Electronic Data Interchange (EDI) has a long history in B2B commerce. Over 50 years ago, it was created in an attempt to remove the inefficiencies of paper and create a standardized process for businesses to buy and sell from each other. An effective solution for its time, the nature of EDI technology allowed businesses to trade with other companies.
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 problems businesses 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 So, while some businesses find EDI to meet their basic operational needs, many more find it to be outdated and ineffective for how they operate.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.
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 solutions are purpose-built to handle the essential tasks of electronic data exchange to standardize documents into and out of EDI formats. This effectively transmits documents between trading partners, and integrates EDI workflows into back-end systems like ERPs, CRMs, and logistics platforms. Below is a closer look at the key components and processes involved in EDI:
EDI mapping and translation are the backbone of EDI workflows. Mapping involves converting standard EDI documents into formats like flat files, XML, or CSV that your internal systems can understand. For example, incoming EDI messages are mapped to files compatible with your ERP, logistics, or CRM system.
On the flip side, EDI translation converts non-EDI business files into standard EDI formats. For instance, a purchase order from your ERP, such as NetSuite, is translated into an EDI X12 or EDIFACT format. Together, mapping and translation automate the transformation of data, enabling seamless communication between disparate systems.
File transmission is the secure exchange of EDI documents between trading partners. Modern EDI solutions, like OrderEase, incorporate managed file transfer (MFT) capabilities to ensure secure transmission via protocols such as VAN, AS2 and SFTP.
The integration of EDI workflows with back-end systems, such as ERPs, is where EDI delivers the most value but also presents the greatest challenges. Effective back-end integration involves automating workflows that connect EDI data directly to business processes.
This process requires mapping and translating EDI files to the specific formats required by your internal systems, then connecting those systems via APIs and ports. Traditional EDI systems often struggle with these integrations due to outdated architectures. By contrast, modern EDI solutions streamline back-end integration, reducing costs and enabling efficient, automated workflows that scale with your business.
By leveraging a modern EDI solution, businesses can overcome these challenges, enabling seamless data exchange, robust security, and fully integrated operations across their supply chain.
When managing EDI, businesses typically rely on one of two approaches: VAN and web EDI or direct EDI.
Value-Added Networks (VANs) are secure, outsourced services that enable the exchange of EDI documents. Users typically connect through a web portal, manually entering data into forms, while the VAN processes and sends the information. VANs don’t directly link to back-end systems, requiring ongoing manual data entry and reconciliation.
For businesses with growing transaction volumes, such as those supplying retailers like Walmart, VAN solutions can quickly become unsustainable.
Direct EDI solutions connect trading partners directly to your systems, automating data exchanges and eliminating the need for manual entry.
EDI standards are predefined formats and rules that dictate how business documents should be structured and transmitted between organizations. These standards ensure that systems from different companies can exchange data consistently and accurately, even if their internal systems are different.
Each standard supports specific business documents, such as:
EDI standards define how data should be organized into:
Trading partners (e.g., retailers and suppliers) must adhere to the same EDI standard to ensure proper communication.
Widely used in the U.S. and Canada for industries like retail, healthcare, and logistics.
Example: X12 850 for purchase orders.
A United Nations standard, commonly used in Europe and international trade.
Example: ORDERS for purchase orders.
Common in retail and supply chain industries.
VDA (Germany)
Used primarily in the automotive industry.
A standard specifically for electronic health information.
EDI standards, while powerful for automating supply chain processes, come with challenges that make them a pain point for many businesses, especially smaller or mid-sized ones. Here’s why:
Different industries or regions often use different standards (e.g., ANSI X12 vs. EDIFACT which means a business trading globally may have to support several standards, requiring additional expertise and resources. To add complexity, each standard often has multiple versions. Trading partners may use different versions, forcing businesses to customize their integrations for each partner. Even if this is done arduously, EDI documents are highly structured, with strict rules for every data field and a small mistake can lead to rejected documents.
EDI standards are rigid and designed for machines, not people. Adding custom fields or adapting to unique business processes can be cumbersome.
