EDI order processing has continually played an important role in business transactions. By automating the said procedure, your organization can gain a number of significant benefits in the long run. The small improvements in seemingly normal, everyday tasks can bring about major gains.
What does EDI order processing mean?
EDI stands for electronic data interchange. It refers to the business document exchange between two businesses that involves certain EDI communication protocols and EDI transaction codes. It is a standardized, automatic document exchange that does not involve any paper or human intervention.
Order processing refers to the process of receiving orders and sending the final product to the customers. In other words, order processing is the process of sales orders or purchase orders.
In conclusion, a consecutive workflow of receiving orders and sending the goods using an EDI solution is known as EDI order processing.
EDI order processing workflow
EDI order processing allows for a much faster purchase cycle compared to the traditional, paper-based workflow. Below is what an EDI order processing workflow looks like:
- A buyer makes a decision to buy a good or service.
- The EDI system on the buyer’s side translates the purchase order into an EDI document.
- The EDI version of the purchase order is sent to the seller.
- The seller’s management system receives the order. Then, it will create two types of documents: one that confirms the receipt of the order, and one that is the invoice.
- Then, their system will create a document confirming the purchase order has been received and sends an invoice to the buyer.
- Lastly, the system sends the buyer a receipt.
The corresponding EDI transaction codes to the aforementioned processes are:
- EDI 850 – Purchase order: This document contains details on a purchase order that was transmitted from the customer to the supplier.
- EDI 855 – Purchase order acknowledgment: Sent from the seller to the buyer to let the buyer know that the order has been accepted, accepted with changes, or rejected.
- EDI 856 – Advanced shipping notice: EDI 856 is used to notify the recipient of an upcoming shipment.
- EDI 810 – Invoice: often known as EDI Billing, is normally transmitted from the supplier to the buyer. It is a digital invoice that requests payment for the goods that have been provided.
As you can see, the automated EDI order processing transacts essential business documents back and forth, eliminating the need for manual data processing, which often involves unwanted, even expensive errors.
Why automate EDI order processing?
A lot of valuable time is taken away when your team has to spend time handling purchase orders manually. Not only is it error-prone but it also prevents your team from working on other more important and value-added tasks like scaling your organization or investing more in value-driven relationships with customers.
Moreover, modern EDI is capable of integrating with your internal management systems such as ERP (Enterprise resource planning), WMS (warehouse management system), CRM (Customer relationship management), and so on. This allows for even more time saved since the need for switching back and forth between multiple applications is eliminated.
Shorter purchase cycles
When placing an order, most trading partners do so in a uniformed way. Therefore, it is only realistic to customize pre-sets in order to automate the transmission of EDI documents.
Let’s say you and your team want to make sure that the information on the invoice matches that of the shipment. Instead of manually checking and comparing the information every time, a pre-set can be established to automate this step. With that being said, a strong EDI platform would have the ability to generate an invoice based on the advanced shipment notice.
Thanks to automation, you no longer have to worry about missing out on an invoice or incorrect information that might occur due to human errors.
It is common knowledge that paper-based documents take longer to process. Typically, you would need to go through the steps of: printing the document, shipping it, then receiving an acknowledgment document, manually entering it into the company’s internal system, and confirming safe receipt. This whole process can take up to days. Unnecessary waste is also created along the way.
Furthermore, there is also the possibility that the documents get lost along the way. You also need to find the time and space to store them.
Cutting paper-based documents saves money and time. You are doing the environment a huge favor and most importantly, improving your overall supply chain sustainability. On top of that, you and your team are also promoting social accountability.
With the booming of online shopping, omnichannel has increasingly played an important role in ensuring the best customer experience. Omnichannel allows you to reach your potential customer via multiple channels.
With the help of EDI, data from the different resources are centralized in one system, ensuring the highest accuracy and consistency rate. This is also to ensure precision when it comes to communication between different retail operations. The consistency across different sources of data helps prevent unwanted situations like overstocking or understocking.
Connect directly to shipping providers
The requirement to automate this EDI order procedure has grown along with the development of direct-to-consumer shipment by providers of orders placed on a trading partner website. Brands and suppliers are now in charge of shipping hundreds or thousands of single-item purchases to individual addresses rather than just a few wholesale orders from a retailer and a few chosen outlets or distribution facilities.
Direct connections between the order information and your shipping provider are made through a strong EDI and order processing platform. Additionally, label printing should be automated.
Tips for choosing your fitting EDI processing order solution
An important factor to consider when choosing a fitting EDI order processing solution for you and your business is big-picture thinking. Try to think of the workflow as an entirety instead of each process separately.
Doing so provides you with a better idea of the EDI order processing that can be improved. This approach also helps the bottom line in the long run. There are three elements to consider.
Big picture thinking – customer experience
Customers now have numerous platforms to make their feedback about a service or product widely known. It is easy to find numerous reviews about a certain product on e-commerce sites. Even more importantly, this feedback and reviews are taken into consideration before a customer decides to make a purchase.
Thus, you should make decisions based on what is best for your customers – and if it meets their needs. In this case, it is to have a comprehensive and adaptable integration solution that provides your supply chain the flexibility and agility to change course instantly. The customer/supplier experience is impacted by an EDI-related failure at any point in the integration process. Some of the negative consequences may include missed orders, lost money, or even worse, strained relationships.
Big picture thinking – scalability
Frankly speaking, relying on EDI alone is often not enough. We now live in an API-first world thanks to the cloud and the rapid speed of digital transformation. Therefore, if your business wants to grow and ride the current wave of global eCommerce, you’ll need to be able to accommodate both API and EDI integration workflows flawlessly. Ideally, you should build these capabilities on a single platform that allows you to manage both at the same time.
It’s definitely best to search for an integration platform that puts you in control and allows your organization to scale up as needed as your multi-enterprise ecosystem matures because you’ll want your integration solutions to mature as your business grows – technology advances never cease.
Big picture thinking – supply chain visibility
Data moves easily, all document types are supported (and when necessary, automatically transformed), and what’s happening at each crucial integration point can be seen, understood, and easily controlled when integration technology is operating seamlessly across your end-to-end processes, including all the internal and external connections that make up your EDI order processing scheme.
The complex constellation of internal and external systems and applications you’ll encounter with your eCommerce initiative can only be connected by an integration method that takes your business operations into account from beginning to end, starting from an “outside-in” point of view. If you have complete visibility and control, your total integration solution, including its EDI order processing components, can easily adapt a change in approach whenever an interruption occurs or a business change is required.
If you need more guidance on how to choose the right EDI provider for you, check out some of our tips on how to choose your EDI provider in 2022.
Automating EDI processing, in the long run, brings about numerous benefits. Some of the notable advantages are the money and time saved, the shorter purchase cycles, omnichannel optimization, the direct connection to the shipping provider, and last but not least, supply chain sustainability. They offer your business a certain competitive advantage. Do keep in mind that if your process is slower, or more error-prone, customers always have the ability to opt for your competitors – those who have worked hard on digitalizing and automating their purchase order processing.If you want to start automating your company’s EDI order processing, let SCS Solutions team help you. We will be more than happy to hear from you! Contact us via our website https://www.scssolutions.io/, Linkedin, or Facebook! We are always happy to hear from you.