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Navigating EDI Requirements: From Vendor Selection to Partner Onboarding

In this article, we'll delve deep into the intricacies of EDI requirements, offering insights into choosing the right vendor and ensuring seamless partner relationships.

November 06, 2023

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B2B transactions run smoother and faster with Electronic Data Interchange (EDI). That’s why the EDI software market is witnessing such rapid growth. Worth $1.78 billion in 2022, it’s forecast to surpass $4.5 billion by 2030.

EDI is crucial for enhancing communication between trading partners. However, it's more complex than just clicking a button to get started. A successful EDI setup requires thorough planning, beginning with a deep understanding of EDI requirements.

But what exactly are these EDI requirements?

Primarily, they revolve around two aspects. First is selecting an EDI vendor that matches your company's needs. Second, once that foundation is established, onboarding trading partners, each with their own unique demands.

In this article, we'll delve deep into the intricacies of EDI requirements, offering insights into choosing the right vendor and ensuring seamless partner relationships. Whether you're new to EDI or looking to optimize your current setup, we’ve got you covered.


Part 1. Determining Your Unique EDI Requirements

Are you looking for a new EDI platform? Or are you planning to transition from old software to a cutting-edge solution? Before diving in, you have to assess each competing platform's features and vendor’s credibility. Cost will always be a determining factor, but here are the other crucial elements to consider:


1. Integration Capabilities

Integration ensures your EDI platform can communicate with your existing software, like ERP. It's essential for streamlined operations, preventing data silos, and ensuring consistency across systems.


2. Scalability

A scalable platform can grow with your company. It can manage increased data volumes, more trading partners, and complex processes as your operations expand. Without scalability, you might find yourself looking for a new solution just a few years later. (Every vendor says their solution is scalable–the only way to tell is to study the size of the companies they serve.)


3. Security Measures

Given the sensitive nature of data transferred through EDI, security is paramount. Your EDI solution should employ encryption and enforce strict access controls for data in transit and at rest, meeting and exceeding HIPAA and FDA standards.


4. Vendor Reputation & Track Record

An established vendor with a positive reputation indicates reliability and industry expertise. Research reviews, download case studies, and read testimonials, but most importantly, partner with a vendor with decades of experience serving companies like yours.


5. Support & Training

Select a vendor who can train your team on the basics of EDI and guide them through advanced EDI mapping, integrations, and partner onboarding.


6. Deployment (Cloud vs. On-Premises Solutions)

Opt for a vendor that can cater to both cloud-first and on-premises deployment strategies, giving you the freedom to choose which suits your business better and the flexibility and support for future migrations.

Part 2. Clarifying Your Trading Partners’ EDI Requirements

EDI integration is like a coordinated dance between two parties. For smooth collaboration with your trading partners, you first need to agree on the intricacies of your EDI setup.

This agreement, which often comes as an EDI Guidelines and Specifications Document, lays out required transaction sets (types of documents) and how they’re used, testing protocols, guidelines for any manual communication, how to address error management, and more.

Below is a checklist to ensure you're well-prepared and ready to proceed:

1. EDI Standards and Protocols

Which EDI standards, network protocols, encryption protocols, and authentication methods are required?


2. Transaction Sets

Which EDI documents (transaction sets) does your partner require? (Just because a company uses EDI doesn’t mean they mandate EDI for every document.) Standard transaction sets include:

  • 810 Invoice: Equivalent to an invoice paper document. The transaction contains data elements such as invoice number and date and pertinent details of the invoice charges.
  • 850 Purchase Order: Contains relevant information, such as unique purchase order number, ship-to codes, and item details, including product codes.
  • 855 Purchase Order Acknowledgement: Supplier accepts/acknowledges or rejects the Purchase Order, either at the document level or line item level.
  • 856 Ship Notice/Manifest: Commonly called the EDI Advance Ship Notice or EDI ASN, it contains shipping information like UCC128 Barcode Values, PRO Number, Bill of Lading Number, lading quantity and weight.
  • 860 Purchase Order Change: Sent to suppliers for any updates or changes to original purchase order.


3. Transaction Formats

Which segments and data elements from each transaction set are required, optional, or not used? And which field lengths, data formats, and values are acceptable?


4. Frequency and Timing of Transactions

How often will particular documents (like invoices or purchase orders) be sent or received? Will transactions be sent in real-time, in batch mode, or at specific times of the day/week?


5. Testing

What tests must be performed during onboarding to ensure EDI systems are “speaking with each other” correctly?

Below is a basic example of how a retailer might stipulate testing an 850 Purchase Order:

i) The Purchaser will send an 850 Purchase Order test transmission.

ii) The Vendor will process the Purchase Order through to their internal order applications to ensure bridge/interface programs are working correctly. Upon receipt of this transmission, the vendor will send the purchaser a 997 Functional Acknowledgment of the Purchase Order.


6. AS2 or WebEDI

Will AS2 or WebEDI be required? These methods are used for conducting EDI but with different implementations, use cases, and technologies.

AS2 is often favored by businesses with higher transaction volumes that require a secure, reliable, and fully-integrated method for exchanging EDI documents. This is because of its direct connection, encryption, and message verification capabilities. On the other hand, WebEDI is ideally suited for smaller businesses with limited IT resources because it doesn’t require a fully-integrated EDI system.

While some buyers offer vendors the flexibility to choose their preferred method, others mandate AS2. Others will set a threshold over which AS2 is mandatory. For example, companies processing over 5,000 invoices yearly must use AS2.


7. Third Parties

Does your partner allow third parties to connect to their network for EDI exchanges on your behalf? Or do they require you to connect directly to reduce points of failure?


8. Error Handling and Resolution

Does your partner have a documented process for identifying, notifying, and resolving errors?

This document might set out:

  • A specific point of contact or department for error notifications.
  • Automated alerts or notifications for system errors or transactional discrepancies.
  • A documented process for how corrections will be made and re-transmitted.


Taking the Next Step

We know navigating the complexities of EDI requirements–yours and your trading partners'–can feel daunting. But you don't have to go through it alone. At 1 EDI Source, our seasoned experts are ready to guide you every step of the way.

Whether you're looking for a fully managed solution, hands-on training, integration support, or an intuitive, industry-leading EDI solution to maintain in-house, we've got you covered. We'll help your business run better.