EDI for Startups: All you wish to have to understand
So you are a startup company looking to get your products onto shelves across the UK, US or APAC. You may have come across the term EDI and most major retailers are now requiring their suppliers to become EDI compliant. Let’s take a closer look at what this means for your business and the advantages it
What is EDI?
EDI stands for Electronic Data Interchange and it is the transfer of electronic data between business partners. To put it simply, it allows a supplier’s system to connect with a buyer’s system, ensuring the transfer of data between both parties is seamless. It cuts out human interference, allowing key business documents to be transferred from one business to another, accurately. A common misconception is that Email is electronic, so that means it must be a form of EDI. However, No! Although email is electronic, it still requires humans to open, read and send data etc.. EDI transmits documents from system to system without any human interaction.
Why do Retailers require EDI?
If you can imagine a large retailer, they may have up to 5000 suppliers at any given time. If they were to receive their invoices by email for example, from all of those suppliers, they would have to have a whole team dedicated to opening emails. They would need to check the email attachments, which could be in a variety of formats (PDF, CSV, HTML etc.) and they would then have to read the documents and ensure that they are correct. Then finally re-enter the document manually into their ERP system (Enterprise Resource Planning System). This takes a lot of time and is very prone to human error. Therefore, if they can have their Sales Orders or their Invoices go directly into their ERP system, in the correct format and with accurate data, it will completely reduce manual data entry and in turn, quicken up their overall supply chain process. That is what EDI will do.
I understand the advantages for the Retailer, but what are the advantages for me?
As a startup business, you may wonder how much you can get out of an EDI solution. You may only be receiving a couple of orders a month at the moment and you are quite capable of entering the information into your own system (Accounting/ERP). However, once those orders start to grow, this now becomes a very timely and even a daily task. You receive orders via email, you manually enter them into your system, going in and creating an invoice for the products and sending it via email. Again, this becomes very time consuming and very prone to human error. You may not be able to afford mistakes with orders to large retailers. Sending them the wrong amount or to the wrong location is not good and it will cost you! EDI allows all of this to be automated for you so that you can spend less time re-entering data and more time on the most important aspects of your business. Suppliers who are EDI complaint have a much better chance of a retailer stocking their products not only because the retailer knows it will be easy to do business with that supplier, but because it may be a requirement to get on the shelf.
Which documents are transmitted?
There can be up to 300 different documents a retailer may use through EDI, but the main documents that most retailers will require are:
- Purchase Orders
- Advance Shipping Notices
- Purchas Order Acknowledgements
Each retailer decides which documents they require. One retailer may just require Invoices to be sent via EDI, whereas another retailer may require Invoices, Purchase Orders and Shipping Confirmations. At EDI Here, we manage all of this on your behalf. Having been in the industry for over 20 years, we are trading documents for our clients with retailers across the world on a daily basis.