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What Is EDI and Why It Matters for B2B Fulfillment

March 4, 2020 Published by

EDI stands for electronic data interchange. Simply put, EDI is the transfer of information from one computer to another using a standardized messaging format. This standard defines how documents such as invoices, purchase orders and advance ship notifications are transferred between businesses.

The standardization is what makes EDI so valuable. It means that businesses, like big box retailers and third partly logistic providers (3PL), can easily exchange information even if they use different systems and technologies because EDI software translates information into one standardized format.

An EDI system transmits data by:

  1. Preparing documents
  2. Translating documents into standard EDI format
  3. Transmitting documents through EDI to recipients

Without EDI, transactions can be cumbersome and time-consuming. They involve plenty of paper—and people—to carry out. Compare a traditional paper purchase order with its EDI equivalent:

It’s easy to understand how fulfilling orders via phone, fax, email or snail mail can become more challenging as order volume increases. EDI eliminates those challenges by automating processes such as transmitting supplier invoices and exchanging transactional documents.

Other the benefits of EDI for B2B fulfillment include:

Less errors
EDI system removes the human factor, which is susceptible to errors. Re-keying errors as well as illegible handwriting often lead to incorrect orders, resulting in higher returns and extra shipping costs.

Shorter cycle times
EDI speeds up the cycle it takes to move products from manufacturing to warehouses. It eliminates the long turnaround for orders, which results in happier customers.

Reduced paper costs
EDI reduces the business processing and administrative costs of filing, mailing and posting, printing and recycling.

It’s also green
EDI systems decrease businesses’ dependence on paper. EDI also promotes social accountability and can help organizations achieve sustainable supply chain management.

Retailers often require their B2B fulfillment service providers to use EDI because it enables orders to be completed seamlessly and electronically. Retailers also need providers with EDI capabilities that:

  • Communicate via EDI to all major retailers
  • Are fully EDI compliant (8-series & 9-series)
  • Can create customized barcodes and shipping labels

Using a provider with expertise in retail fulfillment that supports all EDI services and manages all vendor compliance requirements will minimize chargebacks and increases overall profitability.