Your Guide to the Different EDI Types

Electronic Data Interchange (EDI) is the backbone of modern business communication, enabling companies to exchange vital documents quickly and securely.

This technology has been the de facto choice for B2B data exchange for over 40 years and still handles an impressive 78% of all global transactions (that’s over 20 billion exchanges annually!) According to IBM, 85% of global supply chains leverage EDI in some form.

Thousands of businesses have to become EDI-ready each year—consider it a rite of passage to trading on a bigger stage. The problem is, there are several different types of EDI available—from direct EDI to Value-Added Networks (VANs) and Web EDI.

Choosing the right one for your needs can be tricky, especially if you’re just starting out.

This article will help you unravel how each option works, their individual  strengths, and their ideal use cases.

You'll learn how to make smart choices and set your business up for success in a deeply connected world.

Different Types of EDI Solutions

When we talk about different types of EDI, we're referring to the different methods businesses use to exchange electronic documents—essentially, the various technical approaches to implementing EDI.

Understanding them is fundamental in choosing the right EDI solution for your business needs.

Direct EDI / Point-to-Point

Direct EDI, also known as point-to-point EDI, is a traditional form of EDI where two trading partners establish a direct connection between their systems using agreed-upon communication protocols.

How it works: In a direct EDI setup, both trading partners must agree on a common communication protocol, such as AS2, SFTP, or FTPS. They then establish a secure connection between their systems, allowing them to exchange EDI documents directly.

Advantages:

• Full control over the connection and data exchange process
• High level of security, as data is exchanged directly between the two parties
• No additional costs for data transmission or VAN services

Disadvantages:

• Requires technical expertise to set up and maintain multiple connections and protocols
• Potential compatibility issues when dealing with partners using different EDI standards or protocols

EDI via VAN (Value-Added Network)

EDI via VAN is one of the most common types of EDI used today. A VAN is a private, cloud-hosted network provided by an EDI specialist that connects trading partners and facilitates the exchange of EDI documents.

How it works: The VAN provider acts as an intermediary, managing the network and providing "mailboxes" for each trading partner to send and receive documents.

Advantages:

• More flexible and scalable than direct EDI, as the VAN provider manages the connections and onboarding of new partners
• Supports various communication protocols and data standards, helping ensure compatibility between trading partners
• Offers additional services, such as document translation, data validation, and technical support

Disadvantages:

• Less control over the data exchange process compared to direct EDI
• Additional costs for VAN services, which may include setup fees, monthly charges, and transaction fees

Web EDI

Web EDI is a browser-based solution that simplifies the EDI process and makes it accessible to businesses with limited technical expertise.

With web EDI, users can exchange business documents using online forms that resemble traditional paper-based documents, eliminating the need for complex EDI software or infrastructure.

How it works: Web EDI providers offer a user-friendly, web-based interface where businesses can create, send, and receive EDI documents. Users simply fill out online forms with the necessary information, which is then automatically converted into the appropriate EDI format and sent to the trading partner.

Advantages:

• Easy to use, with minimal technical knowledge required
• Low setup and maintenance costs, as there is no need for specialized EDI software or hardware
• Ideal for small and medium-sized businesses or those with partners who have limited EDI capabilities

Disadvantages:

• Might not offer the same level of customization and control as other EDI types
• Less suitable for high-volume or complex EDI transactions

EDI Outsourcing / Managed Services

EDI outsourcing, also known as managed EDI services or B2B managed services, is a managed solution where an external specialist manages your EDI environment daily.

The managed service provider handles your EDI system's setup, configuration, maintenance, and support, allowing you to focus on your core business activities.

How it works: When outsourcing your EDI, you partner with a managed service provider who takes responsibility for your entire EDI infrastructure. The provider also handles onboarding new trading partners, monitoring EDI transactions, and troubleshooting any issues that may arise.

