50 YEARS OF EDI: THIS IS WHERE WE STAND

The present and future of EDI in the supply chain

Introduction: good old EDI

EDI, or electronic data interchange, you know it well or you have never heard of it. While it's not as well known, it's more common than you think. Perhaps you – without realizing it – also deal with it on a daily basis. For example, if you process an order in the system or pay an invoice to a supplier.

EDI is a staple when exchanging data. New technologies have of course come onto the market, but they are often used in addition. After fifty years of loyal service and probably many years ahead, it's time to take stock. What role does EDI play in organizations within the supply chain? What is it used for? And who works with EDI?

This research report provides insight into the world of EDI within the supply chain. In addition to sketching the current situation, we also look to the future. Will EDI prove its worth again in the next fifty years?

126 Dutch and Belgian respondents participated in this survey, who form a sample of supply chain professionals involved in EDI. The respondents are employed by organizations ranging from 1-50 employees to more than 500 employees, spread over different sectors. 43 percent work in trade and industry, 21 percent in retail/FMCG and 14 percent in transport and logistics. The research was conducted by Markteffect on behalf of Descartes.

IT happening or business driver?

Necessary evil or business-critical

EDI is a kind of computer language. For most people, the number and letter sequences are hocus-pocus. However, the software systems of different companies can communicate effortlessly with each other through EDI. Because of these characteristics, EDI is often an IT thing. After all, they are IT specialists who understand software and codes. And yet, EDI is more than an IT matter. It ensures lightning-fast and error-free electronic data exchange. As such, it saves time and money with more efficiency as a result. This makes EDI suitable as a business driver. In this chapter, we will show you exactly how that works.

The people behind EDI

So, what is it like in practice? Does the business know all the ins and outs of EDI, or is it the IT specialists who have EDI in their portfolio?

Although EDI is more than an IT matter, logistics employees are responsible at only one in four companies. In three quarters of the cases it is therefore an IT matter.

EDI knowledge

EDI requires specific knowledge due to the complexity of the technology. Not every organization has this knowledge in-house. 41 percent of companies believe that there are colleagues with sufficient knowledge of EDI. Companies with more than 500 employees have significantly more EDI knowledge: 65 percent say they know what they need.

Looking at respondents' responsibility for EDI decisions, we see that the largest group of respondents (49%) are co-decision makers. They therefore make decisions about EDI together with other colleagues.

This is how EDI is used

Various EDI solutions are available to companies to deploy to suit their wishes and needs. An EDI solution supports companies in communicating with different stakeholders, such as customers, suppliers or other partners. The most important things are listed below.

EDI communication with trade partners

A web solution for EDI is suitable for companies with a limited volume of EDI communication. Logically, it appears that the smaller the company, the more often a web solution is used. Another option is to completely outsource EDI. Almost one in three (29%) organizations opt for this.

ERP systems

For the right support, it is important that the EDI solution is integrated with the ERP system, so that information is linked quickly and error-free. Organizations mainly work with the following ERP systems:

Just ask: Sufficient knowledge of EDI is important to properly organize communication. If the business does not have the necessary knowledge, organizations in particular (75%) turn to their EDI service provider for advice.

Covid-19 has no impact

The impact of the corona pandemic was major throughout the supply chain. Think of shortages of raw materials, higher transport costs or lack of capacity. Still, Covid-19 has generally had no effect on trade relationships for which companies have set up EDI (90%).

The perfect EDI solution provider

Companies often seek advice from their EDI solution provider. Expertise is therefore at the top of the list of expectations of such a partner. In addition, companies expect the following:

Larger companies are mainly looking for an IT provider that delivers services according to an SLA, while smaller companies expect their EDI solution provider to communicate proactively about EDI developments and trends.

Necessary evil or business-critical

The way companies look at EDI varies widely. Where one company sees EDI as a necessary evil, another sees it as business-critical. It is often one of these two extremes. In the first case, EDI is usually assigned to the IT department. It is something that comes with the territory or that has to be done' and there is little to worry about. Attention is only paid to EDI when something goes wrong. These companies are insufficiently aware of the importance of EDI. Organizations that do have this awareness realize that EDI is a business-critical component. EDI is often assigned to the business here because it is used as a business driver. After all, it ensures that orders come in. In other words, the added value of EDI is realized.

This is how things stand for EDI

The flag is flying at the majority of companies. 84 percent say EDI is a business-critical part of the organization. Employees who influence decisions about EDI agree more than final decision makers (96% and 77% respectively).

If we zoom in on how management views EDI, we see that more than half (56%) of the respondents indicate that management sees EDI as a strategic component.

Business process support

Despite the fact that the flag is flying well, EDI is not yet widely used to support business processes. At one in three companies, less than twenty percent of the processes are supported with EDI. Only one in ten companies uses EDI for more than eighty percent of the business processes. EDI is most often used for the transport process with logistics service providers. EDI is the least popular for PEPPOL (Pan-European Public Procurement On-Line) processes.

