Electronic Data Interchange(EDI) has a long history in B2B commerce - a very long history. Over 50 years ago, it was created in an attempt to remove the inefficiencies of paper and create a standardized business process for businesses to buy and sell from each other. An effective solution for its time, the nature of EDI technology allowed businesses to work with other companies provided that they used this technology. As time moved on, B2B transactions grew increasingly complex, yet EDI has remained relatively unchanged. Despite this, it continues to be leaned upon to address the operational problem business are facing today. So, while some businesses find EDI to meet their basic operational needs, many more find it to be outdated and ineffective for how they operate. Does EDI make sense for your business? Determining that means we first need to understand how EDI works and what its limitations are.
How EDI Works
EDI is a simple technology that started development in the 1960s in search of a standardized way for businesses to transact with each other. At its core, EDI is the computer to computer exchange of information between businesses. It converts messages into a standard coded format that can be received by another business’ internal systems (often called an ‘ERP’), which then translates the message back into a form which can be read. EDI became popularized in the 1980s and had been widely adopted by medium-to large business. They developed integrations into their existing internals IT systems to automate their order management and invoicing procedures. or over 40 years, EDI has been used with little change to the technology itself. It offers a relatively simple solution to a significant problem. This begs the question: does it have a place in the future of business transactions?
EDI Barriers in a Modern Business
Businesses who use EDI require all their invoices and orders to be sent to them through EDI. As you might expect, this can create a significant limitations by preventing them from transacting with companies that don’t use EDI. For example, large multinational retailers may require all their suppliers to comply with EDI for all invoicing and order fulfillment. This means that hundreds of suppliers have little choice and have to adopt the old and expensive technology in order to do business with major companies.
The main disadvantages of EDI are:
- EDI systems are extremely expensive which makes it difficult for smaller businesses to implement and comply with the transactional and logistical needs of large companies.
- There are various formats of documentation and network requirements which can cause problems which cross-compatibility of systems
- Business who fully rely on EDI can’t accommodate business transactions in other formats, limiting potential business opportunities
Removing EDI Barriers Through Technology
The solution for overcoming technology barriers is a technology bridge. OrderEase’s online ordering solution offers integration options for two way EDI capabilities and helps to bridge the gap between businesses who use EDI and business who don’t. Unlike third-party EDI services, OrderEase offers a single solution that converts an online order into the EDI data format that automatically transfers into an internal business system. If your business has outgrown the limitations that EDI creates, or if you’re wanting to work with companies it doesn’t fit for, perhaps it’s time you explore how OrderEase can help.