Demystifying EDI — why a data standard from the 1970s is crucial in the ordering process for retailers and suppliers

EDI (Electronic Data Interchange) is often associated with digitalisation, but this data standard is much older than all the related buzzwords. This article explains why retailers make an EDI connection a requirement for suppliers and what benefits it brings to both sides.

What is EDI?

EDI stands for Electronic Data Interchange and, as the name suggests, it means exchanging data electronically. This is not just any data, but order documents such as invoices and delivery notes. Thanks to EDI, these are exchanged between retailer and supplier in a fully automated way. Partner A, for example, sends an invoice as an encoded EDI message to partner B. For this to work, however, partner B must be able to read and process the EDI format – because there is not just one standardised EDI format, but several. These include:

• UN/EDIFACT
• TRADACOMS
• ANSI ASC X12

For all parties, it is therefore important both to send order documents in an EDI format and to be able to receive different formats. Unfortunately, implementing the various EDI standards in your own IT landscape often becomes a very complex and expensive undertaking. Setting up traditional EDI connections usually involves considerable costs, because connectivity with several EDI standards has to be established with your own ERP system.

Why EDI is here to stay

On average, a German mid-sized company sends 72,000 invoices per year (source: Environmental Protection Agency). If these are sent fully automatically via EDI, the result is enormous time savings. It is hard to imagine how much effort manual data entry would require if EDI had not become the standard for connecting companies technically.

How EDI makes day-to-day operations easier at REWE

When suppliers first come across the term EDI, however, their own efficiency gains are often not the main focus. Rather, it is a requirement from trading partners such as REWE to send order documents via EDI or, alternatively, to use platforms such as the REWE supplier portal. But why do retailers insist so strongly on an EDI connection?

When a store manager stands in front of an empty shelf and wants to reorder goods, the suppliers’ EDI connection already plays an important role. The store manager scans the item to be reordered with a handheld scanner and receives all the relevant information on the device. If the price, availability and other parameters are right, she can place an order immediately. The supplier appears on this device regardless of whether it has a test, warehouse or direct-store-delivery listing. To be able to place an order directly in this situation, however, there must be an EDI connection for the digital exchange of order documents.

Without EDI, the ordering process is considerably more complicated for the store manager. She cannot order with the handheld scanner; instead, she first has to go to the office, look up all the relevant data there (price, availability, etc.) and then laboriously place the order by email or with a completed order form.

For this reason, retailers are increasingly requiring all suppliers to have an EDI connection. Manual ordering processes involve too much effort and are too error-prone. Suppliers’ EDI capability thus becomes a key milestone on the road to long-term success in grocery retail.

How EDI works in suppliers’ day-to-day operations

The digital ordering process via EDI also offers immense benefits for suppliers. In the webinar "Do's & Don'ts in Retail", Rebecca Leichsenring from UniBev gave an insight into the daily operations of a beverage supplier. Like many other start-ups, UniBev initially began operating without an EDI connection. Orders from each REWE store had to be downloaded from a supplier portal and then transferred manually into the company’s own merchandise management system. Once the goods had been shipped, the invoice and despatch advice then had to be uploaded to the supplier portal. Tedious, unrewarding work that was also extremely error-prone.

Since setting up an EDI connection, UniBev receives and sends all order documents directly in its own ERP system. As soon as store management submits the order at the shelf with the handheld scanner, it appears in UniBev’s ERP system. In return, invoices and despatch advices are sent automatically from UniBev’s own ERP system directly to the respective supermarket. A process that requires no manual data entry at all.

Don’t be a dinosaur – meet requirements and scale operations

EDI is a comparatively old and complex data standard that hardly anyone wants to deal with. One reason for this is that EDI is very limited in terms of functionality. Nevertheless, thanks to its defined message types, EDI has become the standard in grocery retail. Today, for example, it is indispensable that a despatch advice is sent automatically so that the recipient can receive the shipment and match the delivery note against the invoice.

Because of the reduced workload and data transparency described above, trading partners in grocery retail insist that suppliers set up EDI connections with them. As a result, many companies face the challenge of becoming EDI-capable while at the same time implementing competitive operations and digitalised processes.

One solution to this is the Procuros Integration Hub.

The Procuros Integration Hub is a platform on which all major grocery retail partners are already connected via EDI. Procuros can be connected to your own ERP system with a click of the mouse, so that order documents can be exchanged with all trading partners in an automated, digital way right away.

The benefits at a glance

• No upfront investment or connection fees
• Work directly in your own ERP system
• Meet retailers’ EDI requirements

The EDI myth

EDI is a data standard with numerous formats that enables the automated exchange of order documents. Many myths have grown up around the complexity and cost of EDI, so that many companies try to avoid an EDI connection for as long as possible. The fear of lengthy, costly IT projects that only pay for themselves after many years is too great.

Procuros was founded to solve this problem and to offer a radically simple, cost-effective and user-friendly EDI solution.

This article was created with the kind support of the REWE StartUp Lounge. You can find more information about the StartUp Lounge here.