Due to its ability to digitise and simplify the exchange of business documents, electronic data interchange (EDI) has been adopted by 85% of companies, including top names like Amazon.
Even as global processes and operations increase in complexity, EDI’s power remains relevant and increasingly necessary to a range of sectors in order to ensure supply chain visibility, including:
For companies looking to gain the benefits of EDI implementation, effective deployment is essential. In-house solutions have been the most logical go-to for businesses. However, the popularity of managed services is growing.
This article considers both approaches in detail so you can determine which solution is right for your business.
What is EDI and why is it important?
The history of EDI goes back to the 1960s when Ed Guilbert developed it as a system to enable cargo via radio, teletype, and telephone tracking. However, EDI didn’t gain widespread acknowledgement until companies realised the value of a methodology that enabled the free flow of critical documentation.
Using a set of best practices, standards and processes that enable information to flow directly to the relevant applications, EDI has been eliminating complex, paper-based processes ever since. This has made exchanging documents like purchase orders and invoices much simpler for businesses.
As well as improved supplier relationships and processes, EDI has been able to provide a range of benefits over the last few decades, including:
- Visibility: The full end-to-end transparency of ordering processes for businesses and their trade partners enables improved relationships and informed decisions that facilitate service improvements.
- Reduced errors: The removal of manual inputs significantly reduces the risk of human errors, which can lead to misunderstandings, order delays, and other unnecessary setbacks.
- Speed: The automated flow of communications shared in real-time eliminates the need to re-enter information or wait for delivery times and ensures much faster processes and outcomes.
Like any process, EDI has evolved, with legacy solutions becoming less effective. That’s why businesses need to choose their solution carefully, choosing between two common deployment options:
- In-house EDI: An EDI solution implemented, managed and maintained by an internal team of experts.
- Managed EDI: An EDI solution implemented and managed by a third-party provider without the need to purchase or deploy software company-wide.
Let’s take a look at these approaches in detail.
Companies looking to deploy EDI in-house must invest in infrastructure and in-house teams with the knowledge and expertise required to make the system run smoothly.
With this approach, EDI processes are handled internally, including implementing the servers necessary to ensure a comprehensive solution. On top of that, teams need to be able to resolve issues to ensure processes run uninterrupted.
Benefits of in-house EDI
While in-house solutions have fallen out of favour in recent times, in-house EDI can still provide:
- Freedom from reliance on a third party
- EDI professionals with a detailed understanding of company infrastructure
- Complete control over EDI processes and communications
- In-house handling of supplier relationships and reputation
Costs of in-house EDI
The financial implications of in-house EDI deployment have been its downfall, with the need to employ dedicated teams of professionals causing costs to rise. Furthermore, to be effective, in-house EDI must respond to market changes, which creates additional costs, including:
- Maintenance, updates, and repairs
- Ongoing licencing fees
These factors can also cost companies in efficiency by requiring resources that could be better utilised elsewhere. That said, when handled properly, the control over supply chain relationships that in-house solutions provide can facilitate supplier relationship management that ensures successful trade partnerships.
Managed service EDI
Managed service EDI is an outsourced deployment model where a third-party provider takes responsibility for an organisation’s EDI implementation, maintenance and management.
With this option, companies aren’t required to invest in EDI infrastructure, but instead outsource these functions to companies with teams of professionals.
Benefits of managed service EDI
Managed solutions that ensure the third-party handling of all EDI components have provided ease and efficiency to companies lacking expertise. The ability to redistribute resources as a result of managed EDI can also lead to opportunities for growth elsewhere, while further benefits include:
- Affordable access to dedicated expertise
- Third-party handling of specific trade partner requirements
- Continual monitoring to reduce connectivity issues
- Reduced infrastructure investments
- Agile implementations
Costs of managed service EDI
Affordability is one of the primary benefits of managed EDI, which traditionally operates on a subscription-based model. That said, managed services aren’t guaranteed to be cost-effective, with poorly chosen providers posing price-based risks, including:
- Loss of control over EDI implementation
- Hidden costs for things like tech advancements and monitoring
- Time-consuming acquisitions
To make managed EDI affordable, businesses need to find the right solution. Return on investment (ROI) where EDI is concerned relies on partnerships with specific affordability benefits, including upfront pricing and ongoing support.
Get the support you need for your EDI solution
The complete control it offers means that an internal EDI solution is still tempting for businesses with established in-house teams. However, as supply chain challenges emerge, legacy solutions are sure to cause operational setbacks.
That’s why managed EDI is increasingly popular, but companies must choose the right provider. 21st-century EDI services overhaul that combines cloud-based tools and managed service to provide a host of benefits, including:
- Oversight and control: Dashboards deliver real-time analysis and supply chain visibility that keeps control in your hands.
- On-demand support: Managed support simplifies the successful handling of supply relationships while helping you develop in-house EDI expertise.
- Simplified onboarding: The flexible use of multiple types of EDI simplifies onboarding across the spectrum of EDI standards.
Without taking control away from your in-house teams, this provides a cost-effective, managed deployment option that ensures the adaptive EDI solutions modern supply chains require.
About the Author
Charlie Hooper works as Field Marketing Principal for Data Interchange – a division of Epicor. Charlie is an experienced marketer with a CIM Level 6 Diploma in Professional Marketing, specialising in B2B and the technology services industry.