What Your EDI Provider Is Missing

In this article, learn about: 

• The various types of EDI providers 

• Potential pitfalls in choosing an EDI partner 

• Questions suppliers should ask of their EDI partners 

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Whether you’re a new supplier or an established vendor looking to scale your business, navigating the world of EDI service providers can feel treacherous. EDI is extremely complex, and it can be difficult to understand the differences between various service providers and EDI formats. No company wants to deal with the consequences of using the wrong EDI service provider, such as missing payments, delayed data transmissions, and costly deductions.  

In this article, we’ll explore the common types of EDI services, as well as potential pitfalls you can run into when choosing an EDI partner and a list of questions to ask yourself when making your final decision. 

Related Reading: EDI Codes and Processes Explained 

Different Types of EDI Providers 

At the most basic level, there are two types of EDI providers: self-service providers and full-service providers.  

Self-service EDI providers supply the platform and technology for data interchange but leave the responsibility for managing and maintaining that platform to its users. Full-service EDI providers, on the other hand, also provide the technology, but in addition utilize dedicated staffing and resources to help users customize and operate their EDI solutions.  

Each of these types of EDI solutions comes with its associated upsides and downsides. Below is a chart detailing some of the potential advantages and disadvantages: 

There are also a number of different methods by which EDI service providers connect to their partners: 

• Direct EDI (also known as point-to-point EDI) 

  • Direct EDI involves two trading partners establishing a direct connection between their data interchange systems, utilizing previously agreed-upon communication protocols.  

  • Direct EDI gives suppliers a high level of security and control, as their proprietary data is exchanged to a trusted partner exclusively over secure channels. However, this EDI method requires technical expertise to set up and maintain, and can create compatibility issues when working with partners who use different EDI protocols. 

• EDI via VAN 

  • VANs are private communications networks provided by an EDI solutions company. They connect retailers to suppliers and facilitate the exchange of data between them. The EDI provider, via the VAN, acts as an intermediary between trading partners, providing secure nodes by which each partner can send and receive documents.  

  • This EDI method is more flexible than direct EDI, as the EDI provider manages new partner connections, ensuring compatibility and offering additional services, such as tech support and data validation. However, suppliers should be aware that EDI via VAN results in less control over the data exchange process than direct EDI, and that there may be additional costs associated with VAN services.  

• Web EDI 

  • Web EDI brings the data exchange process into your browser, making it accessible for smaller businesses without the technical expertise necessary for other types of EDI solutions. Web EDI providers offer a browser interface where users fill out the online forms, converting them into the necessary EDI documents and facilitating their exchange.  

  • Web EDI solutions are typically easy to use and require little specialized EDI knowledge. Additionally, web EDI is associated with lower costs, as there’s little need to invest in specialized EDI software. However, this method does not offer the same level of customization as other EDI methods and is typically less appropriate for high-volume transactions.  

Related Reading: Ultimate Glossary of EDI Terms 

When first navigating the EDI process, many suppliers follow a similar path. New suppliers typically begin with EDI via VAN or web EDI, which typically have lower per-document processing fees. However, these EDI solutions usually require vendors to manually enter information into the web forms. 

As vendors grow, VANs and web EDI can become unwieldy. The higher transaction volume can result in significant time and energy being spent manually entering EDI information, especially if you need to exchange large documents with many different SKUs or if you need your EDI software to handle several document exchanges per sale.  

For these reasons, many suppliers implement direct EDI solutions as they scale. While this means spending money to invest in direct connectivity, the time and energy saved by eliminating the need to manually re-enter information is often worth the extra cost.  

Along with investing in direct EDI, many vendors make the switch to full-service EDI at this point. When searching for full-service EDI solutions, there are several factors to consider. Your full-service EDI should include: 

• All-in-one: Full-service EDI solutions should be able to handle EDI mapping, file transfer, EDI translation, and system integration. 

• Fully extensible: A full-service EDI system should be able to integrate with whichever infrastructure you use, including your database, web server, and operating system. 

