A Structured 10-Step Process for Successful EDI Implementation

Implementing EDI across your organization and network of business partners can be complex. Taking a systematic approach will help you deliver an effective EDI program.

Step 1: Develop the Organizational Structure

EDI is a significant investment and developing the correct organizational structure from the outset will pay dividends as the program evolves.

Key elements of the structure includes:

  • The EDI Coordinator: An IT professional with in-depth experience in delivering EDI. The Coordinator may come from in-house or be hired externally, depending on the EDI experience the organization already has
  • The Steering Committee: Headed by the EDI Coordinator, the committee typically consists of department heads of affected business units, the head of IT and legal representatives
  • Senior Management Sponsor: As with any major IT program, there needs to be senior management commitment if the EDI implementation is to be a success
  • Dedicated EDI Team: The EDI team will be responsible for the actual implementation of the system.

The EDI Coordinator, as an important part of his/her function, must stay in communication with all sectors of the company that will be affected by the EDI program to ensure their support and buy-in. This on-going communication is vital for educating all organizations as to how the EDI program will benefit them and how it will impact their processes.

Step 2: Undertake a Strategic Review

This analysis identifies the most likely corporate applications for EDI deployment and sets priorities for conversion to EDI. To this end, factors to be considered include the number of suppliers, customers or other business partners, and the volume and type of transactions to be exchanged. It includes a description of the present systems in each functional area and an explanation of how EDI will improve them.

The issuance and receipt of each type of business document is based on a system of human and machine procedures, all of which have to be documented and analyzed for EDI efficiencies. For best results, the goal should be to improve the business cycle rather than simply automate it.

Can EDI:

  • Eliminate redundant steps from the business cycle?
  • Eliminate redundant data entry?
  • Reduce manual effort?
  • Reduce the size of inventory?
  • Improve customer service by speeding the delivery of goods?
  • Improve the relationship with business partners?
  • Facilitate larger business strategies, such as Just-in-Time manufacturing?

Fully answering these questions will highlight the business cycles that are likely to benefit most from the implementation of EDI.

Step 3: Conduct In-depth Analysis

The strategic review highlights where in your organization EDI could have the most benefit. However, there are other elements to consider before selecting which business cycle to focus on initially.

These considerations include:

  • Which part of the organization is most ready for EDI?
  • Which cycle will cost the least to implement EDI?
  • Which will deliver the greatest savings/increase in profitability?

Answers to these questions require a different type of analysis. Many companies use two effective tools:

  • Cost Benefits Analysis (CBA)
    This analysis further identifies the most likely corporate applications for EDI deployment and sets priorities for conversion to EDI. It includes a description of the present systems in each functional area and an explanation of how EDI will improve them. The issue and receipt of each type of business document is based on a system of human and machine procedures, all of which have to be documented and analyzed for EDI efficiencies. For best results, the goal should be to improve the business cycle rather than simply automate it.
  • The EDI Survey
    The EDI survey of an organization’s customers and suppliers is to ensure that any EDI system that is created can be supported across a wide business partner network or a small group of high-volume, high-value business partners. The survey should include the underlying technologies and skill levels available. It must take account of the type of data the current systems require, the type of data required by business partners and the data required by EDI standards.

As reaching the pilot stage of an EDI program for a large organization can be extremely costly, the ability to cost-justify the program is essential. But, it must be combined with the results of the EDI Survey. In this way, a final report can be produced covering:

  • The scope of the project
  • Description of strengths and weakness of existing systems
  • Recommended system alternative and its capability to strengthen the company
  • Required data integration and document customization
  • Reference to alternatives considered but not selected
  • Financial data on recommended and rejected approaches
  • Timing of system development and funds needed
  • List of personnel required to develop and implement the system
  • Implementation schedule

Step 4: Develop a Business-Focused EDI Solution

The results of the analysis step provides an organization with the knowledge to develop a comprehensive specification for the EDI system.

This includes:

  • The volume of expected EDI traffic and the IT infrastructure needed to support it
  • The capacity of internal network infrastructure to support EDI data
  • The network connections needed to manage traffic with business partners
  • The programming required to ensure that internal systems comply with the data required by business partners and with EDI standards
  • The amount of customization required to integrate internal and EDI systems

With this information, an EDI system can be designed. There are two particularly important elements to an EDI system: the EDI translator and the communications model.