Each partner often has its own specific EDI requirements, which takes time and effort to configure and test. Businesses must map their internal data (like ERP systems) to the standard format, which requires technical expertise. Legacy EDI software also comes at a high cost which can be a barrier for growing companies.
EDI requires specialized knowledge, and skilled professionals are expensive and not always easy to find. Even when outsourcing EDI management, businesses need to closely monitor and troubleshoot issues with their providers.
Errors like incorrect segments or missing fields can cause an EDI document to fail. Diagnosing and fixing these errors requires deep technical knowledge. If an error occurs, responses vary by partner. Some may send a detailed error message, while others just reject the transaction.
As trading partners update their requirements (e.g., migrating to a new EDI version), businesses need to continually update their configurations to stay compliant. Changes in business systems, such as moving to a new ERP or adopting new sales channels, often require a complete rework of EDI mappings.
EDI transactions often happen "in the background," and without robust tracking tools, businesses may struggle to identify where delays or errors occur in the process. Traditional EDI doesn’t offer end-to-end visibility making it harder to keep up with modern customer demands for faster, transparent communication.
OrderEase simplifies the complexities of EDI standards by providing a centralized platform that integrates seamlessly with both trading partners and internal systems. With pre-configured EDI connections and automated workflows, businesses can easily comply with retailer-specific requirements without needing specialized expertise. Unlike traditional EDI tools, OrderEase integrates EDI with other sales channels, including e-commerce platforms and wholesale B2B apps, allowing businesses to manage all operations from one place.
Traditional EDI solutions are designed primarily to manage the electronic exchange of standardized documents (e.g., purchase orders and invoices) between businesses. These systems typically focus on the transmission, mapping, and translation of EDI documents into formats that both parties can understand. They often require a higher degree of technical expertise, as the setup of document mappings and integrations with back-end systems can be complex. Traditional EDI also tends to rely on third-party networks (VANs) for file transmission, which can incur additional costs and require manual intervention. These solutions are well-suited for large enterprises with complex partner networks and high-volume transactions, but the costs and technical barriers can make them less ideal for smaller or mid-market businesses.
In contrast, middleware platforms act as a bridge between EDI solutions and a company’s business systems, such as ERPs and e-commerce platforms. These platforms focus on streamlining integration by automating workflows across multiple systems, often without the need for deep technical knowledge. Middleware solutions typically offer more flexibility, allowing businesses to connect not only with trading partners using EDI but also with various other cloud-based tools and digital platforms. These solutions are designed with user-friendliness in mind, often providing no-code interfaces that simplify setup and reduce reliance on specialized IT resources. Middleware platforms are well-suited for businesses seeking cost-effective and scalable solutions, particularly those in the mid-market or those experiencing growth and needing multi-channel integration.
The key differences between the two lie in their scope and approach. Traditional EDI systems focus heavily on document exchange and secure transmission between partners, often requiring significant resources for setup and maintenance. Middleware platforms, however, offer broader integration capabilities, connecting various systems and automating workflows across the business. These platforms tend to be more flexible, allowing for easier adaptation to evolving business needs, making them more accessible and scalable for growing businesses. Additionally, middleware solutions often come with lower upfront costs and simpler pricing models compared to traditional EDI systems, which may involve complex licensing and transaction fees.
Ultimately, the choice between traditional EDI and middleware platforms depends on the size of the business, the complexity of its operations, and its long-term growth goals. Traditional EDI may be more appropriate for large enterprises with extensive partner networks, while middleware platforms offer a more agile and cost-effective solution for businesses looking to streamline integrations and expand into new sales channels.
EDI became popularized in the 1980s and had been widely adopted by medium-to-large businesses. They developed integrations into their existing internal IT systems to automate their order management and invoicing procedures. For 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?
Businesses who use EDI require all their invoices and orders to be sent to them through EDI. As you might expect, this can create 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 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 that use EDI and businesses 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 want to work with companies it doesn’t fit for, perhaps it’s time you explore how OrderEase can help.