A Brief History of EDI
The Electronic Data Interchange (EDI) standard has been around for a long time; chances are it’s older than you! The origins of EDI can be traced back to 1948 when a standardized communication system was needed for the American Military. Jump 20 years ahead and EDI really gained steam in the late 60s with the creation of the Transportation Data Coordination Committee (TDCC). The TDCC started to create electronic standards within the transportation industry. In the 70s, file transfer protocol (FTP) was established and in 1981 ANSIX12 published its standards for the first time.
As the decades went on, EDI became a staple for retailers around the globe. By the 90s, tens of thousands of retailers were using EDI. In the mid-2000s, EDI communication could be sent encrypted over the Internet as eCommerce was growing exponentially. All these years later, EDI is still important and relevant! This 50+ year old process allows merchants to scale their business beyond just their own eCommerce store and grow through a multi-channel strategy.
What is EDI?
EDI or Electronic Data Interchange is a digital communication standard that enables system–to–system communications without reliance on manual data entry. EDI replaces the need to send orders via email or archaic methods like fax and mail. In order for both the seller’s systems and those of the company fulfilling an order to communicate properly, parties must agree on a standard EDI format. With retailers, it is generally the supplier’s responsibility to comply with EDI standards. As an example, “retailer A” might be using ANSI 5010 while “retailer B” might be using EDIFACT. It is typically up to the merchant to be compliant with both standards.
Businesses often use EDI for the following documents:
- Purchase orders
- Bill of lading
- Inventory documents
- Shipping status documents
There are a wide variety of industry-specific EDI standards that have conventions that are specific to a region. For example, ANSI X12 is the North American standard, EDIFACT is the European standard and there are many others. The transaction sets could be X12 4010 which contains the different documents (PO, Invoice, Ship Notice, etc.). These sets granulate even further into subsets for industries (e.g. Retail, Manufacturing, Healthcare, Transportation & Logistics, etc.).
In order to use these standards, you need an EDI translator. This can either be in-house software or through an EDI service provider. The translator makes it possible for persons within the business to access the data in a legible format.
Big Box Retail
Think of a typical large brick and mortar retailer. They use EDI to handle their ordering process with their suppliers. Depending on your industry, expanding into retail can put you on the shelves of hundreds of stores nationwide. In order to work with a retailer, you must be compliant with their EDI process. Most retailers have a clear outline of what their EDI requirements are. As an example, here are the EDI requirements that Lowes has for its suppliers. Most retailers will require bi-directional communication of the following EDI documents:
- Invoices (810)
- Acknowledgements (997)
- Shipping Notices (ASN) (856)
- Purchase Order Acknowledgements (PO) (855)
- Any other EDI documents required by WALMART
In addition, you might be required to receive the following documents:
Depending on your product, you might be the right fit for manufacturers. Manufacturing contracts allow you to “lock-in” as a supplier for a predetermined amount of time. Manufacturing contracts are a great way to establish predictable revenue. However, manufacturers are very demanding. There is little patience for error and your orders must be shipped in a timely manner. Just like retailers, manufacturers use EDI to ensure smooth communication with their suppliers. Manufacturers like John Deere make their EDI requirements available to ensure their suppliers are compliant.
Merchants on Amazon fall into two categories, Seller Central and Vendor Central. Seller Central allows merchants of all sizes to grow their online presence with Amazon. These merchants can be classified under the Fulfilled by Merchant and Fulfilled by Amazon headings. However, Vendor Central is reserved for high volume merchants. This invitation–only program allows Amazon to purchase products directly from the supplier. They handle all logistics associated with selling and shipping the products. With Vendor Central, Amazon places all orders from their suppliers through EDI.
CommerceHub is a platform that allows you to diversify your multi-channel strategy. Many retailers are crafting their own online marketplaces to compete with Amazon. Giants like Walmart and BestBuy have already successfully executed similar marketplaces. CommerceHub’s mission isn’t to get you listed everywhere, it’s to get you listed everywhere that matters to you. Once approved by a retailer, CommerceHub allows you to manage your relationships with retailers. Many retailers prefer that you have an integrated solution to process orders via EDI. Learn more about CommerceHub here.
EDI Allows You to Grow Your Business Your Way
The needs of every business are different. EDI allows you to grow your multi-channel presence and sales your way. You’re able to work with your ideal retail and online selling partners. EDI has been empowering merchants to succeed in retail for over half a century. Moving forward, EDI will continue to help merchants scale their commerce both online and offline. In addition, EDI allows you to keep your current commerce systems and won’t force any disruption on your current operations.
About eBridge Connections
eBridge Connections is an iPaaS (integration Platform as a Service) headquartered in Burlington, Ontario, Canada. eBridge provides bi-directional data flow between major eCommerce and ERP platforms. In addition, eBridge can provide EDI integration with hundreds of retail trading partners.