EDI technology dates back to forty years ago. However, it has and continues to play a major role in a number of major industries. In the rapidly digitalized world we are living in, it is no surprise that EDI is evolving to catch up with the growing number of complex regulations and standards. This article will take a closer look at modern EDI and classic EDI.
What does traditional EDI mean?
Traditional EDI, or traditional electronic data interchange, refers to standard electronic document formats, with syntax and semantics established by standards groups, namely ASC X12 (Accredited Standards Committee X12) and EDIFACT (Electronic Data Interchange for Administration, Commerce and Transport).
What does modern EDI mean?
Modern EDI, similar to traditional EDI, works with the conventional file types using the syntax and semantics established by ASC X12 and EDIFACT. However, it also supports the exchange of files not following standards, like spreadsheets or XML files.
Modern EDI no longer solely revolves around the data transmission between business parties, the list of EDI transaction codes, or EDI communication protocols. Modern EDI, or cloud-based EDI, now also takes into account the internal business and integration processes, namely onboarding, data translation, and other administrative tasks that enable the traditional EDI.
The differences between modern EDI and traditional EDI
The most notable difference between modern EDI and traditional EDI is flexibility. It is the flexibility involving:
- The types of files the EDI system supports,
- The integration into the modern business ecosystem, and
- The customization for IT users and businesses.
Below is a table summarizing the key differences between modern EDI and traditional EDI.
|Traditional EDI||Modern EDI|
|File types||Standard EDI documents format||Standard and non-standard document format (XML, spreadsheets, etc.)|
|Integration||Application and data integration using codes||Speedy integration with internal and external systems. No coding needed.|
|Process||Inbound and outbound processes||A combination of internal and business-facing processes|
|Endpoint||Only between internal resources and external party||Connection between trading partners, cloud-based services, and applications|
|Management||Manually, IT-dependent||Managed via dashboards and alerts|
As time goes by, the ever-changing aspects of a modern business environment, which include application, features, and business trading partners pose new requirements for the EDI system. The new demands may involve more support regarding connections, data resources, or seamless integration systems. It is also less about coding but more about making use of the customer’s available facilities, and from then utilizing templates or object reuse to implement changes and onboard new partners.
All in all, EDI’s modernization brings about major benefits. Some of them include:
- The elimination of manual data entry and manual data trace and tracking
- Lowers overhead cost and cost per data transmission
- Saves time since the business interactions are automated
- Boosts productivity
- Speedy onboarding process
- Enhanced visibility across the end-to-end business processes
- Fostering strong, long-lasting client and partner relationships
- Adapting faster to changes or customer’s demands
For all those reasons, it is no surprise that SAAS EDI is gaining popularity over conventional EDI.
What if I don’t want to modernize my EDI?
Modernizing your systems or solution is not really about adopting the newest technology or chasing after the digital trends in the industry, it is about whether a company can handle modern business demands. Modern business demands may refer to the multi-layers of regulations and standards which change often, or a number of specific requirements from a company. The real question here is, can your business handle them without suffering from expensive SLA violations?
SLA (service-level agreement)violations occur when a business fails to meet the client’s demands, e.g. not being able to deliver the final product when the deadline arrives. One of the many reasons behind the violations is a business’ resistance to the modernization of EDI, and the dependency on outdated systems instead. This leads to a number of consequences. First, and the most clearly, is the SLA violation, which then leads to chargebacks. Second, businesses are losing customers, especially when their competitors can do better using modern EDI. Surely, then, the company’s reputation is damaged.
With such many risks in mind, companies would have to constantly worry about problems in the system – which is both money and time-consuming. Then, at some point, even operation alone would become expensive. A cloud-based modern EDI service is much more reliable and stable, allowing businesses to save time and energy to work on more important aspects of the business, including strategizing and business scaling.
