In the modern business world, the electronic data interchange system is crucial in keeping a company running efficiently and productively. Electronic data interchange (EDI) allows companies to decrease costs thanks to minimal administration expenses, lower error rates and faster payments.

Despite the critical part electronic data interchange plays in numerous business transactions each year, the inner workings of the EDI system are still somewhat confusing to a number of business owners. Here are six main components of the electronic data interchange system.

Software and Hardware

Most companies opt to outsource their EDI to software vendors rather than have a system in-house. Because EDI systems contain a variety of different elements, it is often not cost effective or realistic for a business to maintain their own. However, if your company chooses to install an EDI solution, make sure you purchase all key parts from a vendor in order to ensure everything will run properly and smoothly.

The hardware you will need for your EDI systems depends upon your company’s specific requirements. Whether your processing needs call for a supercomputer, multiple servers or simply a personal computer, it is important that all components meet the same standards.

Communications and Scheduling Tools

A communication management tool is used for sending and receiving data. This tool should be included in a bundle with your EDI software package. Communications can be a complex component of EDI, so sometimes an adapter outside of the package is used.

A scheduling tool enables the automation of the EDI process. The communications and translator tools rely on the scheduler to function, making it a critical part of the EDI system.

Database Management System

Separate from the EDI software package, the data management system allows the software to function and save information. Usually there is a degree of flexibility with the type of database your business is able to use. Most standard database tools including Oracle, Microsoft Access and MySQL are allowed by EDI software vendors, though some use their own database.

Data Transmission

Though an EDI transaction set includes all of the data from a certain payment or order, it needs to first be translated before it can be utilized. This is where an EDI translator comes in. The translator converts the information into a readable format, such as a printed report or XML file.

While some EDI is still sent via telephone lines and modems, most information is transmitted through more modern means such as high speed internet or fiber optic cables. The EDI server is usually housed in a data center where necessary support is already in place. This includes network routers, firewalls, VPN gateways and other systems that ensure the data is protected and secure.

Application and Integration

After EDI data is translated, it should be integrated into the business application. Common business applications include a small scale package such as QuickBooks or a larger system like PeopleSoft.

Occasionally, translated EDI files will need to be imported into the business application using an integration bridge tool. This tool links the translated files to the business application, allowing any proprietary translated files to be imported or exported.

Recovery Tools

Because EDI is essential to many business operations, it is important there is a recovery plan in place should a failure or other disaster occur. A good practice is to make sure to back up your transactions and EDI data frequently in an alternate location. This way, a fail-safe or disaster recovery could be more efficiently performed should the need ever arise.

If you want to learn more about your electronic data interchange system, contact our favorite partner Advanced IT Labs.

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