EDI: What Is It And Why Does It Matter?

Electronic Data Interchange is a critical component of modern supply chain management for retailers, suppliers, and brands selling their products. But what is EDI and what benefits do EDI transactions provide?

What is EDI?

Electronic data interchange (EDI) is the standardized transmission of information between B2B purchasers and suppliers over a secure, computer-to-computer connection. EDI systems have streamlined how businesses exchange data needed to fulfill and efficiently manage wholesale orders. They also allow for more visibility and accurate information being transferred between the parties involved, creating a better partnership in the long run. These systems eliminate the need for paper processes such as faxing that could contribute to errors and delays in processing orders, or a lack of security.

EDI systems are able to securely send documents such as:

• Purchase orders
• Invoices
• Agreements
• Payment documents
• Inventory trackers
• Advance shipping notices (ASNs)

How does EDI tie in with wholesale distribution?

EDI is game changing in wholesale distribution because it standardizes fulfillment processes, improves supply chain visibility, and encourages a quick and accurate exchange of information. 

Many large retailers require that EDI transactions are used for exchanging documents and processing orders. If you want to partner with them or have your eCommerce items sold in their store, you must comply with their EDI requirements. As an eCommerce brand, it will be important to find a partner that is EDI compliant and can fulfill your potential B2B orders as your company grows. 

Even if retailers don’t require it, EDI communications are essential in B2B fulfillment because they help to reduce order-to-shipment times. When working with numerous retail partners, it's vital to have streamlined and efficient processes that set your team up to meet strict delivery deadlines. 

The Benefits of EDI

• Secure exchange of information: The elimination of paper-based transactions creates a standard protocol that all EDI participants must follow. This creates a more secure way to share sensitive information. 
• One location for everything: Brands that sell at multiple retailers no longer have to keep separate databases for each of their retail partners. All essential documents are linked electronically, and there is a secure auditing trail if something goes wrong. 
• Saving time and resources: EDI allows for more accurate tracking, reporting, and analytics because transactions appear almost instantly. This eliminates any lags that hinder operations and reduces data entry inaccuracies that happen when doing things “by hand.” Once EDI systems are set up, many features happen automatically, without the need for someone to hit “go.” Replacing manual data entry allows for resource reallocation to more strategic business priorities. 
• Real-time insights: The transparent flow of accurate information allows for real-time insights. These insights allow brands to have a better understanding of inventory management, demand forecasting, and wholesale distribution costs. 

Learn more about the key differences in B2B and DTC fulfillment and the benefits of having a hybrid warehouse.