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What is EDI? Your guide to electronic data interchange

November 13, 2020

Written by: Erik Modh

What is EDI? Learn everything you need to know about EDI to determine whether it’s right for your organization and partners.

With the increasing need for digital communication in the United States and Canada, more organizations are using EDI as a fast, secure and cost-efficient way to do business with their trading partners. But what exactly is it and what should you consider before selecting the right vendor? In this blog, we break down everything you need to know about EDI to determine whether it’s right for your organization and partners.

What is EDI?

EDI stands for “electronic data interchange.” As your business grows, so does your need to manage all your invoices, orders and other related messages within your purchase-to-pay and order-to-cash process. The most efficient way to do that is to digitalize the communication between you and your trading partners. And EDI does just that – it electronically sends and receives documents in a structured format according to a defined set of standards established between you and your trading partners. In turn, this creates a secure and paperless way to directly connect to each of your partners.

EDI helps you quickly adapt to the ever-changing landscape of how buyers and sellers exchange secure documents

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Whether you’re a buyer or a seller, your trading partners may use different financial systems than you and require different formats. With EDI, when you place an order or send an invoice, that document is standardized into a specific EDI version of that document. That document is then sent directly to your trading partner in the correct recipient format.

EDI: A spectrum of benefits

For buyers, EDI streamlines the buying process and cuts costs. For suppliers, it removes tedious manual work so you can serve your customers quickly, accurately and efficiently.

As more companies are looking to work faster and embrace the digital transformation, EDI helps you quickly adapt to the ever-changing landscape of how buyers and sellers exchange secure documents. Furthermore, EDI removes traditional – and typically more expensive – methods of paper, emails, phone calls and faxes. These traditional processes burden organizations with more manual work, lost revenue and more errors.

The challenges of traditional EDI

With the increasing need for automation and digital communication, it’s important to know that not all EDI solutions are the same. In fact, many EDI solutions only bring on more challenges and time dedicated to fixing those challenges.

First, traditional EDI typically comes as software that must be managed and upgraded by your in-house team. While your team can control the system, your staff has to invest more time to manage and upkeep all EDI connections within the software. You can outsource this job to external IT consultants to relieve your staff, but that quickly becomes a costly option.

The right EDI provider will help you save time, cut costs and enable you to scale your organization.

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Second, traditional EDI solutions use a value-added network (VAN) or manage the connections in-house, setting up a customized connection for each of your trading partners. This is called “point-to-point,” meaning that a separate connection is created and configured for each of your trading partners. A point-to-point approach takes lots of time from your IT team or consultants because it requires a great amount of consistent maintenance.

Some other challenges of traditional EDI:

  • Not scalable if connecting with multiple trading partners

  • Customer and supplier onboarding are time-consuming

  • Time and costs taken up by maintenance and upkeep

Cloud-based EDI 2.0 – The Pagero way

At Pagero, we believe business should be easy. That’s why we approach EDI differently to combat all challenges that come with traditional EDI. We go beyond traditional EDI by fully managing all of your documents as a single vendor. Regardless of format requirements, you can connect to Pagero’s cloud-based platform as your single source to communicate securely and effectively with each of your trading partners.

  • One single EDI connection – Pagero has developed a “many-to-many” infrastructure that allows you to easily scale your business and reach beyond traditional EDI. We standardize your documents to fit your trading partners’ requirements so you can easily and quickly exchange documents. With this, you can eliminate the need to set up and manage multiple EDI connections down to a single connection.

  • Automation: Pagero takes on the full responsibility of connecting, converting, validating and distributing all EDI-related messages between you and your trading partners, allowing you to focus on growing your business and automating your processes for true maximum efficiency.

  • Scalability: Pagero doesn’t only help you scale your business by outsourcing EDI connections and handling increasing volumes. You also gain access to our global business network of over 4.5 million organizations, helping your organization grow even faster and become more resilient.

A network of possibilities

Whether you currently use EDI or are interested in learning more about it, EDI creates more efficiencies and security in your processes. The right EDI provider will help you save time, cut costs and enable you to scale your organization. However, it’s important to weigh the pros and cons to find the right partner for your organization.

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