• Fully supported: A full-service EDI provider should offer extensive customer support, especially to help onboarding new retailers and suppliers. 

Potential EDI Pitfalls 

Investing in EDI is often the best move for your business. However, it is not without risk. Here are some common EDI pitfalls that newer suppliers often fall into: 

Cost 

If you’re using a web-based solution or a VAN, EDI costs can quickly spiral out of control. Most VANs and browser-based EDI services require monthly subscription payments, as well as installment fees and per-page pricing. If your business grows quickly, these costs can easily start to add up.  

Onboarding 

It can be difficult and time consuming to bring aboard new partners, either through a VAN or through direct EDI. If suppliers don’t have a consistent and replicable system for onboarding, then the time commitment of onboarding a new partner to the EDI system might not be worth it.  

Reliability 

If you’re relying on an external network, such as VANs or web browsers, for your EDI, then dealing with outages is inevitable. However, the nature of the supply chain industry means that temporary outages can have an outsized impact on your business, from delaying important document transfers to even instigating compliance deductions from missed deadlines. When choosing between EDI providers, assessing the providers’ reliability is essential to avoiding costly delays and potential fines.  

Lack of Validation 

Many EDI solutions simply extract data from the Enterprise Resource Planning (ERP) system and plug it directly into another format. However, this process often lacks tools to validate the data—which means that bad or incorrect data, such as blank values or wrong formats, will be sent to the retailer without flagging, which can lead to costly deductions.  

Double Translation 

In most EDI systems, the data gets translated twice: first from the ERP to a file format such as XML or CSV, and then from that file to an X12 or EDIFACT format for the trading partner. Each of these translation steps introduces further complexity into the system, and therefore more chances for failure.  

Lack of Standardization 

If you’re using self-service EDI, then you might run into issues with a lack of standardization. Each retailer you work with may require different documents, information, and timing. Errors often occur when trying to use a single mapping formula for all your partners. Full-service EDI solutions often include custom mapping per trading partner, which can help to alleviate this issue.  

Related Reading: What Is Supply Chain Resilience? 

What Questions Should Suppliers Be Asking? 

When deciding which EDI solution is right for you, it could be helpful to ask yourself consistent questions to compare and contrast different services.  

Questions that you could ask to help you narrow down your options include: 

• Will full-service EDI provide a competitive advantage for your business, despite the additional costs? 

• What are the specific types of transactions you’ll need to process? 

• Which EDI standards, such as X12, EDIFACT, EANCOM, or others, are used by your retail partners? 

• What’s the overall volume of transactions that you’ll need to process? 

• Is the EDI service you’re considering familiar with your specific industry and regulatory needs? 

• Is the EDI service flexible to your needs, and scalable in case of growth? 

• Does the EDI service you’re considering have strong security policies? Do you feel safe trusting them with your proprietary data? 

• Does your potential EDI provider have readily available and responsive customer service? 

• Does the potential EDI service have a track record of successful implementation? 

• Does the EDI service you’re considering have any hidden costs and/or fees? 

• What pricing model does the potential EDI service offer? 

• What are the costs associated with ongoing maintenance and support of the EDI service? 

• If you’re implementing full-service EDI, is your service provider familiar with your retailers’ specific requirements? 

• Is your potential EDI provider familiar with your warehouse management system? 

• Does your potential EDI provider offer ongoing training and support? 

• What’s your potential EDI provider’s policies in the case of an outage or VAN downtime? 

• What are the reporting and analytics capabilities of the EDI provider you’re considering? 

Ensuring that you’re choosing the right EDI partner for your business is a daunting proposition, even for the most successful suppliers. However, by carefully evaluating your specific needs, asking the right questions, and understanding the potential pitfalls, you can make an informed decision that will support your business growth and streamline your supply chain operations for years to come. 

EDI with SPS Commerce 

The people have spoken! SPS Commerce is making the retail industry a less chaotic place for people like you. Folks in logistics, retail, and supply chain have benefited from partnering with SPS.  Book a free demo to see how SPS Commerce can boost your revenue and save you valuable time!