EDI in the world of e-commerce

We all know that e-commerce really took off in 2020. Whether it concerns large marketplaces, local entrepreneurs, or online newcomers; everyone benefited from the enormous rise of online shopping due to the corona pandemic. This has allowed e-commerce to mature quickly.

The more mature a market is, the more professional processes are set up. That's when EDI comes into play. Although good old EDI has been around for half a century, it is also still used as a means of communication in new markets. In this chapter, we zoom in on how companies view e-commerce. It also becomes clear what role EDI plays in this and what the plans are for the coming period.

E-commerce is booming. Growing or additional e-commerce activities are therefore a (very) important trend for half (51%) of the companies. Due to the growth of e-commerce, 41 percent of companies have a greater need for knowledge about EDI.

Will EDI play a role in e-commerce? If so, how do companies approach this? In the future, 13 percent of organizations want to set up EDI for e-commerce. This is even half among small companies with fewer than ten employees.

Nearly two in five (19%) organizations have no plans to expand or renew EDI.

EDI in the future

The use of EDI is a permanent item on the agenda for many companies. New trading partners, businesses, or markets are reasons to expand EDI. Despite its long existence, EDI still poses challenges for many organizations. Especially interaction and communication with trading partners is often difficult. The lack of internal knowledge does not help either.

You would expect EDI to be self-evident because it has already proven its worth. Nevertheless, the expansion and more efficient organization of EDI is still on the agenda.

This is how it works in practice

There are certainly plans for the future, but how are things actually going?

The respondents stated that in more than half (53%) of the situations new connections or processes are only set up after an application from trading partner(s). The question is, therefore, to what extent all these plans become reality.

Main trends

Companies are influenced by various developments in the market. One trend has a major impact, the other has none at all. In this chapter, we map out which trends are important for organizations. These are trends in which EDI can play an important role.

Agile business operations

Who doesn't want to be able to flexibly adapt the organization to the needs of the customer? Agile business management is therefore an important trend for three-quarters (76%) of the organizations. Especially in e-commerce, agile is of great importance, because the complexity of the supply chain in this market is great. EDI contributes to agile business operations because it enables automatic and error-free communication about, for example, orders.

Complexity of transactions

Transactions sold through marketplaces or other third parties, result in transactions more often running through different parties, especially if a payment party such as PayPal or Klarna is also involved. Return flows and the associated refunds are also a lot more complex in the online world. With EDI, organizations can easily keep track of all these orders, invoices, and transactions.

Reuse of data

Companies collect a lot of data. This data is very valuable if you collect and combine it in the right way. In that case, data is very important for optimizing business processes. By implementing EDI, organizations are taking a big step in maturity when it comes to order data. Due to automation and structure, data is stored in the right way and is immediately suitable for retrieving information. In this way, organizations can get started with their desire to reuse data for other processes, such as accounting or inventory. This is an important trend for 60% of organizations.

New technologies

If you want to stay ahead in this rapidly changing world and be able to continuously adapt, you cannot do without smart technologies. Implementing new technologies is also seen as a way to avoid being sidelined. New technologies include the use of application programming interfaces (APIs), artificial intelligence (AI), or robotic process automation (RPA). More than half of the organizations (57%) are involved in this. These technologies are a nice addition to existing EDI processes. This way, data can easily be shared between the different technologies.

Currently, nearly one in three (29%) companies have completely outsourced their EDI processes. More and more companies are taking this step to ensure that the process always runs smoothly and to always have ready knowledge of the most current developments. 39 percent of companies indicate that this is an important trend for the organization.

For many companies, tapping into new markets is a wish for the future. While this was impossible for some businesses years ago, the massive growth of e-commerce is opening doors. National borders are also increasingly blurred due to globalization. Expanding into new geographies or global trade is a key issue for 38 percent of organizations.

Outsourcing inventory management to the supplier, or Vendor Management Inventory (VMI), is a less popular trend. It is important for one in four organizations. In this case, the supplier no longer receives orders to deliver, but information about the customer's inventory and sales level. Based on this information, he is responsible for creating and maintaining inventories at his customers. This ensures that companies can improve logistics processes and organize their supply chain more efficiently. With EDI, organizations ensure that they steer VMI in the right direction and that communication runs smoothly.

About Descartes

Descartes is the global leader in on-demand software-as-a-service (SaaS) solutions that help improve productivity, performance, and security for enterprises where logistics play a key role. Customers use modular, cloud-based solutions to plan, control, track, and measure deliveries. They can also plan, allocate and execute freight, prepare, verify, and pay freight invoices, view global trade data, archive customs and security documents for import and export, and perform various other logistics processes. All this by joining the world's largest multimodal logistics collaboration community. Descartes is headquartered in Waterloo, Canada, and the organization has offices and partners worldwide.