Everything You Wanted to Know About EDI, But Were Afraid to Ask

by David G. Propson

This year, the biggest buzzword on the internet, and in the economy at large, has been “B2B.” New Web exchanges and established industry leaders are touting e-commerce as a newly discovered font of savings. But many industries have been doing business-to-business e-commerce for years. For most, “B2B” is still spelled “EDI.”

Electronic Data Interchange allows information, like orders and invoices, to be exchanged automatically. Companies in a supply chain often use quite different systems and file formats, but EDI lets them translate these into a standard format that any other company in the chain can also work with. Think of it as a set of generic documents anyone can use. There could be a field for “Number of Widgets,” “Size,” and so on. Around the world, EDI networks act as the central nervous systems of manufacturing supply chains. It’s useful, efficient, and in some fields, essential. However, it can also be expensive to implement, leaving some businesses out of the loop.

Flash back to 1948, fifty years before e-commerce supposedly caught on. The organizers of the Berlin Airlift were orchestrating what was probably the most complicated and longest sustained shipment project in history. Because planes often took off faster than the necessary paperwork could be filled out, a rudimentary system was devised that allowed checklists to be filled out via teletype and telephone.

The essential idea behind EDI is still the same today: Efficiently exchanging information about the shipment makes it easier to exchange the goods themselves. Once a warehouse worker and a delivery person might have deliberated over drop-offs for hours: “How many widgets you got there?” “1,500 or so.” “Large or small?” “574 large, 926 small.” “Hey, isn’t it time for lunch?” These days, they exchange the same information without any words spoken or meals eaten.

In the supply-chain game, the biggest companies set the rules. Unfortunately, small businesses have been excluded from the glories of EDI. It’s just too expensive and complicated for many of them to implement. The software needed to translate the data into accepted EDI formats doesn’t come cheap, and a fair amount of work has to be done to get the translators to work with a company’s existing inventory system. (Some vendors offer prepackaged translators as part of their back-end systems, but these also entail scuttling existing ones and starting from scratch.)

To make matters worse, in fields such as the auto industry, big customers simply won’t do business with companies that can’t handle EDI. So small suppliers resort to what’s called a “rip-and-read” technique. They accept an electronic transmission, print it out, and manually enter the information into their own systems. This keeps them in business, but cuts them out of benefits the rest of the supply chain enjoys. Meanwhile, their problems slow down the rest of the supply chain, and the drive toward total efficiency ­ started by those Cold Warriors half a century ago ­ shudders to a standstill.

That’s where many industries stand now. So far, no one has figured out how to conduct EDI transactions through the Internet, and most transactions still take place over private, proprietary networks. EDI via the Internet would be low-cost and universally accessible ­ just the opposite of what we have now.

EDI, or something like it, will become even more widespread as e-commerce continues to catch on. You know whether the industry you’re in will demand EDI. Get it now, if you can afford it; otherwise hope that a rescue ­ in the form of lower prices and easier access ­ arrives soon.

If you’re ready to sign up for EDI right now, these are the folks who can provide it.
EDS; 800-338-7767; www.eds.com
HarbingerEDI Services; 404-841-4334; www.harbinger.com
IBM Global Network; 800-588-5808; www.ibm.com/globalnetwork
David G. Propson is features editor for SBC. Want a question answered? E-mail us at asksbc@ftmg.net.

Small Business Computing Staff
Small Business Computing Staff
Small Business Computing addresses the technology needs of small businesses, which are defined as businesses with fewer than 500 employees and/or less than $7 million in annual sales.
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