Frequently Ask Questions
Q. What is EDI?
A. EDI is an acronym for "Electronic Document Exchange" EDI doesn‘t work without business (trading) partners. Many well-known large companies have been using EDI for more than 20 years. Wal-Mart, GE, Bank of America, AT&T are just a few examples. Virtually all public and private sectors of industry are represented. The Department of Defense (DoD) and Federal government use of EDI has followed the industry movement to this "new" way of doing business. Until the last several years, EDI was beyond the realm of small business. New communications technology (faster modems, Internet, Value Added Networks) and the increasing functionality and affordability of PC systems, have brought an increasing number of smaller companies into the EDI arena. And, many others plan to do so in the near future. In many cases, small businesses are being pushed into implementing EDI in order to maintain relationships with larger trading partners - including the DoD, who requires the use of EDI to do business. In other cases, a small business wants to remain competitive or to expand business opportunities.
Q. What are Standards?
A. For information transmitted via EDI to be useful to a trading partner, it must arrive in a form that their computer system can use – based on a standard. EDI users need to "talk" to all business partners, whether they use mainframes, minis, Macs, or PCs . . . so EDI has its own standard (actually a few standards). Here‘s how it works: EDI transactions are transmitted from one computer to another in a standard format. At either end of the transaction, the data can be translated to or from the end-user‘s application format by EDI software. For example, my RealWorld invoice files may not be usable by you if your organization relies on Macola software for its accounting (A/P) needs. However, once my RealWorld files are translated into one of the EDI standards (ANSI X12 or UN/EDIFACT), you - or any of my other EDI-capable business partners can retrieve the file and translate it into the format needed for import into Macola, or any other accounting applications. It‘s like having a translator for two people who speak different languages, only instead of translating human speech, the EDI software translates binary data into universal computer-speak (structured ASCII text) as an intermediary step. ANSI X12 is the most widely used standard in the United States. The first version was released in 1983 and there are new releases every year. New versions are created by the ANSI X12 committee to include information needed by business - perhaps just some changes to a transaction set (the EDI equivalent of a business document), or perhaps a whole new transaction set. New versions are not backward compatible.The rest of the world uses the UN/EDIFACT standard. If you have a trading partner outside the US you might have to use this standard. In spite of all the discussions to merge the two standards, there is no concrete plan in action today.
Q. What are theBenefits?
A. EDI can significantly improve communication with trading partners while saving time and money. It can also improve customer service and satisfaction by reducing order/delivery time of your products or services. For a small business, EDI can yield more business opportunities and enhance office operations. In some cases, your business may be pushed into using EDI just to survive. Some EDI benefits:
Quality improvements
Lower data entry costs
Greater customer satisfaction
Reduced order time
Reduced (accelerated) billing cycle
More accurate decision-making information