Advantages:

• Eliminates the need for in-house EDI expertise and resources
• Provides scalability and flexibility to adapt to changes in your supply chain
• Offers 24/7 support and proactive monitoring to ensure the smooth flow of EDI transactions
• Enables the creation of hybrid EDI solutions that combine multiple EDI types to suit your unique needs

Disadvantages:

• Higher costs compared to in-house EDI management
• Requires trust in a third-party provider to handle sensitive business data and processes

EDI Software (In-House)

Another option for managing EDI processes is implementing EDI software within your organization.

This involves purchasing or licensing EDI software and deploying it on your own servers, with your in-house IT team responsible for installation, configuration, and maintenance.

Though once common, in-house EDI is much rarer today as businesses opt for agile, cloud-based alternatives.

How it works: With in-house EDI software, your IT team installs the software on your company's servers and configures it to meet your specific business requirements. Your team is responsible for setting up connections with trading partners, mapping data between different EDI formats, and helping ensure the smooth flow of EDI transactions.

Advantages:

• Full control over the EDI environment and data exchange process.
• Ability to customize the solution to meet specific business needs and integrate with existing systems.
• No recurring costs for VAN services or transaction fees.

Disadvantages:

• High upfront costs for software licenses, hardware, and infrastructure.
• Requires dedicated IT resources to manage and maintain the EDI system.
• May be challenging to scale as the number of trading partners and transaction volumes grow.

Future of EDI Networks

As technology continues to evolve, so do EDI networks. Some emerging trends and technologies that are shaping the future of EDI include:

APIs (Application Programming Interfaces)

APIs are increasingly being used in conjunction with or as an alternative to traditional EDI, offering real-time, bi-directional data exchange and greater flexibility. IBM estimated that 50% of transactions will be completed via APIs by 2023.

However, APIs do have drawbacks, such as a lack of inherent security and standardized formatting. Cyber security professionals say that concerns about API security are growing as they become a key attack vector for cybercriminals.

Hybrid EDI models

Many businesses are adopting hybrid EDI solutions that combine elements of multiple EDI types, such as direct EDI, VAN, and web EDI, to create a more agile and connected supply chain.

Modern EDI platforms can handle different forms of EDI (direct connections, VANs, etc.), as well as multiple standards and protocols, from within a singular intuitive interface.

We also offer a best-in-class web EDI and managed service for businesses seeking true simplicity and peace of mind in their EDI workloads.

Comparison Table

Choosing the Right EDI Type for Your Business

So, which form of EDI is right for you? The answer depends on several factors, including your company size, technical expertise, trading partner relationships, and industry requirements.

Consider the following questions:

1. What is your company's current EDI capability, and what resources do you have available to manage EDI processes?
2. How many trading partners do you have, and what are their EDI requirements and capabilities?
3. What is your expected transaction volume, and how do you anticipate it will grow in the future?
4. What are the specific compliance and security requirements for your industry?
5. What is your budget for EDI implementation and ongoing management?

Answering these questions will help you narrow down your options and select an EDI type that aligns with your business needs and goals.

For example, a direct EDI solution may be the most cost-effective and efficient option if you have a small number of trading partners and a knowledgeable IT team.

On the other hand, if you have a large, diverse network of partners and limited in-house expertise, a web EDI or managed services solution may be more appropriate.

Looking Forward

It is essential to find a solution that enables seamless communication with your trading partners, reduces manual processes, and provides the scalability and flexibility to support your business growth.

Today, EDI via VANs, Web EDI, Managed EDI, and Direct EDI are the most common approaches, but the number of businesses opting for cloud-based or managed EDIs is increasing.

If you're seeking expert guidance on selecting and implementing the right EDI solution for your business, partner with a trusted provider like Epicor.

With over 30 years of experience in the EDI industry, we offer a comprehensive suite of EDI solutions and services designed to help businesses of all sizes streamline their supply chain processes and drive growth.

Don't let inefficient supply chain processes hold your business back. We’re ready to support you on your EDI journey.