Electronic Data Interchange (EDI) Developer with Software AG Salary in 2024

Electronic Data Interchange (EDI)

What is Electronic Data Interchange?

Electronic data interchange (EDI) is the electronic exchange of business documents between organisations. Business workflows often require routing and sending documents such as invoices, purchase orders and shipping forms from one organisation to another. These documents can be attached to emails or communicated over the phone or postal mail and sent to a human representative of another organisation who will process them and record the information within its enterprise data systems. EDI is a standardised technology that automates these workflows so that digital systems within an organisation can communicate with and share documents with another organisation, digitally. These systems can automatically process these documents communicated over an electronic network without human interaction. Since IBM’s Invoicing by Wire was created in 1959, many organisations have connected their IT systems to the IT systems of another organisation so that they could communicate within a B2B network to save time and eliminate formatting errors that accompany document transmission and human-processing such as copy-pasting and data entry.

What are the benefits of electronic data interchange?

EDI provides the following benefits to businesses:

Save time

Invoicing accounting checks and purchase orders going back and forth, going from one person to another: if you’re not using EDI that stuff takes forever. There is no physical requisitioning, everything is automated – you just have to push an order, and the supplier receives it and replies. With a low-code environment, you can always go in and say OK, let’s automate this file processing step that everyone does, going from this menu to this field or that field. You can do all of that more conveniently in an EDI environment.

EDI also gets rid of the delay inherent in paper-based communications. It provides the near-instant delivery and exchange of business documents. Instantaneous transmission of electronic documents will facilitate faster response times and quicker decision-making.

Reduce errors

Due to the fact that EDI’s processing is automated, errors that usually occur when you key in your data manually are eliminated. Secondly, if anomalous data occurred in the document, EDI can help point out such instances. Once the document is set at a higher level of accuracy, we can identify the error and improve the efficiency of data processing.

Increase security

It is far more feasible with EDI. Your digital certificate gives you far better control over user access and authentication. Authorization and security of access are vital with EDI. EDI accomplishes access control through a combination of authentication and encryption. (Authentication checks if an entity claiming to be others’ trading partner has the rights to use the EDI access credentials, while security checks if an electronic message is lait sels, or safe for users to open; often it is used interchangeably with encryption: read the response to examine the difference between these concepts.) EDI makes access control far easier and more foolproof than paper-first decision trees, because the electronic system is far more secure than a paper-first system.

Enhance connectivity

If you want to collaborate with business partners, users and vendors by simply transferring large data sets, such as those undergoing product tests, via cloud-native file transfer services, you’ll find that you’ll be able to enable this very seamlessly. And with regard to EDI transactions, you can easily integrate them into your business processes and enrich your present connectivity ecosystem in your company.

How does electronic data interchange work?

EDI works primarily by using two forms of transmission:

• A point-to-point or direct EDI connection connects two business systems with secure protocols
• Unlike the EDI system, the value-added network (VAN) transmits data through a third-party network.

EDI software uses a mailbox paradigm for document exchanges and batch processing, while SOAP, Secure File Transfer Protocol (SFTP), and HTTPS-based protocols such as AS2 help to securely send EDI documents over the internet. EDI communication standards, codified by organisations such as Accredited Standards Committee X12, Peppoi and ODETTE, also ensure certain basic data-governance rules and often introduce their own glossaries, nomenclatures and terminologies for the data in EDI transactions, all of which highly secure the data and ensure its quality.

EDI software can also combine two or more data segments to produce additional context for items in the document. Take the items and numbers in the order: EDI software might combine the lines ITEMQUANTITY and ITEMDESCRIPTION into the ORDERLINE container. Not only does this allow a richer context for the items and numbers (the lines of the order), but the structure is tidier than if we didn’t use the combination.

What does implementation of electronic data interchange require?

Establish infrastructure

The first step in setting up EDI requires a business to acquire and install any hardware and software components necessary to facilitate the transmission, integration, translation and pathway mapping of EDI documents. EDI software converts any business documents into the correct format to facilitate interaction with trading partners. Common EDI software components include:

Generally, this also includes establishing and connecting to VANs, which are secure and reliable transfer conduits from one network to the next. If you want to host EDI in-house, you need to have the necessary hardware, such as network gear, storage, and servers.

Establish connections

Once you have your technological basis for your EDI system laid down, you need to onboard your particular business partners. Since you are physically processing and sending and receiving documents to and from your trading partners, you must have EDI standards implemented to enable secure communication with them.

For example, different industries, or geographies, can each favour a different EDI standard format. Once the proper trade partner standards are specified, the EDI system can be configured to send EDI documents following that same standard – now the values and context within your purchase order aren’t a big long mess for the carrier, but a clean, orderly EDI document. Contrary to what we’ve seen up to this point, EDI providers and their customers also configure VPNs, firewalls, or AS2 tunnels to ensure the transmission path is secure.

Adhere to standards

Your EDI system will need to remain in compliance with the standards required by your industry, which will include data protection regulations and standards. If your industry has standards (and most will), then every update to those standards must be met by your system. Similarly, if any trading partners change the standards they follow, whether that’s for specific customers or markets, you must be able to exchange information in the new standards that they have chosen.

What are the challenges of electronic data interchange solutions?

Implementation costs

The initial investment in implementing EDI in your business processes is significant: you need to purchase hardware, software and systems that are compliant to regulatory standards. Should you use a third-party EDI network provider, you also need to purchase services from them. Your staff must be trained on the processes, approaches, standards and software used, and you have to consider costs in this for one-off and regular training. You need to provide accessible training resources for your staff to learn.

Document mapping

Another hurdle is intelligently mapping the EDI format to deliverable and legacy documents. If you’re already using more than one system, you have to go through quite a bit of testing to ensure the integrity of your data-mapping. It can be a tedious task to manage if you don’t have the resources in-house to oversee the project.

Scaling challenges

Once you’ve deployed your EDI solution, you’ll likely need to scale your system across your logistics partners and vendors. For instance, purchase orders may contain different business rules, data elements and document fields depending on your trading partner. In order to scale your EDI system, you’ll need to adapt to varying degrees of EDI maturity among different vendors.

Ongoing monitoring

Inaccurate, incomplete or inconsistent information will pose a challenge for EDI solutions. You need to constantly monitor EDI systems and emerging security standards to mitigate risks of business disruption, data quality degradation or non-compliance. You should dedicate resources to continuous audits, security assessments and performance reviews to address potential emerging compliance issues.