How EDI Works? | Benefits of EDI | EDI Basics: Definition by CodeTextPro

EDI (Electronic Data Interchange)

How EDI Works?

EDI basics:

EDI- Electronic Data Interchange (EDI) is the electronic exchange of business documents in a standard, computer-processable, universally accepted format between trading partners. OR EDI is a direct interchange of business documents such as invoices, bills, orders, etc. Between two organizations through computers. EDI is quite different from sending electronic mail, messages or sharing files through a network. It saves money and time as the processing is very fast through the telecommunication network between the different businesses. It eliminates the tedious task of printing and handling of paper on one hand input of the data on the other. The most widely used format is for purchase order and consists of an outer digital envelope with the address of both the sender and the receiver. Any firm can establish a new relationship with suppliers.

benefits of edi

EDI enables the computer in an organization to communicate with a computer in another organization without actually producing paper documents. It thus eliminates the human effort required to read, sort, and physically transport such documents. Since data is exchanged in a standard predefined format, it becomes possible to exchange business documents irrespective of the
computerized business application at either end of the communication. For example, the supplier's Accounts Receivable application for raising an Invoice for payment could still be implemented on a file system using COBOL while the customer's Accounts payable may be based on an RDBMS such as ORACLE.

How edi works

EDI trading partner :

Any company with which another business exchange documents electronically in standard format is known as an EDI trading partner. Many Original equipment manufacturers or OEMs( manufactures products or components which are purchased by a second company and retailed under the second company's brand name) have a large network consisting of trading partners. These networks are
often referred to as 'Trading Communities'. EDI consists of standardized electronic message formats for common business documents such as Request for Quotation, Purchase Order, Purchase Order Change, Bill Lading, Receiving Advice, Invoice, and similar documents. The documents for which standard EDI formats are either in existence or under development, constitute about 85% of the official communications associated with commercial transactions among business, government, educational institutions, and nonprofit establishments in most of the industrialized world. It is estimated that in the developing countries also, the preponderance of these documents is in a similar proportion.




Benefits of EDI / Benefits of EDI in Ecommerce:

The benefits accruing from EDI implementations can be classified into direct benefits and longterm strategic benefits.

Direct benefits:

1)Since the transfer of information from computer to computer is automatic, there is no need to rekey information. Data is only entered at the source.

2)Accelerate the Order-Invoice-Payment cycle from days or weeks to hours or minutes.

3)The cost of processing EDI documents is much smaller than that of processing paper documents.

4)Customer service is improved. The quick transfer of business documents and a marked decrease in errors allow orders to be fulfilled faster.

5)Information is managed more effectively.

6)There is improved job satisfaction among data entry operators, clerks, etc. when redeployed in more creative activities.





Strategic benefits:

1)Customer relations are improved through better quality and speed of service.

2)The competitive edge is maintained and enhanced.

3)Reduction in product costs can be achieved.

4)Business relations with trading partners are improved.

5)More accurate sales forecasting and business planning are possible due to
information available at the right place at the right time.

6) In the manufacturing sector, EDI has enabled the concept of Just-In-Time (JIT) inventory can be implemented. The just-in-time inventory system is designed to ensure that materials or supplies arrive at a facility just when they are needed so that storage and holding costs are minimized. Most organizations with mature EDI programs find they order more frequently, i.e. they make more

orders for smaller quantities.

The following EDI examples outline some common situations where Crossfire Cloud EDI provides a business advantage by automating and providing a robust interface between trading partners.

• Warehousing
• Transport
• Shipping

WAREHOUSING EDI EXAMPLE

Mitre 10 Mega and Mainfreight

Retailer Mitre 10 partner with Mainfreight to use Crossfire EDI for orders, confirmations, and stock the management between two completely disparate systems run by separate companies.

Crossfire Cloud EDI Solution

The following example shows how Mitre 10 employs Crossfire Cloud EDI to ensure enough BBQs remain in stock for summer.

• As Mitre 10 runs low on BBQs, an order message is automatically sent to Mainfreight through Crossfire.

• Mainfreight receives the EDI message and picks the BBQs from their warehouse, then loads them onto a truck for delivery.

• Mainfreight then sends a confirmation message back to Mitre 10 via Crossfire, to confirm the BBQs are on their way.

• Mitre 10’s system receives the confirmation message, including a note that it can expect to receive the BBQs the next day. The following day when the BBQs arrive, Mitre 10’s system is automatically updated with the new BBQ stock.

• EDI translation and validation between Mitre 10 and Mainfreight systems is performed automatically by Crossfire.

TRANSPORT EDI EXAMPLE

Shell Oil and Owens

Shell Oil distributes car oils and fluids to workshops throughout New Zealand via Owens Global Logistics (Owens). Crossfire is used to translate manifests, consignments and status messages between Shell Oil and Owens.


Crossfire Cloud EDI Solution

The following example shows how Shell Oil employs Crossfire to transport oil and fluids to workshops throughout New Zealand.

Shell Oil requires delivery and send through a ‘Pickup Request’ via Crossfire to OwensFreight Services.

Owens receives the pickup request, which automatically creates a consignment note in Owen’s transport management system.

Owens send a driver to pick up the Shell Oil at the designated time and place. Once picked up, the driver scans the barcode on the package, which informs Shell Oil’s system of the ‘pickup event’ via Crossfire. 

Upon delivery to the destination, the driver scans the barcode again, which informs Shell Oil’s system of the ‘delivery event’ via Crossfire. The shell can then instantly see when the delivery was completed.

SHIPPING EDI EXAMPLE

K Line Australia

Kawasaki Kisen Kaisha, Ltd. ("K" Line) is one of the largest shipping companies in Japan, operating a fleet of approximately 320 vessels. The company transports coal, grain, iron ore, lumber, automobiles, crude oil, and LNG across the globe. K Line Australia has been using Crossfire to meet statutory requirements with Customs, update cargo information with Port Authorities and Terminal Operators, and track cargo movements globally and domestically within
Australia.


Crossfire Cloud EDI Solution

K Line Australia has implemented Crossfire to manage their EDI services with over 70 different partners and to cover the business requirements for:

• Declarations with Australian Customs
• Track containers through container terminals and depots
• Container releases with Exporters and Importers
• Vehicle movements with car manufacturers
• Vessel Schedules from Port Companies and Principals
• Principal financial reporting
• Interchange of manifest details with Port Companies, Customs, Terminal Operators and principals