EDI integration with trading partners: 6 best practices
Many large companies with high-volume transactions, especially those involved in e-commerce, manufacturing and retail supply chains, have long migrated from manual processes to Electronic Data Interchange (EDI). EDI, which enables the automated exchange of business documents in a standard format, has significantly improved the accuracy, efficiency and timeliness of business processes.
With EDI, digitized purchase orders, advanced shipping notices, invoices and other business documents flow seamlessly between systems and trading partners, eliminating the need for manual data entry and reducing the risk of human errors. That being said, a poorly implemented EDI integration can create inefficiencies and disrupt operations instead of improving them.
Common challenges include communication breakdowns between trading partners, misaligned data formats, and unexpected costs and complexities. These issues can lead to delayed order processing, missed shipments, and strained relationships between trading partners, negating the very benefits that EDI is designed to provide. To avoid these pitfalls, you must carefully plan and execute your EDI integration. These six best practices can help you achieve that.
1. Identify your EDI requirements in preparation for trading partner onboarding
A critical first step in successful EDI integration is understanding the specific EDI requirements of your trading partners. Different industries and companies may use varying EDI standards, formats and communications protocols, depending on their unique operational needs and compliance requirements.
In the case of EDI standards, some trading partners may require ANSI X12, while others may prefer EDIFACT or Tradacoms. For communications, some organizations may be able to perform data exchanges using general-purpose protocols such as File Transfer Protocol (FTP) or Secure File Transfer Protocol (SFTP). However, some may require more advanced protocols like Applicability Statement 2 (AS2) or Odette File Transfer Protocol (OFTP).
EDI requirements usually vary depending on an organization’s industry and region. For instance, healthcare organizations typically use the X12 and Health Level Seven (HL7) EDI formats, whereas United Kingdom-based retail companies transact using Tradacoms. In terms of communication protocols, European automotive companies use OFTP, while United States-based retail companies prefer AS2.
By understanding your trading partner’s EDI requirements right from the start, you can factor them into your EDI solution buying decisions and tailor your onboarding process accordingly. This allows you to avoid interoperability issues later on.
JSCAPE MFT by Redwood enables business-to-business (B2B) EDI integration through a secure, compliant and easy-to-implement solution. Schedule a quick JSCAPE MFT demo or consultation now.
2. Take into account data security/privacy compliance requirements
EDI messages often contain sensitive information, including personal identifiable information (PII), credit card data, electronic protected health information (ePHI), intellectual property and financial data. Much of this information is subject to data privacy and security laws and regulations, such as the Payment Card Industry Data Security Standard (PCI DSS), Health Insurance Portability and Accountability Act (HIPAA) and the General Data Protection Regulation (GDPR).
For instance, in the healthcare sector, transactions between healthcare service providers often include significant amounts of confidential and sensitive data. One example is EDI 837, the healthcare claim transaction set. It contains detailed information about a patient, including their medical condition, the treatments they received and the associated costs.
This level of personal detail can put the patient at risk if EDI data containing those details falls into the wrong hands. Cybercriminals often use stolen ePHI to carry out medical identity theft, which allows them to fraudulently obtain medical care or benefits using a legitimate patient’s identity.
To mitigate these risks, you must ensure your EDI system is equipped with robust security measures that, at the minimum, comply with relevant regulations. This includes encrypting EDI messages during transmission and storage, securing access to sensitive data with role-based permissions and implementing regular audits to detect vulnerabilities. Additionally, you must work closely with your trading partners to achieve alignment on security protocols across your supply chain.
Recommended read: 10 Essential attributes of secure file transfer systems
3. Choose the right EDI software for B2B integration
Once you’ve understood your trading partners’ EDI requirements and your regulatory compliance obligations, you should be ready to choose the right EDI solution for your B2B integration undertaking. There are currently two popular EDI integration options to consider: acquiring the services of a Value-Added Network (VAN) or setting up EDI integration directly with your trading partners.
A VAN is a third-party EDI service provider that acts as an intermediary between you and your trading partners. VANs used to be the main option for EDI integration, but this practice has changed. Although VANs generally require less upfront costs, they can be quite expensive in the long run. Moreover, since EDI documents are exchanged through a third party, companies with stringent privacy requirements sometimes find this option less favorable.
Companies are instead shifting to direct EDI. Also known as point-to-point EDI, direct EDI entails integrating directly with trading partners through protocols like FTP, SFTP, AS2 or OFTP. Although direct EDI requires in-house talent for deploying, managing and maintaining EDI software, it’s more suitable for businesses that seek to reduce cost and gain more control of their data.
In choosing EDI software, take into account the following factors:
- Protocol support: Different trading partners often have different protocol preferences. Your EDI software should be able to integrate with your trading partners regardless of whether they’re using FTP, SFTP, AS2, OFTP or some other protocol.
- Compatibility with existing infrastructure: Look for software with a comprehensive array of connectors, application programming interfaces (APIs) and other features that allow you to easily integrate with your business applications.
- Scalability and performance: Make sure it’s capable of maintaining optimal performance during high-volume traffic and can easily scale out when the need arises.
- Predictable and flexible pricing: Avoid pricing structures that are susceptible to high upfront costs and unpredictable charges. Instead, choose those that can adapt to changing business demands.