The EDI Translator

Usually a package licensed from an EDI software company or EDI Network provider, the EDI Translator’s role is to interpret the EDI information it receives from the sender and translate it into a format that the receiver can accommodate. In addition to its primary function, an EDI Translator often has several sub-systems, including the handling of the EDI envelopes, document management, audit trails, compliance checking and functional acknowledgements.

The Communications Model

One of the decisions you need to make is the type of communications you will need to connect to all your partners. There are four basic approaches:

  1. Connect directly to each one — this works well for connecting to a small number of business partners. Your organization is responsible for all mapping, translation, technical support and reporting. As long as everyone agrees on a single connectivity protocol, e.g., FTP over VPN, Rosetta Net, Odette FTP, AS2, a single document format and the community size remains relatively small, this approach works well. This is how EDI was handled in the early days. However, as the size of your community grows, it becomes a very complex and resource-intensive approach.
  2. Use an EDI Network provider — The EDI Network provider facilitates the exchange of electronic documents via its “document mailbox” service. The sender connects to the EDI Network and sends its EDI transactions to the recipient’s mailbox. The receiver then connects to the network to receive documents in its mailbox. This approach relieves all community members of the resource-intensive responsibilities for supporting all communications issues, ensures data security and non-repudiation, while providing audit information, reporting, backup and recovery. This approach avoids many of the complexities of the direct model. Use of the EDI Network/VAN model for 100% of an EDI community was extremely popular before the rise of the commercial use of the internet and large trading networks. It remains a very popular option, but for very large communities it’s much less common to have 100% of the business partners on the EDI network.
  3. Use Direct Connects for your high-volume business partners and use the EDI Network for the rest — This approach saves the transaction fees charged by the EDI Networks when trading with the high-volume business partners, while relying on the EDI Network to support the high number of low-transaction volume partners.
  4. Outsource the EDI program to a Managed Services provider that connects to your entire community on your behalf — The Managed Services provider receives your business documents directly from your ERP system (SAP, Oracle, etc.), assumes responsibility for all the mapping, translation, technical support, data center operations and reporting. Once documents are ready for delivery to your business partners, the service provider delivers them either directly to the partners or via the mailbox service, depending on the individual business partner requirements.

Step 5: Select the Correct EDI Network Provider (VAN)

Your selection of an EDI Network Provider should be focused on your business requirements more than the provider’s technical capabilities. There are many important issues to consider.

What do you want the EDI Network Provider to do?

Do you require a basic EDI service or are you keen to explore a range of value-added services? Do you require your provider to deliver training and support to you and your partners? Can your provider help you rapidly onboard new business partners? Do you need automatic rejection of documents with bad data before they reach your system? Can your service provider enable your line-of-business personnel to independently obtain data and reports on-demand and view the status of your business transactions at all stages in the supply chain? Quite often, the availability of these value-added services is a more important factor in your decision than cost alone.

What is the Provider’s reach?

How many of your business partners already use a particular VAN? Does the provider have a strong installed base within your industry sector? Does the Provider have a global presence, not only for the exchange of documents, but also for providing local customer support.

What is the Provider’s pricing structure?

Most EDI services charge by the amount of kilo-characters (KCs) within a document but other factors will be important such as whether timely delivery is important and the volume of transactions being exchanged. Most VAN’s offer flexible pricing structures including pay-as-you-go and monthly or annual subscriptions.

What is the Provider’s influence in your industry?

Is the provider actively involved within the key industry associations in your sector? Does it have an active role in the worldwide EDI standards bodies?

Will the EDI Network Provider be around tomorrow?

Does the provider have a proven track record and is it likely to be around for the foreseeable future? Those organizations with global reach, the most comprehensive range of services, and the ability to deliver support regardless of worldwide location that will survive. Does your VAN give you all this?

Step 6: Integrate EDI with the Business

For most EDI systems, the greatest development task is integrating EDI systems with existing corporate applications. Data required by business partners and EDI standards must be “mapped” onto data contained in existing systems.

After purchasing the necessary hardware and/or software to support your EDI solution, a skilled EDI programming staff must next convert the requirements into reality. The staff must be fully knowledgeable of EDI standards, in-house systems and communication protocols. The basic tasks that need to be performed include: (1) integrating EDI with your in-house (ERP) business systems, which means, extracting and loading data; (2) creating the EDI documents by mapping (correlating) the extracted data to the proper segments and data elements of the EDI transactions, as well as providing the enveloping and other necessary data; and (3) installing and configuring the communication software for sending and receiving documents. Each of these processes can be very complex, particularly when you have many business partners, such as customers, each with its own requirements. That’s why a good, technically-skilled staff is needed.

