EDI document transport is far more complex than simply sending e-mail messages or sharing files through a network. These EDI documents are more structured than e-mail. What really differentiates EDI from messaging is its emphasis on the automation of business transactions conducted between organizations. In addition, EDI messages have certain legal status. For instance, if a buyer sends a supplier EDI purchase orders that specify the requirements, time of delivery, and quantity and the supplier does not uphold its end of the contract, it can be taken to court with the EDI trading agreements serving as evidence. Table below indicates some EDI properties which distinguish it from e-mail.
How EDI Works:
Benefits and drawbacks of EDI
Benefits of EDI
Information is transmitted from one organization to another organization efficiently and swiftly.
Automated Data Entry
Data is entered automatically by EDI software. For instance, when purchase order (PO) from one company is received by another company. Sales order (SO) is automatically generated at other company’s system with the help of EDI software.
Receipt verification can easily be done with help of EDI software. No human intervention is involved so there are minimal chances of error or delay.
Data validation is automatically done.
Availability of Free Software
Free software are available depending upon the EDI format For example- In TRADACOMS EDI format, Price Information file and order files are available for free.
Lower administrative, resource and maintenance cost.
With the help of EDI, business processes can be executed at a much faster rate as compared to the traditional method sending information.
Building long-term Relationships
EDI helps in building long term relationships with trading partners and hence helps in business growth.
Reduction in Error
EDI has discarded manual data entry and paperwork. So there are minimal chances of error.
Drawbacks of EDI
Setup and maintenance of some of the formats of EDI is expensive.
Initial Setup is Time Consuming
Initial cost to setup EDI is time consuming.
EDI Standard Changes
The business process depends on EDI standard format. If any of the standard format changes then the business process has to be changed accordingly.
System Electronic Protection
An EDI enabled system needs electronic protection from viruses, hacking, malware and other frauds.
Staff Training Cost
Staff needs training in order to run EDI enabled software. Investment has to be done in training.
Proper BackupProper backup should be maintained as the whole data depends on EDI. In case of any crash of EDI system, proper backup has to be maintained and extra cost is required for
Limit Your Trading Partners
Some organization stops doing business which don’t use EDI. For instance, Wal-Mart prefers to do business only with those organization which uses EDI.