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 digitalization, but this data standard is much older than all the associated buzzwords. This article explains why retailers define EDI as a requirement for suppliers and what the benefits are for both sides.
What is EDI?
EDI stands for Electronic Data Interchange and as the name suggests, data is exchanged electronically. This is not just any data, but order documents such as invoices and shipping notes. Thanks to EDI, these are exchanged between retailers and suppliers completely automatically. Partner A therefore sends an invoice as a coded EDI message to Partner B. To do this, however, Partner B must be able to read and process the EDI format. There is not only one standardized EDI format, but several. These are among others:
- UN/EDIFACT
- TRADACOMS
- ANSI ASC X12
It is therefore important for all players to be able to send order documents in an EDI format on the one hand and to be able to receive different formats on the other. Unfortunately, implementing the various EDI standards in one's own IT landscape is often a very complex and expensive undertaking. Setting up classic EDI connections usually involves considerable costs, since connectivity with several EDI standards must be established with the company's own ERP system.
Why EDI is here to stay.
A German medium-sized company sends an average of 72,000 invoices per year (source: Environmental Protection Agency). If these are sent fully automatically via EDI, an enormous time saving is the consequence. It is hard to imagine the effort that would result from manual data entry if EDI had not become the standard in the technical connection of companies.
How EDI simplifies daily processes at REWE.
However, it is often not the company's own increase in efficiency that is in the foreground when suppliers come into contact with the term EDI for the first time. Rather, it is a requirement of retail partners such as REWE to send order documents via EDI or, alternatively, to use platforms such as the REWE supplier portal. But why does retail insist so much on EDI connectivity?
If a store manager is standing in front of an empty shelf and wants to reorder goods, the EDI connection of the suppliers already plays an important role here. The store manager scans the article to be reordered with the handheld scanner and receives all relevant information on this device. If the price, availability and other parameters are correct, the store manager can place an order immediately. Regardless of test, stock or route listing, the supplier appears in this device. However, in order to trigger an order directly in this situation, an EDI connection for the digital exchange of order documents must be available.
Without EDI, the ordering process is significantly more complicated for the store manager. For example, it is not possible to order using a hand-held scanning device. Instead, the store manager must first go to the office, look up all the relevant data (price, availability, etc.), and then laboriously place the order by e-mail or by filling out an order form.
For this reason, retailers are increasingly demanding an EDI connection for all suppliers. The effort and error-proneness of manual ordering processes is too great. The EDI capability of suppliers is thus becoming a relevant milestone on the way to long-term success in food retailing.
How EDI works in daily operations at suppliers.
The digital ordering process via EDI also offers immense advantages for suppliers. In the webinar "Do's & Dont's in Retail", Rebecca Leichsenring from UniBev was able to give an insight into the daily operations of a beverage supplier. Like many other startups, UniBev initially began its business operations without an EDI connection. Orders from the respective REWE store had to be downloaded from a supplier portal. The orders were then manually transferred to the company's own merchandise management system. When the goods were shipped, the invoice and shipping notifications then had to be uploaded to the supplier portal. This was tedious and not very useful work, which was also extremely error-prone.
After setting up an EDI connection, UniBev receives and sends all order documents directly in its own ERP system. As soon as the store manager at the shelf uses the handheld scanning device to submit the order, it appears in UniBev's ERP system. In turn, invoices and shipping notifications are automatically sent from the company's own ERP system directly to the respective supermarket. A process that does not require any manual data entry.
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. This is also due to the fact that EDI is severely limited in terms of functionality. Nevertheless, EDI has become the standard in LEH due to the defined message types. For example, it is nowadays indispensable that a delivery notification is sent automatically so that the respective recipient can receive the shipment and match the delivery bill and invoice.
Due to the workload reduction and data transparency described above, retail partners in the food retail industry insist that suppliers set up EDI connections to them. Thus, many companies are faced with becoming EDI-enabled while implementing competitive operations and digitized processes.
One solution is the Procuros Integration Hub.
The Procuros Integration Hub is a platform on which all well-known food retail partners are already connected via EDI. At the click of a mouse, Procuos can be connected to the company's own ERP system so that order documents can be exchanged immediately with all retail partners in an automated and digitalized manner.
The advantages at a glance:
- No initial investment or connection fees
- Work directly in your own ERP system
- Meet the EDI requirements of the trade
Myth EDI
EDI is a data standard with numerous formats that provides for the automated exchange of order documents. Many myths have grown up around the complexity and costliness of EDI, so that many companies try to avoid an EDI connection for as long as possible. The fear of lengthy and costly IT projects that will take many years to pay off is too great.
Procuros was founded to solve this problem and provide 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.