Implementing electronic-data-interchange (EDI) is really the most basic step on the road to the digitalization of the company’s supply chain. It is, however, an important one because if the information and the method of transmission are not up to par and not as accurate and secure you wouldn’t be able to manage more complex and future implementations.
Did you know that Electronic Data Interchange (EDI) improves data quality and reduces errors in transactions (caused by illegible handwriting, lost faxes/email, and data entry errors) by at least 30%-40%?
I have come across numerous scenarios and challenges during multiple implementations of EDI in Dynamics 365. Hence this article.
What are the challenges?
Scaling EDI: With a diverse set of data rules and invoice formats available in the market, it is difficult to determine the scale and scope of EDI software during implementation. There are various technical challenges in terms of technical scalable architecture that need to be addressed too.
Bad data: Inconsistent data is one of the leading problems of EDI implementation. Many bad data issues originate at the order level while manually entering data into the system. Typical data inconsistencies include incorrect prices, out-of-stock or discontinued items, and duplicate orders.
Speed of service: It can be quite a challenge to keep your EDI software up to date with the speed of changing technology. Real-time documentation is the need of the hour.
Transparency: Complex supply chain processes can make transparency between trading partners a challenging task. Businesses are no longer interested in bulk fulfilment. Instead, companies are actively adopting one-to-one models for data transfer between trading partners. Transparency is of high priority in direct-to-consumer models to ensure seamless data flow between the partners.
Interoperability: It is difficult to do business with a trading partner who has not implemented EDI. There might be scenarios where you might have to onboard customers or suppliers who are unable to do EDI messaging. In such cases, the trading partner sends the document to a broker, who transforms and translates the message into the same integration in Dynamics 365 similar to the one in place for normal EDI messaging.
- It saves time by automating
- It reduces the cost of operations
- It improves customer service by providing real-time information
- It strengthens supplier relationships by bringing transparency
- It can increase sales
Trading partner onboarding
Plan the process from design to steady-state by identifying,
- What are my trading partner’s requirements?
- What are my needs?
Different scenarios in EDI integration
Scenario 1: Direct EDI integration
Let’s consider an example where Company A has a manufacturing unit in Europe and has a logistics service provider in the USA to deliver its products across the USA. Company A has very few trading partners with EDI, and there is a massive volume of documents exchanged between Company A and its logistics service provider.
Direct EDI integration refers to a direct connection over the internet between your ERP system and trading partners using a specific protocol, establishing a secure communication line to exchange electronic documents (also referred to as messages). Both you and your trading partner need to use the same communication method or protocol.
When you exchange a high volume of documents with your trading partners, it makes sense to opt for direct EDI integration. It is the most basic choice and works well for starters, although when you need to set it up for many trading partners, its implementation is time-consuming and requires a lot of knowledge.
Scenario 2: Indirect EDI integration
Now, what if Company A wants to make EDI scalable by setting up a lot of EDI connections with other trading partners?
Direct EDI integration is not a scalable solution. That’s when you opt for indirect EDI integration.
Indirect EDI integration refers to the electronic exchange of documents/messages via a Value-Added Network (VAN) or a Managed Service EDI provider, also referred to as an EDI broker. An EDI broker offers your organization automated communication channels in multiple formats to communicate with different trading partners. Brokers also work with VANs to make connections with customers around the globe.
All you need to do is create a message with all the possible data fields you might use for any of the customers. This message is the ‘golden message’ or golden document. The broker takes care of picking the right fields as per the customer, does the translation/transformation to the right EDI format (both document format and protocol), and ensures it meets compliance standards. You might be aware that EDI standards vary across industries (X12, EDIFACT, Odette, VDA, Tradacoms are a few examples of EDI compliance standards), and there are specifics to these standards. It is difficult for an organization to maintain all that knowledge. But brokers are adept at adhering to different standards as they work with organizations from various industries.
So, if you are looking to scale up now or in the future, it is easier to set up a pipeline with brokers who can take care of all the EDI integrations with your trading partners, leaving you with time to focus on your core workplace-related tasks. Of course, there is cost involved compared to a direct EDI integration, but it also offers greater scalability and more flexibility.
Two-Step Indirect EDI Integration
Referring to the previous example, if company A has multiple trading partners spread across the globe, and the broker does not have connections with all of them, what would be the next step?
In this case, the two-step indirect EDI integration, which is a slight variation of indirect EDI integration would be the ideal choice. Here, a broker ties up with VANs for successful EDI integration with global trading partners.
Scenario 3: Hybrid EDI integration
Let’s consider an example where company A exchanges large volumes of documents with trading partners Y and Z. It also has many other trading partners where the transfer of documents is in a lesser volume as compared to Y and Z.
It seems like you need a mix of direct and indirect EDI integration. And that’s what we refer to as Hybrid EDI integration.
In Hybrid EDI integration, the exchange of electronic documents happens both directly and indirectly.
If you’re wondering why you can’t just opt for indirect EDI integration in this case, here’s why. When you have a lot of data (any data, not necessarily EDI documents) going back and forth between trading partners, it is best to go for direct EDI integration. Another reason could be that the trading partner can handle the golden message/document themselves. After all, it doesn’t make sense to have millions of transactions go via a broker as it would mean additional expenditure.
You can leverage indirect EDI integration when the volume of messages is less, and there are different standards and protocols to follow. In short, hybrid EDI offers the option to choose based on the volume, frequency, and complexity of transactions.
Tip: Hybrid EDI integration requires flexibility in the integration process. It would help to have the right technical infrastructure and knowledge.
For strategic businesses who want to be more in control of the EDI process, To-Increase can help set up both direct and indirect EDI connections.
Scenario 4: EDI Integration 2.0; Connect customers without EDI!
While many of your large trading partners may be using EDI, some businesses (large and mid-scale) with whom you still exchange a lot of documents may not. (because of the cost involved or technical inabilities).
So how do you onboard customers or suppliers who are not able to do EDI messaging?
I like to call this scenario EDI 2.0 because we are adding another level to EDI communications, it is different from a standard EDI integration that you would typically do.
Here’s an example to explain this. Let’s say you have customers or suppliers who can generate an Excel document for an order or a PDF for an invoice, which they can send by email. The trading partner sends the document to the broker, who transforms and translates the message into the same integration to D365 like the one in place for normal EDI messaging.
Dynamics 365 users will not notice any difference and be able to handle all documents in the same way, this is what I call real digital transformation.