Recommended read: EDI transmission types every trading partner should know
4. Focus on solutions that simplify business process automation
EDI and automation are supposed to go hand in hand. However, some EDI integration solutions make it extremely difficult to apply automation. For instance, if you're using a solution that still requires complex scripts to automate workflows, you won’t be able to maximize that solution’s full potential unless you have someone in your organization who can write those scripts.
A truly effective EDI solution should offer intuitive, low-code or no-code automation capabilities that empower business users to create and modify workflows even if they don’t have deep coding skills. Imagine an EDI platform where complex business rules and integrations can be configured through a graphical user interface with a drag-and-drop workflow builder and pre-built templates.
Consider the typical challenges organizations face with script-based EDI automation:
- Dependency on specialized IT personnel
- High development and maintenance costs
- Increased risk of human error
- Slower response to changing business requirements
- Limited flexibility in process design
An ideal EDI solution should provide:
- Graphical workflow builders that allow even junior IT staff to design automation logic
- Pre-configured connectors for common business systems and applications
- Built-in error handling and exception management
- Real-time monitoring and reporting dashboards
- Adaptive configurations that can quickly adjust to changing business rules
Instead of relying on traditional, complex, script-heavy EDI platforms, look for solutions that can empower your team to focus on strategic initiatives rather than getting bogged down in technical configuration. If you’ve hired a managed services provider (MSP) to manage your IT infrastructure, make sure they’re capable of helping you with EDI integration, regardless of which option you choose.
5. Test thoroughly before going live
Testing minimizes the risk of costly disruptions once your EDI platform goes live. It helps you identify and address potential issues, such as data mapping errors, connectivity failures or security vulnerabilities, before they occur in production. To strengthen your testing process, incorporate the following activities.
Validate data accuracy and quality
Start by checking whether the data exchanged between you and your trading partners meets the required standards. This includes validating that EDI documents conform to the agreed-upon standard format, such as ANSI X12 or EDIFACT, and that all fields are mapped correctly. Poor data quality can lead to issues like incorrect purchase orders or delayed order fulfillment.
Simulate real-world scenarios
Mimic real-world EDI processes and end-to-end transactions to uncover problematic data flows and data integration issues. Verify whether your internal business systems, such as your enterprise resource planning (ERP) or warehouse management system (WMS), are correctly receiving, processing and exchanging data with your EDI platform.
Test connectivity
Connectivity testing ensures that communication protocols, such as AS2, SFTP or FTP, function as expected. Verify that your system can send and receive EDI messages successfully, especially if you’re working with multiple trading partners or using a third-party service provider.
Conduct partner testing
Once everything runs smoothly at your end, collaborate with your business partners to perform joint testing. In this phase, you and your trading partner should be able to verify that all electronic documents flow seamlessly from your respective back-end systems (e.g., WMS, ERP systems) through your integration platforms all the way to the other party’s systems.
Optimize for scalability and performance
During testing, assess whether your system can handle high transaction volumes without lag or downtime. If your EDI technology is not optimized for scalability, it could suffer from performance degradation during peak periods, affecting critical business processes. Ensure your platform can adapt to growing business demands.
Final acceptance testing
The last phase of testing should involve a comprehensive review of the entire integration process, from the initial transmission of documents to their successful processing in your and your partners’ endpoints. Address any issues you discover during this phase before proceeding to live operations.
6. Monitor and streamline EDI transactions proactively
The moment your EDI integration goes live, you must institute a comprehensive monitoring strategy and address any performance, security and efficiency deficiencies before they impact operations. Here are some key elements you can incorporate into that strategy.
Set up automated alerts for critical issues
Configure your EDI platform to automatically flag anomalies such as failed transmissions, delayed acknowledgments or missing data. For instance, failed EDI 856 Advanced Shipping Notices or EDI 810 Invoices can disrupt order fulfillment and payment cycles, so these should trigger immediate notifications.
Use dashboards for real-time insights
Implement dashboards that provide real-time visibility into your EDI operations. These dashboards should display the status of all current transactions, the health of your EDI platform and the flow of data through your systems. A well-designed dashboard empowers your team to act swiftly and effectively to prevent operational disruptions.
Conduct root cause analysis for errors
When errors occur, go beyond fixing the immediate problem. Rather, conduct a deeper investigation to determine the underlying cause. Recurring errors may indicate a need for better-defined integration processes or additional training for your team. Addressing root causes helps prevent similar issues from recurring, thereby saving time and resources in the long run.
Collaborate with trading partners on continuous improvement
Regularly review transaction performance with your trading partners to identify areas for improvement. For example, if one partner consistently fails to send acknowledgments on time, you can work together to optimize their processes. Open communication fosters stronger partnerships and ensures smoother data exchanges in the long term.
Next steps
Every EDI undertaking is susceptible to missteps that lead to inefficiencies, vulnerabilities and a poor ROI. By adopting these best practices for EDI integration, you can significantly reduce the risk of getting these unfavorable outcomes while dramatically increasing your chances of success.
Best practices work best when you have the right tools. For over a decade now, JSCAPE MFT has been the common denominator in countless B2B EDI integration projects, providing organizations with a robust, secure and flexible solution that transforms complex data exchange challenges into streamlined business opportunities.
Don't let EDI integration complexity hold your business back. Schedule your personalized JSCAPE MFT demo today and discover how we can streamline your electronic data interchange processes, reduce operational risks and drive business growth.