EDI modernization options
EDI is a serious investment. Therefore, it is important to go through the available modernization options. Keep in mind that these options need to take into account factors like the EDI requirements, the volume of transactions, the EDI-related knowledge, and so on.
There are 5 main approaches to this subject:
Keep everything as is
This approach would work if your business has no problem with handling the transactions manually. This is often the case when the number of transactions per day is small, so the tracking and tracing process can be done manually. Eventually, however, this approach will not be as effective anymore. The increasing number of errors leads to chargebacks. Being IT dependant means there is going to be more and more bottlenecks. Late responses will have a negative impact on you and your trading partner’s relationship. Over time, the negative impacts will become clearer and clearer, and you will lose more and more customers.
In a rapidly digitalized world, not having automated processes in place puts your business in a seriously disadvantaged place.
Customize the coding/ utilize tools
Upgrading your existing, classic EDI system with the help of customized codes or tools. This may help your system make up for the missing features and boost productivity. The added features will provide your system with modern EDI capabilities that allow enhanced compliance and more automation choices.
Do keep in mind, however, that the combination of classic and modern EDI systems does not always work together. Even if you manage to code or use the additional features together, it can be difficult or confusing to navigate. Switching from one application to another may cost you extra time to get the full picture of the operation, or in other words, gain the much-needed visibility. All in all, manually coding or adding external tools do boost efficiency to a point, but your flexibility is also possibly limited.
Use a third-party EDI provider
Another good choice to consider is outsourcing your EDI system. With an EDI service provider, your biggest benefit is the fact that you can utilize the expert team with the newest, most-updated relevant industry knowledge. As a result, you are also saving a lot of money on labor, which includes hiring, training, and maintaining the team. It could also be that your IT resource is scarce (some companies only have one EDI expert only), so outsourcing your EDI team is both cost-effective and time-saving. Your internal IT resource then can focus on more urgent, important matters. You and your company are also only paying for the services that you need.
However, even with relevant industry knowledge, your EDI service provider is not always familiar with your EDI environment. Therefore, it might take more time to run the service smoothly. Another possible advantage is the time the providers might take for troubleshooting. Be sure to clearly state the downtime you can manage to avoid any SLA violations or worse, affecting the entire productivity of your business.
Completely shift to the modern EDI solution
The last approach is completely shifting to the modern EDI solution. If you cannot find an EDI provider that has the ability to provide you with the modern EDI requirements you are looking for, this is the optimal solution – especially in the long run. As mentioned earlier, modern business demands are more complex, it is more about the fact whether you and your team can handle them timely while complying with all the complex regulations and standards. Hence, a modern EDI solution will enable you and your team to handle the modern requirements, along with the traditional, essential ones smoothly without any complications or delays.
Try to answer these questions
Shifting to a modern EDI solution is a big decision. Below is a list of questions to truly determine whether your company needs to modernize the EDI solution.
- What are the current EDI transaction volumes?
- If the volume of transactions is to grow, can your team handle it?
- Is your current EDI system scalable?
- If you are using an EDI provider and looking to scale up quickly and efficiently, will the cost go up significantly?
If your current IT team cannot handle the growing transactions, modernizing your EDI system might be a good idea.
- How often does your team suffer from expensive chargebacks due to SLA violations?
Chargebacks might seem minor individually at first, but as they pile up, your business is going to suffer financially.
- In the long run, will the price of EDI modernization save you the cost spent on SLA violations?
After answering these questions, you will most likely determine whether your business needs to modernize the EDI system or not.
In short, modernizing your current EDI system might be cumbersome and costly, while the classic, familiar EDI seems much easier. However, do keep in mind that businesses with modernized EDI systems gain a lot of advantages in today’s ultra-competitive market, and those companies might be that of your competitors. If you are interested in modernizing your EDI system but do not know where to start, let SCS Solutions team help you get started. We will be more than happy to hear from you! Contact us via our website https://www.scssolutions.io/, Linkedin, or Facebook!