Prototyping methodologies, where system prototypes are developed before systems are actually coded, and Computer Aided Software Engineering (CASE) tools help to streamline system development. Integration usually consists of three key activities:

  • The data analysis portion of mapping
  • Mapping via the EDI software
  • Development of any custom interface programs or user exits

When selecting a software package or VAN service, check how much of the mapping elements have already been addressed in the chosen solution. Not only will this impact how easily the EDI system will integrate with back-office systems, it will speed the integration process and reduce the cost of custom development.

Integrating EDI with the business often highlights opportunities to re-engineer the business process and reap further benefits.

Step 7: Integrate Data across the Business

Before integrating data across the business, you will have to undertake a good deal of data analysis. It is wise to start this process at the ultimate destination for that data. For example, if you wish to use EDI for your purchase orders, the first thing to do is understand the data requirements of the order processing system.

An important reason to analyze each affected business system is to ensure its ability to share data. Sometimes, obstacles need to be overcome, such as different business systems may contain the same data, but in different formats.

Data is often broken down into primary and secondary keys. A primary key is a highly important but common piece of information – for example, customer PO, invoice number, bill of lading number – and often requires less attention from the EDI team, as IT departments have learned to honor these keys. Secondary keys are pieces of information that are likely to be more specific to an individual business partner or group – such as a department number, carrier code or product code.

Industry-wide codes – such as the Standard Industry Code (SIC) or Drug Enforcement Agency (DEA) number in pharmaceuticals – greatly facilitate the use of EDI, as they standardize the use of these keys across a wide range of organizations and they are often adopted as best practice across an industry.

Once the structure of the data required throughout the system is understood, the EDI team can start data mapping.

Step 8: Undertake Data Mapping

Once the data analysis is complete and data structures understood, the ‘map’ is defined to the EDI translation software. For most EDI software packages or VAN services, the EDI Coordinator will be able to define the map.

The map defines how the data in the EDI transaction relates to the data in the internal system. The EDI software stores the map, usually in tabular form. When a transaction enters the system, the EDI Translator uses the map to determine where each incoming field goes and whether the data needs to be reformatted.

The major goal within mapping is to avoid the need for custom interfaces as much as possible – especially custom edits per individual business partner. The more standardized the data formats, the better the system performance and the less need for specific programming.

Step 9: Establish a Pilot Project

Once an organization has developed and tested its EDI system to the best of its ability, further system tests are conducted in pilot mode with selected business partners. The EDI pilot is critical. It enables an organization to refine its own system, show the benefits that can be achieved and ensure that it can integrate with business partners.

Organizations should set up a pilot project with a small number of business partners. The organizations with the most EDI experience make the best pilot partners. To be successful, the pilot must focus on one primary EDI application such as simple purchase orders.

Begin by transmitting documents to the pilot partners, who will confirm that the documents can be processed accurately. Pilot partners then return data for testing. As each of these tests is completed successfully, each pilot partner begins to send real orders, which tests the capability of the system to handle daily business processing.

Paper transactions are not eliminated, however, until both business partners are completely satisfied that the EDI system is performing well.

Pilot project results must then be analyzed from an internal perspective to answer the following questions:

  • Can the EDI system maintain adequate control?
  • Does the system appear to provide the benefits projected in the original EDI study?
  • Will the system handle anticipated EDI traffic?
  • Are internal users satisfied with the result?

Step 10: Roll out EDI to Business Partners

If you are the initiator of the program with your business partners – for example, you want all your suppliers to receive your purchase orders via EDI and return EDI invoices – you must have the skilled resources to develop, manage and maintain an EDI rollout program to your supplier community.

This includes:

  • surveying your community to understand each supplier’s level of EDI readiness
  • developing and implementing a community communication plan to convey your program goals and provide education needed
  • offering various EDI options, such as web-based forms or Excel-based options for those suppliers that are not ready to integrate EDI with their back-end systems
  • supporting each supplier through the start-up process

Even after rolling out EDI to your business partners, you need to manage and maintain your program ongoing. Invest in skilled personnel resources to manage your EDI program, including:

  • monitoring and troubleshooting communication to ensure documents continue to flow
  • responding to inquiries from partners 24×7 as issues arise
  • reporting on business partner activity and system usage
  • making updates to translation maps and/or communication protocols as you or your partners add new documents, make changes to current documents or upgrade their communication processes