangible costs associated with maintaining a responsive, flexible, and production-quality EDI system. This page will help you to better understand some of these costs, and we hope that this will also help you to understand why many businesses, large and small, choose to outsource their EDI operations to a company with a reliable and pre-existing EDI infrastructure.

Cost-of-EDI related topics on this page include:

Benefits of Using EDI
Step by Step EDI Process Overview
Typical Costs of an EDI Implementation
EC/EDI Advantage: Leverage Existing Infrastructure

EDI is a term used to describe computer to computer exchange of information - usually via private networks. Business documents such as Purchase Orders and Invoices are sent and received in a standard electronic format. This lets other computers understand and use the content included in EDI documents.

Benefits of Using EDI

Some of the many benefits realized through EDI include:

Fast, accurate, and dependable business transactions.
Shorter order-to-payment cycles.

Companies using EDI enjoy a competitive advantage over non-EDI companies because of any number of the following reasons:

Increased opportunities through quicker and wider spread of information related to buying/selling opportunities.
Better record-keeping, fewer data errors, reduced information processing time, standardized interpretation of data, and reduced unproductive time.
Reduced inventory due to faster and more accurate order processing.
Reduced communication costs due to - less hard copy paper distribution time, no "lost" documents, and reduced postage and handling costs.
Reduced order time because orders can be processed much faster.
Improved customer satisfaction because of faster response times and a reduced reliance on paper.
Reduced billing cycles because orders are delivered more quickly.
More accurate information about business processes to help identify efficiency improvement priorities.

Step by Step EDI Process Overview

The following is a step-by-step overview of a simple EDI process:

A buyer completes an electronic Purchase Order form on their computer. When the buyer completes all the information, it is saved in a standard format that has been agreed to by the Buyer and the Seller.

The Buyer sends the Purchase Order to the Seller. The Purchase Order is sent to the Sellers' mailbox. EDI documents often travel via several networks, including the Internet, before they reach their destination mailbox.

The Purchase Order is held in the Sellers' mailbox until the mailbox receives a command from the Sellers' computer. The Sellers' receive command downloads all documents waiting in the mailbox.

Once the Purchase Order is received by the Seller, the Sellers' vendor's computer generates an electronic receipt to let the Buyer know that their Purchase Order was received. The receipt is generated automatically. The next time the Sender sends/receives their mail, the receipt is sent via the network to the Buyer.

The Confirmation Receipt is stored in the Buyers mailbox waiting for the next time the Buyer sends/receives their mail. The Buyer's receive command retrieves all waiting mail messages from their mailbox - including the Purchase Order Confirmation Receipt.

The overall process is simple, but the simplicity depends on Buyers and Sellers using a common standard for different types of documents. Both parties need to agree on the types of documents that they will send to/from each other. They also need to agree on naming conventions for data fields within each type of document. Also, while some types of data are useful to both parties, there are likely to be snippets of information that do not overlap. How to correctly handle non-overlapping data fragments needs to be resolved dynamically as electronic documents are transferred between partners.

Typical Costs of an EDI Implementation

Some of the costs normally associated with EDI operations can include:

Implementation Costs - Software
- Communications, mailboxing, and translation software.
- Consider: Does the communication software support multiple protocols (i.e. VAN, FTP, ASYNC, BISYNC, direct connection)?
- Can the translation software easily support multiple, nonstandard, transaction sets?
Implementation Costs - Hardware and Datacenter
- Servers, communications devices and peripherals.
- Secured office space, monitored security and redundant power.
- Online and offline storage for reliable data retention.
Interface Software Development / Application Integration
- Cost to integrate with existing enterprise applications.
- Consider: What if existing applications need to be upgraded? How will this effect EDI integration? How will this effect other processes?
Message/Document Transportation and Delivery
- Value Added Network (VAN) mailboxing costs.
- Maintaining communications equipment and other peripherals.
- Sending and receiving data -- line and connectivity costs.
- Monitoring communications processes for accuracy.
- Trading partners may choose different means of communication (i.e., VAN, direct connection, e-mail). Can you handle a combination of all of these message transportation methods?
Personnel, Training, and Continuing Education
- Software training and education costs.
- Training for staff members with respect to business processes.
- Business processes must be monitored for accuracy. This requires skilled personnel, and this requires their dedicated time and resources.
Planning and Risk Management Considerations
- Business process issues must not be introduced.
- Modification inflexibility -- implementation must be scalable.
- Mismanaged data leads to strategic business vulnerabilities.
- Excess expense and systems inefficiencies can weigh on a business.

EC/EDI Advantage: Leveraging Existing Infrastructure

We understand that these costs and inherent risks can be sometimes overwhelming for both small and large organizations alike. Because of this, EC/EDI has developed a reliable and pre-existing infrastructure to support many organizations' needs with one set of the people and resources required. We have many ways to simplify your EDI requirements. For example, we offer mapping and translation services that allow us to perform application integration, thus allowing you to use the same software you use today. We also offer web-integration services that will enable your people to process data with an easy-to-use web interface, thus eliminating the need for you and your staff to learn the intricacies of running an EDI datacenter. This helps you to focus on your business and do what you do best while we handle EDI operations.

Is Your Company Doing EDI In-House?

Testimonials

"Their staff is thorough, competent and reponsive to our needs. Because we have outsourced our EDI to EC/EDI, I have one less concern about day-to-day operational issues."

Christopher Emminger
Senior Systems Manager
Brush Wellman Corp.

"We just recently switched to EC/EDI from another EDI provider. Their VAN service is great and the staff is extraordinarily knowledgeable and can answer any questions we have. They go the extra mile to take care of us."

Beverly Green
Information Manager
Emess Corp.