What is electronic data interchange (EDI)?
Overview
Electronic data interchange (EDI) is the electronic exchange of documents in a business-to-business (B2B) transaction. Find out about the history and benefits of EDI and how Cin7 Omni supports EDI for small- and medium-sized businesses.
What is EDI?
Several decades ago, business-to-business (B2B) commerce was labor intensive and time consuming. A retailer would write a purchase order and send it to the supplier. The supplier would manually enter the data into their computer system and send the retailer confirmation, and before the order could be fulfilled and invoiced, it might get updated dozens of times. Imagine a retailer with hundreds, even thousands of suppliers with unique document formats and processes: order management would have been a nightmare.
In order to simplify order management, major retailers brought about a step-change in B2B commerce. Now, they won’t send a purchase order by email or post. They won’t visit a supplier’s website and fill a cart. And they won’t accept an invoice on paper or in email. To send and receive business documents, major retailers use electronic data interchange (EDI).
EDI is the electronic exchange of business documents in a standard format. The retailer’s EDI system extracts purchase order data from their order management system and translates it into a special syntax, known as a standard, which it saves to a text file, known as a message, which it transmits electronically to the supplier. The message’s data is fed directly into the supplier’s inventory management system, which automatically returns confirmation, and without any manual data entry, the supplier can directly fulfill the order. EDI is used to send and receive all the documents to support the transaction, such as adjustments, shipping notices, and finally the invoice.
The benefits of EDI are clear. Because the documents are standardized, retailers can automate their B2B processes. Because their processes are automated, they can reduce their operating costs. And because they’re saving money, they can offer lower prices and set off a positive feedback loop – more customers and purchasing power, more suppliers and variety, more data and intelligence, and more low prices. By improving the marginal cost and efficiency of B2B commerce, EDI helped unleash today’s retail behemoths.
EDI with Cin7 Omni
An important milestone for many businesses is supplying to major retailers. These retailers’ stores are enormous. Their online presence is ubiquitous. They stock the widest possible range of products and serve millions of customers every year. And because of their size, they achieve tremendous economies of scale. It’s easy to see that by supplying these retailers, businesses discover a precious competitive advantage.
But major retailers use EDI for B2B commerce, and for many small- and medium-sized businesses, EDI is too costly and complex to implement. The direct connection model, where a business hires permanent engineers to procure, implement, and administer an EDI solution, is hugely resource intensive. And the network model, where a business outsources the engineering to a third-party known as a value-added network (VAN) or network service provider (NSP), has high fixed costs and ongoing fees. Because of its knowledge and resource intensity, EDI has long been the advantage of enterprise-level businesses.
To overcome these barriers, businesses need an EDI solution that’s easy to set up, simple to use, and because major retail contracts entail immense financial opportunities and risks, highly automable and up to date with real levels of stock. For an increasing number of businesses, that solution is EDI with Cin7 Omni.
Cin7 makes EDI simple and affordable. Because we built our customers’ inventories and have already implemented connections with hundreds of retailers, we can set up EDI with minimal development, analysis, and cost. Our purpose-built EDI Dashboard gives customers a simple unified view for processing EDI orders. And because our software centralizes inventory control, it’s easy for customers to automate time-critical, business-to-business (B2B) transactions and minimize the risk of chargebacks.
In a word, EDI with Cin7 is native. We support core standards and workflows, advanced automation and cartonization, and custom warehouse and third-party fulfillment. EDI with Cin7 gives businesses leading functionality to supply to major retailers and scale their businesses safely.